Interview With Hotel Investor Jeff Coe
10 June 2020 David Grammig, 5 min read
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— Jeff - thank you for speaking to me. Please tell us a bit about your background?
— I am a long-time tech entrepreneur and investor, who started his career in this space in Denmark and via Australian and then Germany, worked with many early-stage tech companies. My core focus was first content, which moved onto SaaS and finished within the hospitality technology sector where I met my current business partner Benjamin Habbel. As an Australian who lived most of his adult life in Denmark and Germany, I was very exposed to the Northern European way of doing business, and saw how there was an opportunity to take many things from tech, and the Nordics, and move this into the Hospitality Real Estate business, hence my pivot, to leave "pure tech" and move into the sector I am today.
— How has Covid transformed the hospitality industry?
— This is a massive question, and needs to be divided into transformation of the industry and transformation of consumer behaviour, with that underlying reality that we are only now learning what the trues impact will be on both. The industry has been dealt a once in a century "gut punch" as there are not many people who can remember being forced to shut their business on force of imprisonment/fines, as well as having their market completely taken away in one single week..... Being in a western democracy, this would normally be unheard of, and trying to make sense of it, as well as the ramifications are still very difficult to decipher.

So, trying to do in fact that, what I can see is the following :

1. A rethink of hiring and training of staff, where hotels and restaurants will try to hire less people, but people with more of a higher skill level and who can be agile in the face of change - So, better staff, with a more entrepreneurial spirit.

2. A bigger focus on local and regional guests, with this also extending to F&B, with having a more balanced dependency on F&B and not just rooms. Membership will become an increasingly important part of hotels and restaurants as membership fees are more resilient to global events, and international tourism is now a luxury and not a given - The hotels with just tour groups have been the hardest hit, with no clear site of recovery.

3. Space; people now want even more privacy and space and will pay for it, so hotels that are smaller and more unique with things like private beach, rooftop and garden will be able to charge significantly more that other hotels without these attributes.

4. Bigger travel budgets: This one is more controversial and something I believe in and may note be broadly supported, but it appears that travel is now much more uncomfortable and challenging, so when people take the effort to travel and take time away, they seem to be willing and also wanting, to spend more on the actual stay and on experiences that come with this. There are psychologists stating that also after global catastrophies, people tend to want to either stay in their "cave" protected at home, but when they leave, want to live life to the fullest.... so the old saying "Go big or go home" resonates after events such as this.
— How quickly will the industry bounce back (keyword: revenge tourism)?
— I do not like the term "revenge tourism" as it's very "American" in they love to make it about "sticking it to something...", so my opinion is that its as stated above, people do not like to be caged up and need / want to experience life and simply put, have a good time. This though does not mean (as many pundits are saying) that things will bounce back to be twice as big as 2019, but will be more targeted in some sectors within tourism will be quicker to regain traction and revenue than others. As I stated early, people will be more inclined to spend more when they actually travel, and will look to have a more intimate and meaningful experience than what was the "norm" pre-Covid ( Think 2019 ... EasyJet weekend to Barcelona and end 2021 - Week long trip to Umbria, with a very open wallet to experience all the best the place can offer).

Saying that, I think 2022 will see more global revenue from tourism as a whole than ever in history, it will just be channeled heavily into certain sectors that are new/different than pre Covid.
— Are family offices considerable players in the hospitality industry?
— Family offices can bring to the industry a more patient capital than many other sources of finance, as they (in many instances) are interested in investing in regions/countries they have a passion or interest in, and can therefore help develop a market more than many other sources of capital. Banks are constantly failing to support entrepreneurs due to heavy legislation and restricions enforced by govt, whilst family offices have the ability to back an idea more freely. A good example is the "silver coast" in Portugal north of Lisbon, which is a wild and beautiful space, but which does not have an established track record. Banks and larger institutional funds are restricted from investing in this area until it has been proven, whilst FO's can back projects and influence the growth of the area. This is also what happened in places like Ibiza and Bali, where it was FO's that helped create the destinations that we all know today.
— Have you identified super trends that are emerging in the hospitality industry?
— Yes, as I have mentioned above under the changes to the industry due to Covid. But defining these again, I would say

1. Smaller hotels with more space

2. Focus on local communities ans all things members

3. Authentic experiences vs tour guide tourism (for the more mature tourist markets)

4. Wellbeing - People are looking for more of an impact on their mental well being when choosing to travel and to stay somewhere.
— You are focusing on Mediterranean countries in Europe - why is that?
— We first targeted Portugal as we saw this as a market that was undeserved by the hotel experience that we envision, and we love the country :) Then we focused on Italy, as we noticed Italy was broadly very stuck in a traditional mind set, yet was /is one of the most culturally wonderful countries in the world.. If you think food, architecture, wine, weather, nature.... its really hard to beat, yet 99.9% of hotels were relying on this fact, and were incredibly poorly managed and simply not delivering to people the experience they should be getting.

From a real estate perspective, it was also the case, where there are thousands of underperforming assets with so much potential, which just needed a repositioning and some capex, and they will be delivering vastly better returns per m2.
— What are the opportunities for SFO investors?
— The combination of having consumers willing to pay more for the right experience, coupled with many poorly run hotels (but with great potential) being made available at accessible prices, the opportunity for investors now is to invest in the acquisition, capex development and rebranding of these hotels, which will deliver sustained high returns into the long term future.
Jeff Coe and his Co-Founder Benjamin Habbel are hosting a small and exclusive circle of family offices in their newest hotel in Milan. If you are a qualified real estate investor contact David Gammig for more information - david@grammigadvisory.com