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As home prices surged during the cost-of-living crisis, Millennial and Gen Z travelers purchased more expensive Airbnbs and four-star hotels at reduced prices, increasing demand for Generator Hostels.
The private equity-owned accommodation group is one of the world’s largest operators, operating 21 hotels in Europe and the United States with about 12,000 beds. This year, the company is expected to post record revenue of 225 million euros, with earnings before interest, tax, depreciation and amortization reaching about 75 million euros.
Generator’s revenue is expected to grow by about 20% over last year, while the group’s profits are ahead by nearly 30%.
Jason Kow, chief executive of Generator’s parent company, private equity fund Queensgate Investments, attributes the group’s success to its ability to withstand economic downturns.
“This is cheaper… If I wanted to travel to Paris and know how all the other budget hotels are priced, I could choose to stay in the 10th arrondissement… I could do it for a fraction of the price, but I had to share accommodation, and it became an interesting proposition,” Kow said.
Average hotel room rates rose 14% in the seven months to July from last year and 30% from 2019, according to industry data provider CoStar.
“Affordability is definitely a key factor, so we’re attracting more people . . . based on the downward trend in the cost of living of our products,” Kow said.
Generator owns and operates sites in major international cities such as London, Barcelona and New York. Next year, the company plans to launch an additional 10 locations around the world without long-term leases under an asset-light model, including a new hotel in Bangkok.
The average age of Generator’s customers is 27, but Kow said the group also caters to families looking to save on a budget and has also received corporate bookings. Kow said that young people’s enthusiasm for travel consumption and the huge demand for travel after the epidemic have given the group the ability to capture more market share from other accommodation providers.
Queensgate, which manages approximately €3 billion in assets, acquired Generator in 2017 for €450 million. Kow said he would hold on to the asset until there is “more certainty” about interest rates or “maybe even a couple of rate cuts.”
“Then we can consider some strategic options, but at this stage we are focused on growth,” he added.
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