Koncept Hotels' Founder on The Role of Digital in Limited Service
We really try to bring communication within the guest journey. Today, it's still if you have an issue with your reservation, you have to change the channel of communication.
Speaker 2:From Hotel Tech Report, it's Hotel Tech Insider. A show about the future of hotels and the technology that powers them. Today on the show, we have Martin Stothberger, the founder and managing director of Concept Hotels, a fast growing limited service brands coming out of Germany. In the wake of high profile flops like Sonder, where hotel startups were telling the market that they were technology companies when in reality, they were hotel companies that leverage technology. Martin's ability to build a business the right way is a breath of fresh air and is a blueprint for other hoteliers looking to build sustainable and durable businesses in today's business climate.
Speaker 3:Martin, thanks so much for coming on the show today. It's great to have you.
Speaker 1:Thank you. Thanks for having this opportunity.
Speaker 3:Yeah. So tell us about Concept Hotels and the concept behind Concept Hotels. Where do you guys operate? What market segments? And what's the operating model and unique value proposition of your business?
Speaker 1:That's funny because you do the right emphasis on the company's name. If your company name transports what you're doing, you're doing pretty well with marketing. What we really made good in the last couple of years is that we've reached a nice market positioning. The company name transports that we are a bit setting apart from the majority of our colleagues. We do hotels in a different way.
Speaker 1:The idea of the company has been from the first day on to really deliver a digital and sustainable way of doing hospitality. So that is not 2 components we really provide to our guests. What we understand is that doing the one enables us to do the other. So due to the fact that we use all that digital components and due to the fact that we really have a kind of a streamlined operational process, we are able to operate in a different way, and we can afford to do all that sustainability stuff we love. And what is our motivation and what gives our associates the purpose to work for us, and that's perhaps more or less the core values of the company, digital applications in order to afford a sustainable way of operating hotels.
Speaker 1:And perhaps that's the 3rd component of the brand. What we realized when we shaped the marketing and the brand was that customers do not necessarily want to have the unique hotel experience all over the world. So, the time of Hilton Macau and Hilton Miami operating exactly the same bedding, exactly the same lobby experience, and exactly the same kind of rooms that's probably gone. That's why we have kind of a local approach. According to where our properties are located, the design and the way how we do it is different.
Speaker 1:So that's the three components of our brand, sustainability, digital way of doing hospitality, and the local spirit of where we are.
Speaker 3:And where are the properties today? And is that representative of where you wanna be in 3, 5, 10 years?
Speaker 1:Well, I have 3 sons, and they request Paris, Tel Aviv, and, I don't know, Tokyo. But at the end of the day, they adorn football clubs here and there. And therefore, probably, they did their location scouting. We are purely German company. There's no investor within the company, so it's really bootstrapped.
Speaker 1:That's why we have not a growth that is focused on to going in the maximum of destinations or markets possible. We do organic growth. And one of the theories of marketing is that you first really work intense in the market prior to open a new one. So we had been for a couple of years in in Austria. Luckily, in the times of the pandemic, have been able to hand over to another operator.
Speaker 1:And to our days, we are still in Switzerland or Germany. That's our for area, we operate our service center here in Germany. One is obviously with focus on the German language. So we are not really keen on going into this and that destination. You know, it's a small company.
Speaker 1:We try to focus onto the markets where we have huge knowledge and do quite well.
Speaker 3:When you came from the world of the Kempinski's and the luxury group that you're working at in Germany, when you were first drawing up the model for concept, where did you think technology would have the biggest impact in terms of you would not need to be as staff dependent as you would otherwise? Was it revenue management? Was it, like, operations? Where were the departments that you saw the biggest kind of operating leverage through technology when you started, and has that changed in the last 7 years?
Speaker 1:Well, in those days, I really built the business model on, let's say, kind of friendship relations. There have not been suppliers out in the market that really catered to the needs we have in those days. In those days, the digital check-in process has not been allowed from government yet. So we started with a kind of allowed way of doing check ins and put printed out check-in forms onto the beds of our guests and asked them to fill them out because that has been the legislation in those days. But in those days, there has been no, let's say, app in the market that really fulfilled in a compliant way to the needs and the request official sites approach to hotel industry.
