MAGAZINE: Cash injection spurs CitizenM’s growth plan

CitizenM is on track to fulfil its global expansion plans with a fresh injection of cash from existing and new shareholders, as Singapore sovereign wealth fund GIC takes a 25% stake in the Dutch hospitality brand.

GIC, KRC Capital – the investment vehicle of owner Rattan Chadha – and APG, the largest Dutch pension investor, have committed to invest a further €750 mln for future growth, exceeding the current secured development pipeline, which represents an additional investment in excess of €1.5 bn.

Michael Levie, chief operating officer (COO) of CitizenM, said the latest cash injection from GIC would give the group ‘the opportunity to fulfil our growth map’. Levie said the company had set a stable growth plan for the company to develop over the next few years with the main focus for the ‘affordable luxury brand’ on Europe and the US, but also with some expansion in Asia ‘to grow the company at a steady pace’.

CitizenM has been opening around five to six hotels a year, a little shy of its goal of seven to eight hotels a year. However, with the new investments from all three shareholders the company will be able to meet its higher target now for hotel openings.

Rattan Chadha, founder and executive chairman of CitizenM hotels, said at the time of the announcement: ‘With our bold expansion plans for the coming years, we are thrilled to have the financial support of investors who trust our vision and are instrumental in securing our future success.’

Owner and operator
CitizenM is uniquely placed in the hotelier market in that it develops and operates all its hotels, unlike most of its competitors. Other affordable hotels like W are owned by the Marriott Hotel group. ‘The majority of our industry is asset-lite.

The chains that operate like us are less agile to respond to market changes and adjust their product. We have more control over that process. It was important and beneficial for us to use the owner/operator model,’ Levie told PropertyEU.

In 2008 CitizenM opened its first hotel at Schiphol airport in Amsterdam, going head-to-head against established, more expensive brands such as Sheraton and Hilton. It was a move that was characteristic of the CitizenM brand, Levie says. ‘The location of the hotel is so indicative. It’s more than who you are competing against,’ Levie says.

Nowadays, the hotel industry is as much about the right technology as it is about the right location and hospitality offering. And it’s not just the back office technology that matters, although that can be a significant game-changer, it’s also about the efficiency of the front of house technology such as guest check-in.

‘Those companies that have more competent systems that allow data to flow freely are in a better position to compete. I think that’s a change with which the industry is struggling because there are a lot of legacy systems,’ Levie said.

22 hotels in 2019
He says that from the start CitizenM has focused on channel sales rather than traditional segmented sales thanks to its capture and use of data. The next hotel openings are due in Zurich, Boston and Seattle. One was recently opened in Shanghai and another in Copenhagen. In total, CitizenM will have 22 hotels in operation by the end of 2019. Eighteen hotels are currently in various stages of development.

‘We have tailored our offering to the frequent, savvy traveller. We are such a nice player and can therefore find the perfect match. The frequent traveller rates the “no friction” offering in our hotels. It’s a 20-second check-in process,’ he said.

With investments from the hotel’s original shareholders KRC and APG, the largest Dutch pension investor, as well as new shareholder GIC, CitizenM hotels is now valued at around €2 bn.

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