The Future of Smart Stays with Dr. Josef Vollmayr (Limehome)

00:03
Kristian Lupinski
Welcome back to Pillow Talk Sessions. I'm Kristian Lupinski, joined as always by my co host, Jessica Gillingham.

00:08
Jessica Gillingham
Thank you, Kristian. And today on the podcast, we're joined by Dr. Josef Vollmayr, who is the co founder and managing director of Limehome, which is a hospitality brand that operates across Europe. We're going to be exploring with Josef whether experience led stays are still what guests are value most, the reality behind Poptech's big promises, and how hospitality operators can stay resilient in an increasingly volatile market.

00:37
Kristian Lupinski
We'll also explore the balance between efficiency and comfort in hotel design and why the conversation around direct bookings needs a serious rethink.

00:45
Jessica Gillingham
Josef, welcome to Pillow Talk Sessions. It's really good to have you here as a guest, so thank you very much for making the time. And before we kick into the discussion, which I know we're going to have a really interesting discussion because you've got some great thoughts on various things that we'll talk about. But could you first set the scene and tell us a little more about Limehome and then also about yourself and your background and I guess how you came into hospitality as well.

01:15
Dr. Josef Vollmayr
Thanks. I'm very pleased to be part of the podcast and thanks for having me. Yeah, so I'm Josef, Dr. Josef Vollmayr. So the doctor I think already shows that I'm not originally from the space. So I used to be a management consultant for five years at McKinsey and then decided to start Limehome, which is a leading tech enabled hospitality operator, how we call it in Europe. So we have around 11,000 units under contract in Europe. And I think what sets us apart is that we are able to operate our locations with very limited stuff. So basically already, as of today, 85% of our reservations basically are handled without any manual touchpoint. And this of course takes out a lot of operating costs. And now we're rolling out the concept across Europe and yeah, it's working quite well.

02:16
Jessica Gillingham
And you're in a number of European cities and countries and not just kind of primary cities, but also secondary cities as well, I believe. Do you want to just give us an overview of where Limehome is like, where and what the concept is as well, from a guest perspective as well.

02:35
Dr. Josef Vollmayr
So I think like the original thought was to basically have a very flexible product which fits both business travelers, leisure travelers, which works for families, and also the growing demand for, let's say, leisure travel. And since we figured out that travel basically happens everywhere, if you look into the numbers, only 30% of the travel happens in the typical A cities, 70% happens in B, C, D cities, remote locations. We always like wanted to be able to be very opportunistic. So we have developed a concept as said, which is very lean operations and therefore allows us also to go into smaller properties. And smaller properties of course work very well in BCD cities. So we have 45, 50% of our rooms in Madrid, Berlin, the A cities of Europe, but also in smaller locations.

03:32
Dr. Josef Vollmayr
And I think the business model, how we have developed this works soon super well in these cities. And usually or quite often they also offer higher margins for us.

03:41
Jessica Gillingham
And then final question for me before we get into the discussion is how does a McKinsey management consultant go from, you know, a PhD to running a hospitality brand?

03:54
Dr. Josef Vollmayr
That's a very good one. I actually, I wanted to start something on my own and then I, I looked into different industries and in the end the hospitality industry is one of the largest ones in the world. I think depending on how you cut it, I would say the third largest one. It's, I still believe the least digitized one probably together with real estate as a whole. And then I just saw a massive opportunity spending thousand nights in hotels, seeing that some of the hotels are inefficient, at least when you look at it from the outside. And then we just kicked it off and gave it a try. And I think over the last now almost seven years, it was a lot of learning by doing.

04:41
Dr. Josef Vollmayr
I think the first one, two years were quite, I think, bullish that we reinvent the wheel and can do everything better. I think we got a bit more humble. But the overall thesis, the overall thoughts still hold true. I think there is a huge value in digitization, there is a huge value in having a more flexible real estate product. And there's definitely a value around a product which works for different traveler segments and is not as let's say specifically designed for a business traveler with 16, with a 16 square meter room.

