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

SPEAKER_01 0:03

Welcome back to Diddle Talk Selections. I'm Crystal Finski, joined as always by my co-host Jessica Gilinger.

SPEAKER_00 0:08

Thank you, Chris General, and today on the podcast, we're joined by Dr. Joseph Online, who is the co-fandal management dialect of line mode, which is that hospitality land operates across Europe. We're going to be exploring this code, whether experience led data still what gets valued most, the reality behind context big companies, and how hospitality operators can stay resilient in an increasingly volatile market.

SPEAKER_01 0:37

We'll also explore the balance between efficiency and comfort in hotel design and why the conversation around directive bookings needs a series rethink.

SPEAKER_00 0:45

Joseph, 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 Lime Home and then also about your yourself and your background and I guess how you came into hospitality as well?

SPEAKER_02 1:15

Thanks. I'm very pleased to be part of the podcast and thanks for having me. Yeah, so I'm I'm Joseph, Dr. Joseph Vollmeier. 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 yeah, then like 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 touch point. And this, of course, takes out a lot of operating costs. And now we're rolling out the concept across Europe. Um and yeah, it's uh it's working quite well.

SPEAKER_00 2:16

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

SPEAKER_02 2:35

Um so I think like the original thought was to um to basically have a very flexible product which fits both business travelers, leisure travelers, which works for families, and also the growing demand for um, let's say, leisure travel. Um, and since we figured out that travel basically happens everywhere, uh, if you look into the numbers, only 30% of the travel happens in the typical A cities, um, 70% happens in B, C, D cities, remote locations. Um, we always like wanted to be able to be very opportunistic. Um, 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 B C D cities. So we have 45-50% of our rooms in Madrid, Berlin, the A cities of Europe, but also in smaller locations, and uh, I think the business model, how we have developed this, works super well in in these cities, and usually or quite often they also offer higher margins for us.

SPEAKER_00 3:41

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?

SPEAKER_02 3:53

Yeah, that's that's a very good one. I actually um I wanted to start something on my own, uh, and then I I looked into different industries, and um in the end, the hospitality industry is is one of the largest ones in the world. I think depending on how you cut it, I would say the third largest one. Um it's I still believe the the least digitized one, uh, probably together with real estate uh as a whole. And then I just saw saw a massive opportunity spending thousand nights in hotels, um, seeing that some of the hotels are inefficient, at least when you look at it from the outside. Um, 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 um learning by doing. I think um the first one, two years we were quite um, I think, bullish that we reinvent the wheel and can do everything better. I think we got a bit more humble, but the 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 uh traveler segments um and is not as, let's say, specifically designed for a business traveler with 16 with a 16 square meter room.

SPEAKER_01 5:16

No, it's a really interesting uh background and in your journey so far. And then uh yeah, I'm excited to start talking about some of the topics that we have planned for today. Uh, and I think we should just jump straight into it. Um, 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. Um, 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?

SPEAKER_02 5:47

I mean, most questions uh are best answered with a it depends, right? Um so in the end, it's it's uh it's both a yes and a no. Um, I think if I probably start with a yes, uh with a no, sorry. If we look into the luxury segment, um which is also growing, right? It's it's a nice segment growing, especially in Southern Europe. Um you it's all about the experience. You need a personalized service, attention to detail. Um, it also, by the way, applies to remote destinations, uh, wellness, bar focused offerings, for instance. Um 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%. 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. Yeah, you need to go somewhere and you need an accommodation which simply supports that purpose in the most efficient and cost-effective way. So, in the end, the state just needs to be clean, functional, as efficient as possible, and and because guests are, anyways, mostly outside of the property. Uh, and there also I think the 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. And then in the end, operators just have to choose do they want to compete around service in the luxury segment, um, which gets quite hard because there are strong brands, it's hard to find personnel, uh costs are much higher, or they or do they want to compete in the much larger market segment around value for money? Um, and I think if we now think about who's traveling, right, it's 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 for travel, although they spend a larger share of their wallet for travel. Um, so I believe if you want to build a a large growing brand, it's probably much easier in the mass market.