Speaker 1:So we let's say, that has been a kind of MacGyver way of doing a guest journey. You know, we took something from here and something from there, and then there has been a kind of a friend in the neighborhood. He operated a sausage takeaway place, and we gave physical key cards to that sausage catering place. And whenever somebody arrived without a smartphone that has not been able to use an application at those days, 7 years back, we asked him to go to the my Curry sausage place in order to pick up a card. That has really been a different way compared to today.
Speaker 1:Then legislation changed. There entered a couple of larger companies that digital hotel tech arena like Numa, Lime Home, or CitizenM, and the supply also came up to that new demand in the market. You know, when we opened up 7 years ago with our first 20 rooms, there has been actually no demand for those kinds of applications. You know, we screwed something together and it worked more or less, but there has been no kiosk in order to issue the key cards in the market that really suited to our needs. And that really dramatically changed over the last couple of years.
Speaker 1:Yeah. In those days, when we entered 7 years ago, there had been an article on the most important cologne news paper, and they wrote an article about operating a hotel without hosts. And the president of the Cologne Hotel Association gave also an interview to that newspaper, and he said, no. No. That's not the future of hospitality.
Speaker 1:That will not work because guests want to get welcomed by a host. And 7 years later, we know that this exactly is the estimation you and me have when we go into a vacation hotel where we really want to feel welcomed or hosted or spend 2 weeks with a family. But when we are on a business trip, we are perfectly fine with a 8 digit pin code in order to enter the hotel or the room. Yeah? And as well, how customers are open to these new technologies, as well as suppliers are offering new solutions to our needs has really dramatically changed.
Speaker 1:Perhaps also due to the pandemic. You know, after that pandemic, each and every elderly person is quite aware of using QR codes. And before, it has definitely been a thing of the devil.
Speaker 3:So your hotel entry experience, when someone arrives, they're getting an email from you. You mentioned that you guys use Hotelbird for online check-in. So they're getting a pre arrival email to check-in. And then is it, like, mobile key to enter the building, or they can enter without it? How does everything work?
Speaker 3:From the moment that they kind of, like, land in your destination to the moment they get into their room now that you're not leaving the digital authorization form on their bed anymore?
Speaker 1:Yeah. What we learned is that over the last couple of years, we had to offer different, product. There is, let's say, the traveler that has not that tech savviness and that is really not willing to use his own mobile device in order to arrange his business day with us. So for these travelers, we really offer a possibility to provide them a kind of a door code in order to enter the building and then do the registration process on spot within our hotel. And then they have two possibilities to after they've registered on our iPad to either let them send a digital key or just embedded into an email.
Speaker 1:So it's no need to download an app. So they can receive an an email and enter with a digital key their room or to really encode key cards. On the other hand side, there's also the opportunity for the, let's say, generation digital that does the registration process beforehand on their smart device, and then they have again the 2 possibilities to either issue a key card on spot or to use their mobile device in order to access. We always think to let the client decide how he wants to get his hotel experience shaped.
Speaker 3:And what is your kind of staffing mix look like from a back office perspective? Revenue management, sales, marketing, finance, how are those roles distributed in your organization?
Speaker 1:Well, on spot, in our hotels, there's only a manager of the property. We call her or him location manager. She or he, they just take care that it's clean. Everything is fine. That there's a good smell.
Speaker 1:That everything is nicely prepared for our guests. All other services are really organized from, central located service center, which takes care of reservation flow, of revenue management, of cashiering, of doing all that finance stuff from the mobile on, the guest test paid with us. So, actually, the operational team we need is, on one hand side, the ones who really take care of the property. Cleanliness is not a digital process. It is just some very analog traditional things to clean up a room.
Speaker 1:Yeah? So that's the one part of our team, and the other part of our team is the ones who really manage the guest flow. And in this area, we have highly experienced, very well trained staff as we use a lot of automatism. So there's hardly anything done by hands. So we really tried to not get in touch with our guests.
Speaker 1:The moment our tech stack really flows, we don't have contact points at all with our guests, and that's what we really want to reach that it is as intuitive and as flowy that all our guests do not need to crap their phones in order to call.
Speaker 3:So I intentionally left out asking about your tech team. You mentioned to me before we got on their record that you guys don't have a tech team. I think that's super interesting, and it seems like it's done well for you. Why is it that you guys are so passionate about not having a tech team?
Speaker 1:The first reason why we are having the tech team is that we can't afford 1. That's very simple. Right? We had been in talks with VC companies a couple of times. And then at a certain point, it always came to the moment that those VCs said, well, it's quite lovely what you're doing in that sustainability arena.
