Imagine working in operations at some of the leading hotel companies in the world, and then having the chance to start all over with a blank canvas in a role leading operations for a new brand. What would you do?
What frustrated Julius working in other hotel operations roles
Julius had several frustrations working in a wide range of operational roles for leading hotel companies throughout Europe for more than a decade: as a receptionist, back-of-house manager, front office manager, operations project manager, and then regional operations manager.
#1: Organizational structure
“Traditional hospitality industry has a very hierarchical approach. It’s completely outdated and not matching the needs and desires of the next generations of our industry. Its values are clashing with the hierarchical approach the traditional hospitality industry has. There’s a lot of opportunity left on the table.”
#2: Outdated technology
I always had the feeling you’re trying to compete in the 21st century but had the tools from the Middle Ages.
“For me, the Bonvoy program from Marriott was an example. You would try to credit points and would need to deal with some DOS-mode hotel software. You had receptionists copy-pasting handwritten registration cards.
“We all grew up with the mobile phone in our hands and are able to scan text and do language translation through AI. I found the feeling of being stuck in the past frustrating when I knew there are other systems out there that worked.”
#3: Lack of drive for innovation
“People kept telling me, ‘we have always done it this way’ or it’s too risky’ or ‘let’s see what other people do.’
“I had the feeling that nobody was willing to do the first step. I worked in pretty innovative companies that tried to do things differently, but in the end, the fundamental principles of traditional hospitality held us back.”
Hotels are stuck with ‘unbreakable rules’
“Consider the check-in and checkout time. It’s a fundamental principle that you have in every hotel operation. Or the division between rooms and F&B. That is changing slowly now, but in many hospitality organizations that clear division is still there, which creates a lot of inefficiencies within the operation. Or the fact that someone needs to go to reception to get the key to their room. Who said it needs to be a counter?
“There’s an artificial boundary between the front of house and the back of house area in a hotel, which half of the day is just empty corridors that you’re paying rent for and are not in use. All of this just because somebody said, ‘This is the back of house area, guests are not supposed to be here.’ It’s a waste of space and resources.
“In hospitality, we’re creating revenue and an ROI per square meter for the property owner.
“All of these examples used to be ‘fundamental principles’ of the industry, and nobody was willing to touch them. I realized very quickly how frustrating these were and wanted to change them because I saw there was so much waste and so many opportunities.”
Where hotel operators get stuck
“There are two reasons hotel operators get stuck in traditional ways of operating,” Julius says.
One is the typical decision-maker.
The people who make decisions in this industry are white men in their fifties who say, ‘we have always done it this way,’ and don’t want to risk anything so close to retirement.
“The other thing is hospitality real estate is usually expensive real estate. It’s always in prime locations. It needs big investments and a large FFE (Fixtures, Furniture & Equipment) contribution. Who is doing those investments? The bigger properties are owned by institutions like banks and pension funds. They are rather traditional in their approach to how they invest money and have a long investment horizon. They’re not the most innovative.
“They have to meet internal compliance standards and fulfill certain criteria. They’re always going to think in the old metrics of what’s going to be the cost per room, what’s going to be the cost per night, and so on – rather than looking at opportunities by tweaking the model and looking at the total outcome.”
Metrics can hold us back – or they can be used to prove a new model
Metrics can constrain us and prevent innovation – but they can also be used to speak the language of decision-makers and convince them to make changes. According to Julius, numa has the possibility to generate more revenue or more money overall with this new model.
“Imagine you have a 70-room property in an AAA location where you have the ground floor, F&B space, lobby lounge, reception, some back-of-house offices, and then rooms on the first floor and above. We as numa probably pay the same amount of rent per room as any other hotel – any Marriott or IHG. On that side, the real estate owner’s getting exactly the same rent per room per month, as with any other operator. But numa doesn’t need the entire ground floor. All we want is a door and ideally two meters of the corridor and you go into the lift and go up to your room.
“The ground floor is the most valuable part of the asset because if it’s in a city center location that’s a prime location, can be rented out to a retailer, F&B operator, restaurant concept, whatever. And hence yielding much better total rent for the property owner. The owners can achieve up to 30% more rental income with us than if they have a traditional hotel operator in there who traditionally doesn’t pay for these public spaces because they’re included in the rent per room.”
And that’s talking with a real estate owner who is considering using their building as a hotel. When compared to use as an apartment building, it’s a different calculus.
“We do little studio apartments, which are a little bit bigger and have a kitchen, which gives us a wider market to target. We don’t only serve overnight hotel guests, but also what we call mid-stay or temporary housing markets we can tap into. If we have seasonality and there’s a period of low demand, we can bring 20-30% of our inventory to the temporary housing market on a monthly package, to help contribute to our fixed costs.
“By operating this way we perform much better on the top line. We tend to have an occupancy rate of around 90% throughout the year and outperform STR market benchmarks by up to 30-40%. Even during COVID complete lockdown, we were operationally profitable with our model.”
