Property Pinch

In Munich, Where Hotels Rooms Are Hard to Find, Local Businesses Begin Building Own Overnight Accomodations

Hotel Bayerischer Hof, Munich, July 2014 Source Hotel Bayerischer Hof
Tourism is rising to Munich, forcing some local businesses, such as BMW, to build their own hotels to accomodate corporate visitors.
  • Why it matters

    Why it matters

    The lack of hotel accomodations in Munich is a threat to local businesses trying to house visitors during the midst of a tourism boom.

  • Facts

    Facts

    • The start-up center attracts scientists and businesspeople from around the world to its trade shows and to Munich’s Oktoberfest celebrations.
    • Other companies such as Ikea already operate hotels and automaker BMW next year plans to open its own 270-room corporate hotel in Munich.
    • The new hotel being built by BMW will need to reach an average of 67 percent occupancy to turn a profit.
  • Audio

    Audio

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Peter Hanns Zobel never planned a career as hotelier.

With his doctoral degree in pharmaceutical technology and executive positions at drug research giants such as Merck KGaA, Novartis Pharma and Horizon Pharma Inc., he seems ill-suited to be choosing furnishings and fixtures for a five-star hotel.

Yet here he is proudly leading tours through the futuristic, elliptically shaped new building that will open this fall on the 25,000-meter campus of the Innovation and Start-Up Center for Biotechnology, known by its German acronym, IZB, in Martinsried near Munich.

“The business model of running a hotel is new to us,” said Mr. Zobel, IZB chief executive officer. “This is really entering new territory.”

IZB of Germany is not alone in building its own hotel. Ikea has been running its own in Sweden since the 1960s. The home furnishings giant's Hotel Värdshuset has rooms that are spare but comfortable and furnished solely with Ikea products.

Building and operating the hotel has become a necessity for IZB, which houses some 60 biotech companies employing more than 650 and is now among the top 10 biotechnology centers in the world. Owned by the Free State of Bavaria and one of the most successful business incubators in Germany, there have been no vacancies at the IZB for the past five years.

Scientists, researchers and businesspeople from all over the world travel regularly to Martinsreid, but it’s often difficult for them to find quality accommodation, especially during trade shows and, of course, Oktoberfest, when some six million visitors descend on the area.

Deciding to build a hotel was not a great leap for Mr. Zobel. He had been advocating for construction of a centralized meeting center that would not only serve the IZB, but could be used by Ludwig Maximilian University’s Biocenter, two Max Planck Institutes and the Klinikum Grosshadern Hospital, all of which are located in the immediate vicinity of the IZB.

“Until now, that community feeling has still been missing a bit,” Mr. Zobel said.

The focal point of the 27-meter high, €10 million ($13.45 million) hotel will be the “Faculty Club” on the top floor, where executives, researchers and scientists can compare notes, exchange research results and, ideally, reach agreements on new joint projects. Visitors will be well fed. Renowned French chef Jean Michel Féret will be running the hotel restaurant.

IZB is not alone in building its own hotel. Swedish home furnishings giant Ikea has been running one since the 1960s. Hotel Värdshuset sits in the middle of the company grounds of the world’s largest furniture dealer in Älmhult, Sweden, with rooms that are spare but comfortable and furnished solely with Ikea products.

The venture has worked so well that the Swedes are collaborating with the American hotel company Marriott International on a low-cost hotel project called Moxy, with Ikea furnishing the property while the U.S. company handles business operations. The first three Moxys will open in spring 2015 in Berlin, Frankfurt and Munich.

 

izb-residence-campus-at-home-startseite
The new hotel at the IZB headquarters outside of Munich. Source: IZB

 

BMW has no interest in opening a hotel chain, but the automaker has become frustrated by the lack of accommodations in Munich during peak travel periods. BMW is building a 270-room facility in the Moosach district, which will put out-of-town BMW employees and other visitors extremely close to the company’s headquarters and its research and development center. Strabag International is building the three-story structure with completion expected by mid-2015.

Running a hotel is not an easy business. Revenues in the industry dropped by one percent last year, largely because of increased energy and operating costs, according to the German Hotel and Restaurant Association. Low-cost chains such as Motel One put additional pressure on the prices hotels can charge.

IZB’s Mr. Zobel met with Dieter Müller, chief executive officer of Motel One Group, but the two parties were unable to hammer out a deal, leading the biotech center to go it alone. It’s been a learning experience for Mr. Zobel, who found out the hard way that it’s best to purchase towels from a company that also will handle the laundry service, but overall, planning and execution of the new facility have gone smoothly.

The average occupancy rate for hotels in the Munich area is 67 percent. “When we reach this number, we will be in the black,” Mr. Strobel said. He’s limiting the risk of empty rooms by working out an agreement with the Max Planck Society, which will reserve one-fourth of the rooms for its use.

Prices are moderate considering the quality of the hotel and the expense of doing business in Munich. An average room, for example, will cost €85 ($114.32).

Mr. Zobel promises there will be no surcharges during Oktoberfest.

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