Speaker 1:But, you know, sustainability does not earn money. So if we invest into your company, we would end up with that. You could glue a sustainability label onto your company, but we would end up. And that has been the point where I said, well, it has been very interesting talking to you, but at that point, we are done. And so, yes, we had been in talks with VCs, but we never finally came to that one moment when we decided on really crediting 10 or 20,000,000 of funding.
Speaker 1:And if you do not have that funding, you have to arrange yourself in a different way. You know, it might be easy if you live in a castle and there's a lot of employees around, you can sniff or snap and say, well, I would love to have this or that. But if you're not living in the castle and if there's no servants around you, you probably have to go to the fridge yourself. Right? And that has always been our, let's say, topic or problem or adventure that we had enough money to do quite a decent hotel experience for our guests, but we have never had enough money in order to really put 10,000,000 on to the main entrance and asking all that fancy people if they wouldn't be interested of programming some guest experiences for our guest journey.
Speaker 1:So that really is the hard point. So we never had that funding, and that brought us to the point that we always had to use off shelf solutions. So in our days, we have a couple of, let's say, tailor made optimizations. What really makes our business, how we do hospitality, and how we want to have the business flow more suitable for our guests or our needs. But what we never did was hiring tens of thousands of IT guys in order to shape our systems.
Speaker 1:And what is quite funny in today, we use, let's say, the most tech savvy PMS out in the market that is also used by Live Home, Nooma, StayCook, CitizenM, Stary, all that tech focused hotel companies. But the huge difference between them and us is that we don't have those techies. And if they would knew, perhaps they would think about spending their tens of 1,000 of 1,000,000 of funding into other areas instead of hiring IT people.
Speaker 3:You mentioned you used Happy Hotel for your revenue management system. Was that a vendor that you guys used from day 1, or when did that vendor come into your tech stack?
Speaker 1:Mostly all components of our tech stack have changed at least one time during the last 6 or 7 years. There are also components that we have changed about 2 or even 3 times as we just realized that the component we picked in those days isn't suitable anymore for today. Most important today is that you really have in focus that IT security aspects. And if a vendor is really focusing on that, you can rely on him. If there's not a focus on the vendor side to really have your homework down, it is important to have somebody on spot within the company that really has the view on that.
Speaker 1:Because if your vendor is only sales driven, they will sell whatever they have on shelf. Alright? At the end of the day, you have everything but nothing. So I think that's a bit of thing you should have in mind. There's perhaps a second thing when you have to cater with vendors that are deeply in this tech arena.
Speaker 1:And they try to service you as a company without having, tech team. They really have to adapt to your level of knowledge. You know? When I get messages from customer success, they use all that vocabulary I have never learned in my life because I'm Autelier. I come to a kind of a limitation in using that vendor's tool just based on their kind of dealing with us.
Speaker 1:If they, on the other hand side, have the understanding to really serve us as a customer and to really provide their tool to our business. And that not we have to adapt to their business, it works. But if you use vendors that are in their kind of funnel, they do not want to adapt to your needs and your knowledge and what you really need for doing your business. You need someone on your team to shape this vendor's tool to your needs. That perhaps, Jordan, is one of our most important experiences that we do best with those vendors who really are willing to cater to our needs.
Speaker 1:That's not that they have to do a program on our specific request or that they have to shape their application to only concept use cases. But if they, you know, just shit a kind of tool book on your table and say, well, it's all written down. Take it or leave it. That's not a partner for us.
Speaker 3:So out of curiosity, when you're making decisions across the tech stack, whether it's like Hotelbird for the guest experience doc or happy hotel and revenue management. What does the decision making process look like? Is that all coming top down from you, or is it your corporate revenue managers are deciding and evaluating and bringing new stuff when they have problems? How do all those tech decisions and optimizations occur from a decision making process?
Speaker 1:We have always been a trial and error company. So when you run against the wall for 5 times and there's no door, It might be quite intelligent to try a bit more on left or on the right hand side. You know, we have no investigation team or a team of scientists that work up the latest developments in the industry, bring our focus to all the developments. No. No.
Speaker 1:It's always coming from if there's an issue or a problem in day to day operation. You know, when it comes to the point that we get a lot of credit card frauds and that we realize that there obviously seems to be something out, that we are not catering the perfect way, we dive into that problem. And we try to figure out why can that be possible, how does this happen. And then we try to solve that issue, that problem with the tools we have in our toolbox. And if there's no tool fitting to that issue or to that problem in our toolbox, we look left and right.
