In the last decade the hospitality industry has witnessed a revolutionary and rapid evolution with the emergence of “Innovative Hotel Concept”. Since the concepts’ first occurrence in 2008, with the hotel chain ‘CitizenM’ in Amsterdam, a rapid expansion of this new segment was observed, and multiple investors, developers and hotel operators have followed the trend through their own concepts and interpretations.
Innovative hotels distinguish themselves through their focus on experience, flexibility, space efficiency and the elimination of hidden costs. These new concepts are a response to the changing customer demand and to independent sharing economy networks, such as Airbnb. Todays’ ‘Millennial generation’ travels differently and has novel interpretations of ‘luxury’. This definition includes experience, a combination of work, sleep and socializing possibilities while proposing the latest technology services, such as online check-ins and keyless room access.
Not only the clients’ demand has changed, but also the investors’ attitude. Through the availability of information and the awareness of new technology, owners are looking to decrease costs of construction as well as operations.
Innovative hotels exemplarily meet this criterion. They manage to maximize the use of space and to minimize human resources expenditures, achieving client satisfaction and ultimately the best possible financial results.
As space in cities is limited and expensive, a more efficient usage of real estate has become an important component of new developments, for instance using modular and prefabricated construction. Furthermore, the clients need for more ‘we space’ rather than ‘me space’ has led to smaller, more efficient room concepts and innovative hotels can fit up to 50% more keys in the same surface than the traditional hotels.
Regarding human resources, innovative hotels outsource most of their departments, including IT, maintenance and housekeeping which, together with the use of new technology, drastically decreases the number of full-time employees and hence also the payroll.
1. Improved revenue
2. Decreased expenses
3. A higher GOP to Revenue margin (40% to 55% vs. 30% with traditional hotels)
4. Ultimately this results in higher returns on investment
The improved financial results, as well as the availability of long-term lease contracts, were ultimately important factors for hoteliers and investors to move into this direction. The financial highlights of innovative hotels can be summed up as follows:
Although the short hindsight doesn’t allow us to give any exact values and comparison by how much innovative hotels perform better, we can conclude that they indeed achieve high profitability and premium returns.
It seems that the next chapter of hospitality will be focused on efficiency and experience and that innovative industry standards could set new traditions in hospitality.