SPEAKER_00 8:28

So, one of the things that we talk about, Joseph, on this podcast, one of the themes is the the and because on the podcast we'll have hospitality leaders, but we also have sort of the living sector leaders, you know. But one of the themes that we talk about is the hotel or we explore is the hotelisation of real estate. And that can, I guess, mean different things, but but one of the the meanings of it is that we're now real estate is is really looking at more of a service-driven experience. And what you're kind of saying is almost the opposite of that, 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, you know, you that's what you're going for, or you're a luxury traveller. But actually, for most of us, for most of our trips, that's overplayed perhaps that kind of hotelisation. 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 it is am I correct in in sort of summarizing that as being more of your position?

SPEAKER_02 9:38

Uh you know what's coming, right? It's it's a yes and a no. Uh, it depends a bit. So I think uh maybe tackling the first part of your question, I think the hotelization of like real estate, uh, 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 you can just move in, and that's it. If you compare this with a 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, and this probably holds true. Um, but it's still a very different segment if people stay for a month or six months. Um, and this is definitely growing because people are more mobile, people work remotely, um, they go on project work for three to six months. So, this is something we we can see all across the world. I think when it now comes to the second part of the question, um I I truly believe that like 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. There is even a certain resistance um versus like the large hotel bonkers, um, because it gives a different perception when you travel. Um, so there I'm I'm I'm quite confident that that this is rather a declining market segment. And we'll concentrate on the luxury segment.

SPEAKER_00 11:41

I mean hospitality, there's a there's a great emphasis on guest experience. And I have a view on this, and 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 or the book is about, if you like, is that guest experience can be done digitally, and that's actually the way, you know, that and 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.

SPEAKER_01 12:27

Um, so yeah, and I'm just gonna jump in there as well because that's a that's a great segue into our next uh topic. As you know, technology uh as 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. Um, you know, where do you see the biggest gaps between what prop tech promises and you know what it actually delivers on the ground?

SPEAKER_02 12:54

Um it's it's actually a very complex one, and and I will try to break it down a little bit because when when I usually hear prop tech solutions, for instance, this is for me it's all about devices, usually, right? Um I think when it comes to these devices, I'm thinking about smart term of sets, for instance, like cooling systems and and stuff, and maybe energy efficiency solutions. So I think they're 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, um, 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. And we also have done a lot of uh I'll 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 uh meaningfully with in-room devices proptec. So it's much easier to just open the window uh and like to manually cheat basically the systems. And um, in the end, like features like smart uh thermostats, for instance, which we 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. I think that's something very like important for the residential space, but less for hospital for the hospitality space, just because it's difficult to use them. I believe I I believe in two things. I think first guests, guest-facing technology needs to work on the guests' 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. I think the second point from my is from my perspective is the biggest efficiency gains in hospitality, they come from back-end 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'm 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 if you're not capable to connect them to your backend system, it's mainly useless. People check, 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 and documents and type it in manually into their system, so there is no efficiency gain. And as long as you still offer a physical solution, like guests just stay to that or 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 backend systems because that's where the efficiency gains are.

SPEAKER_00 16:42

So, by that, are you saying that you know we that 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 the the other way around?

SPEAKER_02 16:56

No, exactly, because uh I mean, in the end, it's 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 uh people in the world. But it's very complex, and it's very complex to combine different topics uh of digitization. Is it like the guest facing part, is it the guest identification, um, is it pricing and so forth? And hotels are very complex systems, uh, they have running systems which work with your 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 back end, and then you can add guest-facing topics in an efficient way.