Speaker 1:If you would go to the grocery store in order to purchase that one component you need in order to complete your recipe. And that's how it is done in our company. We never changed, a component just due to the fact that all the others are going into a new PMS or whatsoever. We always spotted problems and tried to solve that problems. And in case the problem is so relevant that it really is crucial for doing our business and the vendor is not able to solve that issue, we look left and right.
Speaker 1:And at the end of the day, you know, there has been a trainer of German national team, and he said, you only can dance with the girls that are on the dance floor. So if you don't have anything in your toolbox, and there's no suiting solution for the problem you have, you have to look left and right. If there's outside your dancing area, somebody else. But that's always the process we do if we can't cater with a solution we have on hands with a problem we face.
Speaker 3:So I know you guys have used 3 PMSs in the last 6 years. Switching PMS is, like, the most painful thing that you can do from a hotel technology perspective. You had to be experiencing some pains. What were some of the problems that you felt with vendor number 1? And then how did the process go switching?
Speaker 3:And what did you expect to come out of vendor number 2? And then what happened that that didn't materialize, and now you're vendor number 3?
Speaker 1:When we started, they have actually no, let's say, open API. PMS is out in the market. There's only those huge tanks, huge cruise ships, PMS's that catered for sales and catering topics, finance topics, rooms topics, point of sales topics, and all that stuff. And in those days, we picked a cloud based PMS, not an on premise PMS. That has been the selection criteria we had in those days, and we ended up with In for that provided a quite decent PMS that enabled us to operate from wherever a hotel in whichever destination.
Speaker 1:And after a couple of years, about 2 years, we realized that the, design of that PMS has never been for a focus service concept we are running. So on the one hand side, we had huge costs for that PMS. And on the other hand side, they due to the fact that it really has been a worldwide company in the back, they were not able to cater to our needs in the specific way, as I mentioned before. As small as we are and always working in the, let's say, top notch of the pyramid, We really need specific solutions for the specific problems we have.
Speaker 3:Are there any other systems that are mission critical for you guys? Do you guys have a decent group business, or is it more kind of individual business travelers? And then any other kinds of technologies like a CRM system that you're using to, like, bring guests back? Anything like that?
Speaker 1:No. So far, we don't use the CRM. That will be definitely the next step. So far, the performance of our brand is as strong as we do not need sales. So we have quite a nice product, and we have the right rates out in the arena.
Speaker 1:And that really brings in our guests. So there's no need to do hardcore sales or all that other parts of bringing guests back or retaining from leaving to another company. So so far, we are really purely focusing on giving a good service and a lot of products for a fair price, and that brings in our guests. So key components definitely is PMS, a good channel management, KI revenue management tool. And if those are in good correspondence, a lot of way is done.
Speaker 3:And you guys use SiteMiner for your channel manager?
Speaker 1:Yeah. Exactly.
Speaker 3:What makes you saying that it's a great channel manager? Does it stand out from other solutions you guys have used?
Speaker 1:Well, also in the channel management arena, we had a couple of different vendors before. But a good channel manager is the one you never hear about. Good channel manager is the one you can link to all relevant distribution channels. Might it be Cvent or all the other OTAs in specific markets. It is perhaps even local tourism authorities that bring in business, and you need to have a vendor that is really catering to all that specific needs.
Speaker 1:And as long you don't hear anything from your channel manager, it is a nice channel manager. At the moment, you really have a lot of hiccups and fuckups and all that stuff, and you really have to work intensely with your channel manager. It might be time to look left and right on the party if there's anybody else on the bench floor.
Speaker 3:What are some of the big problems or challenges that you're facing in the business today or things that you guys wanna optimize for that as we go in the next 3, 6, 12 months out, where you wanna look back and say, oh, we've fixed that one, and here are the tools that we're looking at to do so.
Speaker 1:What will be the next important thing is to streamline communication. So we really try to bring communication within the guest journey. Today, it's still if you have an issue with your reservation, you have to change the channel of communication. You crap your phone. Well, it has nothing to do with your online booking process or your online checking in process.
Speaker 1:You crap your phone and call a physical voice call, or you even write an email or all that stuff. It for us, what is really the next step is that we get it managed that from your smart device, you can text us or you can reach us via WeChat or WhatsApp or Instagram or TikTok, within one communication suite. And, of course, there are already vendors out there who deliver that service, but that would be the next important thing. Also, second thing we really currently look into is using artificial intelligence in order to respond to client needs. Because the questions we get is 75% stupid questions.
