B&B Hotels will try lease model in US

MIAMI – B&B Hotels USA is going down the road no other hotel company in the U.S. has dared – the lease model, which is more the norm elsewhere around the world but has never gotten off the ground stateside.

The hotel company with Goldman Sachs as the main shareholder since 2019 and more than 870 hotels across 17 countries, primarily in Western Europe and a preponderance in France, has named Amir Mustafa CEO of the U.S. division, succeeding Valerio Duchini, who was recently appointed CEO of Western Europe.

When Hotel Investment Today talked to Duchini last July, he said, “The U.S. is more than familiar with the triple-net lease agreement in student housing, retirement homes, car washes, retail, restaurants, and in a lot of businesses. Why do we not apply the same rules for a hotel? We don’t want to create a franchising network. We would like to create a hotel network in the U.S. where we directly manage our hotel and pay the rent to our investor.”

Before joining B&B Hotels USA, Mustafa held various leadership positions at Extended Stay America and more recently served as senior vice president of operations at Aimbridge Hospitality.

Amir Mustafa, CEO of B&B Hotels USA

To date, the upscale limited-service B&B brand has five lease deals in Florida with one open near the Miami airport, as well as two conversions under development in Jacksonville, one in Orlando, and one new construction in the Brickell neighborhood of Miami.

The goal, Mustafa said, is to add about 15 hotels a year, all via lease with the owner-turned-landlord benefitting from B&B investing in all the FF&E and receiving what Mustafa calls a very favorable return or yield with their fixed rent.

“The model is very intriguing to a lot of investors in the U.S.,” Mustafa told Hotel Investment Today. “In fact, I’ve been with the company for about two weeks, and I’ve been busy talking to potential investors and people who just want to invest in our structure because the yield is very lucrative.”

Leases will be 20-year terms with options to extend with two incremental five-year terms. Mustafa said they like the model as they control the brand, the assets and operations with property GMs incented on the upside.

“We call the GMs mandated managers,” Mustafa said. “They have skin in the game, getting a percentage of the revenue, making them entrepreneurs with basically their own business. We do it because we want to make sure they’re motivated and grow revenue because they partner with us running the business.”

Growth opportunities, challenges

Mustafa said he expects Florida to be B&B’s initial growth market before expanding in the U.S. Most of the growth will come via conversion but there will be some new development, according to Mustafa.

We call the GMs mandated managers. They have skin in the game, getting a percentage of the revenue, making them entrepreneurs with basically their own business.

Amir Mustafa

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“Our goal is to make sure that we find deals with great locations at good price points,” added Mustafa, who said ADR will range from $100-plus in a market like Jacksonville to $200 in Brickell. “With renovations, we’re going to be able to make huge impacts… We have a long list of potential owners and partners.”

When asked to explain B&B’s differentiators in an already crowded marketplace, Mustafa said they focus on basics like the quality of the bed, free breakfast and strong WiFi. “The product is going to be consistent, the rate affordable and the team will focus on delivering a great experience.”

For now, Mustafa’s focus is to get the five hotels up and running with construction about to start on the Brickell project.

“That will give us proof of concept,” he said. “Obviously, it’s a new brand here and once we get the first five open, we will mimic the process and develop more hotels the same way.”

The bigger challenge will surround creating brand recognition – both with the consumer and development community.

“This brand has a proven track record in Europe, and we are confident that we’re going to be able to be successful in the U.S.,” Mustafa said. “What differentiate us from the rest is that lease model, which is going to guarantee very favorable return yield for the investors. It’s going to be an opportunity for investors to join and grow with us and we’re excited about all these opportunities that lie ahead in the U.S.”