Money flowing in for hotel expansion is the real signal that the hospitality industry is roaring back to life.
Dutch hotel company CitizenM is dusting itself off from the pandemic with deep pockets to go on a global growth spree.
Company leaders revealed this week they raised $1 billion off existing investors to expand the brand. GIC, Singapore’s sovereign wealth fund, as well as APG Asset Management and KRC Capital, a private equity firm founded by CitzenM founder Rattan Chadha, all contributed.
More than half of the hefty sum will go toward expanding the brand while some of the money will go to finishing projects already underway and make up for the company’s financial downturn during the pandemic.
CitizenM was one of the many hotel companies during the pandemic to roll out new offerings to shore up any potential revenue while demand levels hit historic lows. The company offered corporate subscriptions where business travelers could work from public areas in one of the brand’s hotels, reserve meeting space, or stay three nights out of the month with breakfast.
But the expansion plans hinted at this week sound a lot like a return to normal times for the hotel sector.
“It has not been business as usual, but the long-term strategy with our shareholders is unchanged,” CitizenM CEO Klaas van Lookeren Campagne said in an interview with Bloomberg, which first reported the capital raise. “We are patient. We have all gone through many crises in the past.”
While the company has European roots, the brand has significantly expanded into the U.S. and Asia.
Representatives with CitizenM did not immediately respond to Skift’s request for comment about its plans for the most recent financial infusion.
CitizenM is slated to have 24 hotels in its portfolio by year’s end and potentially more than 40 by the end of 2022, a notable step on the gas pedal for a company once known for adding only one new hotel a year. The company is known for its so-called micro-hotel style, where rooms are smaller than a typical hotel room and encourage guests to utilize more public spaces.
That kind of concept may have seemed out of place last year amid the early days of a pandemic when social distancing was the main mitigation effort against spreading the virus. But van Lookeren Champagne doesn’t see much of a drastic shift ahead in the travel climate.
“We pretty quickly came to the conclusion that not much will change,” he said. “People will travel maybe a little less frequently, but when they travel, they’ll travel for longer.”
CitizenM even made inroads during the pandemic in appealing to business travelers. The company inked a deal with Facebook-turned-Meta for a 240-room hotel next to the tech giant’s headquarters in Menlo Park, California. That deal also signaled long-term optimism around the return of business travel, something Marriott International CEO Tony Capuano echoed this week.
“I think business transient is going to shock us all to the upside,” he said this week at the NYU International Hospitality Industry Investment Conference. “Business transient is going to roar back in a way that will defy some of the really downward prognostications.”
Van Lookeren Champagne’s broader upbeat travel sentiment has rippled throughout the C-suite at many of the world’s largest hotel companies.
Capuano was joined by the CEOs of IHG Hotels & Resorts, Hilton, and BWH Hotel Group — the parent company of Best Western — at the NYU conference. Each provided optimistic recovery forecasts for 2022.
Hilton CEO Christopher Nassetta indicated his company would eclipse 2019 performance levels next year. If such a return to normal happens, hotel development plans like CitizenM’s are possible.
“Sharks never stop swimming because, if they stop swimming, they die. Developers develop,” Capuano said this week while commenting on an uptick in deal activity at his own company.
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Photo credit: CitizenM's growth trajectory picked up in recent years, and a recent raise of $1 billion will toss major financial fuel onto this expansion fire. Matthew Parsons / Skift