Speaker 1:People calling if there's a parking slot around the hotel. How should I need whether there's a space available or not? So and then you explain them, well, what about going on to Google Maps and typing the hotel's name into Google Maps? And Google Maps will direct you to the place where the hotel is and perhaps around there's some parking spot available. Or whether there's Wi Fi and whether Wi Fi is free is another question we really, you know, or if there's a 24 hour service in the hotel to check-in.
Speaker 1:And all that questions in the near future need to be filtered out by artificial intelligence and replied to without the need of really putting workforce onto that.
Speaker 3:I know you guys are big in sustainability. Obviously, sustainability, digital first, and light on the tech team and really outsourcing that tech capability. From a sustainability perspective, like, how do you think about business? How have you constructed? Are there tech tools that you use for that?
Speaker 3:Or how do you think about being a sustainable brand in this market?
Speaker 1:Well, in order to really make our guests being part of that sustainability approaches, we definitely have to be looking into that, how we can transport in a way of gamification and letting our guests know whether their stay is causing a lot of emissions or not. So that's definitely a thing. We are not yet quite tech savvy. I think we are quite savvy in doing a sustainable hotel operation, but we are not tech savvy in that sustainability arena. And that would be quite interesting to really let somebody know, well, you know, you took a shower, but you needed 150 liters of hot water.
Speaker 1:And the lady next door had a decent shower with only 50 liters. That kind of gamification or taking our guests into that scope 2 and 3 perspective of sustainability really would be interesting. I think there's no window so far in the marketplace that really can provide, comprehensive solution. There's a couple of vendors that offer, let's say, island solutions, for example, for not changing the linen or using less water or something like that. But really to have a kind of a dashboard, a sustainability dashboard, that would be interesting.
Speaker 1:I'm sure that will come because, larger companies, international companies really have to report on their sustainability efforts and as well travel, traveling to a location as well as staying in the location will have a relevant impact on the scope 2 and 3 emissions. So there needs to come a kind of tracking possibility to really have that on spot. But so far, we are not
Speaker 3:in that. Anything else that we didn't touch on in terms of strategic objectives? Are there any other kind of big projects, big challenges in the business that you guys are focused on right now before we hop on?
Speaker 1:Managing the need of workforce is 1. So really thinking about artificial intelligence. It is not the best way to try to pattern from your competitor, the best receptionist. It might be more intelligent to reflect about how we could cater to the change in society and just offer a product that corresponds with that changes out in society. I think that's one important thing.
Speaker 1:Sustainability, interesting that you're mentioning that you opened up a new category of that because I think that really will be one of the next things. Yeah. If energy costs really sky rocks, why shouldn't hotels look into that topic in a more professional way instead of asking the guests to hang back their towels onto the rack? That's not intelligent.
Speaker 3:Absolutely. And we usually end these interviews by asking, what is one thing that you believe that you think most hotelier industry professionals would disagree on? And I think we already have 2 from this conversation. The first one is you don't need a tech team to be a tech savvy organization. And the other that I'm getting from this and from our conversation is that I think most of the industry thinks there's a labor problem and talks about it a lot, but it seems like you actually think that there's a staffing model problem and there's a an operating model problem.
Speaker 3:And it's not actually the labor that's the challenge, it's that hotels haven't adopted the way they do business to the latest tools in the toolkit. Yeah. Absolutely. Martin, thank you so much for your time. I know you're a very busy man.
Speaker 3:Appreciate you coming on the show, and I know our audience is gonna get a lot from this conversation.
Speaker 2:That's all for today's episode. Thanks for listening to Hotel Tech Insider produced by Hotel Tech Report.com. Our goal with this podcast is to show you how the best in the business are leveraging technology to grow their properties and outperform the concept by using innovative digital tools and strategies. I encourage all of our listeners to go try at least one of these strategies or tools that you learned from today's episode. Successful digital transformation is all about consistent small experiments over a long period of time, so don't wait until tomorrow to try something new.
Speaker 2:Do you know a hotelier who would be great to feature on this show, or do you think that your story would bring a lot of value to our audience? Reach out to me directly on LinkedIn by searching for Jordan Hollander. For more episodes like this, follow Hotel Tech Insider on all major streaming platforms like Spotify and Apple Music.