SPEAKER_01 17:44

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

SPEAKER_02 18:21

Yeah, I think like from a purely conceptual point of view, the recipe for success is quite clear. Uh I'll come to this in a second because it's it's about the execution. But I think to introduce it a little bit, I would I would like to talk again about the main developments now. And I think you 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 six to seven percent annually. And like, I mean, of course, I'm I'm German, you probably can hear it. Uh, the the minimum salaries will even increase further by around 10% uh over the next two years. So it's 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, 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 are 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 2020 or 2019. That's one. So we have to find solutions on space efficiency because rents are up. We have to find solutions about reducing person 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. 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 you change, 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, and that's I think the the one part. Um 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. Um so this might may include outsourcing, working with partners, or maybe just leaving them away. Um that's the other option because I 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 servers and back-of-house functions. And I think also very, very important making sure that there is a layout flexibility to allow for, for instance, for conversions or mixed use applications or properties, because there are not that many development plots for developments available in city centers. 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, you usually lose a lot of space to make a proper layout for these. I think last but not least, offering a more flexible accommodation product, uh, which serves a wide range of guest profiles, business, leisure, families, couples, uh, and so forth. Because in the end, I think that's also one of the main hypotheses I do have. Um, and we tried probably hundred times to build a proper traveler segmentation. I am myself hundred different segments. If I travel alone, if I travel like for work, if I need to stay there just for the night, or if I spend some time if I need to work there, it's almost impossible. So flexibility is key. 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 my strong belief.

SPEAKER_00 23:26

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 live living. Like, is that something that you that you look at at Lime Home?

SPEAKER_02 23:43

Um, I mean, yes, yes and no. Um again, I think first we 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, um, and also the way how we manage, for instance, our distribution and pricing. Um we basically optimize everything for margin, and there's a higher willingness to pay for shorter stays, which is also no surprise, right? Um, because um like the longer the stay is, the more residential offerings become competitive. Um, and then usually we are too expensive to be attractive, uh, while we are very price um like beneficial or value for money, um a good value for money offering or for for short-state offerings. So that's not our key. What we still believe in is again the flexibility, and that's also why we have uh kitchens in most of our rooms, because the kitchen might not be the primary drive primary driver for the booking for many of our guests, but it might be for 10, 15, 20 percent. And this helps us also to reach high occupancy rates because families who want to cook when to have a glass of wine and and maybe even just order food and sit down on the table for them, it it has a benefit. So, yes and no, it helps for the flexibility to have a more home-like um extended stay-long stay product, uh, but it's not the prime um the primary intention to actually have longer stays.

SPEAKER_01 25:20

I I had one more question on on this topic before we move on to the next one. Um, you know, what role uh is community building or partnerships with local businesses, you know, what what role do they play in strengthening hospitality bans?

SPEAKER_02 25:34

Um I think like the the whole community aspect um I think it's it becomes more important the longer the stays. Um so it's it's nothing which I think um we think about too much, to be honest. Um, because it's on the one hand side not our core segment. Exactly, it's very, very difficult to implement because I think building a community only works if you have a local person there which really like cultivates the community, and that's not not our key. I think the second aspect of the question is um 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, um, cafes, restaurants, and so forth. And like the strategy there is to use the guest device, um, offering them an app to give them the best recommendations and ideally directly work with partners where they can get a preferred offering.

SPEAKER_01 26:49

I want to go back to um something that you were talking about in uh the previous answer, um, and that is you know, the the space, you know, being flexible with the space. Maybe we can talk a little bit more on that is you know, space uh 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?

SPEAKER_02 27:13

Yeah, I think it's it 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 if you think about Model 1, Premier In Citizen M, um, I think they are capable of making small rooms look like quite spacious, and there is everything in what guests need. Um, so the main lever in spatial optimization is the building itself. It's less the room, it's the building. Um, and to be able to optimize the total space efficiency of the building, it's it's a business model topic. Um, let me elaborate this a little bit. And I even start with the 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 room rooms. Um and why is why is this feasible? First, I think hotel rooms usually use a lot of built-in furniture, right? Um which makes a lot of economical sense because you bring down costs if you have the same room layouts, um, if it's entirely standardized. Um if the room size varies, it gets very expensive because you need uh you need to customize um everything in the end. Secondly, hotels also usually have very strict operational standards and they require a uniform room size and layout. Um, if not, it's very inefficient. Um, and if they now fit in the same uniform rooms in a more complex building uh 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 it helps a lot. And then thirdly, hotels usually require quite large team on site. If you have hundred 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. Um, and then I think the last point, uh, which also is I think quite obvious, is the additional service space, like for breakfast, F and B outlets, uh, which is usually highly space uh intensive. Um and I mean there are a lot of smart ways to optimize these space, like combining reception desks 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. It's not only about optimizing rents, it's also about being capable of going to mixed-use buildings, going into conversions, um, and also making like the capex or bringing down capex requirements a lot.