05:16
Kristian Lupinski
No, it's a really interesting background in your journey so far. And then yeah, I'm excited to start talking about some of the topics that we have planned for and I think we should just jump straight into it. You know, there's a growing argument that today's travelers care more about functionality and consistency than, you know, a traditional high touch service. Do you think that the hospitality industry is placing too much emphasis on these experience driven stays and you know, how should that influence how we design and operate, you know, modern Accommodations, I mean.

05:48
Dr. Josef Vollmayr
Most, most questions are best answered with it depends, right? So in the end it's both a yes and a no. I think if I probably start with a yes with a no. Sorry. If we look into the luxury segment, which is also growing, right? It's a nice segment, growing especially in Southern Europe, it's all about the experience. You need a personalized service, attention to detail. It also by the way, applies to remote destinations, wellness bar focused offerings, for instance. I think in all these cases where the accommodation itself is a primary reason for the trip, it's about the experience. But these segments in fact are still rather small. I think probably in the end it's 10 to 20% of the entire overnight stays. Like luxury, probably 10%. Remote destinations one is another 10%.

06:49
Dr. Josef Vollmayr
However, for 80% of the total stays, ranging from budget mid scale to even like upscale segments, travelers do not spend a lot of time at or in the property. And in these cases there is usually a very clear purpose for a trip. You need to go somewhere and you need accommodation which simply supports that purpose in the most efficient and cost effective way. So in the end the stay just needs to be clean, functional, as efficient as possible, because guests are anyways mostly outside of the property. And there also, I think the brand's main role outside of these luxury segments is to convey a sense of professionalism, consistency and quality. And that's what matters most.

07:38
Dr. Josef Vollmayr
And then in the end, operators just have to choose do they want to compete around service in the luxury segment, which gets quite hard because there are strong brands, it's hard to find, personnel costs are much higher, or they, or do they want to compete in the much larger market segment around value for money. And I think if we now think about who's traveling right, it's already, as of today, 65% of the people who are traveling are millennials and younger generations, which are quite cost sensitive and maybe can't spend that much money from travel, although they spend a larger share of their wallet for travel. So I believe if you want to build a large growing brand, it's probably much easier in the mass market.

08:27
Jessica Gillingham
So one of the things that we talk about, Josef, on this podcast, one of themes is because on the podcast we'll have hospitality leaders, but we also have sort of the living sector leaders, you know, but one of themes that we talk about is the hotel or we explore is the hotelization of real estate. And that can, I guess, mean different things. But, but one of the meanings of it is that we're now real estate is really looking at more of a service driven experience. And what you're kind of saying is almost the opposite of that actually that service piece is really important for that 10%. Whether it's because you're going to stay at a resort and you know, you're going for or you're a luxury traveler.

09:15
Jessica Gillingham
But actually for most of us, for most of our trips, that's overplayed perhaps that kind of hotelization. It's more that we want function, we want that functionality rather than that, you know, the experience of it or the service of it being the key driver for us. Does is. Am I correct in sort of summarizing that as being more of your position?

09:39
Dr. Josef Vollmayr
You know what's coming, right? It's a yes and a no. It depends a bit. So I think maybe tackling the first part of your question, I think the hotelization of like real estate, I think this probably holds true because to a certain degree because in the end there is a large growing segment about serviced residences and so forth. So basically there is a small service level for usually residential assets where people have a higher willingness to pay because they don't have to take care of anything, right? You get the furniture, you can just move in and that's it. If you compare this with the like full service upscale luxury hotel segment, it's still a completely different level of service. So like it goes basically from zero service to. To very reduced service.

10:27
Dr. Josef Vollmayr
And this probably holds true, but it's still a very different segment if people stay for a month or six months. And this is definitely growing because people are more mobile, people work remotely, they go on project work for three to six months. So this is something we can see all across the world. I think when it now comes to the second part of the question, I truly believe that the full service hotels will become more a niche. Why? It has become extremely easy for people to travel to new cities and destinations because all information is available, you know, where you find the right cafe bars, restaurants and so forth. So you're not dependent on the typical like full service hotel where everything happens within the building anymore. So this has become easier. People are also way more open to that they want to explore.

