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Mike Haney, Newcastle Limited
Achieving Maximum Results from Your Hostel
Perspective
Newcastle Limited q Real estate advisor & investor
q $400 million portfolio
q 2,000 apartments
q 300,000 SF of retail
q No hostel operating experience
Chicago Hostel Scene q 8 million people in the Chicago area
q 36 million visitors annually
q 3 hostels – 1,000 beds
q High barriers to entry
Chicago Getaway Hostel q Chicago’s Lincoln Park neighborhood
q Built in 1928
q 115 rooms with 338 beds
q Room mix: dorms, private rooms, private rooms with bathrooms q 88 dorm beds q 64 private rooms with shared bathrooms q 40 private rooms with bathrooms
Hostel Background q Small part of 2008 portfolio purchase
q Lack of experience = imperfect due diligence q Hostel product & guests
q Revenue & marketing
q Operations & costs
q Retained previous management
q Declining performance in all divisions
Challenges
Challenges q Aging Infrastructure
q Unattractive common areas and rooms
q Poor management
q Bedbugs
q Terrible online reviews
q Falling NOI
Aging Infrastructure
Lobby
“Computer Room”
Common Room
Kitchen
Rooms
Rooms
Poor Management q No staff training or standards
q No focus on guest satisfaction
q Oblivious to reputation
q No rate or occupancy management
q Lack of housekeeping oversight
q Unmanaged bedbug problem
Terrible Online Reviews
“I have to say it's the worst place I have ever stayed and actually reduced me to tears on entering our room!!!”
“The manager didn't care about our complaint or anyone else's for that matter. We overheard many complaints during the course our of stay.”
“Trust me, it may be a nice location but the place is a dump. Spend 15 extra bucks and go down the road to a clean place with great employees. I was very disappointed.”
Comp 1 Comp 2 Hostelworld 65% 86% 76% Hostelbookers 67% 90% 71% Hostels.com 71% 85% 78%
Terrible Online Reviews
Falling NOI
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
2005 2006 2007 2008 2009
Realization of Problem
Hostel Purchase
The Turnaround
Approach
q Went to school
q Focused on key business activities q Operations q Marketing q Facilities
q Used hostel guest reviews as a guide
Guest Reviews
Turnaround Strategy
Operations Marketing Facilities Character X X X Security X X Location X Staff X Fun X X Cleanliness X X Facilities X X Value X X X
Character q Foundation of complete re-branding
q Vintage building
q Relevant, memorable theme: 20’s gangsters
q Boutique hotel with hostel attitude
q High level of service
¨ Goal: Offering a great Chicago experience
Lobby
Security q Electronic keycard system
q Electronic room lock system
q 22-camera security system
q Improved nighttime staffing
Keycard Access
Location q Perceptions: local vs. visitor
q Upscale Lincoln Park neighborhood
q Great Chicago nightlife nearby
q Close to transportation, beach, Wrigley
q Communicate the benefits
q Make the neighborhood experience accessible
Nightlife
Staff q New strategic focus:
q Guest satisfaction q Online reviews q Stays
q Training & Tools
q Organization & delegation
q Incentive-based compensation
q Benefits
Front Desk
Fun q Design that enhances guest interaction
q Activity-based spaces q Options for socializing q Outdoor space
q On-premises events q Breakfast q BBQ q Special events
q Off-premises events q Blues Clubs q Pub crawl q Bike Tours
Kitchen
TV Lounge
Reading Room
Music Room
Outdoor Patio
On-Premises Events
Off-Premises Events
Cleanliness q Standards
q Training
q Supervision
q Maintenance-minded renovations
q Bedbug protocol
Cleanliness
Facilities q Memorable common areas
q Layout that supports key functions
q Comfortable, clean rooms
q Design that reflects the demographic
Great Room
Rooms
Value q Boutique hotel style at hostel price
q Hostel attitude
q Exceptional customer service
q Everything included q Breakfast q Wi-Fi / Computer / Printing q Luggage storage q Social events
Marketing q Re-branded the hostel
q New blog-based website
q Social Media (Facebook & Twitter)
q Relationships with “feeder” organizations
q Focus on guest satisfaction & referrals
Results
Reviews
“This is an outstanding hostel that exceeds all expectations for cleanliness, security, reasonable rates, and professionalism of the staff! I have absolutely no problem recommending this hostel to friends I know, and would certainly stay here again!”
“Far and away the best hostel I have ever stayed at, and I've stayed in over 20!”
“One of the best hostels I have stayed at. Good location, fresh sheets and towels everyday, friendly staff, hostel events, sociable, best kitchen facilities I've seen at a hostel.”
CGH 1 2 Hostelworld 89% 87% 77% Hostelbookers 92% 90% 81% Hostels.com 92% 88% 81%
Guest Ratings
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
App
rova
l Per
cent
age
Monthly Average 6 Mo. Trailing Avgerage
NOI
$-
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
2005 2006 2007 2008 2009 2010 2011
Hostel Purchase
Realization of Problem
Opportunities q Renovate unused space to increase bed count
q Corporate and institutional partnerships
q Explore food and beverage sales
Applying Our Approach q Use guest rating system as a guide
q Explore how all areas of business contribute q Marketing q Operations q Facilities
q Focus on guest satisfaction
q Get the word out
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