SPEAKER_00 30:21

Are there any communal spaces, or I guess what 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?

SPEAKER_02 30:38

I mean, um 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 like fire and safety regulation, but uh other than that, um, it can be eliminated completely.

SPEAKER_00 31:07

And do you use any data or kind of insight, business insights, behavioral insights on how guests approach and feel and 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?

SPEAKER_02 31:31

Yes, um, I mean, we do a lot. I mean, maybe um mentioning a few things. So first, of course, besides the typical reviews, we also have an NPS, um, so that promoter score for every for every booking. Uh, we also do quite a lot of like dedicated surveys. For instance, we we were working now for one and a half years in our new design concept, where we also had quite a lot of uh guest um focus groups also assessing some of the changes, mainly from a functional point of view, to be honest. Um, 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, uh, and what we do is we basically we track every contact, um, which is like obviously a lot on a daily basis, uh, and they are classified. So we know exactly what is the time consumed of our guest relations team for certain contact points with a guest. And just to give you one example, there um it doesn't directly address your question, but the most time actually we consumed on or we we need it 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 it's very complex because people have specific uh demands for a room, they want to have a nice view, um, 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 we implemented a virtual AI agent which is basically covering this task, so it doesn't have to be done by human, um, because it's in the end the most customer success team hours we are using for these for these tickets. Um, so now coming back to your question, we know every interaction. So if if there's if there are too many noise complaints, if noise is a topic, uh we will rework our building standards, or we will like consider this for the next signing. Um, so this is the main source of our like internal intelligence.

SPEAKER_00 33:44

So I guess you're always iterating based on feedback.

SPEAKER_02 33:47

Yes, there are small and larger iterations. Um obviously, you can't change your uh your building standards and your room design every three months, so we do it usually once a year because also like to explain this a bit, we we work, for instance, with with warehouses for our furniture. So we we buy at scale, and then it needs to basically be a concept for at least one year, and then basically we we go into the negotiations with the suppliers again. Um and for instance, the whole design piece it needs to be negotiated with with the landlords of our pipeline, right? So you can't change it uh 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 the guest feedback and insights we get through the ticketing system.

SPEAKER_01 34:34

You always gotta continue to uh evolve, uh no matter what industry you're in or um you know where you work, you gotta keep uh building onto it. And if you stay stagnant too long, then then you're left in the dust. Um, you know, there's one topic, uh, you know, since I've been in hospitality that all hotels talk about, uh, and that's direct bookings. Now, direct bookings have been long seen as the holy grail for hospitality brands, but many operators uh 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?

SPEAKER_02 35:12

It's it's probably the most controversial topic um I'm always facing because it feels like I always have a different opinion than almost everyone else. Um I don't know. I I'm still not 100% sure if I'm right, but uh happy to tell you my 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, very many strategic decisions. Actually, if I would optimize the company for direct booking share, it would definitely harm our profitability. And and why? Um, 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, 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 uh channels. It could be someone calls, it could be a tour operator, agency, um, agency business, and so forth. Um, and these let's say offline channels are usually not very efficient. Um there are a lot of personal costs involved, a lot of manual effort, and usually they are also quite heavily discounted. If 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. You have to guarantee an occupancy, so you missed the high event prices, uh, you have to give them a fixed price and so forth. So it really can really harm your ADRs. We actually we only focus on online channels because they run through completely automatically, and as I 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, um increasing direct booking share would mean you have to fight against booking.com and Xpedia in marketing spend. I think booking.com and Xpedia they spent seven billion US dollars last year for marketing, and given these amounts, it's just an uphill battle. I mean, I don't know how much Marriott is spending, need to look it up, but probably even for Marriott, this is a difficult game. They they win the game through the loyalty program this year and but like competing for a new traveler who hasn't been to this city and doesn't know the hotel supply on site, it's always better. It's 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 if you price it smart because you're paying 15% commission. So if you reduce prices, you will get more direct bookings. You will not get all of them, uh, 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. Um, 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. Like I could talk with you about Model 1 for quite a while, and then they have reached a certain stage in B holders 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. Um, the success, the route to success to increase direct booking share over time is CRM, uh, is like having the right strategy and initiatives around like optimizing repeat and like like linking or getting a loyal repeat uh traveler base. Um that's for me the key. Uh but it's a very long-term play because the market is so fragmented. Travel locations um are very, very difficult or different, and people usually don't come to the same location uh like 10 times a year. Um, so you need to be everywhere, you need to invest a lot a lot of time into CRM. So it's a long-term play.

