Sleeping on the roadside

Hotels at petrol stations can offer a higher standard than motels – and at a lower price. Is this merely marketing or instead a strategy that will prove both effective and highly profitable?

Mladen Petrov

A car pulls over at a petrol station. The driver pays for petrol, does some shopping and after that receives a magnetic card. A magnetic card? Yes, a card for his room in the hotel next door. The cashier of the petrol station is, at the same time, a receptionist, which allows administration costs to be lower. This is not the only novelty, though. A stay in a hotel at a petrol station could take two forms: a traditional and a ten-hour one. The price is also different, but in both cases it is cheaper than in a traditional three-star hotel on the outskirts of the city.

A change in approach

“We’ve broken the mould a little bit and created new demand. Drivers, who know they can stop on the road in a place that is both convenient and pleasant, will change their habits. At the moment, 92 pct of Poles do not use hotels while on the road,” says Wioletta Kastrau, sales director of Kraków company ComfortExpress. “So far drivers have preferred to drive without a break in order to avoid the costs of a hotel stay, but this is starting to change,” she adds.

There are currently two such hotels in existence (one under the aegis of ComfortBusiness), and in March another two hotels are to open. According to the company’s plans, by the end of the next year the chain will consist of approximately 20 hotel facilities across the country, which will be located at petrol stations and along the most important roads. The company will also be debuting on the New Connect market of the Warsaw Stock Exchange in the summer and is currently negotiating with investors interested in its offer.

An express hotel

ComfortExpress hotels are built according to ‘modular technology’, which means that after all the necessary permits are obtained a hotel could be finished within just 3 months. The smallest has only six rooms. The costs for the construction together with the building permit amount to app. PLN 600,000, and with a 60 pct occupancy rate the investment is expected to pay for itself within four years. “We are currently in negotiations with the owners of local petrol stations and individual investors who already have a petrol station, a garage or a car wash. At the same time we are buying motels, which we then adapt to our requirements so as to have a product that we can show to interested parties,” explains Wioletta Kastrau. Petrol stations owners can cover the investment cost out of their own pockets, but the leasing of the facilities is also possible, as is financing of up to 70 pct of the investment costs from EU funds.

A MOP not just for floor cleaning

The parties interested in entering this market niche include big players such as Orlen, Shell and Lotos. From where does this interest in the hotel business derive? As part of its motorway development programme in Poland, the General Directorate of National Roads and Motorways (GDDKiA) is planning to have petrol stations built at around 100 so-called MOPs (passenger service places) by 2015. As a result, the GDDKiA will be announcing many tenders, thus putting in place excellent conditions for the development of such chains of hotels. MOPs in Poland are divided into three classes. The most advanced class III type MOPs, which apart from standard facilities such as having a petrol station, also has hotel accommodation and – depending on the local needs – sometimes a post office, a tourist bureau and an insurance office.

In October 2008, Lotos acquired the right to build six petrol stations beside the A2 and A4 motorways in a tender organised by the GDDKiA. Lotos Paliwa, which is responsible for the management and development of the Lotos petrol station chain, signed a contract with PUHIT at the end of last year concerning the operation of the hotel infrastructure of the MOPs. There will initially be four hotels built under the already existing Star Hotel brand.

According to Eurobuild CEE’s information, there will also be two hotels built at Shell petrol stations. Orlen is also in advanced negotiations over the construction of the first two hotels at its stations. Several dozen new hotels could eventually be built along motorways. Up to six MOPs including hotels are to be developed next to each of the motorways under construction. Each hotel will be of a three-star standard – but we will not see any stars at the entrance as the categorization system does not provide for this kind of new product, and would qualify it as a motel. The operators mentioned earlier would not find a motel categorization satisfactory, because they insist on having the higher “hotel standard”. Andrzej Wójcik, deputy chairman of the board and dealing with sales and development at PUHIT, has monitored this market niche closely and remains cautious. “We will not enter each of the locations designated by the GDDKiA. Because of insufficient traffic on national roads at this stage, not all of these locations will be profitable for us. This is a new product and the risk is relatively high. This has clearly not yet become a very attractive niche,” claims Andrzej Wójcik.

