Cannes was calling: Water instead of champagne
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Bettina Graef-Parker is managing director at Aareal Bank and heads one division of Special Property Finance. This division includes Aareal Bank's hotel and student housing financing as well as the branches in Istanbul and Stockholm. She tells us here why her experience in the hotel sector is so important when assessing hotel investments.
Editor: Ms Graef-Parker, you joined the hotel financing team at Aareal Bank in 2003 and then briefly left the Bank before coming back in 2009. Today you're the head of one division of Special Property Finance. You're not a banker - in fact, you studied hospitality management – how does this actually fit with Aareal Bank ?
Bettina Graef-Parker: Aareal Bank is a commercial property financing provider with a special focus on hotels, offices, logistics and retail. Over a third of our loan volume is invested in hotels. This is a special type of asset class in which the property, i.e. each room, is let again each day. It helps to know exactly which factors will have an influence on high occupancy rates and ultimately a hotel's success.
Editor: Why did you actually study hospitality management – and how did you end up moving to the investment side?
Bettina Graef-Parker: You might remember the popular American series "Hotel" from the 1980s. It was filmed in the Fairmont luxury hotel in San Francisco. I was always fascinated by how the hotel manager would come down the spectacular staircase into the lobby and support his guests through major and minor tragedies. Of course, that doesn't have much to do with the day-to-day business of a hotel manager, so I soon found the investment side a lot more exciting. What's amusing is that, many years later, I was involved in the financing of the Fairmont San Francisco here at the Bank. So I came full circle.
Editor: Let's move on to the investment outlook for hotels as an asset class. What are the specific issues here?
Bettina Graef-Parker: For properties such as office buildings, there will be long-term lease agreements. Hotels are different in this respect – they don't often depend on a single leaseagreement with a fixed rent, and every day, the operator has to prove itself again in the competition for guests. Every day, the hotel has to attract a guest for each room. That means you're financing a business that needs to be successful, rather than a property. You need a lot of sector-specific expertise and well-informed networks for that. That's the only way to recognise whether the operator's concept for a hotel will actually work or not.
Editor: So that means you need to develop a feel for what hotel guests will expect currently and in the future?
Bettina Graef-Parker: Yes, definitely – and my passion for hotels remains intact. I like checking in and immediately getting a sense of whether I'll be welcome as a guest and whether they've got the details right. Yes, the location and facilities are important, but often it's the little ideas or sustainability aspects, like shampoo in glass bottles, that make all the difference.
Editor: As well as the expectations of guests, the demographics – and therefore the overall societal framework – are also changing. What trends are you noticing and how are you adapting to them?
Our experience in the hotel sector also helps us in new segmentsBettina Graef-Parker
Bettina Graef-Parker: Up to 50 per cent of people living in big cities nowadays are single. Many of them are "nomads", such as students, who only stay in one place for a limited period of time. Apartments that offer services and social facilities like a hotel are a segment that is specifically tailored to this growing need for a new kind of living environment – and not just for students. These residences have a concierge service, which receives the mail and arranges for laundry to be carried out. You can also book a room cleaning service. But above all, there are "shared spaces" where you can meet up and work. They're more than a lobby – there are communal kitchens, a gym or a sauna. That means the tenant has the best of both worlds – somewhere to live, a community, a flexible workplace and the relevant services. We can make optimum use of our experience from the hotel sector on this operational side of the business. And we're investing in it!
The get-up-and-go attitude under the motto 'We're building the new Bank' inspired me greatly then, as it does nowBettina Graef-Parker
Editor: What does the theme "100 years of Aareal Bank" mean to you in this context?
Bettina Graef-Parker: I've been at the Bank for almost exactly 20 of those 100 years. When I joined Aareal Bank, it had just come up with the motto "We're building the new Bank", and, despite all the tradition, I'm probably more a child of this new Bank. The hotel portfolio was worth EUR 2 billion at that time; today, it's over EUR 11 billion. As a specialist institution, we're known to every international investor, particularly in the hotel sector, and we can manage practically any financing deal ourselves. Today we are one of the leading finance providers in the hotel sector. This is what we want to achieve in the areas of student housing and co-living, too. My team and I are hugely proud of that.
Editor: Thank you very much for talking to us!