Building a new operating model from a blank canvas
Julius joined numa very early and had a blank canvas to build his operating model. I wanted to know what parts of traditional hotel operations he decided to keep and what he decided to throw away to design a new experience for numa guests.
“When I did my job interviews with the founders. I spoke to Gerhard, our CTO and co-founder, about how he sees the industry and what we can do. He said, ‘Julius, we have a white canvas. We look at what’s the challenge we have or the service we want to provide, and then we look at what systems and technology are out there. Do we like it? If so, we implement it. If we don’t like it, we build it ourselves.
“I really like this simple approach to decision-making. We ask ourselves, ‘what do guests want?’ Guests want a clean and safe and comfortable place to stay.
“Guests want an authentic stay rather than golden taps and a marble staircase. An authentic stay means arriving in a community, interacting with the local surrounding, and having a curated experience rather than a mass-generated accommodation where you close the curtains and you could be anywhere in the world.
You arrive and you stand for 15 minutes in a queue for somebody to ask, ‘Did you have a safe trip?’ and you say, ‘yeah, I had a safe trip – it’s the 21st century, I didn’t get robbed in the forest!’ It’s so outdated.
“You fly airlines and you have a ticket on your mobile phone and nobody asks you those questions. That’s stupid. Why do we do that in the hospitality industry? It’s just outdated.
“If we want to build a brand for millennials and younger we can cut all of this out. They grew up interacting with Instagram and TikTok. They don’t want the human interaction or the front desk where you need to wait for it in order to get asked impersonal, generic questions because it’s a corporate standard.
“We looked at what we needed to do from a guest expectation perspective, then we looked at what we need to do from a legal perspective, and finally what do we need to do from an operational efficiency perspective. Then we went on and thought about how we could create this.
“The cool thing was within that early group of people at numa, I was pretty much the only one with a hotel background and everybody else came from different industries, from different startups, and different backgrounds. We didn’t have ‘we have always done it this way’ baggage, which I think stops a lot of innovation. We had really completely different angles and fresh views on the topics and that really is one reason why we are innovative and we can differentiate ourselves and our product.”
How numa learned what its guests wanted
“We did a lot of focus group interviews. We looked at what we appreciated ourselves as frequent travelers.
“We also did a lot of A/B testing: We would renovate a room or property and the room or property next door we renovate differently. Then we looked at guest feedback and other data over time to understand what was performing better.”
How numa collects guest feedback
“Our guests complete their registration online on their mobile phones. They then get a digital pin code via WhatsApp or email, which they can enter at the main entrance. It’s valid only for the length of their stay and the doors they’re allowed to enter. There’s no physical reception, there’s no transaction of key cards. We only know that the guest arrived once the system detects the first usage of the pin code. There’s also no checkout. No boring and meaningless ‘how was your stay’ questions.
“We all know how annoying email campaigns are. ‘Thank you for staying with us. Do you mind filling out the survey?’ Few people will do that in the generation we are targeting. If they do it it’s delayed and happens two or three days later. There’s very little time to react at that point.
“Instead, we are asking guests to check out with us via WhatsApp or by scanning a QR code on the inside of their room door. Once they do that, they’re immediately prompted for an NPS survey. They already have the phone in their hand, it pops up on their phone, and they just press the number.
“We have around 85% of our guests leaving feedback for us.”
An example of changes made from guest feedback
“One of the things we implemented was a complimentary mini-bar. When you come into your room you’re going to have a free soft drink, water, beer, and some nibbles. There’s also a little note from somebody welcoming them.
“We did A/B testing and saw that the small investment it costs us per room, per stay to do this is really well invested because we have an average NPS rating that is 15 to 20% better, and higher guest satisfaction means more returning business.
“It’s just an example of something we tested and has an impact, so now it’s a unique feature for us at numa. As a guest, you have the feeling that despite nobody being there, someone thought of you and provided exactly what was needed.”
Using marketing and branding to attract the type of guest that makes operations easier
numa uses branding and marketing to attract the people who are a fit but also repelling the people who are not going to be a fit for the brand.
“We did an advertising campaign called Join the Haters. This is a bit cynical, sarcastically dealing with reviews like super long reception queues – things you can’t complain about while staying at numa. We are playing with that in a fun way:
“In our social media as well as in our communication, I think that’s one way of targeting the audience from a branding perspective.
“We also have a campaign for our regular guests where they benefit if they recommend us. We give them a personalized code to share, and if their friend uses it, they get credit for their next stay. It’s completely automated. It’s a nice way of creating word-of-mouth promotion without having a big email campaign and spamming people.”
Operationally, these types of campaigns make life easier for numa’s teams because it attracts the right type of person to their properties.
