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PRESS » Price and quality decide (Development News Slovakia, 6/2009)

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One of the attracting guests at ’Reality & Development‘ Trend Conference was Yannick Langlade, manager of the Orion International apartment hotels, the member of Pierre & Vacances Group. Genuine lawyer passed from consultancy and telecommunications to hotel services having tried positions from head of reception desk to the manager of the Holiday Inn. Since 2002, he works with Pierre & Vacances Group, which is developing the apartment hotel model since seventies, first at mountain, later at seaside resorts, and in urban sitings as well since nineties.

Why are the apartment hotels so successful?

This product type works in many European countries as well as in the world in particular because of very broad clientele from typical holidaymakers up to corporate guests, i.e. a broad spectrum of those who use it for short as well as long time stays according to their needs. Of course, the first of above groups seeks after this accommodation form mainly in mountain, seaside or similar holiday resorts but also in the towns; the other group aims primarily at towns only, but it may be interesting for business clients alike other hotels also in tourist locations as a place to hold various seminars, presentations and other events. Our apartment hotels provide number of benefits if compared to conventional hotels: First of all, they offer better price at the same or better comfort as offered by higher category hotels as is right attracting in this economically complicated period. In addition, the client feels easier there. For instance, the kitchen equipment offers the guest a freedom from boarding in restaurants, on the other hand hotel services such as breakfast, tiding and so on are taken for granted. Just the optimizing these services allows us working at substantially lower cost than the traditional hotels do requiring more staff, bigger common areas etc. The product is more interesting also in view of an investor. Here, simpler formality applies than with traditional lease; we do not know terms such as security, termination period and the like. Hence, it is a product optimized for all parties involved – investor, developer, operator and client, and therefore successful. The most important is to adapt the concept to the right clientele.

Do you mean holiday or business clients?

I am speaking of urban apartments we are starting in Slovakia with. That is the point principal for the structure of apartments. In the town there is 60% of studios for singles, 30% larger studios for couples and only remaining 10% are required for the family type apartments. In the tourist locations, it must be exactly vice versa. For instance, tourists also arrive to Bratislava by groups, but mainly on weekends, whilst during the weekdays there are numerous business clients here. If we will serve both groups, though each of them in different time, we need the overall concept adjusted to them.

Who is first coming with the idea of a new hotel? Developer or more often the future operator?

In countries, we operate for longer we co-operate with developers. The situation is different in new countries as the local developer comes with its project first. The most important for us is always the location, if there is a space for use of about hundred apartments. Then, we provide specifications to developer based on which we jointly prepare the project. Later on, the project is submitted to the Comité d’engagement of Pierre & Vacances to setting up the annual rent upon project approval. Signing of an agreement would finalize the procedure. It is usually a Facility Management Agreement, but in big towns it might also be a Lease Agreement. At the beginning, of course, we need a feasibility study of conditions in the local market, so we used to enter sometimes a new environment through acquisition of an older hotel, since the experience from the specific operation allows one to acquaint the market better then ever best study.

The Lease Agreement is about a lump sum or percentage?

The lease features two components. The first one is a guaranteed minimum to be updated by inflation rate; the second is defined as a share in turnover. Nevertheless, the trend goes to reducing of the fix component and some companies have already changed to the sole variable component depending on turnover.

Your exclusive partner on the Slovak market CREDO has already introduced their project you will run in Liptovský Mikulá¹. Do you recommend they commence building up during current economic crisis?

Certainly yes. Right because this is the product suitable for client also under current condition, in addition there is neither similar one in the Slovak market so far.

What period you suppose to elapse until the new hotel is commercially successful?

Everything depends on the specific project. Return on such investment amounts approximately 10 years. As far as the operation income is concerned, for the first three years we make any effort to make it growing, from the forth year we assume stabilizing turnover to achieve the maximum profit margin.

Did the marketing expenses reflect the current crisis?

If you mean the marketing that aims at occupancy of our products, the tourists have been addressed by means of traditional communication through travel agencies and internet support, for business clientele there are two levels – the local to specific companies and international to supranational groups. However, we put the major stress on action and commitment of every employee: from manager to receptionist in order that they sell their facility by addressing a new client or a response to client’s request either. We certainly avoid relaying to internet only. I do not mean the guests who book their stays on our website, but those who are coming to us throughout a travel portal. The latter represent 15 to 20% of new clients, although very volatile ones, out of which a minimum become regular guests. That is why we emphasize that every client needs to be comfortable with us and next – before starting to search a hotel through an explorer – throws first a look on what our hotels offer. The Internet is an excellent tool for the client, but relaying on it may have two ends for hoteliers.We have seen this on example of our first hotel in Prague as we could follow up the real time competition as a four star hotel reduced its prices by 60% for one night and then all went down with their prices at the same moment.

Do you have a formula for sticking regular clients and acquire new ones at the same time?

The price. More accurately, the quality-price ratio. Our principle is to stay below average local market price at a comparable quality – in Europe this means to be at the level of a four stars hotel. This pricing policy is due to optimized cost. On the other hand, it is the overall atmosphere, which is very important for the guests. It differs from that of traditional hotels, as they feel easier, it is not about a ’uniformed‘ service, but staff and guests being closer to each other.

Have you already a strategy for offering the first project in Slovakia and abroad, viz. in France?

We have not any, since every our marketing strategy focuses first on local market. Hotels we will have running in Slovakia are primarily for the Slovaks. We are not to dealing with transfer of tourists from one country to another. All we can do is to contribute by our product being well-known in the European countries and every our hotel advertises in the papers of the entire group, but this is not we could build the marketing on. Also Holiday Inn is an international brand, but most of its clients are local guests.

Do you think that it could be interesting for French people to come to Slovakia as tourists? Do they know anything at all about our country?

No. Slovakia is for tourists certainly an interesting country with abundant natural beauties and memorials, but no one knows about it abroad. Until recent however, the French did even not know that any Croatia existed as a massive campaign has arrived and everyone was going to see there. Hence, neither I, nor you will change this, it is on decision of the government whether they want tourist to allure. Also therefore, we primarily focus on domestic guests.

What are further plans of Orion International in other Slovak locations?

Sure Bratislava, where – as far as I know – there is a single apartment hotel for high-end clientele. This is in what we differ from other international groups that are running their apartment hotels in luxury segment in particular. Experience shows that it is not the best solution as to profitability. I do not claim that our quality is better, but certainly is not worse either. For comparison: the list price for a room in a four star hotel in Bratislava, as I am accommodated, amounts EUR 183. In our facility – of a comparable quality – this would be EUR 80 to 90. The point is the mutual agreement between investor, developer and operator in order to create a compact product with no unnecessary items and additional costs.


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