Sometimes he just sits there with his eyes closed and imagines what it will be like. He stretches out on the turquoise-colored lounge chairs on the hotel’s rooftop terrace on Berlin’s famous shopping street, Kurfürstendamm. There’s a great view over Berlin – but also over the terrace of the Waldorf Astoria next door.
Soon, Dieter Müller will be able to offer his guests a better view than the luxury-class competitor. The owner of Motel One will be opening his ninth and biggest hotel in the German capital in 2017. He will also offer a much more affordable room price of €69 ($74) a night.
“Long before signing the contract and starting construction, I have to imagine what kind of a feeling our guests will have when they visit one of our new hotels,” said Mr. Müller, founder and chairman of the budget hotel chain with the distinctive turquoise logo. “We want to offer our guests a pleasant atmosphere – but I also always have to have an eye on economic efficiency.”
“We leave a lot of the things out that our competitors have as basics, but that we consider uneconomical and our guests deem unnecessary.”
According to industry rumors, the luxury Waldorf is said to have invested €1 million ($1.1 million) per hotel room. For Motel One, a mere €70,000 does the trick to create the its by-now iconic look: a high-end, double bed, a brand-name television and lamps. There is no wardrobe, safe, minibar or telephone. There are no meeting rooms, restaurant or speed dial for room service.
“We leave a lot of the things out that our competitors have as basics, but that we consider uneconomical and our guests deem unnecessary,” said Mr. Müller, who rejects the hotel sector’s customary star ratings.
He prefers to listen to customers: The 150,000 guests that filled out the hotel’s feedback questionnaire in 2014 said they wanted to have small bottles of shower gel replaced by large dispensers on the washbasin for environmental reasons.
Mr. Müller’s motto: “Concentrate on the essentials, but do it while meeting the highest requirements. And keep looking back over your calculations.”
Today it’s difficult to imagine the German – and soon European – market without the hotel chain.
Last year, 4.2 million guests stayed in 54 Motel One hotels with nearly 13,000 rooms in Germany, Austria, Belgium and Great Britain, reaching an average occupancy rate of 75 percent per night.
Optimizing hotel space, calculating, empathizing with the needs of guests, offering attractive rooms in central locations at an attractive price. It is a model that has allowed Mr. Müller not only to successfully positioned Motel One in the industry within just 15 years.
He has also created a new and prospering segment – in between the fantastically equipped but high-priced luxury hotels on the one side, and the affordable but run-down boardinghouses on the other.
Motel One – a combination of the word synonymous for a cheap stay and the aspiration to quickly become number one in the market.
“It’s a great concept,” said Florian Haller, managing director of Germany’s biggest owner-operated hotel travel agency, Serviceplan. Mr. Haller said he’s a regular guest at Motel One when he’s traveling on business. “It hits the nail on the head in terms of what guests want.”
After the French Accor Group and the British Premier Inn, Motel One was third among Europe’s fastest growing hotel chains, with nearly 2,900 new rooms. Turnover climbed to €256 million last year; operating profit reached €51 million.
Around 40 percent of the hotels are owned by the holding company itself, rather than franchised out. That is unusual for the industry and valuable for Mr. Müller. It helps him to better distribute the tax burden and increase both solvency and financial solidity. According to his own statements, he has earned €100 million of the €280 million in equity through real estate deals.
“That allows us to provide solid financing for our expansion,” said Mr. Müller.
Video: How Motel One improves employee morale: A lounge manager in Edinburgh explains.
The chain added eight new locations in 2014, for example in Vienna, London and Prague. Another 22 hotels with 7,000 rooms are in the pipeline – including one in Barcelona, set to open its doors at the end of 2016.
An expansion to the United States is on hold. There will be no Motel One in the middle of New York City for the time being, despite being years in the planning and high upfront investments. The ever-higher building costs did the planning in.
“Too bad,” said Mr. Müller, “but we’re not going to build it just for the sake of prestige.”
Mr. Müller hasn’t just given up on New York. Without much fanfare, the chain in January closed nine hotels that had been there pretty much from the beginning, and which had been profitable right until the end. Mr. Müller said the locations weren’t central enough anymore.
“We want to offer hotel rooms in top locations, where we ourselves feel comfortable. And it has to be economical.”
According to an internal survey, employee satisfaction is at an all-time high of 86 percent.
