Israel's Brown Hotels' focus is on Greece, CEO says

TEL AVIV — Over lunch at the Israel Hotel Investment Summit, at the InterContinental David Tel Aviv, Leon Avigad looks out of place among the sea of suits packing their plates at the buffet. Discernibly younger than most on hand and wearing jeans, Avigad gives off an interloper vibe, but as CEO of Brown Hotels, he's anything but.

Brown Hotels is not an international name, yet, but it has scale: 50 hotels, half in Israel, but then 10 in Greece, another in Croatia and two in Germany. It's a mixture of resort chic and edgier boutique urban. Consider the Brown Brut in Tel Aviv. It's located directly across from the beach and close to the Old Jaffa historical district. It's also right on point for today's traveler who is less focused on space and room amenities and more on location. The lobby is compact and can be manned by one employee for checkins and checkouts. When guests step out of the lifts they are greeted by an eerie red glow and accompanying ethereal music that delivers them to their room through darkish passageways. Rooms vary in size depending on accommodation—an executive room clocks in at 33 square meters, while a classic room measures 16 meters. Compact, but every meter is curated and, above all, beds are comfortable and showers strong.

Avigad is a stickler for details. When I told him I was staying at the Brown Brut, he immediately asked me if the water in the shower seeped onto the bathroom floor. It, indeed, did, a design flaw he shook his head at.

Though Brown Hotels has Israeli roots, it's expansion plans fall outside the country. Avigad said that Greece is its main focus and the

company is hopeful to double its footprint overall within the next three years. "Impressive or kamikaze?" he asked me. 

Brown Hotels CEO Leon Avigad
Brown Hotels CEO Leon Avigad (Photo from Brown Hotels)

"Greece is a big market for us," Avigad said, alluding to the some 33 million visitors a year there and the excess of what he called moderately priced accommodations. "The market is big, so this arbitrage of a really good business stream with moderately priced hotels, this is good, the environment is great."

He added that the Greek government and various municipalities have been very supportive of their investment plans. "The banks are supporting us," he said. "Greece will remain our growth engine, followed by Croatia," in locations such as Split and Opatija. 

Investment Model

Avigad describes Brown Hotels' investment strategy as opportunistic. "When we can buy, we will buy," he said. "When the opportunities are good and the banks are there, we will buy."

The company is trying to move away from leases unless it's a 45- or 50-year lease, "which is as good as ownership," he said.

But Avigad is looking to expand the brand and that is done quicker through management agreements than by buying and building hotels. "It's the quickest way to to become a household name," he said. "There are many companies post-COVID that are looking to either give out their properties or to have a professional operator that will take away the risks of management and will enjoy the benefit of the brand."

Avigad is open to all sorts of structures, taking the deal as it goes, he said. "We feel that it's very important to diversify the portfolio geographically, but also by type and type of agreement. Some of them are ownership, some of them are leases and some of them are management. The more you're diversified, the better you're prepared for the next step."

A franchise model is not yet on the table for Brown Hotels, but Avigad is not saying no to it, it's just not the right time. "We have to give a really good proposition to a potential client," he said. 

In addition, he said that the hotel industry still has a lot of recovering and catch up to do. While many data consultancies and prognosticators are adamant that RevPAR is back to or creeping back to 2019 levels (Thomas Emanuel, a director at STR, said Israeli RevPAR reached its 2019 level for the first time in September), Avigad is not convinced. "That's a blunt lie," he said. "It's not back."

Rates and occupancy, he said, are doing well, but are complemented by higher costs. "The figures are not as good as before, but we're definitely back on track. It'll take another year or a year and a half."

Labour Headache

The struggle to fill positions is alive and well in Israel as it is elsewhere. "This is a huge hassle. It's not just difficult—it's an all-out war," he said.

Poaching employees is a constant practice in Tel Aviv hotels, for instance, Avigad said. "People are taking from me all the time," he said, adding that exacerbating the issue is, as he described it, that "people don't want to work anymore," especially the young, who typically fill the entry-level or lower-level jobs at hotels.

The Competition

Brown Hotels is and never will be Marriott, Avigad said. It's not part of the DNA. "I don't think Marriott would allow me to bring tattoo artists to my group meetings," he said, seriously.

At the same time, he doesn't like to be known as just a regional brand, but has plans to one day expand beyond Europe and into the U.S. Miami, for instance. 

"Our vibe is our way of getting a higher ADR," he said. "This is our way of differentiating ourselves."

Brown Hotels, Avigad said, is not actively seeking outside capital investment or an outright sale of the company. Avigad champions its independent spirit and structure. But like the concept of franchising, he's never saying never. "I want to take the Brown as far as I can. I don't want to do a high-tech Israeli exit. I don't want to take a lot of money and leave—this is what I do. If a big someone would like to blow a lot of power in our wings and to take us further, then yeah, but we're not actually looking because we are happy with what we do."