M&A leads to fast growth of Bob W brand in Europe

HELSINKI – There’s an elephant in the room. It’s Airbnb – and though it’s been around for a while, few in the mainstream hotels industry seems to want to recognize the beast by name. The room itself, meanwhile, is becoming increasingly crowded. In Europe, the fast-growing Bob W – co-founded in Helsinki in 2018 by a former Airbnb superhost – is one of those jostling for position in a space sometimes labeled “extended -stay” and, or, “short stay rentals.”

Bob W, indeed, derives its name from mingling operating models and styles. Bob W is an acronym – of sorts – standing for “Best of Both Worlds.”

In the U.S., the big beasts Marriott and Hilton are also making their presences felt. But where “Project MidX Studios” from Marriott and “Project Hilton H3” are still works-in-progress, Bob W is already making tracks.

Bob W recorded an eightfold increase in revenues in 2022 and now has 2,500 apartments in 30 properties, nine countries, and 20 cities including Berlin, Madrid, London, Amsterdam, and Helsinki. Some of the growth is coming from acquisitions. It bought the Estonishing Stay apartment operator in Estonia in May 2022 and the Finnish competitor KOTI Hotel the following October. Most recently, in April 2023, it entered the German market with its third acquisition, Charly Hospitality.

So, is Bob W all about acquisition? Consolidation in this fragmented sector of hospitality is certain a good part of the story. But new builds and conversions are on the agenda, too.

Niko Karstikko

CEO and co-founder Niko Karstikko explained that the company operates via leases (including rent-to-rent) and management agreements. “We will continue to expand using these two approaches but will build on that with M&A deals,” he said.

Wherever the growth is coming from, Bob W seems to be making guests happy. Sustainably operated, design-led apartments have their own tech platform, along with a suite of apps to provides a seamless digital front desk experience that is backed by digital customer service and other fail safes, so guests always feel looked after. Interior schemes are curated in partnership with local designers and the most interesting neighborhoods are handpicked to allow guests to live like a local.

Each location’s furniture, art and design are tailored to the destination to bring the flavors of the neighborhood to the guest. Bob W partners with creatives, artists and local talent for its properties with an aim to create authentic spaces that combine quality hotel-level standards with a nomadic home experience that feels intimately connected to the destination.

“Our properties have a stellar customer satisfaction ranking (4.8 out of 5), which puts us at the pinnacle among international European operators, based on over 5,000 public reviews,” Karstikko said.

Although the quantity of Bob W business is clearly increasing quickly, the quality of the revenue is hard to discern since there are few financial details in the public domain.

Indeed, Karstikko recognizes “velocity in growth” as one of the company’s largest current challenges.

At the same he said the company is making money. “We maintain profitability across all our markets,” Karstikko said.

Further than that, and without giving much away in terms of underlying detail, he points to performance as measured by a Revenue Generation Index (RGI). “An RGI score of 1.0 means a property equals the RevPAR (revenue per available room) performance of other players in the sector, and we reach that score in an average of three months. Other operators will take between 16 and 19 months to achieve that score,” Karstikko said. “In certain situations, we’ve even been known to reach this milestone in a single month.”

Bob W’s RGI score, Karstikko said, is “extremely attractive to investors because it shows that we waste no time in getting to the point where we are generating an optimum return on their investment.”

We operate more like a tenant, whose team then works alongside the landlord, as well as their developers and investors.

Niko Karstikko

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The quality of the earnings profile – current and prospective – is enough to attract chunky investment interest. Bob W has €31 million in what Karstikko called “seed and Series A funding” and reckons it is in “an excellent position to acquire and develop new assets.”

Bob W is 100% asset-light, operating under leases and management agreements, and this will remain the case for the foreseeable future, according to Karstikko. “We plan to raise additional equity in the near future to propel our expansion across Europe and further consolidate our position in the short-term stay market,” he added.

Among the funders at present are venture capitalists, family offices, and entrepreneurs including byFounders, IDC Ventures, Elevator Ventures, Verve Ventures, Flashpoint, Superangel, NREP, Tesi, Wolt co-founder Miki Kuusi, and Supercell co-founder Ilkka Paananen.

They and other investors may be attracted by Bob W’s relatively low cost when it comes to developing assets. "We operate more like a tenant, whose team then works alongside the landlord, as well as their developers and investors,” Karstikko said. “That’s why our cost per key is relatively small compared to those operators who get involved in the building of new assets.”

Typical projects include makeovers, conversions of hotels, offices and retail space, and as well as the new-build developments. Where it takes on the tenant or management company role, it deploys an in-house team of project managers, architects, and real estate professionals.

How big are the ambitions? Bob W wants to secure profitable, sustainable, and swift growth. “The goal is to be the world’s most loved, leading tech-enabled hospitality brand,” Karstikko said.