A flat hierarchy, rapid and flexible decision making, family values and ownership, as well as respectful behavior, explain many of the reasons behind the rocket-like trajectory of Hamburg-based Novum Hospitality Holding, founded in 1988 by CEO David Etmenan’s father, Nader, and since 2004 managed by the 34-year-old with a penchant for fast cars and dynamic hotel growth.
Novum has grown from three hotels when David took control to about 160 operating or developing today with 20,000 rooms across Europe – mostly in Germany but now as far as the UK. Ambitions spread as far as the United States with its mid-market, location-inspired lifestyle brand, Niu. With some 46 of the 160 hotels set to open between now and 2020, the goal is to do enough deals to reach 200 hotels by 2020 and then 250, which is certainly within reach as, three years ago, the company shifted to more of an asset-light, new development approach away from one that focused on renovating and repositioning one-off assets.
“We put our focus into signing fixed lease agreements with a term of 20 years and an additional two-time, five-year option,” Etmenan says. “It gives the end investor a high, strategic fixed-year expectation. And for us, it makes it very quick and makes a lot of sense to sign leases and putting them into our own books.”
Etmenan is confident in Novum’s ability to reach such lofty goals not only because of a hot German market with solid access to capital, but because of the company’s infrastructure. Its home-grown IT and project management divisions, he says, gives Novum the confidence needed to execute on the development and crucial distribution sides of the business.
The family-managed hotel portfolio is comprised of 3- and 4-star properties in central locations, operated under the brands Novum Hotels, Novum Select Hotels, Niu Hotels and Niu Apart Hotels. Around 20% of the hotels are owned with the remainder operated through long-term lease agreements as well as via franchising partnerships with the likes of IHG, AccorHotels, Best Western Hotels & Resorts and Choice Hotels International. In fact, in October 2016, Novum announced a multiple development agreement (MDA) with IHG, spanning 20 hotels in Europe.
Deutschland, Austria and Switzerland will remain Novum’s core market, while it looks to expand further into the Netherlands and Hungary. Spain, UK and Ireland, Scandinavia and Poland are among the other targets for Niu, according to Etmenan. It is also looking at gateway markets in the United States for Niu (native, inspiring, unique). Among its latest deals: acquiring a conference hotel under its IHG MDA in Frankfurt-Niederrad at the start of 2018.
“The German hotel market is seriously under-roomed and we are seeing rapid expansion by the branded operators,” says Toby Baines, chairman of London-based Citygrove Securities, which is developing a Niu hotel with Novum in Dusseldorf. “Novum is not so well known but is on a fast expansion program, positioning itself in the 2- and 3-star market. They know the market very well, are very hard working, well connected, and make clean, concise decisions.”
Baines adds that Novum differentiates itself with design and branded concepts and does not see any near-term issues for the group, which already has 41 Niu hotels in various stages of development since launching the brand in 2017. Some 2,000 Niu rooms are projected to open this year. “They need to grow their balance sheet and be ready for any unexpected headwinds, but generally I see a very well run business expanding nicely,” he says.
Etmenan says synergies develop through standardized processes along with strict quality and financial management. Efficiency, flexibility and fast decision-making, he says, are his major strengths, and as a result the group constantly adjusts processes.
A company philosophy that emphasizes attracting young Gen Y- and Z-focused talent who are given freedom and flexibility to make decisions is part of an environment continually nurtured by Etmenan.
“We implement a co-working atmosphere, having bosses that are always reachable,” he says. “Transparency is also, for me as an owner and also as CEO, important. In our office tower walls are glass, which translates into transparency.”
Rapid expansion has also led to rapid growth as during the first half of 2017 the company raced to a new sales record, marking a 47.8% increase year-over-year – from €55 million (US$68 million) to more than €81 million (US$100 million) for the entire group. For 2018, Etmenan projects revenue to reach €250 million (US$310 million) based on 10 new openings in 2018.
