Deutsche Hospitality diversifies portfolio to become leading hotel group by 2026: Q&A with CEO and CDO

M Bernhardt CD Jandel Deutsche Hospitality
Marcus Bernhardt, CEO, and Claus-Dieter Jandel, EVP & CDO of Deutsche Hospitality

German hospitality company Deutsche Hospitality’s portfolio comprises more than 160 hotels in 19 countries on three continents, with brands targeting a broad range of segments from resorts to economy to lifestyle.

Marcus Bernhardt, CEO, and Claus-Dieter Jandel, EVP & CDO  of Deutsche Hospitality, share their views on recovery, diversification,  and the company’s goal to become one of Europe’s leading hotel groups by 2026, ahead of their participation to the International Hospitality Investment Forum (IHIF) on 1-3 September in Berlin.

Hospitality Insights: The past 18 months have been tough for hospitality. What has kept you positive for the future of the sector during this time?

Marcus Bernhardt: The hospitality industry has certainly been particularly affected by the corona crisis. Nevertheless, people's enthusiasm for travelling was and is very strong. In particular, the leisure customer will come back much faster than the corporate business customer. In my opinion, a focus on domestic travelling is a short-term trend that we observed last summer and that will most likely continue this year. But international travel is on the up and will, in the long run, become very relevant again. We are well prepared and looking forward to welcoming guests from around the world in our hotels. In the last months, we have been very busy in driving our expansion plans forward. With the support of our shareholder Huazhu, we will grow significantly over the next five years. Our goal is to advance to become one of Europe’s leading hotel groups by 2026.

Hospitality Insights: What is your outlook for the recovery of the sector in EMEA?

Claus-Dieter Jandel : In EMEA, I expect leisure travel to come back as of summer 2021, especially domestic business in the hospitality and travel sector. International business will probably not recover before 2022. Regarding the MICE sector, conferences and conventions will most likely not come back before autumn 2021, fairs even not before 2022.

Hospitality Insights: Where do you focus to drive recovery in 2021?

Bernhardt: We recently restructured our brand portfolio and have established the portfolio of Deutsche Hospitality in six different segments: Luxury with our new brand Steigenberger Icons, Upscale with Steigenberger Hotels & Resorts and Jaz in the City, Midscale with IntercityHotel and MAXX by Steigenberger, Economy with Zleep Hotels as well as Franchise and New Business. This makes it very easy to integrate new hotels and brands into our portfolio. Our expansion focus lies on our economy and midscale brands, as they were particularly resilient during the pandemic. Furthermore, we are experiencing growth in demand for new business models such as long-stay and shared living offerings or hybrid meetings solutions which represent an area of business we see potential to grow in. To meet this demand, we launched our new Hybreeting concept in May which offers innovative solutions for virtual professional events.

Hospitality Insights: Which regions do you expect will lead recovery in 2021 and beyond?

Bernhardt: Besides domestic travelling, in 2021 I expect resort destinations like Egypt to play a major part in the recovery since the leisure segment will recover faster than the business travel segment. Furthermore, we see great potential in China and in the Middle East. In these regions, we have exciting projects in the pipeline. In April, we opened the Steigenberger Resort Ras Soma located closely to Hurghada and in May the Steigenberger Jinan Fengming opened its doors. Steigenberger Future Galaxy and Steigenberger Icons in Hangzhou Bay, China, are expected to open in 2022. The Steigenberger Hotel Doha will open in September 2021. Jaz in the City Dubai is another exciting project in the Middle East. In Egypt, we also just announced the Steigenberger Alora Resort Residences & Spa on the Gulf of Suez which opens in 2024.

Jandel: Generally, we do not see significant growth in greenfield development in Europe. We do see more potential for the development of our brands in the Mediterranean (particularly regarding resort hotels) and for further growth opportunities in Africa.

Hospitality Insights: Has the Covid crisis had an impact on the segments you are expanding into?

Bernhardt: The Corona crisis had the effect of a catalyst on our expansion plans; it added speed to processes and changes that we are currently implementing. We took the "enforced break" that resulted from the crisis as a chance to re-evaluate the structure of Deutsche Hospitality and lay the structural foundations for our strategic growth in the next years. We traditionally have a very strong presence in the business hotel sector but also have a growing number of leisure hotels and the pandemic has confirmed our approach to further diversify our portfolio in the future.

Hospitality Insights: How have you managed relations with owners during the pandemic, and what long-term impact do you expect this will have for Deutsche Hospitality and its partners?

Jandel: Having more than two thirds of our portfolio under lease contracts, the pandemic hit us hard. The strong support from our shareholder Huazhu helped us financially and with most of the owners of our properties we were able to agree on rent waivers for limited periods. This also helped us to build up an even stronger relationship with these partners.

At the same time, we had to face the fact that some owners did not show any signs of support. We decided to see this as a “lesson learned”, which will have an impact on our future relationship with those partners. In future lease contracts we will include a “Covid-clause” and we will focus more on hybrid/variable leases than on fixed leases. At the same time, we will focus more on management and franchise contracts and we aim to reach a balance in our portfolio between lease and management and franchise contracts.

Hospitality Insights: The leisure segment is hailed to be driving hospitality recovery. What are the keys to succeed in this market?

Bernhardt: The pandemic has a lasting impact on the behaviour and needs of our guests, and we quickly adapted to this. Safety and well-being have taken on a much higher priority, so the unique selling point of a hotel is no longer focused on location alone. We are also putting sustainability at the heart of our global corporate approach. Travellers are more likely to choose a place they trust and feel safe in. And this is exactly what Deutsche Hospitality stands for: the attribute caring is anchored in our corporate culture and we are committed to the highest quality standards.

Hospitality Insights: The corporate segment is expected to come back later than leisure. How are you managing the recovery of your brands that were targeting this segment?

Bernhardt: Due to the pandemic the demand for hybrid or virtual meeting offers like live broadcasts, live streams or video recordings have increased significantly. To meet these new needs, we have introduced new hybrid formats and set up broadcasting studios in some of our Steigenberger Hotels. In Germany for example, the Steigenberger Airport Hotel Frankfurt houses a fully equipped, 265 square metres studio while a mobile and size-adjustable pop-up studio is available at the Steigenberger Hotel am Kanzleramt Berlin. Demand for innovative concepts that facilitate a modern way of working was high even before the onset of the pandemic. Our new events formats enable us to offer customised solutions for all types of virtual and hybrid events.

Hospitality Insights: Have the ESG requirements from customers and partners changed in the past year? What new initiatives have you put in place to improve sustainability and inclusion in particular?

Bernhardt: One of the key tenets of our business model is that the impacts of our actions on the environment, on the climate and on people and society must be taken into consideration whenever any decision is made. Our goal is to have completed a global shift in our procurement processes by 2024 by establishing fixed key ecological and social indicators measuring our success. Sustainable change requires cooperation and we are listening carefully to our colleagues, investors and guests to make sure we live up to our commitment.

Hospitality Insights: What are your looking forward to with regards to your participation to IHIF?

Bernhardt: I am particularly looking forward to face-to-face encounters with existing and potential partners and friends in the hospitality industry and sharing views and experiences.

Jandel: I am very much looking forward to meeting with new potential partners and to strengthen relationships with existing partners. Also, IHIF is a great opportunity to see friends in the hospitality sector again. As Deutsche Hospitality we have the chance to show the industry how we handled the crisis and to share that we are now looking forward to an even stronger Deutsche Hospitality with strong brands and an enthusiastic team.  We are ready to inspire our guests worldwide with our hospitality.

Deutsche Hospitality is a Patron Sponsor of the International Hospitality Investment Forum (IHIF)