Artur Lupashko about the hotel business in Ukraine and the role of the management company in it

What do you need to open a hotel and how to build effective management — this and other equally exciting things are explained by Artur Lupashko, the founder of the Ribas hotel chain, in an interview with Kirill Solar, основателем агентства SOLAR Digital.

In the episode on the YouTube channel “Ribs Rooms: everything about the hotel business” Artur Lupashko shared the experience of the management company and showed how he created and developed the Ribas Hotels Group hotel chain.

What are the key Ribas properties?

For us, the key properties are those that we manage - these are 26 hotels in Ukraine. There are the flagships: the 4-star Wall Street Hotel and the 3-star Bortoli in Odessa, the Bossfor Hotel, the Richard Beach Hotel in Gribovka, Ribas Karpaty and Helios by Ribas in Bukovel.

How did it all start?

“Luck and chance helped me” — Artur admits.

Artur Lupashko was engaged in the family construction business. One day he happened to be on the property of the recreation center Dacha in Zatoka. At that time, he already had skills in marketing and management. And the owner of the recreation complex asked Arthur to make the hotel profitable again from a loss-making project. After working for a year and showing the result, Artur realized that the field of activity is very promising.

There were 4 other hotels with similar indicators in the district. And the next year, Arthur went to the neighbors, literally “knocked on the door”, and offered to take their hotels under his management. According to the conditions, the overdrive was divided 50/50. This combination attracted and satisfied everyone.

6 years ago, the business was conservative, the owners did not follow the trends in marketing, promotion and management, so it was easy to bring the hotel to an overdrive. The scheme worked like clockwork. That's how Artur Lupashko accidentally moved from construction to the hotel industry.

In 2014, Artur and his small team opened the first Ribas mini-hotel in an office space on Deribasovskaya Street. There were only 6 rooms. The usual scheme worked-he started turning in neighborhood hotels, realizing that the situation on the market is not very good, and offering his services. The offer remained the same — to set up marketing, management and service in the hotel, and divide the received excess income in half. The owners agreed, because the model was effective.

Our goal was to double the quantitative and qualitative indicators annually. Therefore, we grew rapidly, and in the period 2014-2016 we created 10 hotels under the management of Ribas Hotels Group.

How did the crisis of 2014 help?

“I can say with confidence that the crisis was on our side! He helped us 100%.”- says Artur Lupashko.

If the hotel business continued to develop, nothing would have happened. Because everyone would have been fine anyway. And during the crisis, the hotel owners looked with burning eyes at Arthur, who presented business plans and the results of his work.

“Talent and abilities are good, but luck and getting to the right time and the right place doubles the chances of success,”- sums up Arthur.

How did the Ribas team develop?

In the first year, there were 3 people in the team. The first was responsible for booking, the second was engaged in advertising and the third counted the money. We worked in a small office. “Those who believed in me and were with me at the beginning - remain close to this day. And they will definitely be my partners.”- says Arthur.

Now every employee of the company who is an expert or is developing in his niche has a wonderful opportunity for radical growth. Arthur suggests that his experts open their own agencies so that the hotel chain orders services from them. These are completely different obligations, responsibilities and, of course, money. Many employees use this opportunity and we successfully cooperate.

How to properly stimulate the team for a better result?

We tried several schemes. For example, in the first year of the Wall Street hotel's operation, Arthur said at a meeting “If Wall Street enters the top 10 hotels in Odessa on Tripadvisor, then everyone gets a bonus in the form of the 13th salary.” But, alas, that year we did not conquer this peak.

After several more unsuccessful bonus schemes, it was decided not to allocate the results of the work of an individual employee anymore. We noticed that rewards for individual work seem insincere and bring a sense of competition to the team. The management decided to move away from such bonuses and switch to strengthening team spirit.

After all, customer loyalty is not just +50 hryvnia to the salary. This is the result of teamwork, where each employee, like a football player, is responsible for his zone. But everyone has the same goal — and this unites them. We understand that all the links of the organizational structure are important. Therefore, we are focused on motivating all departments of our company. Thanks to this scheme, we have an average rating of our hotels of 9.4-9.5 out of 10.

What is the market of management companies in Ukraine?

There are 3 top companies in Ukraine: Premier Hotels and Resorts, Reikartz Hotel Group and Ribas Hotels Group. The rest are concentrated more locally: only in the west, north, south, and east.

Initially, we were also only an Odessa company, but we wanted to become a national one. Therefore, the Ribas team packed a franchise product and took part in all exhibitions with it. And today we are at the start of the launch of a hotel in the west. A little more effort and Ribas Hotels Group will become a national company.

