CitizenM Looks for Emotional Connections Through Fledgling Subscription Model

Dutch hotel group CitizenM has signed 18,000 members to its “Plus” loyalty program that launched 10 months ago. But the company views the $12-a-month subscription as a means to grow its business rather than a revenue stream.

It’s also willing to make a “sacrifice” to get to know its members better, and this year plans to build the community side of the new membership plan.

“We’re trying to trigger some of the emotional elements of having not a subscription, but an actual membership, in terms of membership community,” said Ernest Lee, chief commercial officer.

“If you say you’re part of a subscription, it feels very financial. But for us it’s more important to build a membership of people who like to travel, and like to travel to CitizenM,” he added.

Short-Term Sacrifice

Plus program perks include 10 percent discounts, upgrades and late check-outs. It’s a different strategy to larger hotel groups that focus on the monetary value of points. Global Hotel Alliance, for example, overhauled its loyalty scheme last year to create “Discovery” dollars.

But Lee, who in January this year expanded his role to include marketing, sales and revenue on top of running the growth team, said it’s not feasible to go up against major hotel chains in the same manner.

“We don’t have enough scale to compete with the big chains of the world to offer that pay-to-play dynamic,” he said. “We’re trying to understand what the short-term sacrifice would be, via room discounts and throwing in a lot of room upgrades and other ancillaries as part of a bundle, in exchange for what we see as a longer term play.”

That longer term play involves calculating the customer’s lifetime value and potential repeat bookings. After 10 months, the customer lifetime value increased by about 30 percent, and the average stay duration has gone up “six or seven tenths of a day,” Lee estimates, when compared to a pre-pandemic non-member.

“For us it’s a net gain. It’s one customer or member we don’t have to think about spending a ton of acquisition cost on” he added.

CitizenM also wants guests to be able to work that out the math quickly in their head that they’re able to break even within two nights. “Our goal for this year is to get that arithmetic down to one night,” Lee said.

Slowdown Danger

Business transient continues to be a strong market for CitizenM, but it’s probably feeling a little exposed right now. Like many hotel businesses it saw an uptick in the fourth quarter of last year. As a private company it rarely shares figures, but the number of room nights sold in the last three months of 2022 “exceeded expectations” by 20 percent.

But with its hotels popular among the technology, media and financial services sectors  — it even has a hotel opposite Facebook’s HQ in Silicon Valley opening later this year — Lee said this first quarter was off to a slower start.

“We have some ties to what’s happening with certain macroeconomic conditions that reverberate through those industries, whether it’s certain austerity measures, or they may have a closer eye on expenses,” he said.

The bright side though is continued growth among travelers checking in to attend nearby meetings and conferences.

“We think the events industry this year will probably exceed 2019 levels,” he added.