SPEAKER_00 40:37

So I've got a couple of things on that, Joseph. 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, you know, rather than having it come from, you know, channels like tour operators, travel agents, phones, you know, whatever. So that's really interesting, is is is is focusing on that rather than the direct initially. But in terms of the the building that because a lot of hoteliers will will also be frustrated, let's say, with OTA bookings because they don't have that relationship with the customer because the OTA is is owning the the email address and and and 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 there's a blocker in between. And I suppose my question to you is at Lime Home, you're happy from what I'm gathering, is that if you get booking from the OTA's happy days, you know, that's just another marketing channel for you. But after that, then you want to build build a relationship. And the thing is, you do have you do have accommodation in 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 travellers 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 then go and book foodbooking.com next time?

SPEAKER_02 42:18

Yeah. I think if first of all, um if the booking comes through an OTA, it doesn't mean that you don't like have the guest details. Um I think there are very, 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 a both web-based app and a native app. So even basically right after the booking, they get onboarded onto our journey. So that's one. Secondly, uh, I mean, if you want to have the email address or if you want to build the connection with a 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 uh booking behavior. So if you if you're not capable to um to basically like make the guest loyal to your experience, and probably um the just experience has not been great. That's 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 uh 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 a significant share of it back to the guest. So the guest knows they get a very nice experience, um, consistent experience, the best value for money, and it's even slightly cheaper at um at our website. Um, and they know that we are basically everywhere, and they have a smoother and easier check-in uh process and journey. So there is no reason why they shouldn't book um through LIMEHO. 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, um, and therefore the density of supply is very, very important. Um, like sometimes people have to travel ten 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. So it's a long-term play, and I said 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. Um, 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 in on a smaller scale.

SPEAKER_01 45:19

Yeah, that that that's great, and I think this is a good place to leave today's conversation. So uh Joseph, we appreciate you joining, but before uh we let you go, uh one last question for you. Uh anything coming up at Lime Home our audience should be aware about, or if they're interested, where can they go?

SPEAKER_02 45:34

I mean, uh feel free to reach out. Um I'm always happy to talk. It's uh I'm obviously not from the industry originally, and uh I really enjoy um like being in conversations with uh with industry experts and and smart minds. Uh that's probably the easiest way. Um, and then we will be in London for the short-term rental summit. Um, so uh I'll be there and happy to talk. And then I think uh what's next for us? We will open our first properties in in the UK and uh in France soon. Can't tell you more, but that's basically a matter of weeks, and then we're basically covering almost all European markets.

SPEAKER_00 46:15

Excellent. Well, I will certainly be at the short-term rental summit. So we'll look forward to meeting you in person there, Joseph. And thank you so much for for sharing some of your insights with us. You know, really interesting stuff. So thank you.

SPEAKER_02 46:29

Yeah, again, thanks for having me with Red Fun.

SPEAKER_01 46:32

And that wraps it up for today's episode of Pillotalk Sections. Thank you so much for joining us. And to stay connected and never miss a conversation, head over to pillotalksection.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. Philotalk Sections is brought to you by Avode Worldwide, the strategic public relations agency for tech brands and tech enabled operators, transforming the way we work, play, and stay. Avode 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 Phillotalk Sections.