Generator rides the rebound waves

LONDON – Having been sequestered by the pandemic for up to three or four years, next-gen travelers are getting their first taste of true freedom and hybrid hotel brands like those of London-based Queensgate Investments' Generator are big beneficiaries.

In fact, the group's Generator and Freehand Hotels brands recorded record-breaking financial results for 2023, with EBITDA up 28% over 2022. It beat pre- and post-pandemic performances with a 15% increase in revenues.

Led by CEO Alastair Thomann since July 2017, 21 properties today are owned and managed, including the Generator Berlin Alexanderplatz hotel coming online this month and a Generator at what has been known as the Paramount in New York City expected to open in September 2024. Three additional properties are due to be announced this year, according to Thomann, who added a “huge announcement” is forthcoming.

Hotel Investment Today spoke to 30-year industry veteran Thomann, who previously launched and served as managing director of Rosewood Hotel Group’s Pentahotels, about how the brands are performing and what is next for the group.

Hotel Investment Today (HIT): How would you characterize performance over the past several months, including Q1 2024?

Alastair Thomann: We delivered our best financials to close out 2023 and our Q1 numbers only continue to show that upward trajectory. In fact, our 2025 numbers look even stronger than last year because we are finding that travelers are booking earlier – we have had the highest early bookings on the books: 33.1 days in advance versus average 21.4 days in advance from last year, even surpassing pre-pandemic years, especially in Los Angeles, Chicago and Berlin. We can credit positive numbers to consumer hunger to travel. Especially in the U.S. market, we are finding that consumers are still working from home and have more time to travel.

HIT: Were there key challenges to address and what tactics/strategies were put in place to help get Generator and Freehand to where they are in April 2024?

Thomann: Challenges for us seem to be challenges the entire industry is facing: inflation and labor costs across the board. We have addressed these issues with a leaner more efficient operating model. We have optimized our buildings to add additional beds and rooms to counteract inflation pressures.

Viewing room at the Generator Miami

HIT: Where is the focus on growth in terms of Generator versus Freehand, and where do you see market opportunities for expanding each brand’s footprint?

Thomann: As opposed to the past where we were asset heavy, we are now moving forward with an asset light strategy – management contracts and licensing. Because we still consider ourselves a small brand, growth for us is global. Asia is on the docket as a new market, which will be momentous for us since it is a magnet for budget travelers and hostels. We are also considering expansion in markets we are already in that are highly successful for us. Because we are small, we haven’t run out of space yet for where we can grow.

HIT: How is Queensgate Investments supporting the brands’ expansion plans?

Thomann: Any asset heavy plan is enabled through Queensgate Investments as they provide the capital for us. They have been fantastic supporting our brands. When it comes to asset light expansion, we rely more on our inhouse team.

HIT: There was a mention of a ‘huge announcement’ about the overall Freehold portfolio. Please do share what’s ahead.

Thomann: Stay tuned for more information here. We will be announcing something soon.

HIT: What was the vision behind entering the third-party management sector (this is via Generator only, yes?) and why is now the right time to be making this foray?

Thomann: Not just for Generator but for all of our three brands which include Generator, Freehand and the Broken Shaker concept. In order to make the foray into third-party management, we first had to establish ourselves and prove our concept. Now that we have successfully done that, that is fueling our expansion and interest from third party owners. Like I said, we still consider ourselves a smaller brand, so we are being selective with who we partner with.

HIT: What do you expect this move to do for the portfolio overall and is third-party management expected to be a key revenue contributor in the future?

Thomann: Yes, third-party management and franchise fees are expected to be a main driver of a profit growth in the coming years. This will supercharge our expansion.

HIT: Do you have other properties in mind for third-party management (besides in Berlin)?

Thomann: Yes, we have around 10 deals under serious negotiation right now spread across the U.S., Europe, the Middle East and Asia.

Four-bed room at the Generator Washington, D.C.

HIT: Will you be creating a separate management division?

Thomann: No. We have one management division, all of this is run by a lean management out of New York, London and Singapore.

HIT: Is there interest from other investors who want to be part of a Generator or Freehand project? Is that something you’re open to such as doing joint ventures on future hotels? Is that more likely in the U.S. or internationally?

Thomann: As this is such a uniquely profitable operating model, interest has historically been high. Since last year, we’ve started working with other investors. For example, the iconic Paramount Hotel that is reopening this year – that is a 600-bedroom management contract as reflected with RFR Hotel Group and Aby Rosen. We have also had amazing cooperation working with Schroders Capital for the launch of Alexander Berlinplatz.

HIT: How long was the Paramount management deal in the works?

Thomann: The RFR deal for Paramount in New York City took around six months from first contact to signing. As with everything we do we are very efficient and like to move quickly.

HIT: We understand the New York City property opening for May has been rescheduled for October. What will be going on between now and then, and are there specific opening events planned in the fall?

Thomann: We have started the rebranding but felt opening in the fall was a better fit for the New York City market.

HIT: How will you be alerting potential guests that they will be able to have a Generator-led experience at the New York City property in the near future?

Thomann: A lot of Generator touch points have already been incorporated on property. Over the next three months, we will introduce a new food & beverage operator, new programming and activations – among other updates. We will really use the summer months to turn the property into the full experience.

HIT: Since the brands present as eclectic offerings, how are you planning to accomplish this growth – via adaptive reuse, conversions? Is new construction even a thought?

Thomann: We historically have been great at conversions as some of our properties are converted police stations, former parking garages, office spaces. Conversions are the most cost-effective to turn buildings into modern hybrid lifestyle hotels. New construction is definitely in the pipeline but to existing real estate. We intend to add 300-600 beds overall in the existing portfolio over the next two years.

HIT: Will you be looking to do one-off deals or perhaps small portfolio grabs?

Thomann: Yes, like we have done historically.

Freehand Chicago

HIT: How much of an impact on the U.S. market do you want to make with each of the brands in terms of distribution as well as brand awareness?

Thomann: We are aware that our brands are in their infancy in the U.S. The priority for our properties is that they have an impact on their local markets with cultural programming and exceptional food and beverage outlets.

HIT: Toward this, how well do you think the brand concepts are understood, particularly for those properties that mix accommodations (private, shared)?

Thomann: When we first entered the market in 2019, we had to do a lot of explaining thanks to the huge demand for shared accommodations and family rooms. We benefit from this as few groups offer that. It is a cost-effective way to stay in prime city center locations as all of our 21 properties are.

HIT: Family and friends business seems to have increased. What’s driving that?

Thomann: We definitely think this is still from the effects of the pandemic when families weren’t able to spend time together. Since then, we have seen group travel and family travel explode.

HIT: We saw Internet chatter asking if, at age 30, that person was “too old” to stay at a hostel/hostel-type property. Your thoughts on your brands being inclusive?

Thomann: We like to say that this is not about age but a mindset at our properties. When I travel and stay at our properties and get assigned a dorm room, I am often not the oldest in the room.

HIT: As CEO, you live and breathe these brands. What’s in your hopes for each in the next 12-18 months?

Thomann: For all, we hope travel demand stays as strong as it is and that the brands continue to expand on the upward trajectory. We hope hybrid accommodations continue to become more mainstream.