A Third Hospitality Model That Big Brands Have Essentially Ignored

Skift grip

Investment manager LaSalle is betting on Numa, a hotel start-up. The deal suggests that some institutional investors are attracted to a market segment that has little appeal to big brands.

Sean O’Neill

Hotel owners have long been faced with two choices: manage independently or become franchisees. But a third way is emerging for owners of small urban propertiesthanks to startups such as Numa.

  • On April 27, Numa received a vote of confidence in its plan to build a third hotel model.
  • The roomproperties investment manager It is a subsidiary of a major hotel investment adviser JLLlaunched a $525 million (€500 million) pan-European branded travel accommodation aggregation strategy.
  • Numa will manage the properties as travel accommodation.

Berlin-based Numa belongs to a wave of similar companies startups.

The model usually has a few parts.

  • The brand essentially “borrows” properties owned by investors, developers and hotel operators.
  • It manages units as licensed hotels or licensed short-stay apartments. Most clients travel for leisure on short stays or for remote work on visits lasting up to a few months.
  • Companies are automating many processes to drastically reduce labor costs to save money and hopefully create more profits.

Numa won LaSalle’s support for several reasons.

  • It has contracted over 2,700 units. About a third are in service today. The agreement with LaSalle will add 2,700 to that.
  • Numa said its occupancy rate averaged 85% last year, despite the omicron wave. No building has been unprofitable in the past 18 months.
  • It claimed an average revenue per available room (a common hotel performance measure) of $98 (€86). This compares favorably to German averages in the limited service segment of the market.
  • Most of its units are in Germany. Germans are notoriously cheap when it comes to travel accommodation, as third-party data shows. So, when the startup expands into France, Spain, and other markets, it should have more pricing power to generate higher margins.
numa stays numa wood vienna source numa
Hotel Numa’s Wood in Vienna, Austria. Source: Numa.

LaSalle’s support for Numa is important because it could represent a strong push from the institutional capital to enter the European hotel business.

  • Startups like Numa are targeting a segment that Accors and Marriott have largely overlooked: small urban properties with less than 100 rooms.
  • In Europe, the majority of hotels have less than 100 rooms.
  • Numa represents a potential operational partner that can make them profitable enough for institutional investors.
  • Owners can rent to Numa or sell to the LaSalle-Numa combination.
  • Numa has no reception. Customers check in virtually by uploading photos of their ID documents. Data, such as name and date of birth, is extracted by software and checked for authenticity. Guests digitally unlock their room doors.
  • The startup handles special requests, such as late check-in, remotely.
  • About 60% of its tech stack, like its pricing algorithm, was developed by its 40-member tech team, the company said.

Why would consumers stay at a Numa property instead of a traditional franchise-style branded hotel?

  • At Numa, the average age of customers is 35 years old.
  • “That’s 14 years younger than the average age of hotel guests in Europe,” said Christian Gaiser, Founder and CEO of Numa. “This is a group that first traveled on Airbnb because it was cheap. Now they have more disposable income, but they still want a similar customer experience. »
  • Numa wants guests to recognize its brand as consistently offering certain amenities, such as free Wi-Fi and minibars with a handful of free items.
  • He usually gives a name to each building. The name is a sort of sub-brand, showcasing decor or Instagrammable features.
  • Its under-marked buildings include Sketch, a hotel located in the trendy district of Friedrichshain in Berlin, close to popular techno places. The hotel features custom graffiti and preserved industrial decor. “If this building could talk, it could tell so many amazing stories,” Gaiser said, quoting an investor.
  • His last building in Vienna bears the name Drink because workers built it from spruce wood in a city where most buildings are made of stone or concrete.

Numa has raised $60 million in venture capital to date. But hotel venture capital firms have traditionally not raised capital, where investors typically expect high multiples of return on investment. Can Numa really be a fast growing company?

  • Gaiser said venture capitalists are focused on capital efficiency and that Numa delivers. He is well above average at quickly turning a property with small margins into one producing high margins, he said. This reduces the cost of launching new locations. The startup’s resilience during the pandemic, when it maintained neutral to positive cash flow as other hotels lost money, suggests it managed downside risk well.
  • Other sectors, such as grocery, have also seen low margins, but venture capital-backed companies have managed to build profitable scale-ups like Germany-based Hello Fresh.
  • “Why shouldn’t this also happen in the hotel space?” Gaiser said.

LaSalle, a subsidiary investment manager of JLL (Jones Lang LaSalle), a public real estate professional and financial services company, is betting half a billion euros on Numa. Many hoteliers will watch how this bet plays out.

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