11:24
Dr. Josef Vollmayr
There is even a certain resistance versus like the large hotel bonkers because it gives a different perception when you travel. So there I'm quite confident that this is rather a declining market segment and we'll concentrate on the luxury segment.

11:41
Jessica Gillingham
In hospitality there's a great emphasis on guest experience and I have a view on this. And I have actually just written a book that comes out in three weeks, although it probably will have come out by the time this podcast comes out called Tech Enabled Hospitality. And one of the things that, that I have discovered in the book or the book is about, if you like, is that guest experience can be done digitally. And that's actually the way, you know, and you talked earlier on, you know, that hospitality, just like real estate, is really behind on digitalization of the customer experience. And actually guest experience can be done really well without a human being in front of you as long as you get that digital bit right.

12:28
Kristian Lupinski
So yeah, I'm just going to jump in there as well because that's a great segue into our next topic. As, you know, technology, as Jessica mentioned, you know, has, you know, become kind of a cornerstone of this modern hospitality operations. But not all solutions scale effectively across regions to property, you know, types, you know, where do you see the biggest gaps between what proptech promises and, you know, what it actually delivers on the ground?

12:55
Dr. Josef Vollmayr
It's actually a very complex one and I will try to break it down a little bit because when I usually hear proptech solutions, for instance, this is for me it's all about devices usually, right. I think when it comes to these devices, I'm thinking about smart tam of stats, for instance, like cooling systems and stuff and maybe energy efficiency solutions. So I think there, the major problem for me is like usually these solutions are market as plug and play solutions, but in reality it's hard to impossible to integrate them into like an existing system across different regions and countries because like even in Germany there are so many different meters, so many different building types, layouts. It just doesn't work. It requires so much customization that the use cases don't work out, at least at scale. I think that's one.

13:50
Dr. Josef Vollmayr
And we also have done a lot of, I come to this in a second. The other major challenge is, I mean we're still talking about hospitality where people stay for two nights, two and a half nights on average. So guests usually don't have time or the interest to engage meaningfully with in room devices proptech. So it's much easier to just open the window and like to manually cheat basically the systems. And in the end like features like smart thermostats, for instance, which we rolled out, they become largely ineffective. So our own data even show that we can reduce energy consumption. For instance, in bathrooms where people don't open windows, it doesn't work in the sleeping Area for instance, has very minimal impact. So I of course do believe in technology, but I do not believe in these devices.

14:44
Dr. Josef Vollmayr
I think that's something very like important for the residential space but less for the hospitality space just because it's difficult to use them. I believe in two things. I think first, guest facing technology needs to work on the guest's own device, which is basically the phone. So whatever you want to roll out, it needs to be on the phone, even tv. Like you need to connect your phone to the tv, you need to get all the information on the phone. There is very limited to no willingness of guests to learn, adapt to a new device. That's one I think the second and happy to also dive a bit more into details there.

15:30
Dr. Josef Vollmayr
I think the second point from my, is, from my perspective is the biggest efficiency gains in hospitality, they come from backend systems that improve the operational performance of the operator and not necessarily the guest facing solutions. Because I mean we have seen it also across some hotels and I will not give you very specific examples now, but many hotels have rolled out digital check in solutions. They have rolled out, I don't know, revenue solutions for instance, but the problem is if you're not capable to connect them to your backend system, it's mainly useless. Some people check in online. If they're not forced to, it might be 20, 25% and then the hotel still has to print out the information in documents and type it in manually into their system. So there is no efficiency gain.

16:21
Dr. Josef Vollmayr
And as long as you still offer a physical solution like guests just stay to the stay in the same patterns. So I believe it must be digital first, that's one. And secondly it must be an integrated system which connects guest facing solutions or the back end systems because that's where the efficiency gains are.

16:42
Jessica Gillingham
So by that are you saying that, you know, we, the hoteliers must look at, or hospitality operators must look at the operational side first and then the guest stuff comes on rather than the other way around?