Occupied roads

Hotel market analysts are not very optimistic either with regard to the development of hotel chains alongside main roads. Jean-François Laport, head of the CEE hotel department at CB Richard Ellis, is no exception. “In this part of Europe we now have a large number of boarding houses and economy hotels which do not operate on a franchise basis. The condition of the roads leaves much room for improvement and the main buyer of the product – sales representatives and lower level managers – travel less than their colleagues from Western Europe. Eventually their number will decline even more. Besides, people in the Czech Republic, Hungary and Slovakia can quickly return to their original cities on the same day, without having to stop along the road,” argues Mr Laport.

There is no lack of competition according to 
KPMG’s data, with two- and three-star hotels constituting as much as 74 pct of all the accommodation options in the CEE region in 2007. Jean-François Laport expresses some doubts: “I do agree however that Poland and Romania are exceptions in this respect. In order to be profitable such a hotel should have up to 100 rooms. Operators must provide the highest standard possible at a low price. 
Is the road-side location a desirable one?”

Alex Kloszewski, director of the hospitality department at Colliers International, emphasizes that the surroundings are as important as the location of the hotels. “If there are retail or warehouse parks in the vicinity, these facilities start to ‘cooperate’ with each other after some time. It is up to developers to fulfil this potential,” says Alex Kloszewski. According to Colliers International, the number of people travelling on business is growing in Poland. “The numbers speak for themselves: in January 2008 there were 650,000 business people on the road. A year later it was 1.5 mln!”

The power of the brand

What are the requirements of hotel guests? According to Alex Kloszewski uniformity is the most important thing to them. “A guest does not like surprises. If they often travel on business, they need to know that there is a brand waiting for them on the road which always offers the same standard. I personally do not believe in the potential of new brands. Here you have to put your money on proven international brands, which push themselves forward much more effectively and access the client easier thanks to the global reservation system,” stresses Mr Kloszewski.

Andrzej Wójcik of PUHIT, however, is not afraid of the foreign completion for the Star Hotel brand. “Most guests of economy class hotels are Poles who do not really recognize international brands. These brands will have to be promoted in this country. We all have the same chance,” believes Mr Wójcik.

There has been no invasion of international hotel brands into this sector yet. Orbis hotel group, which includes the Etap and Ibis brands in its portfolio, was forced to re-evaluate its development strategy due to the financial crisis and the decline in turnover. The company was working on 18 new projects under the Etap and Ibis brands at the beginning of last year. After Orbis opened an Ibis hotel in Kielce and an Etap hotel in Toruń, the construction of the next five planned hotels was frozen. The company is focusing now on improving its financial situation, and so there is no sign of any new projects. Meanwhile, the first two hotels under the Ramada brand will be opened in Poland in 2012.

PUHIT is looking to develop its chain, which currently consists of 49 hotels. What connects the hotels of this brand at this point is a common reservation system; but the prices, standard and locations differ. “Making the Star Hotel brand uniform is our long-term target. First we would like to focus on the standard of a hotel, which is a task for the designers whom we will select on the basis of a tender,” reveals Andrzej Wójcik. 
   The company plans to eventually build around 15 hotels based on this standard project. It is possible that it will then offer cooperation on a franchise basis to interested companies.

Reaching the client at a (lower) cost

ComfortExpress is also in negotiations with big companies. Wioletta Kastrau puts forward the following idea. “At the moment, the employees of such companies are still driving around Poland; but taking care of their finances is a bookkeepers’ nightmare. One business trip involves a number of often inflated invoices from a number of hotels. What we offer is a card, which works in the same way as a petrol fleet card. A company receives one invoice for all employees at the end of the month.” 
Apart from making the paperwork easier, the advantages also include discounts for corporate clients. An employee will pay from PLN 69 for ten hours spent at the hotel. “This idea of a shorter stay works very well at airports in Western Europe, because the time of the next flight determines the length of the stay in the room. Things look different on the road. What happens if a guest stays 11 hours? It is not practical and in this case a loyalty programme would work better,” comments Alex Kloszewski. Andrzej Wójcik of PUHIT is also unconvinced: “We will leave innovations to the new players. Instead of experimenting, we are trying to improve our standard.” ν