Hotel employees are comparing technology to what they use in their personal lives
How do we know what technology can look like? We have to look no further than our mobile phones to see what’s possible – and that’s what the hotel staff is doing, Julius says, recalling his own experience working in operations at other companies.
“I think in every other industry there’s more innovation and there’s more digitalization and there’s more eagerness and willingness to automate processes. Then you go to work in a traditional hotel and it’s like you leave your mobile phone at the entrance and you take a hammer and a chisel. That’s how it felt to me.”
Outdated technology is making it harder for hotels to hire people
“It’s one of the reasons why hospitality has a massive problem finding employees at the moment. In Germany alone, we have 40,000 vacancies in hospitality. That’s not because it’s an uninteresting industry or the industry isn’t attractive. It’s because conditions are just not up to date anymore. They’re not competitive.
We had too many years where innovation meant finding better ways of exploiting our employees and giving them outdated tools.
“As an industry, it’s our own fault that we now have these recruitment issues.
The role of AI and BI in managing numa operations
Artificial intelligence (AI) and business intelligence (BI) plays a big role in numa operations, starting with cost controls.
“We have a BI tool established where I can track all costs, such as the cost per cleaning and the costs per room per night. It gives me a live forecast of my financial performance. It’s linked to our PMS. As bookings come in, it automatically allocates the respective cost and I have a live dashboard showing my real-time financial performance.
“I don’t need to wait a month till the P&L is ready and done by accounting because I see it live.
I’m not sailing blind, and am really in control of my costs.
“I can build a scalable model and I’m still in control of my costs because I have live data and don’t need to wait a month to react to something, I can see immediately what the impact is. I can make much faster, more educated decisions.
Pricing is another application of AI. “Many hotel chains are updating their price two times a day, three times a day if they’re really eager. We do that live up to a thousand times a day based on internal pickup and market changes.”
Automation is more important than sophisticated AI
“I don’t think you really need super sophisticated AI,” Julius says.
“We have automated about 80% of the back-of-house processes and need about 60% less staff than a classic three-star hotel. Most of this is just common sense and simple, data-driven decision-making.
“The best example is housekeeping. Each morning at pretty much every hotel in the world, the housekeeping supervisor comes in with all of the rooms to clean. And then it’s split out: this cleaner is going to these five rooms, this cleaner is going to these 10 rooms, this cleaner is going to those seven rooms. You do this distribution manually every morning and then they all have that little clipboard with their room list and their text marker, marking I’ve been in the room, this room has been checked.
“We have housekeeping completely integrated through our own back-of-house app called Shine. The cleaner can see the guest check out, and the room immediately pops up on their to-do list. Our app automatically assigns the right room to the right cleaner in the building according to a set of rules we created in advance. This saves massively on housekeeping costs.
“Another example is inventory counts. Why do we need to have somebody go once a week into the warehouse counting how much toilet paper we have and place an order manually? We can have an algorithm doing a forecast on toilet paper and then just ordering it automatically to the respective property. Then once every quarter we can do a quick inventory if we need to adjust our consumption data per guest per night. Otherwise, that’s automated. And that’s just for toilet paper. We can do that for shower gel, tea, coffee, and anything else in the room. For me, managing inventory manually is just a waste of resources. It’s stupid work that nobody wants to do.”
“Getting rid of all the stupid jobs makes our industry far more interesting.”
A new operations leadership structure
“We are linking our operations teams not to properties, but to cities. For example, in Berlin, we have seven properties now with 500+ rooms and another 300+ rooms already signed and contracted to open in the next two years. We have one city manager who’s in charge of whatever happens operationally in the city.
“We have a clear division between operations and revenue: operations is about controlling cost and driving quality, and revenue is a centralized business function that is very much AI-driven and automated. If the same person at the end is responsible for revenue and operational decision-making, you will impact both sides of the business and you’re not going to have the best outcome. A GM or somebody who’s operationally focused will never be aggressive on a revenue strategy in terms of overbooking. The revenue manager who is heavily operationally involved is most likely not the most analytical person you could have.”
The type of person who succeeds in operations in the numa model
“We are really looking for people who are good multi-taskers. In this new model and you need to be willing to be hands-on because we don’t have massive teams to spread the workload. If stuff hits the fan, the operations manager needs to be willing to also roll up their sleeves and do whatever is required.
“At the same time, you also need to be a person who is really good at managing relationships and negotiating with our external suppliers because maintenance, facilities management, and housekeeping are all outsourced.
“I always say your performance is only as good as you are at managing external partners. Stakeholder management, building trust, and shaping a productive relationship with external partners is the key to success. A good understanding of your business, your data, your financial results, and your performance is key.
“It’s a really wide array of skills required, but I think that’s what also makes working in our business super interesting because you have exposure to lots of things that you usually don’t have exposure to in a traditional hotel environment.”
numa is hiring a city manager for Berlin. Check it out here if you’re interested.