Many apartment-style hotels struggle with profitability, despite large funding rounds. Berlin-based Numa Group It has published numbers which suggest that it is on the right track to creating a resilient business as it expands in Europe.
The company is now operating in 36 cities and 15 countries. It has already signed nearly 9,000 units with most of them already operational.
Numa Group CEO: We want to reach 15,000 live units within the next 4 years. Christian Gaiser Tell Skift.
Numa uses a hybrid business model, which combines traditional hotel management and short-term rental apartment services. The properties are equipped with fully-equipped studios and digital check-in. They also have code-based access codes to the rooms.
Pandemic-Forced Scrounge
Numa’s executives say that, having launched just before the pandemic, they had no choice but to be lean and mean from the start.
Gaiser said, “We are forced to work as efficiently as possible with the capital we have.” Early on, you must establish a cost culture in your company. It is very hard to change this a few more years down the line.
The numbers show the results of this approach: Numa’s €50 million (approximately $57 million) gross operating profit represents a 62.5% margin on its revenue. That’s an unusually high figure in the segment where many operators are believed to be posting losses.
Sustainable Growth vs. Growth through aggressive expansion
Numa’s growth strategy is measured, unlike competitors who pursue aggressively market share.
Gaiser stated that “in this model we believe that there is a sustainable ceiling when it comes to growth too aggressively.”
Numa wants to keep its properties close together so that housekeepers can provide cost-effective service or update their furnishings as necessary.
When you push things too hard, they can break.
The company concentrated on increasing density in a few strategic markets, rather than expanding widely.
“For example, we only aim for large metropolitan cities, reflecting 20–25% of the expansion list that other players reportedly seem to pursue,” Gaiser said.
Limehome Staycity and Smartflats are also operators in this sector. They all follow variations of the apartment hotel model.
Master Lease Traps to Avoid
Numa is different from its competitors who failed because of its property agreement approach. Numa was less concerned about meeting contract terms than Lyric Domio or Stay Alfred who all committed to long-term leases with fixed payments for landlords, regardless of occupancy.
Gaiser stated that they adhere to a strict underwriting policy, which focuses on rent coverage ratios and minimum profitability thresholds. We also perform a lot stress tests to evaluate the effect of demand shocks.
Numa was able to survive when occupancy rates plummeted due to pandemic lockdowns. Companies with large master lease obligations were quickly out of money.
The European Advantage
Numa thinks that Europe is a better market for their business model than the U.S.
Gaiser said that the European market was less competitive than the U.S. and had less capital coming in. “While many avoided hospitality during and following Covid, for us this was the perfect time to build something amazing when there is ‘blood on streets’.”
The fragmentation in the hospitality industry of Europe presents unique opportunities.
Gaiser stated that “Europe’s hotel market is fragmented and highly fragmented. There are fewer brands, smaller properties and less branded hotels.” Many family-owned hotel chains face succession issues and staff shortages. This creates opportunities for tech-enabled hotels.
Numa has expanded its presence in Europe through organic growth as well as acquisitions. the startup raised $59 million in a Series C round in 2023.
Numa’s acquisitions in the UK have been of particular interest. Native Places, a UK based operator, with properties in London and Manchester, as well as other major cities.
Numa has also expanded in Southern Europe, adding new locations in Madrid, Lisbon, and Málaga. Numa has also expanded in Italy by adding new sites at Rome, Venice, Florence, and other cities.
Gaiser explained that Southern Europe was probably the first thing to come to mind when we consider the idea of Europe as a museum or Disneyland for Americans and Asians.
Accommodations Stock Index Performance from Year to Date
What am I seeing? The performance and stock prices of the hotels and short term rental sector within the ST200. The index comprises companies listed on global markets including international and local hotel brands, REITs in the hotel industry, hotel management firms, alternative accommodation, timeshares, and other hotel companies.
The Skift Travel 200 The combined financial performance from nearly 200 travel agencies worth more than one trillion dollars is summed into a single figure. See more hotels and short-term rental financial sector performance.
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