An interview with the hotel group boss: "Do we have to ask for proof of vaccinations in the future?"

Marcus Bernhardt started his job at the beginning of November 2020 with a clear mandate: to develop Deutsche Hospitality into one of the leading hotel groups in Europe. This is also what the new owner, the Chinese Huazhu Group, demands.

During the video call for this interview, you can see a book by Huazhu founder Ji Qi on a chest of drawers behind his desk. The 53-year-old multi-billionaire, founder of the Chinese hotel group Huazhu and owner of Deutsche Hospitality, has published a book with his experiences as a founder and entrepreneur: "The Founder's Notes".

While its hotels in China have long been running at full speed again after the pandemic break, Europe is in the second shutdown. Strict travel restrictions apply. Deutsche Hospitality maintains emergency operations in around 120 houses and draws on its reserves.

Capital: You took up your position at Deutsche Hospitality in November at the beginning of the second corona wave, when all hotels had to shut down again. Wasn't that how you had imagined the start?

Marcus Berhardt: Anyone can sail when the weather is nice, but when the storm comes, it shows who is still holding the ropes. We have a good team and we rise to the challenge. In the past few weeks we have been able to bring new top experts into the company. We are still at the beginning of the transformation process for the entire organization. We are very active and feel a spirit of optimism despite the current situation.

Many other hotels are struggling to survive due to the abrupt and prolonged booking freeze. Surely that will not leave your company untouched?

Around ten percent of our houses are closed due to the corona measures prescribed by law. Over 100 hotels are currently open, almost all of them are in so-called sleep mode with a minimum of employees who maintain operations for guests who book with us for necessary business trips. These include, for example, airline crews and medical staff. The federal government is also a very important and long-standing business partner.

Is that enough for a cost-covering operation for which, according to the industry average, a capacity utilization of at least 50 percent is necessary?

In 2020 we had an average occupancy rate of 30 percent. Every single house that can help us reduce our fixed costs helps our balance sheet. In the past few years the budget has been good, but at some point every piggy bank is empty. We are fortunate that at the end of 2019, shortly before the outbreak of the corona pandemic, the Huazhu Group joined us as a new investor. Huazhu boss Ji Qi believes in us, supports us, but also challenges us and is not ready to simply transfer money. We definitely need government support too. We are a company that has been based in Germany for ninety years and pays taxes here.

With around 11,000 employees, they already benefit from state-subsidized short-time work benefits. Have you received any further compensation?

In the hotel industry, the promised compensation payments have unfortunately not yet reached the required level. We see a lot of catching up to do here. The hotel industry employs over two and a half million people in Germany, but unfortunately it does not get as much attention from the government as the automobile industry or the airlines. The decision of the European Union (Editor's note: approval of aid to large companies) is now a ray of hope. We hope that these political commitments will be implemented in the near future.

How much longer do you have to hold out? What crisis scenarios are you preparing for?

For our branch there is an incredibly great potential, at least for national business. People want to travel as soon as that becomes possible again. But many will probably initially travel to destinations within the country in a safe environment that they can reach by train or car. Business travel and long-haul international flights will not recover anytime soon. I think that we won't see an upturn in our business until 2022 at the earliest. This of course also depends on how the vaccine distribution develops and whether this also has consequences for those who have been vaccinated and those who have not been vaccinated.

You mean the discussions about vaccination certificates, according to which vaccinated citizens could in future have more privileges and freedom than those who were not vaccinated?

When the Australian airline Qantas announced at the end of November that it would only transport vaccinated passengers in the future, it sparked a major discussion among us in management. What does that mean for a hotel business? Do we have to ask for proof of vaccination in the future? Should we tell our customers before major trade fairs and congresses that we only allow vaccinated people into our homes? How does that work? For me personally, this is more of an ethical question that needs to be answered, as we shouldn't create a two-class society.

And what are your answers to that?

We don't have any answers yet. The discussion also goes far beyond our corporate responsibility. Because ultimately it must be clarified to what extent this is ethically and legally justifiable and what the consequences are. A binding political consensus on this should urgently be found. At the same time, each individual will have to clarify for himself whether he makes a difference between vaccinated and non-vaccinated people in personal dealings with other people.

Is your new Asian owner following these discussions?

We talk to each other regularly via video conference. He is interested in political and social developments in Europe and especially in Germany. We have to explain to the owner that we are still in the middle of the second wave, that maybe a third one will come and that the uncertainties and restrictions will drag on for even longer. In China, the pandemic was fought very rigorously. The hotels there have been open again for a few months and Huazhu, with its one- to three-star hotels, is already back at a booking level of a good 90 percent of the pre-crisis level. This is also developing in China through domestic tourism. With 1.4 billion people this is of course a lot of bookings and overnight stays. Huazhu has a portfolio of 6,800 hotels that are frequented by 150 million guests. If ten percent of it came to us in Europe at some point, I would be very happy.

Is that the plan for the Steigenberger and Intercity Hotels in Europe to attract more customers from Asia?

First of all, the Huazhu Group is helping us to grow strongly in Asia with our prestigious brands, even with luxury concepts that would not catch on in Europe. Eight new hotel complexes are currently being built – three Steigenberger in China and three in India and two Intercity Hotels in China.

In addition to entering these growth markets, you are also planning strong growth in your European home market. Or will there be smears because of the crisis?

No, every crisis offers its opportunities. Organic growth will be less, but in the coming months there will be numerous takeover candidates with several hundred houses that will enable us to grow even faster. By 2025 we want to dock with the top three hotel companies in Europe with around 700 hotels. At the moment we're more in the lower midfield.

With Steigenberger Hotels & Resorts, Intercity Hotel, MAXX by Steigenberger, Jaz in the City and Zleep Hotels, you already bring together five brands under the umbrella of Deutsche Hospitality. Do you want to add to the hodgepodge of acquisitions?

Our focus on acquisitions will be in the one to three star segment, where we are already very well positioned with Intercity Hotel and Zleep Hotels. These areas have also proven themselves in the crisis. In order not to manage a hodgepodge, we will change the structure of our organization. Instead of brands, we will in future run the company according to segments from economy to luxury. Then it is also easier to integrate a purchase quickly and efficiently.

Does that mean that no further growth outside of Asia is planned for the luxury segment around the Steigenberger brand?

We are also open to further growth there. We will divide this area into the luxury area with the majority of our existing 60 Steigenberger hotels and a segment for very unusual and prestigious hotels such as the Frankfurter Hof, the Parkhotel Düsseldorf or our grand hotels Petersberg, Davos and Leipzig. We are currently working on brand positioning here.

Many of your homes are geared towards business travelers. Even after the crisis, this market is unlikely to return as quickly or as strongly. What are you doing?

So far, 60 percent of our lives come from business travelers. However, many large corporate customers expect their employees to travel 30 to 50 percent less in the future. So there will be a clear shift that we have to adjust to. We are thinking about new offers and also about using areas that were previously booked for conferences and events differently. At the Airport Hotel in Frankfurt, for example, we have set up a professional film studio that companies can use for multimedia broadcasts. We see long-term bookings as a further trend, in which company employees who work in the consulting area, for example, book for several weeks or months. This guest rather needs a kind of apartment with a work area, kitchen and service. There are already some very interesting models on the market that have become more attractive to many customers during the crisis. We are looking very closely at this market.

Finally, you have to tell me whether you have already read the book by your new owner Ji Qi, which is on the dresser behind your desk?

Of course I read the English version. And we are currently even having it translated into German so that we can distribute the book to all employees. I highly recommend this book.

Jenny von Zepelin spoke to Marcus Bernhardt. The interview first appeared on "Capital".