The rumor broke last week that Netherlands-based lifestyle darling citizenM, one of the progenitors of the “tech-forward, modular build, smaller room, activated public space” movement, was considering options for a potential sale or some type of capital injection, as it huddles with advisors, including Morgan Stanley and Eastdil Secured
The owners of citizenM, which currently has a portfolio of 40 hotels, including the first-ever new-build hotel on Meta’s California campus, throughout the world, include Dutch pension provider APG, Singapore-based GIC, which, in 2019, acquired a 25% stake in citizenM in a deal that valued the hotel chain at €2 billion, and founder Rattan Chadha. They are reportedly looking to expand following the post-pandemic rebound in the travel sector, the report, which was broke by The Financial Times, said.
While discussions are currently at the initial stages, citizenM might also be considering the sale of a minority stake, although no final decision has been taken yet, the FT report said.
The owners are also looking at ways to raise money from institutional investors to boost its expansion and allow for existing investors to monetize their shareholdings, the report added.
Who Will Buy?
The thinking for some time now is that once a hotel brand hits a certain threshold of properties, in order to grow more, it needs help, which it can get by becoming part of a larger company. Scale, as it goes, matters.
At 40 hotels now, citizenM is around that level. And there is recent precedence to draw from. Consider Graduate Hotels, which in March was acquired by Hilton for $210 million. At the time of the announced deal, Graduate totaled 30 hotels, mostly in the U.S., but with two in the U.K. Now, it has the growth engine and loyalty program of Hilton behind it to increase its footprint at a likely more rapid pace.
Could Hilton strike twice? The company has typically grown from the inside, choosing to build its own brands, but a recent spate of partnerships, between AutoCamp and Small Luxury Hotels of the World, and the acquisition of Graduate, makes it such that you can’t count them out.
In the brands arm race, Accor reigns supreme, boasting more than 50 up and down the chain scales. In 2018, Accor acquired 21c Museum Hotels, which had a small footprint, but a fierce loyal following of guests. citizenM has a similar fervent following that could fit in nicely with Accor’s current portfolio of brands. citizenM is also a Dutch brand and Accor is French, making any linkup a bit easier due to the two sharing a continent. Never bet against Accor and its CEO Sébastien Bazin.
If not a lodging company wanting to add another arrow to its quiver, the most likely suitor is private equity, the likes of Blackstone, Brookfield, Starwood Capital, KKR, KSL—the usual suspects. At the Hunter Hotel Investment Conference in March, both Blackstone and Brookfield have preached patience in making acquisitions in the hospitality space. Their patience could be wearing thin, which makes citizenM a good candidate for either one of them or others looking to deploy capital. Blackstone has a legacy of acquiring hotel companies. It owns G6 Hospitality, which manages the economy Motel 6 brand, and Extended Stay America. It’s biggest hospitality acquisition was its 2007 buy of Hilton, which it realized a $14-billion profit on when it sold it.
The allure of citizenM, which opened its first hotel in 2008, at Schipol Airport in Amsterdam, lies in its business model: through the use of modular design they are typically easier to build and, therefore, operational quicker. They also involve less full-time employees, saving on labor costs, often using technology to cultivate the guest experience, such as checking in on mobile pads, foregoing a traditional front desk.
Chadha and the citizenM team have done a great job in creating the story of citizenM. Now, it appears, another company will look to elevate it even more.
citizenM’s portfolio has gown to include 40 hotels totaling 8,545 rooms as of 2023, according to the company’s website. The company said it has plans to grow in the U.S. and Europe and has upcoming openings in Boston and Miami.