Following the acquisition by Queensgate Investments, Alastair Thomann, chief executive of Generator, has transformed the company from a provider of cheap hostels to a pioneer of multi-segment accommodation.
As the latest phase of expansion begins, he here tells Breaking Travel News editor Chris O’Toole about his ambitions for the brand
If you have a long-suppressed memory of trying to get to sleep while a group of rowdy backpackers drank all night in the bar below your room, you might be delighted to find out Generator has undergone something of a transformation of late.
Once the hostel of choice for those travelling Europe on a shoestring budget, the company has reinvented itself as a sleek, stylish accommodation option.
Currently beginning an expansion in North America, Generator is now seeking to position itself as an industry disruptor, one bringing professionalism to the somewhat grubby hostel sector.
Speaking to Breaking Travel News in London, Alastair Thomann, chief executive of Generator, explains: “We recently launched a brand change, one that returns us to the original name – Generator.
“Generator Hostels was only around for three years, and was European-led: hostels are very cool in Europe.
“We are now trying to move away from that, to not be defined as much.
“We still have that hostel vibe, but we now have expensive suites, fantastic private rooms: some of our hotels have more private rooms than dorms.
“There are also long-stay apartments, which means we are even able to target corporates for the first time - we now play in a lot of segments.”
With a nod to the latest property in Miami, he adds with a smile: “Of course, moving into the United States, we also have to distance ourselves from the movie Hostel – which was a concern for Americans, they are scared!”
Generator has undergone a complete transformation since its acquisition by Queensgate Investments
The impetus for the change, from grimy hostel provider to global hospitality pioneer, has been driven by Queensgate Investments, which acquired the company in a £400 million deal in 2017.
Queensgate saw an opportunity to professionalise a whole sector of the market, implementing systems seen as standard elsewhere in the industry to drive up profits at Generator.
Thomann continues: “We now benchmark ourselves against four- and five-star hotels – because occupancy and room rate is so high, that is where we are now positioned – more people to the room really drives that rate.
“But this has been interesting, the metrics used to measure the business.
“We have an average bed rate, an average room rate and an average guest rate – when we came into the segment, we were amazed to discover there we no real systems for our type of business.
“The property management systems and point of sale systems were not developed, they could not talk to each other – selling by the bed means there is never a check out in the room, which caused problems.
“The systems part has therefore been a big focus for us, installing these professional systems, able to measure the total value per guest – something that has existed in the aviation industry for decades.
“We have come in as outsiders and said this needs to grow up quickly.
“This is not something the guest would notice – the takeover by a private equity company has not diluted the cool factor of the hotels, this is all behind the scenes.”
Generator has a strong presence across Europe
A large part of the evolution of Generator has been this growing understanding of the guest, with the company less keen to maximise room rate if money can be made on auxiliaries such as food and beverage.
“There is now an understanding of the guest,” continues Thomann.
“Hostels would turn away a group of visitors because they were paying £5 less for a room, without realising that those people then go and spend much more in the bar, for example.
“We are now completing the roll out of this technology, that gives us this insight, across the properties – as well as the revenue management systems, something that has been a complete norm for everybody else in the industry.
“This has immediately pushed numbers up – the bottom line is up 50 per cent over the past 18 months.
“This was a company that people were looking at and asking, why would Queensgate spend more than £400 million on it.
“All of a sudden, people are looking and seeing that it was a bargain.
“This year we are looking to add another 20 per cent to the bottom line, again largely based on this systems overhaul, before we turn our attention to stage two, which is expansion.”
Food and, especially, beverage is a major revenue booster for Generator
With properties in Dublin, London, Copenhagen, Hamburg, Berlin, Venice, Barcelona, Paris, Amsterdam, Stockholm, Rome and Madrid already in place, Generator has a strong presence in Europe.
Washington DC has just been signed to double the footprint in the United States, with Thomann keen to stress speed is of the essence for further deals.
Santa Monica in Los Angeles is mooted as a possible example, if the right location can be found.
“It is likely it will be existing properties that we rework,” he explains.
“We have to be quick to market and we do not have time to build – it can take two years design and build a hotel, and a further two to establish and that is too long.
“We have to be honest, we are owned by a private equity house and they will want to exit at some point, so we have to move fast.
“We can buy a mid-market property, put our logo on it and make money.
“It is still a good time to buy real estate – there are strong numbers everywhere.
“Further ahead there is potential for an acquisition – a group takeover – although there are no firm plans on who this might be as this point.
“In terms of eventual size, I cannot say, it might be 25, it might be 35 hotels, we will have to see.
“Queensgate still has a lot of capital it has to invest, so the biggest pressure we are under is spending money, which is an unusual situation.”
With the model proving successful, another pressure is likely to come from larger industry players seeking to get involved in the growing segment.
“We own all but two of the properties – and as we expand, the new properties we buy will be purchased with own funds,” continues Thomann.
“Queensgate would not be doing this if it were not making money – they are on to a good thing.
“But we have to use this time, all the large players are chasing us, and we have two or three years.
“People have missed a trick – even our dorm bed suppliers are seeing an uptick in interest – the big players know they have missed out and are taking a look at this market.”
When it comes to filling the expanding room stock, it is diversity that will be key, Generator hopes.
While large hospitality companies are targeting an ever-growing number of brands at specific groups of consumers, Thomann hopes his company will be a broad church.
“We are moving in the opposite direction to the industry, which has been keen to define segments – apartments, hotels, long-stay.
“But we are asking, why are we doing this, rather than opening ourselves up to everybody?
“At Generator we offer products to all segments, however long you want to stay – just a mattress for the night or a suite overlooking Miami Beach.
“We need to be open to guests – at the right time of the year to welcome the right customer.”
He concludes: “For the people who want to continue to see it as a hostel, we still have that segment, but for the others, we now also offer something different.”
Generator is one of Europe’s fastest-growing hospitality brands, located in the most central locations across Europe.
Pioneers of affordable luxury, all properties include a range of room types from shared to private bedrooms, chill-out areas, bars, cafes and a variety of spaces available for private hire - from street facing or basement exhibition spaces to penthouse suites and rooftops.
Find out more on the official website.