At the Gaming Industry exhibition of gambling and entertainment business services

At the largest retail exhibition RAU EXPO 2021

In fact, the share of management companies in the Ukrainian market is very small. Most often, hotel owners themselves are engaged in the management and promotion of their business or create a special management department. Our goal is to show the owners that putting the hotel under management is a very European thing and, moreover, profitable. We want to develop the culture of the management company.

How many hotels are there in Ukraine?

There are no more than 100 certified hotels. In Ukraine, hotel owners are not required to have certification and many people use it. Therefore, it is not known what the total number of hotels is in Ukraine. According to unofficial statistics-about 5000 hotels.

Why is it more profitable to hire a management company than to manage a hotel yourself?

The management company will earn the investor more money. 90% of hotels in Ukraine do not order marketing, branding, staff training, etc. at all. What is considered a must have in the West, we have either one person or a department in the hotel (which is rare). But our people don't trust each other. And the owners are afraid that the management company will take their profits. During the negotiations, Arthur shows mathematical schemes that the owner will earn more, that we insure our hotels, and take personal responsibility for all the property. And, despite the fact that we guarantee an increase in profits, potential partners do not stand in line to use our services.

A hotel is an expensive business. It is difficult for a person who has invested millions to transfer this business to someone else's company. Therefore, our task is to build trusting relationships. It may take years, but this is an important step and we are ready for a long communication. It's like sending a child to kindergarten. First, you get acquainted, ask questions, observe, and only then, on the basis of trust and loyalty, you give the child to no longer strangers.

We also show business plans, organizational charts, tell partners how the hotel will work, how much profit we expect to receive. We explain that under our management it will be safe, profitable and correct in the conditions of the capitalist world. This strengthens our position in the eyes of a potential partner.

Why are there no large hotel chains in Ukraine?

An international chain hotel is interested in being in a country where it will have a high average check. This is a brand, so such ambitions. At the moment, Ukraine is not attractive for hotel giants. Our climate is not suitable for many people: political, economic and temperature. According to the owner of an international network, until the average salary of a citizen of Ukraine grows 2-3 times, corruption does not go away, then network operators will not enter the country.

When will we have a “Ukrainian Las Vegas”?

The Las Vegas model is possible if this zone is offshore. And you need to build near the airport or where there is a road to the airport to ensure convenient transportation of people from anywhere in the world.

In general, we can identify 3 components for creating a Ukrainian Las Vegas: tax benefits, investment nannies for foreign and our investors and a developed infrastructure.

What reforms does our city need to make to become more attractive for tourists all year round?

Ukraine needs to develop business, event and medical tourism. For example, the Odessa region is a storehouse of medical resorts. Let's take medical muds. The mud of Kuyanik is recognized by world experts as one of the most valuable sources, overpowering even the benefit of the Dead Sea. But, there is nothing in the estuary zone, except for mini-hotels and Soviet sanatoriums. If you attract investment and put new life into Kuyalnik, then it will become a high-level resort. And it can operate year-round.

Ribas hotels in Poland

We were invited to Poland for a building under construction. The owners immediately said that they wanted a hotel, but they did not understand at all about its creation. They proposed the following scheme: we design, they build according to our project and transfer the complete hotel under our management.

As a result of our cooperation, we have created a mini-hotel in the city of Elenya-Gura for an audience of 50+. 27 rooms, staff of 1 person, maids on outsourcing — another Ribas hotel with its own highlight.

How does the automation of hotels affect the payback?

This year, we have transferred 2 of our hotels in Odessa to a system without a reception. The Ribas hotel was transferred to such a system all year round, and Bossfor works with a reception in the summer, and from October 1 there will be no reception, only rooms with combination locks. There are no difficulties in automation: a guest books a room online, he receives a link to payment, then he receives an SMS with a code to the room. And in the guest's room there is a card that opens the door.

The decision to switch to automation arose due to the growth of the salary fund. Since we work in white, we pay all official taxes for employees, the financial burden for the year can be +20-30%.

The absence of a reception is the highest average score on booking.com. We saw this for ourselves: six months after the introduction of automation, the Ribas rating increased by 0.1 point.

Many partners are afraid of such innovations, assuming that they will lose some of their customers. But the reality shows the opposite. This does not scare away regular guests, but rather involves them. Automation reduces the actions of the guest and accelerates the receipt of the coveted room and rest. This is convenient, because the guest comes at any time, without following the temporary rules of arrival/departure.

How did you build automation in your hotels?

We work in the Bitrix24 system. This is a CRM system that unites employees and shows the current state of affairs.

All requests in social networks and requests on the site are automatically entered into the system, distributed among responsible managers who already respond to customers. Fast, efficient, convenient and transparent-this is about the automation of processes in the Bitrix24 system.

What is the portrait of the client of the management company?

Based on 7 years of experience, we distinguish 3 main portraits of our clients.

The first is a business owner who has the funds to invest in passive income.