16:56
Dr. Josef Vollmayr
No, exactly. Because I mean in the end it's not an easy industry, right? I mean none of the things we're dealing with are rocket science. And that's probably why it's also not as sexy for some of the brightest people in the world. But it's very complex and it's very complex to combine different topics of digitization. Is it like the guest facing part? Is it the guest identification, is it pricing and so forth? And hotels are very complex systems. They have running systems which work with the operational setup. So if you now Add something to a very complex system. You have so many breakpoints, so you first have to rethink how do you want to build your system in the backend. And then you can add guest facing topics in an efficient way.

17:45
Kristian Lupinski
Super interesting. And I think, you know, you're right about a lot of points, especially with, you know, IoT devices. You know, they are cool sometimes but you know, they're very limited and then they end up not working after a while or not being compatible with any other systems that you try to introduce. I want to talk a bit more about the hospitality sector in general. As you know, it's under pressure from rising costs, changing guest behavior, market volatility, you know, what strategies do you believe operators prioritize to stay resilient? You know, especially in this competitive and evolving environment.

18:21
Dr. Josef Vollmayr
Yeah, I think like from a purely conceptual point of view, the recipe for success is quite clear. I'll come to this in a second because it's about the execution. But I think to introduce it a little bit, I would like to talk again about the main developments now and I think you pointed them out already. Yes. First, cost pressure is arguably the most defining challenge in the market today. Why? Well, what do we see? Personal costs are more or less rising by 6 to 7% annually. And like, I mean, of course I'm German, you probably can hear it, the minimum salaries will even increase further by around 10% over the next two years. So and I believe ADRs will not rise linearly with the personal cost increases. So the main challenge is how are we able to automate, to digitize, to take out costs.

19:21
Dr. Josef Vollmayr
Right. Again outside of the luxury segment. Secondly, development costs have increased by around 50% since 2020. And of course this has led to rising rents. Usually they're indexed, so existing rents have also grown or increased, but not as much as new rents. And then you also have the energy price topic, right. So costs are up in Germany for instance, 40% UK, probably similar versus 202020 or 2019. That's one. So we have to find solutions on space efficiency because rents up, we have to find solutions about reducing the personal cost share then secondly, I mentioned it previously, 65% of the travel spend already comes from millennials or younger generations. They are all digital natives. They're more open to self service models, digital solutions which create both opportunities and expectations for hospitality providers, of course.

20:21
Dr. Josef Vollmayr
And then lastly, probably the third main driver travel patterns have changed and evolved since COVID already pre Covid, but it definitely accelerated the Development, there are much more families traveling. The lines between business and leisure travels continue to blur. And as a result there is a growing demand for a like accommodation product which is more flexible and like maybe has a kitchen, can accommodate families, has a place to work, has a place to relax. And in the end I think if you combine these three things together, as mentioned before, the recipe is very simple, but it's very difficult to execute in practice because you have to change your entire business model. It requires a business with a very high personnel efficiency. And here of course, technology plays a critical role, particularly in automating repetitive labor intense tasks to reduce staff needs without compromising quality.

21:28
Dr. Josef Vollmayr
And that's I think the 11 part. And then secondly, there is a possibility to reduce services that are both labor and space intense because people are open to go outside of the hotel. So this might may include outsourcing, working with partners or maybe just leaving them away. That's the other option because there are not too many hotels which really make money with additional services. And then thirdly, designing properties for maximum space efficiency without compromising on room size. And the logical consequence there is like eliminating or minimizing underused common areas, reducing space allocated to service and back of house functions. And I think also very important making sure that there is a layout flexibility to allow for instance for conversions or mixed use application or properties. Because there are not that many development plots for developments available in city centers.

22:28
Dr. Josef Vollmayr
So you have to be flexible to go into these assets and especially like the typical hotel product where every room needs to have the same size, usually lose a lot of space to make a proper layout for these. And I think last but not least, offering a more flexible accommodation product which serves a wide range of guest profiles, business leisure, families, couples and so forth. Because in the end I think that's also one of the main hypotheses I do have and we tried probably hundred times to build a proper traveler segmentation. I am myself 100 different segments. If I travel alone, if I travel like for work, if I need to stay there just for the, or if I spend some time, if I need to work there, it's almost impossible. So flexibility is key.

23:17
Dr. Josef Vollmayr
And if you want to build a brand for a large share of the market, you need to be able to offer a flexible product. That's I think my strong belief.

