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30 % during Miami Music Week in March . Generator Stockholm and Dublin are forecasting a 50 % year-over-year increase in revenues during the 2024 Eras Tour , while Freehand Los Angeles bookings were up by 15 % during Coachella .
Interest in what was a niche , overlooked space is now high amongst institutional investors . An example being TPG ’ s 2023 sale of the 40-property a & o Hotels and Hostels for € 800 million to private investment firms StepStone and Proprium . Another hotel chain , similar in ethos and feel to Generator , Meininger Hotels has been
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WE CAN ACHIEVE THE SAME RATES AS A FOUR-STAR HOTEL , WHILE OPERATING WITH ONE- OR TWO- STAR COSTS
– ALASTAIR THOMANN , CEO ,
GENERATOR AND FREEHAND
HOTELS
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rumored for some years to be up for sale by owner Cox & Kings . It ’ s all part of a move toward consolidation in the industry , Thomann believes . “ If you look at the big players , there ’ s going to be consolidation . You can feel it ,” he said .
So-called bolt-on acquisitions by major hotel companies continue to have their day . Examples are recent ( Hilton ’ s purchase of Graduate Hotels ) to older ( the 2022 acquisition of Germany ’ s Vienna House brand by Wyndham ). A potential sale of Generator could include both brands packaged together or separated out , Thomann said .
PIGEONHOLING GENERATOR Beyond its Hollywood portrayal , hostels , and Generator by extension , imply shared accommodations , bunk beds , communal bathrooms , rooming with complete strangers . It conjures travelers hauling immense backpacks — mainstream traveling it is not . Generator straddles both sides , a hybrid of shared and traditional accommodations . Consider its D . C . property : 25 % of the accommodations are shared and individuals can book single beds for as low as $ 25 per night , depending on the time of year . At all Generator properties , there is the ability to book a single bed in a room , though , as Thomann pointed out , that won ’ t be the case in New York , where prostitution laws prohibit it .
Most of the newer
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Generator hotels have ensuite bathrooms only , while some of the older , European properties still include shared hallway bathrooms , which , for those solely booking a bed , is preferable : “ Who wants to get woken up in the middle of the night ?” Thomann said .
Meanwhile , Generator has appealed even more to traveling families post-pandemic , who , instead of paying for two rooms , can book a private four-bed room where accommodations look strikingly similar to a sleeping car on a train . As Thomann pointed out , there is true value in this , where fouror even three-star hotels have priced out some families . “ You have the same 270 square feet of room , where the whole family can stay together ,” he said . “ It ’ s an affordable alternative .”
Don ’ t get it twisted : To believe that Generator is a low-cost alternative with slim profit margins is to not understand the complete model and offering . One of its more popular properties Generator Amsterdam has rooms that go for more than € 500 per night . At Generator Miami , a superior suite has a flexible rate that reaches over $ 530 a night before taxes and other fees . And , as Thomann pointed out , room revenue is not actually where it makes its money . The 76-room Miami hotel does around $ 3 million per year in room revenue . It does more than double that in alcohol sales , Thomann said . “ Our demographic is social and will spend money on ancillary
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products ,” he said .
Generator further benefits from ancillary revenue by turning to an airline model and charging for ad-hoc products , like $ 5 for a lock ( shared rooms have lockers for safe storage ) or another $ 5 for towel . “ It makes the total expenditure that much higher ,” he said .
In stronger months , Thomann said profit margins can run as high as 75 % in some of the hotels , entirely because of the business model . As he explained it : “ We can achieve the same rates as a four-star hotel , while operating with oneor two-star costs .”
GROWING UP AND OUT Generator ’ s growth is through conversions , which allows it to be in the most desirable city locations . The Generator Madrid , right off the bustling Gran Vía , was a parking garage conversion . Meanwhile , Generator Dublin is located in the hip Smithfield neighborhood , close to Temple Bar .
When it comes to locations , Generator Paramount , a relaunch of the former Paramount Hotel , which for two decades was under the operating thumb of Ian Schrager and received a Philippe Starck-led makeover in 1990 , is in a prime position in Manhattan ’ s Theater District , abutting Times Square . How Generator won the operating contract for the 600-room hotel is a question Thomann often gets . Rightfully so : “ Why the hell would they
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July / August 2024 hotelsmag . com 71 |