The Yotel brand has a new feather in its cap – a 600-room development set for 2016 on Singapore’s Orchard Road – which CEO Gerard Greene hopes further jump starts development of the chic, cabin-style brand with a presence in New York City and at airports in Europe.
The inventive brand got its start at Heathrow Airport in 2007, added its high-profile New York City experience two years ago and has Greene scouring the world for hard-fought deals. Today, he is very bullish about growth prospects in Asia Pacific as he says developers there better relate to the Yotel model and are not as strapped for cash for the right opportunity.
HOTELS spoke to Greene last week to find out how the brand is managing and where he intends to take the flag from here.
HOTELS: How’s business in New York City?
Gerard Greene: Good. It is getting stronger and stronger, and we are making money, even though it is a tough market from a union, recruitment and OTA perspective.
There has been a massive supply increase with more coming and a lot of it is mid-market and Midtown with big brands and their points systems – so it makes it tough.
HOTELS: How is your pipeline in the States?
Greene: It is one thing to have a hotel in New York City, but we need scale across the States. We have developments in Boston, Chicago, San Francisco and Atlanta. The Chicago and Boston deals went ‘south,’ but now we have new deals in those cities. San Francisco is a potentially interesting market for us and Atlanta looks like nice opportunity at the airport. The market is still hesitant about ground-up and if you are not a big boy it is very hesitant. And if you are not willing to do a franchise there are too many other options out there.
We have more deals under development in Brooklyn and downtown New York. Nothing is signed but I think we will get one done this year.
Also, Manchester (in the UK) is close, as is London.
HOTELS: Tell us more about your plans for Asia?
Greene: We are hiring a development person for Asia where there is more opportunity, and developers get the business model there. Signing a management deal for 600 rooms on Orchard Road has put our flag down there.
Singapore breaks grounds before the end of this year and will open by end of 2016. It is a big project on a complicated site on a hill, in a car park between two massive buildings. Plus, there are labor shortages there and you have to be cautious about finding contractors with all the building going on there now.
Asia is hot for us now and we should be taking advantage of the market. Hong Kong, Seoul, Japan, Taiwan, Manila, Bangkok and further afield are on our radar. We are getting inquiries from Sydney, Melbourne and Perth, as well. These are all management deals.
People in Asia are starting to realize spending X per key for a luxury brands doesn’t make the returns they want, especially considering the cost of land. So budget brands are starting to come in now. Where land is expensive, the Yotel model works very well and probably works in Hong Kong and Singapore more than anywhere else given that land prices are so high and it is so difficult to get a hold of.
HOTELS: What can you tell us about your deal in Saudi Arabia?
Greene: Someone wanted the rights to Saudi and we gave it to them, and they are assessing opportunities. It is a joint venture with management contracts.
HOTELS: So what are your expectations for development in the near term?
Greene: If we are doing five to seven deals globally per year, it will be about right for us. If we get to 20 to 30 hotels it will be right for us. What we don’t want is to sign 100-bed hotels in the middle of nowhere. We’d rather wait and get the big deals like Singapore.
HOTELS: How are you managing the impact of OTAs?
Greene: From the digital and distribution side of things, Asia will prove to be a different story. OTAs are so prevalent and powerful in the U.S., whereas the consumer market is stronger in Asia, and the same goes for Europe and the UK. We will have much higher levels of direct distribution in those markets.
We are about to appoint someone from the airline industry to come on as digital director. We are looking to see what we can do differently, and not just from a revenue management perspective. It is more about digital marketing and ecommerce, which we find more interesting – and mobile marketing.
People still embrace brands and want to go direct. Look at Apple and the budget airlines. So there is still an opportunity to penetrate directly to consumers. The question is finding right strategy to get to them in new ways.