23:25
Jessica Gillingham
And what about offering sort of a more hybrid. So it's sort of going beyond that flexible, but it's maybe offering the midterm and the longer term like I guess almost like Branded residences or living like is that something that you look at Limehome?

23:44
Dr. Josef Vollmayr
I mean, yes and no. Again, I think first we are a commercial operator in the short stay accommodation space, so we're not looking into like branded residences and so forth. And like also what we have experienced and also the way how we manage, for instance our distribution and pricing, we basically optimize everything for margin and there's a higher willingness to pay for shorter stays, which is also no surprise, right? Because like the longer the stay is, the more residential offerings become competitive and then usually we are too expensive to be attractive, while we are very price like beneficial or value for money, a good value for money offering or for short stay offerings. So that's not our key. What we still believe in is again the flexibility. And that's also why we have kitchens in most of our rooms.

24:43
Dr. Josef Vollmayr
Because the kitchen might not be the primary driver for the booking for many of our guests, but it might be for 10, 15, 20%. And this helps us also to reach high occupancy rates because families who want to cook when to have a glass of wine and maybe even just order food and sit down on the table for them, it has a benefit. So yes and no, it helps for the flexibility to have a more home like extended stay, long stay product, but it's not the primary intention to actually have longer stays.

25:20
Kristian Lupinski
I had one more question on this topic before we move on to the next one. You know, what role is community building or partnerships with local businesses? You know, what role do they play in strengthening hospitality bands?

25:35
Dr. Josef Vollmayr
I think like the whole community aspect, I think it becomes more important the longer the stays. So it's nothing which I think we think about too much, to be honest, because it's on the one hand side, not our core segment and secondly, it's very difficult to implement because I think building a community only works if you have a local person there which really cultivates the community. And that's not our key. I think the second aspect to the question is do you want to have this full service, one stop, shop, hotel or do you want to basically more or less fit into the existing infrastructure? And we have to fit into the existing infrastructure because we are not the full service offering. So if you don't want to compromise on the services, we need to find local partners, cafes, restaurants and so forth.

26:37
Dr. Josef Vollmayr
And the strategy there is to use the guest device, offering them an app to give them the best recommendations and ideally directly work with partners where they can get a preferred offering.

26:48
Kristian Lupinski
I want to go Back to something that you were talking about in the previous answer and that is, you know, the space, you know, being flexible with the space. Maybe we can talk a little bit more on that is, you know, space efficiency is becoming a competitive advantage, especially in urban hospitality. You know, how can rethinking floor plans in common areas lead to better performance? And is there a risk of compromising guest comfort in this process?

27:13
Dr. Josef Vollmayr
Yeah, I think in the end comes down to the business model, right? Because if you think about like how hotels do their floor plans and the layouts, they're extremely good at optimizing room space. If you think about Motel One, Premier Inn, Citizen M, I think they are capable of making small rooms look like quite spacious and there's everything in what guests need. So the main lever in spatial optimization is the building itself. It's less the room, it's the building. And to be able to optimize the total space efficiency of the building, it's a business model topic. Let me elaborate this a little bit and I even start with a number first. So we have a space efficiency of on average 72% while a regular hotel rather has 50%. So 50% of the gross space being used for net rooms. And why is this feasible?

28:15
Dr. Josef Vollmayr
First, I think hotel rooms usually use a lot of built in furniture, right? Which makes a lot of economical sense because you bring down costs if you have the same room layouts, if it's entirely standardized, if the room size varies, it gets very expensive because you need to customize everything in the end. Secondly, hotels also usually have very strict operational standards and they require a uniform room size and layout. If not, it's very inefficient. And if they now fit in the same uniform rooms in a more complex building with not too much like window space, for instance, the building geometries, the window niches, deep floors are very difficult to utilize effectively. So I think flexibility on the room sizes helps a lot. And then thirdly, hotels usually require a quite large team on site.

