22 Jan 2016
Words Resort Brokers Australia
Eight is a number laden with meaning. In numerology, it denotes balance, focus and leadership. To the Chinese, it is considered very lucky. The atomic number of oxygen, the series of notes in a musical octave, the number of bits in a byte, eight repeats in nature, art and science. It is also the number that brands one of Australia’s most innovative boutique hotel groups.
8Hotels is an eclectic collection of properties, each with a distinctive feel, and each shaped by a culture built on authenticity, enthusiasm and daring to be different.
Founded by Paul Fischmann in 2003, what began with a 14-room hotel lease in Sydney’s Darlinghurst grew by 2013 to be a market-leading hotel company controlling more than 1,200 rooms in 21 hotels across Australia and abroad.
These days Fischmann is paring back his 8Hotels portfolio to focus on a new phase of growth driven by new hotel development activity and the provision of asset services to other hotel developers.
Before exploring that new direction though, it’s worth looking back on the path that brought Fischmann and his independent 8Hotels to this point. It’s a journey of tough lessons learned early, determination to succeed, and canny business instincts, not to mention the mysterious power of ‘eight’.
The accommodation industry has been Fischmann’s focus from the get-go. He sidestepped university in the late 1990s to operate some “less than salubrious” inner Sydney backpacker hostels.
Barely more than 20, he picked up a half share in a boarding house lease and, within three years, had five backpacker hotels. It was a seat-of-your-pants ride that didn’t end well. Youthful over-confidence and some ill-advised diversification meant he had to sell down and start again.
But start again he did, this time with more focus and the benefit of experience. “When a deal came up from some landowners, I proposed they build a boutique hotel to cater to a backpacker market I now knew wanted more than run-down share facilities,” he said.
“I knew I could fill an 80-room hotel, eyes closed. The deal was they would build, I would pay for fit-out and take on the lease. It had its risks, but I made back the initial investment of $500,000 in the first year. Before I knew it, I had three successful boutique hotels.”
It was about this time the ‘lucky’ number eight entered his life. “The number eight kept coming up,” he recalls. First it was in a mobile phone number he was offered by his telco – one that included repeated eights and threes. “I just thought it was a good number, easy to remember, so I took it.”
Then, when Fischmann was negotiating to develop a hotel, he gave his contact details to the landowner and architect, both Chinese. Needless to say, they were impressed. It was the first time Fischmann learned of the significance of the number eight in Chinese culture.
Needing finance for that same deal, he approached a mentor, the father of a former girlfriend and (as luck would have it) founder of the Table Eight fashion label. He agreed. “When the Chinese asked where I got the finance, I said Table Eight. They signed the deal,” he laughed.
“So I decided having the number eight in my life wasn’t a bad thing. When it came to creating an umbrella brand for my hotels, it felt right.”
Fischmann says 8Hotels Group grew organically, opportunity-driven rather than following a set corporate strategy. At its core have been an understanding that “good hotels are about good locations”, and an ability to deliver unique, personalised hotel experiences without an overblown price tag.
8Hotels’ culture is based on a ‘can do’ service attitude that is both personal and flexible. The staff are encouraged to do what “makes sense for guests individually” because policies and procedures are there to enhance, not jeopardise the guest experience.
“I’m really proud of the way we’ve evolved,” Fischmann says. “We are literally self-started and self-funded, and we compete successfully in an industry that is predominantly controlled by very large, very well established, and very well funded companies.”
Now, having proven 8Hotels to be a serious contender in the capital city hotels space, Fischmann has re-evaluated the group’s direction. In 2014, they began a divestment strategy, selling some core hotel assets and terminating agreements on noncore hotels.
It’s about strengthening their balance sheet to embark on a new growth phase that will see 8Hotels develop more of its own properties. Already this year, they’ve sold five hotels. And that lucky number eight must still be working, because four of those sales were to Chinese buyers, two from mainland China, and two to Hong Kong and Singapore buyers.
Now the 8Hotels portfolio includes 10 properties: Pensione Hotel, Aarons Hotel and Park8 Hotel in Sydney city, the Kirketon Hotel at Darlinghurst, Pensione Hotel in Melbourne CBD and Cosmopolitan in St Kilda, Brisbane’s Limes Hotel in Fortitude Valley, Pensione and All Suites in Perth, and a collection of four Paris8 Apartments in the French capital.
Four hotels are owned, four are operated under management agreements, and one involves a service agreement. One Sydney management agreement will be terminated at the end of this year.
“Now we are not so interested in volume,” Fischmann says of the new business model. “Once we were focused on competing with the large groups, but now I know I prefer to focus on quality, bespoke, boutique properties.”
8Hotels has been engaged by site owners to design and develop a new 158-room hotel at Sydney Airport, which he says will “capture a hip urban aesthetic with a mid-20th century modernist twist.” While that will open in early 2017, details are yet to be released about two more 8Hotel projects in Sydney, one at Green Square and the other in Surry Hills.
The proven expertise of the group is also in demand from other hotel developers and owners undertaking new ventures.
8Hotels was recently contracted by Ovolo Hotels to assist in their acquisition and take-over of Blue Hotel Sydney. In Brisbane, Calile Malouf Investments has brought them in on the early design and development of their new 165-room luxury boutique James Street Hotel.
“We would really encourage hotel developers to talk to us before they go down the path of signing up to management or lease agreements with the big operators, agreements that tie them up long term,” Fischmann says.
“We can assist, partner with them to maximise their property value and avoid locking into management agreements that can actually devalue a property.
“We can help design, develop, launch and run a property, to build value and allow it to retain maximum flexibility for greater market appeal and ultimate worth,” he said.
It seems hotel developers looking for an edge could do a lot worse than partner with 8Hotels Paul Fischmann who, just nudging 40, is a fixture on BRW’s Young Rich List.
And, given the rising power of the Chinese market – both in terms of visitor numbers and hotel investment – his serendipitous attachment to the number eight should only bring him ever more good fortune.
The success of 8Hotels, though, is obviously a great deal more about good management than good luck.