The Von der Heyden Group of companies was founded in 1989. Earlier this year, the hotel management company IBB Hotel Collection in which the Group has majority shareholding, moved its operations to Malta.
The Von der Heyden Group also concentrates on the renovation and reconstruction of historical buildings, such as old city houses turning them into superior boutique hotels with their first hotel in Malta situated in Valletta's Pjazza Merkanti.
Group chairman Sven von der Heyden and IBB Hotel Collection's managing director Vladimir Saal, spoke to The Malta Business Weekly.
Group chairman Sven von der Heyden
Q: The VDG Group is relatively unknown in Malta: could you outline its principal areas of activity?
SvdH: The Von der Heyden Group is principally a developer of high quality office buildings. We are not known for being the biggest, but we are considered as a high-quality niche player. The group is also the majority shareholder in a hotel management company called IBB Hotel Collection which, earlier this year, moved its operations to Malta.
Q: Your group is currently involved in developing or acquiring properties worth some €200 million in Europe. You are presumably up-beat about medium to long term prospects in the region then?
SvdH: With ever falling interest rates, real estate markets offer an above average return on investment. Identifying the appropriate sites, and timing our entry in individual markets correctly, have been two of our major strengths over the last decades, enabling us to generate very attractive returns on our selected real estate projects. We are bullish for Germany and Malta, while Poland has changed from an emerging market into a stable economy where we have been active for over 25 years.
Q: Which cities does your group currently operate in?
SvdH: We have offices in various cities, sometimes only small ones, including Warsaw, Poznan, Munich and Malta. We are building a beautiful 90-room hotel in the Baltic city of Gdansk in Poland and are now looking forward to our first presence in Valletta next year. In Munich, we are developing and building our biggest project ever called Bavaria Towers.
Q: You are not currently active in Malta, so why have a head office location here?
SvdH: Definitely not because of taxation. Rather, it was for cost efficiency, and to benefit from professionalism and good governance which I admire in Malta, when comparing it to the usual countries for holding companies such as Luxembourg or the Netherlands. In addition, after thorough market research, we concluded that Malta also offered the most competitive and attractive environment. At the end of 2013, we decided to relocate from Amsterdam to Malta, and are very satisfied with this move. We are spreading our operations here with both expanding our hotel portfolio and intend to develop a top-spec office building to meet the needs of quality at a reasonable and sustainable price. We are in the process of securing certain locations, sometimes on our own, or with hand-picked Maltese partners whom we trust and want to do business with on long-term basis.
Q: You stated that the medium level hospitality sector is one of your key areas of business; surely the three and four star categories are highly competitive and crowded: what inspires you to forge ahead in this sector?
SvdH: Rockefeller once said and I love to quote him: "you either make money with the poor or the rich, but not with the middle-class". In a way it might sound paradoxical, but we only believe in this when it comes to office real estate development, despite the fact that even middle-class office buildings have their rental income and profits. When it comes to hotel business though, it is difficult to make money in the luxury segment unless one has economies of scale, a prime location and high occupancy rates; small properties mostly are no more than a hobby of the owner. Real budget and cheap hotels are not close to our heart as they do not match up with our quality driven approach. Hence, what is left, is the superior 3-4 star segment which has growth potential as, these days, it reflects the needs of the vast majority of travelers.
Q: Your type of activity entails, by its very nature, substantial capital resources; how is the group financed, is it heavily leveraged?
SvdH: Real estate is very capital intensive, as you quite rightly point out. Our average project costs around €20-30 million to develop, although currently we have a project of €150 million as it is the case with Bavaria Towers in Munich. Successful real estate investment consists in getting a sound financing structure in place, and it depends on a smart way of arranging the overall project financing. Our group is going for an average leverage on project level that never exceeds 75%; the historic average is rather 65%. Most importantly though, our holding company in Malta never guarantees any real loans or liabilities to banks which grant financing to our subsidiaries - this is a golden rule for us. Throughout our group's history, we have always stood by all our companies, subsidiaries and projects, always safeguarding the interest of third parties even when there were unforeseen obstacles. And this is what I am very proud of.
IBB Hotel Collection's managing director Vladimir Saal
Q: The IBB Hotel Collection is a relatively young but at the same time dynamic hotel Group. What is the vision driving this business?
VS: Our slogan 'inspired, bespoke, bold' sums up our business vision: to grow by focusing properly on each individual market because every market deserves a different kind of hotel. We formulated this vision following our early years in the sector when we had properties in three different countries. We realised that a one-size-fits all formula, often applied by major players, is not always attractive to investors as the needs and preferences vary by market and, sometimes, by region. Each of our bespoke hotels deserves their own, perfectly fitting, standards.
Q: What motivated you to go into the hotel industry?
VS: From a very early age, I was strongly attracted to the leisure industry, even in my student days. This led me to focus my career in the hotel industry which I am still very passionate about.
Q: What are the key points of differences between IBB Hotel Collection and competing international hotel chains?
VS: Whereas the very large institutional investors may feel comfortable working with large international chains, medium sized investors are looking for the flexibility, personal involvement and ability to adapt which we, as a family run business, can offer. IBB combines a professional, international-standard, approach with the capacity to concentrate on individual properties.
We adapt to our clients, not the other way round - this is a great advantage, especially when that investor is venturing for the first time in the hotel business. It's not to say that we don't have our brand standards, of course we do: rather we are the right partners to guide investors into the sector, because of our willingness to listen, understand, and adapt.
Above all, we aim to conduct our business in an honest and transparent manner, share our knowledge and build on trust by aligning interest with the owner. And this is our competitive advantage.
Q: How will you be promoting the IBB Hotel Collection?
VS: Times have changed. A big international brand alone cuts little ice with savvy travelers who often seek reservations online. We know that travelers first look around for location, quality and price, and only then decide about the brand - we aim for the right location in every market where we are represented. IBB then positions its brand as a perfect alternative in that location.
Q: Will you be looking to consolidate existing markets or to develop new ones?
VS: Our approach is twofold. We consolidate and expand in existing markets such as Germany and Poland, whilst entering new markets such as Austria and Malta, and keeping an eye on other potential countries like Portugal.
Q: Why Malta?
VS: Why not Malta? As frequent business travelers ourselves, we know from experience that there already exists a demand for proper quality business hotels in Valletta. This potential will increase, especially when Malta becomes even more visible on the European stage as it takes over the Presidency of the Council of the European Union in 2017, and Valletta becoming the European capital of Culture in 2018.
Q: Can you tell us a bit more about your plans for the new hotel in Valletta?
VS: We are excited about the prospect of managing a new and beautiful boutique hotel which is excellently located in Pjazza Merkanti just behind the Grandmaster's Palace, an area which is already being upgraded and regenerated. Opening in late 2017, this will have 18 rooms, offering a truly personal and bespoke service of European mainland upscale 4 star standard.
Q: Will this be your only venture in Malta?
VS: We hope not; we believe in economies of scale and are actively looking at some other two or even three opportunities in this country. It's obviously crucial therefore, that we get our first venture on the right track from the very beginning.