29:18
Dr. Josef Vollmayr
If you have 100 rooms, I think it's minimum 20 people with reception and so forth just for the daily operations, which already in turn necessitates like a substantial back of house space. And then I think the last point, which also is, I think quite obvious is the additional service space for breakfast, F and B outlets, which is usually highly space intensive. And I mean there are a lot of smart ways to optimize this space like combining reception desk with bars and so forth, which you already see in practice, but they still require dedicated areas. And I think being able to work on around these four levers requires an entirely change of the business model and then you can become way more space efficient. And space efficiency in the end is key.

30:06
Dr. Josef Vollmayr
It's not only about optimizing rents, it's also about being capable of going to mixed use buildings, going into conversions and also making like the CapEx or bringing down CapEx requirements a lot.

30:21
Jessica Gillingham
Are there any communal spaces or I guess what we might see in more traditional hotel hospitality offerings that you think are still required on the tech enabled model or on your business model? Like is there something that you just would never get rid of?

30:38
Dr. Josef Vollmayr
I mean it's in the end it's the entrance area, right? You need the entrance area. And we also always plan in the layouts with a certain space for one person on site because there might be regulatory changes and so forth. So this is something we just keep there as a security buffer for us. But in the end everything else can be eliminated from our point of view. And of course you have to stick to fire and safety regulation, but other than that it can be eliminated completely.

31:06
Jessica Gillingham
And do you use any data or kind of business insights, behavioral insights on how guests approach and feel and I guess sort of respond to the change, that change. Is there anything that you, beyond reviews and beyond booking patterns, is there anything that you use to sort of get that feel, you know, to get a sense of satisfaction?

31:31
Dr. Josef Vollmayr
Yes, I mean we do a lot, I mean maybe mentioning a few things. So first, of course, besides the typical reviews, we also have an NPS that promoters call for every booking. We also do quite a lot of dedicated surveys. For instance, were working now for one and a half years in our new design concept where we also had quite a lot of guest focus groups also assessing some of the changes, mainly from a functional point of view, to be honest. And then what we do, we have still a lot of touch points with the guests, right? So they write us emails, they might call us. And what we do is we basically we track every contact, which is like obviously a lot on a daily basis and they are classified.

32:25
Dr. Josef Vollmayr
So we know exactly what is the time consumed of our guest relations team for certain contact points with the guest. And just to give you one example, there doesn't directly address your question, but the most time actually we consumed on or we needed for new guest reservations. Like people call us and they want to make a reservation or they want to prolong their stay and it might lead to a question probably around the distribution, but this is it's very complex because people have specific demands for a room. They want to have a nice view. You have to ask for all the personal details, you have to ask for the city and so forth. This is very time consuming and what we did there, for instance, we implemented a virtual AI agent which is basically covering this task.

33:16
Dr. Josef Vollmayr
So it doesn't have to be done by human because it's in the end the most customer success team hours we are using for these tickets. So now coming back to your question, we know every interaction, so if there are too many noise complaints, if noise is a topic, we will rework our building standards or we will consider this for the next signing. So this is the main source of our internal intelligence.

33:44
Jessica Gillingham
So I guess you're always iterating based on feedback.

33:47
Dr. Josef Vollmayr
Yes, there are smaller and larger iterations. Obviously you can't change your building standards and your room design every three months. So we do it usually once a year. Because also to explain this a bit, we work for instance with warehouses for our furniture. So we buy at scale and then it needs to be a concept for at least one year and then basically we go into the negotiations with the suppliers again. And for instance, the whole design piece, it needs to be negotiated with the landlords of our pipeline. Right. So you can't change it constantly. So these are major changes which need to be well prepared. But there are smaller iterations which are happening basically on a daily basis based on the guest feedback and insights we get through the ticketing system.

34:34
Kristian Lupinski
You always got to continue to evolve no matter what industry you're in or, you know, where you work, you got to keep building onto it. And if you stay stagnant too long, then you're left in the dust. You know, there's one topic, you know, since I've been in hospitality that all hotels talk about and that's direct bookings. Now direct bookings have been long seen as the holy grail for hospitality brands, but many operators obviously still rely heavily on OTAs. You know, how should the industry approach its distribution strategy? And is, you know, chasing direct share always the smartest long term play?