The second is also a business owner who generates enough money and dreams of a hotel. This is our most frequent client. Having money and dreams is the best combo for starting a cooperation.

The third is government employees, for whom this type of investment is the most optimal: they have invested money, are not engaged in the hotel and at the same time make a profit.

Why is it more profitable to invest in hotels than in restaurants?

In Ukraine, the payback period of a hotel is 7-8 years, and a restaurant is 2-3 years. That's why they turn to restaurateurs more often than to us. But, as practice shows, the risks of investing in a restaurant are much higher.

The hotel business is more like the real estate market, where there are almost no risks. Even in the worst case scenario, if the hotel turns out to be unprofitable, it can be converted into an office, a hostel, etc.

If the investor wants to quickly return the money and understands all the risks, then let him invest in a restaurant. If you want to get more guarantees and reduce risks, it is better to choose a hotel business or commercial real estate.

Examples of unsuccessful cooperation

There was a case when we started cooperation on a positive note, and at the end of the year we shook hands and were glad that we were stopping working together. We were burning with the idea of making a cool project, and the partner wanted to get a super profit, but we never managed to establish communication with each other.

Another case. In 2020, in 2 out of 25 hotels, our management company did not fulfill the plan. We discussed the results of the report with the owner, worked on the errors and prescribed a new scheme. But there were some owners who had a veil of misunderstanding before their eyes: “There is no plan, goodbye” In this case, we accept the position of the owner, do not take a commission and disperse for good. For us, reputation is more important than a million hryvnia (the approximate amount of commission from one hotel). Therefore, it is not in our rules to quarrel and rebel.

The biggest financial fail

There was one facap related to the rebranding. Sometimes hotels come to us that we do not manage, but we are engaged in booking and providing a full load. Our team presented a new name for the hotel to the client. The main reason for the rebranding was the fact that there were already 2 hotels with a similar name in one region. The guests were confused and did not reach our client's hotel.

As a result, we did a rebranding and the new name coincided with the name of the hotel in the neighboring resort region. And again, guests mixed hotels, which negatively affected the occupancy of rooms. As we later found out, our specialists analyzed the names only from our region, without looking into neighboring ones. Therefore, we got such a fakap, because of which we lost guests and we had to spend 2 times more effort on attracting them. The result of this situation is that we have gone into the negative, as a franchise company.

What is your focus now: managing hotels or building your own?

Today, our focus is on development. Our team creates new hotels, selects locations, designs, builds, and as a result, we, as a management company, close this chain and guarantee a return on investment. If we are approached by a hotel owner who is already, for example, 5 years old and for some reason he does not make a profit, then it is more difficult here. The maximum that we can influence is to give the best service, rebrand, update the decor. But it is no longer in our power to change the backbone. Therefore, we cannot guarantee any positive figures.

When we create a project from 0, we influence all processes. As a result, you will get a cool business that will probably pay off 2 times faster than the estimated payback. That is, development is where we are 100% responsible for the result.

How did you decide to open a hotel in Poland?

“In fact — it was a matter of chance”, — Arthur admits.

The owner bought the building and wrote a post on Facebook with the message that he was looking for a company that could build him a hotel. Luck in works - under this publication, someone recommended the Ribas company. We were not familiar with this person, and he apparently knew us, thanks to articles, advertising and related projects. It's nice to know that even strangers recommend us. That's how the hotel in Poland came across.

Do you count LTV guests?

It is difficult for us to measure the client's path, because every year it is different. In addition, our guests are divided into 2 types: those who start choosing a hotel in 4 months and those who book a hotel on the day of arrival. And this does not make our calculations easier.

Naturally, the marketing department draws a sales funnel, describes the planned activities and predicts the result. If we look at these calculations, then on average we spend from 8 to 18% of our income on attracting 1 guest.

What are the other ways to develop a tourist business in Odessa?

It is definitely worth developing business and medical tourism.

In Odessa, and in Ukraine, there are many fortresses, lakes, healing springs, beautiful wildlife, etc.You need to spend a little money, desire, effort and time to refine and pack these zones. And this will 100% ensure a stable influx of tourism to the country.

Which locations in Ukraine are undervalued and need to be invested in them?

TOP 5 places in Ukraine by Artur Lupashko:

• There are lakes Outside of Vilkovo, gorgeous nature by the Danube
• Transcarpathia, namely Shayany, Svalyava
• Uzhgorod
• Jarylgach Island on the Black Sea coast
• Kinburn spit.

How is the certification of hotels in Ukraine?

At the legislative level, certification is not mandatory, but it is important to make a categorization. And the category cannot be obtained without certification. This is such a vicious circle.

In our country, these documents do not carry any value. When opening a new hotel, the owner himself determines how many stars to assign to it. And the service suffers from such independence. That is why there are so many unofficial hotels in Ukraine, but so few worthy ones.

How many 5-star hotels are there in Ukraine?