Making a name
Even as Novum becomes a powerhouse in Germany, it is still a company not as high on developer’s radars. To expand beyond its “insider” perception, the growth of Niu through fixed leases could move the company further into the global spotlight, and Etmenan knows size equals power and strength with the development community and as it negotiates with the like of OTAs and other vendors.
Etmenan sees a minimum of between 41 new Niu hotels in Germany and the same number in Europe within the next three to four years.
What makes him so bullish about Niu is the flexibility Novum can offer developers with rooms sizes between 18- and 21-square meters.
“Flexibility is our USP (unique selling proposition),” Etmenan says. “And the construction cost level is less.”
The 3-star Niu brand has an F&B concept, a high range of multimedia systems, critical co-working zones, online check-in, a solid CRM solution and social media campaigns. “Our own systems give us a very high live of confidence that we did our work right, and we will develop this brand more and more,” Etmenan says. “A high level of developers want to work with us to because this brand, this category did not exist in the market.”
Ten of the 41 Niu developments include micro-apartments, a combination that Etmenan truly believes represents the future mix. “We are now working on the next decade of development and we will also adjust to the co-working space,” he adds. “We are talking with a global co-working company… That’s one of the next stages of offering more service.”
Etmenan says the combination of micro-apartment, co-working and hotel, including the full open lobby zone, will give customers the full range of services they desire. “And the reason why we want to cooperate with the global co-working brand is that they have access to their clients and the distribution,” he adds.
Peter Joehnk of JOI-Design, Hamburg, who is working with Etmenan on Niu, says opportunistic Novum is now starting to benefit from developers who bring tailor-made projects to the table.
“David found a very smart niche (with Niu), which is big enough for ‘endless’ growth,” Joehnk says. “It is much simpler (cost wise) than a 25hours, but much more design oriented than a Leonardo… I would say Niu sits right between an Indigo and a Holiday Inn Express.”
The opening of more than 40 hotels in the upcoming years is really challenging but manageable for Novum, according to Etmenan. He adds that recruiting of young talent will be a key to success for Novum as well as everyone else. To that end, Novum is developing its own learning academy in the form of a hotel.
“It’s a big project for us, and it’s a really nice project, because with our own academy we will also acquire and put the focus into generations Y and Z,” Etmenan says.
Alternatively, Novum’s MDA with IHG gives it more ability to adjust to owners’ needs, especially as it goes upmarket into the 4-star arena. Etmenan points to a 2016 deal with developer Gerchgroup to invest €250 million (US$310 million) to develop an Indigo and accompanying Staybridge Suites, the first extended-stay of its kind set to open this year in Frankfurt.
“We have a very communicative relationship and decided together whether or not brand X or Y is correct for the location,” Etmenan says. “We put the hotel size, what the target market is, if there are companies nearby, if leisure is the market, et cetera… Internatioally, Novum is not that well known yet, but an international brand is and it gives us excellent access to the existing developer network. So, we put more of our focus in the MDA partnership across Europe.”
When asked about potential disposition of 21 owned assets, Etmenan says because the business is cash flow-oriented, there is no desire to sell. “We have a loan-to-value ratio of 35%, and the value of the properties increased rapidly, which gives us a comfortable position,” he says.
Finding inspiration
At the tender age of 34, it appears Etmenan is just becoming comfortable with his ascending position in the European hotel world, which should help feed his passion for global travel, learn about new concepts, find new friendships and business partners, and grow with his family, which includes a wife, Sahra, and two young children.
He says he has been inspired by the likes of Dieter Mueller of Motel One because he brought a new concept to Germany with the right style and vision. “It is inspiring and motivating to think about hospitality differently because you cannot adopt the same product or the same concept,” says Etmenan, who looks for further inspiration by taking special trips.
“And I’m using, of course, the network of friends who are in other divisions,” he continues. “You have to get your inspiration from successful companies or entrepreneurs… You cannot be everywhere the best and to identify your own weakness is, for me, a sign a strength.”