35:12
Dr. Josef Vollmayr
It's, it's probably the most controversial topic I'm always facing because it feels like I always have a different opinion than almost everyone else. I don't know, I'm still not 100% sure if I'm right, but happy to tell you my perspective, I think, I believe that direct booking share is not a goal in itself. No one should steer a company based on direct booking share because it's in the end, it's the result of very many strategic decisions. Actually if I would optimize the company for direct booking share, it would definitely harm our profitability. And why I think I would first probably start with the different booking channels. I mean looking in the, looking at the market, probably 45% of the booking volume is purely coming from online channels.

36:05
Dr. Josef Vollmayr
And online channels is probably like 30% of the total demand from OTAs, 15% from the hotel websites. 55% of bookings are still coming from very physical challenge channels. It could be someone calls, it could be a tour operator, agency business and so forth. And these, let's say offline channels are usually not very efficient. There are a lot of personal costs involved, a lot of manual effort and usually they are also quite heavily discounted. There are just a few hotels out there which actually publish the adrs by channel. If and if you really look into this, usually the OTA channel is the one with the highest adr, the direct website channel is the one with the second highest adr and then everything else is heavily discounted.

37:04
Dr. Josef Vollmayr
Like you have to guarantee an occupancy so you miss the high event prices, you have to give them a fixed price and so forth. So it really, it can really harm your adrs. We actually, we only focus online channels because they run through completely automatically and as said, like the ones who are calling us will now even replace it with a virtual AI agent. So that's one. And then so taking ADRs and costs into account, usually online indirect channels are the most profitable ones. And if you now think about your strategy, increasing direct booking share would mean you have to fight against booking.com and Expedia in marketing spend. I think booking.com Expedia, they spent US$7 billion last year for marketing. And given these amounts, it's just an uphill battle.

38:08
Dr. Josef Vollmayr
I mean, I don't know how much Marriott is spending, you need to look it up. But probably even for Marriott, this is a difficult game. They win the game through the loyalty program this year. But like competing for a new traveler who hasn't been to the city and doesn't know the hotel supply on site, it's always better. It's impossible to compete with a booking.com in a new city. And I think then the third aspect comes also into play, which is quite nice for the industries. Guests and travelers are very rational and the market is very transparent. So it's very easy to compare prices. So travelers who are price sensitive and who are willing to invest time to search for the best price. They will end up on your website if you price it smart because you're paying 15% commission.

38:57
Dr. Josef Vollmayr
So if you reduce prices you will get more direct bookings, you will not get all of them, but you will get a certain share of them. So in the end we could easily double the direct booking share if we would further discriminate prices and reduce prices on our website. But that's not the intention because it harms your margin. So in the end the direct booking share a hotel gets in most cases is rather a signal of inefficiency unless it has a very strong brand like a certain history.

39:27
Dr. Josef Vollmayr
Like I could talk with you about Motel One for quite a while and then they have reached a certain stage in B&B HOTELS also where they have quite high direct booking share for certain reasons, but probably because they invested a lot of margin in the past on purpose or unintentionally, I don't know, but they invested a lot of it in the past. So in the end direct booking share is not a success factor in itself. The success, the route to success to increase direct booking share over time is CRM is like having the right strategy and initiatives around optimizing repeat and like linking or getting a loyal repeat traveler base. That's for me the key. But it's a very long term play because the market is so fragmented.

40:18
Dr. Josef Vollmayr
Travel locations are very difficult or different and people usually don't come to the same location like ten times a year. So you need to be everywhere, you need to invest a lot of time into CRM. So it's a long term play.

40:37
Jessica Gillingham
So I've got a couple of things on that. Josef. So firstly, it's really interesting how it's maybe the question is less about a direct booking strategy, it's about an online booking strategy rather than having it come from channels like tour operators, travel agents, phones, whatever. So that's really interesting is focusing on that rather than the direct initially, but in terms of the building because a lot of hoteliers will also be frustrated, let's say with OTA bookings because they don't have that relationship with the customer because the OTA is owning the email address and that relationship stuff. So they're not able to provide what they might feel is the service because they've got, there's a blocker in between.