There are no more than 20 5-star hotels in Ukraine. Most of them are in Kiev. As a rule, these are chain hotels that meet all the standards. There are about the same number of 5-star hotels in Odessa and Lviv. But what the Ukrainian hotel business definitely lacks is the level of service of 4, 4+ star hotels.

Is it difficult for a young management company among the old-timers of the hotel business?

“We are the youngest company in the Ukrainian market of management companies. The age range of the team is 25-35 years, but the level of professionalism is much higher than many who have been in the hotel business for 20 years”, — says Arthur.

Our partners perceive our youth as a plus. Yes, people look at us longer, we build trusting relationships longer, but our partners like working with us. We are young blood, we follow trends, we are looking for creative solutions, we adapt faster to the changing hotel market. Hotel owners are usually aged 50+, they have a spirit of conservatism. And we are like a breath of fresh air for them.

What is our advantage? An integrated approach.

We invite a potential partner to the office and check into one of our hotels. In the office, the manager presents an offer, and in the hotel, the team envelops him with warmth. This way, he will see in real time how we organize work in hotels. Another difference is our approach to design. We experiment, try new experiences and generate unusual stylish ideas.

One of the main advantages is that our team makes detailed business plans even at the negotiation stage.

The team, emotions and numbers are what we bribe our potential investors with.

How are things with the staff?

Service is our everything. And there are just not enough service employees. The knowledge that is given in special institutions does not create the skills and skills that we need for students. Of course, we train our employees, but there should be a base in any case.

How does the process of adapting new employees in Ribas go in 3-5 days?

We use online learning services. So far, this applies to such positions as receptionist, maid and sales manager. The candidate successfully passes the online testing and then goes to work.

Do you have standardization of work?

Of course, we have standards, otherwise we would not be able to manage 26 hotels. But the hotels are different and each needs its own rules.

Our HR department, together with the manager, adapts the standards for a specific hotel. It would seem that what can change in the maid's checklist? But carpet is one thing, tile is another, parquet is the third. It can be a bathroom or a shower room; the surface is matt or lacquered. Accordingly, different chemistry and inventory. This is a clear example that even for a maid in different hotels, different cleaning rules are needed.

How are the standards being adapted? The manager takes our standards and goes to his hotel. He looks at what does not suit him and prescribes it himself as it should. If you encounter a problem, contact us at the management company. It happens that the Ribas team also cannot prescribe any nuances. In this case, we do not hesitate and buy knowledge from other successful management companies.

What are the risks of the management company?

We sign contracts, including for rent. But, unfortunately, they do not work in our state. If the investor wants to stop working, the contract will not stop him. Therefore, we also sign gentlemen's agreements (memoranda), which, surprisingly, work better than standard ones.

The main risks of the management company: the owner may sell the hotel, rent it out and refuse our services.

We are not immune from loss of profit. In the first year of cooperation, we invest our strength, money, and soul in a new hotel, and then the investor may change his mind and no contract will save us. In this case, the company loses its profit.

What are the risks for the investor?

A frequent question from investors is “What if I don't earn anything at all?”. Theoretically, there is such a risk. But it is difficult to imagine what should happen for this. Even with the closure of the borders, we still accumulated internal guests and provided the hotels with a full load.

After all, with partnership cooperation, there are more risks for the management company.

How much does Ribas Hotels Group cost?

“Perhaps in the distant future I will be ready to sell the company to Marriott Hotels or InterContinental Hotels and Resorts, but now — definitely not”,  - Artur Lupashko voiced his position on the sale of Ribas Hotels Group.

Before selling the management company, you need to evaluate the hotel chain, franchise agreements and the team (internal agreements, protocols, employees, etc.). Only after that you can form a price. But we are still closed to such proposals.

Is Ribas Hotels Group a profitable company?

“Of course. - says Arthur. — I reinvest part of the money, I pull out some amount of dividends for life. I keep some of the money for launching new hotel projects or investing in IT products. That is, we are accumulating funds in order to reinvest them further”.

Artur, have you earned your first million?

Artur Lupashko confession: “Not yet. I'm one step away from it, but sometimes this step stretches. There was a year when we made a net profit of half a million dollars! But costs, future expenses and reinvestments have eaten up most of this emergency. If we talk about turnover, we have 10 million dollars annually”.

How do you spend your free time? Do you have it?

“I'mI walk in the park, go to the movies, and meet with friends. I try to travel once a year. Actually, my vacation is no different from the rest of other people”, - Arthur shares his personal life.

Watch the full video interview in the new issue How does the hotel business work in Ukraine. Artur Lupashko about the management company. Ribs Rooms. Subscribe to the Ribas Youtube channel. All about the hotel business, where Artur Lupashko shares the experience of a management company and introduces the specifics of the hotel business in Ukraine.