These are the principles that Mr. Müller has internalized since the beginning of his career in the hospitality industry, which he more or less stumbled into.
After graduating from secondary school in the western German city of Saarbrücken, he got an apprenticeship at a local BMW car dealership in 1970. After that he was hired as an accountant and spent a year at a BMW motorcycle factory on the outskirts of Berlin, but said he saw “few opportunities for development in these rigid corporate structures.”
One day he passed by a construction site in Saarbrücken. Mr. Müller spoke to one of the construction workers and learned that the French hotel chain Accor was planning to build Germany’s first Novotel hotel there.
Mr. Müller had “no idea about the hotel industry,” and his French wasn’t particularly good either. He asked for a job all the same and was hired to start working at the new location.
Soon he was all about the hotel business – among other things because one of his tasks became to push the company’s expansion in Germany.
Mr. Müller spent time looking for possible locations throughout the country, negotiating on properties, planing new hotels, learning what was important in dealing with guests, staff and room service. All this while he was only in his early twenties.
Mr. Müller stayed at Accor for twelve years, moving up the ladder to become head of the catering division in Germany. When he was eventually asked to switch to the company headquarters in a Paris suburb for his next career move, he quit instead and became self-employed, starting in 1987.
His start-up capital consisted of three unprofitable middle-class hotels that were left to him by his ex-employer, which Mr. Müller and his co-partner used as the foundation for their own hotel chain. They called it Astron. It’s Greek for “star,” but more importantly for the pre-Internet age: “We were right at the front of the phonebook.”
The chain quickly grew to more than 50 locations in Germany. But at the end of the 1990s it had reached its growth limit.
When a co-worker drew Mr. Müller’s attention to a budget hotel’s business plan instead, he immediately grew enthusiastic. Even back then, he expected middle-class hotels would die out. Only luxury or low-cost segment hotels would have a chance.
He quickly decided to create his own budget chain, and even decided on the name: Motel One – a combination of the word synonymous for a cheap overnight stay and the aspiration to quickly become the number one contender.
Mr. Müller soon put all of his energy into the new venture. He sold the 54 Astron hotels to the Spanish hotel chain NH for €95 million, and earned another €250 million for the real estate. The first Motel One that opened in 2000 in Offenbach, Germany, outside of Frankfurt and near its busy airport, was profitable right from the start, with an occupancy rate of 80 percent.
But low prices alone are not enough to ensure success in the long run.
For that reason, Mr. Müller came up with a stable brand strategy, together with his wife Ursula, who he had met at Astron. To this day, they don’t run classic advertising campaigns, apart from online banners. “The divergence losses are too high,” said Mr. Müller. “Our hotels are our best marketing.”
In addition to high-quality design from original manufacturers, the Müllers focused on great locations, complemented by items that created regional flair. For example, they added egg-shaped chairs with tartan upholstery in Edinburgh and in Prague they offered bombastic chandeliers.
After a vacation on the Spanish island of Mallorca, they chose turquoise as their company color – “because it just makes you happy.”
Bedspreads, carpets and chairs in that color have since then been part of the standard features. Even the service employees wear turquoise-colored uniforms.
“Don’t think too much about your wages,” said Mr. Müller to his employees. “If you’re good, the money will come automatically.”
That is part of how Motel One operates. If guests indicate on feedback questionnaires that they are happy with the service and cleanliness, Mr. Müller distributes bonuses of up to 20 percent to the entire hotel team. “If you’re only driven by money, you’re following the wrong principles,” he said.
The result: According to an internal survey, employee satisfaction is at an all-time high of 86 percent.
Mr. Müller himself stays overnight at his own hotels when he is on traveling on business. He said it helps him get the best feeling for his company. Either that or he stays over at one of his competitors’ hotels for a night to get inspiration.
Mr. Müller still holds the voting majority, but only around a fifth of the shares in Motel One. In addition to the investment bank Morgan Stanley, SAP founder Dietmar Hopp is also one of his co-proprietors.
Mr. Müller said he wants to remain company chairman for at least another five years. But the transfer to his 36-year-old son Daniel, who is currently head of hotel operations, is not yet agreed upon.
“He has been on a good path so far, but the company has to function,” said Mr. Müller. “We’ll see what the future holds.”
This story first appeared in the business weekly WirtschaftsWoche. To contact the author: email@example.com