41:30
Jessica Gillingham
And I suppose my question to you is at Limehome you're happy from what I'm gathering is that if you get bookings from the OTAs, Happy Days, you know that's just another marketing channel for you. But after that then you want to build a relationship. And the thing is you do have accommodation in many cities. So it's not like you are just in Leipzig or something you are in many cities. So you have that opportunity to kind of be there when your travelers go to a different location for work or pleasure. So what do you do to like what investment do you do in terms of keeping that relationship so that they do come back via the direct lime home channel rather than them go and bookfoodbooking.com next time?

42:17
Dr. Josef Vollmayr
Yeah, I think first of all if the booking comes through an OTA doesn't mean that you don't like have the guest details. I think there are very easy ways to work around this. Like for instance, after the guest got the booking confirmation, we bring them into our, we call it guest hub. So basically if the guest needs to be the checker that has to do the check in. If the guest wants to have all the information for the stay, they click on the link and then they are on both web based app and the native app. So even basically right after the booking they get onboarded onto our journey. So that's one.

43:01
Dr. Josef Vollmayr
Secondly, I mean if you want to have the email address or if you want to build the connection with the guest, I mean they're staying in your hotel for two and a half nights and days which is much longer than just a five minute booking behavior. So if you're not capable to basically like make the guest loyal to your experience and probably the just experience has not been great. That's one. And then on the second part of the question like what are we doing? So we have a membership program, we have an application, we have ideally the best value for money offering and guests also get a slightly better price because in the end we don't have to give 15% commission to a booking.com and we can give quite significant share of it back to the guest.

43:55
Dr. Josef Vollmayr
So the guest knows they get a very nice experience, consistent experience, the best value for money and it's even slightly cheaper at our website and they know that we are basically everywhere and they have a smoother and easier check in process and journey. So there is no reason why they shouldn't book through Limehome. It still doesn't happen too often because in the end people travel and then three months later they travel again to a totally different city. So they in many cases are not aware that we are even present in the city and therefore the Density of supply is very important. Like sometimes people have to travel 10 times and they find Limehome three times on booking.com and then they know, okay, now it's really time to check on the website or through the app.

44:50
Dr. Josef Vollmayr
So it's a long term play and it's very important if you want to build a brand which is in the mass market outside of I travel there and the hotel is the destination in itself. And then it's about the scale which is important and the consistency of the experience. Everything else is tactics. Everything else is tactics. Is it CRM, how to structure the membership program, how to do the pricing. This is just then optimization on a smaller scale.

45:20
Kristian Lupinski
That's great and I think this is a good place to leave today's conversation. So Josef, we appreciate you joining, but before we let you go, one last question for you. Anything coming up at Limehome our audience should be aware about or if they're interested, where can they go?

45:34
Dr. Josef Vollmayr
I mean, feel free to reach out. I'm always happy to talk. I'm obviously not from the industry originally and I really enjoy being in conversations with industry experts and smart minds. That's probably the easiest way. And then we will be in London for the Short Term Rental Summit. So I'll be there and happy to talk. And then I think what's next for us? We will open our first properties in the UK and in France soon. Can't, can't tell you more but that's basically a matter of weeks and then we're basically covering almost all European markets.

46:14
Jessica Gillingham
Excellent. Well, I will certainly be at the Short Term Rental Summit so we'll look forward to meeting you in person there Josef. And thank you so much for sharing some of your insights with us. You know, really interesting stuff. So thank you.

46:29
Dr. Josef Vollmayr
Yeah, again thanks for having me. It was great fun.

46:32
Kristian Lupinski
And that wraps it up for today's episode of Pillow Talk Sessions. Thank you so much for joining us. And to stay connected and never miss a conversation, head over to pillowtalksessions.com to subscribe. You can also follow us on LinkedIn for more insights and interviews with leaders shaping the future of hospitality, multifamily living and community driven spaces. Pillow Talk Sessions is brought to you by Abode Worldwide, the strategic public relations agency for tech brands and tech enabled operators. Transforming the way we work, play and stay. Abode Worldwide creates category leaders and builds brand value across hospitality in modern rental living. Thanks again for tuning in and we'll see you next time on Pillow Talk Sessions.