Despite the gloom in the hotel sector as a result of corona-driven curtailments on travel and larger business gatherings, the Dutch hotel and lifestyle brand group CitizenM recently boldly announced its collaboration with Germany largest hotel project developer GBI to identify prime locations for the group’s entry into the German hotel market.
The focus for citizenM's expansion in Germany will be on four cities: Munich, Hamburg, Frankfurt and Berlin, where citizenM plans to open several hotels in each city. GBI and citizenM will search for suitable properties and plots of land for the brand to acquire, and then develop turnkey citizenM hotels together. According to Klaas van Lookeren Campagne, CitizenM’s CEO, "It had been clear for some time that Germany, as Europe's strongest economic country and a sought-after travel destination, would be one of our next targets, but we needed the right partner and consultant for our expansion. We are delighted to have found this with GBI."With its owner-operator model - which it claims delivers a high profitability per square meter - lean operational cost structure, and a robust tech-forward approach, citizenM has been expanding its global portfolio smoothly and continuously across Europe, North America and Asia in prime locations. In March 2019, citizenM welcomed its third investor, GIC, Singapore's sovereign wealth fund, raising the value of the company to €2 billion. GIC joins citizenM's two other investors, KRC Capital (the private investment vehicle) and APG (the Dutch Pension Fund). Together, they have committed to invest €750 million of new equity for future hotel developments.
The philosophy of citizenM is 'affordable luxury for the people', offering guests all the luxuries they would expect from a high-end hotel in a prime location, but without sky-high prices. citizenM was founded by Rattan Chadha, the founder and former CEO of the fashion brand Mexx. The first citizenM hotel opened at Amsterdam's Schiphol Airport in 2008, and from there expanded across Europe, then Asia and the USA.For the fourth year in a row, GBI was recently ranked by German research group BulwienGesa as the largest project developer for hotels in the country, with its hotel developments covering 140,000 square meters of usable space altogether, or about 14,600 hotel rooms. Since its foundation in 2001, it has sold or placed real estate in Germany and Austria with a volume of around €1.9bn. It also acts as a fund or asset manager for institutional investors in various property classes.
GBI’s CEO Reiner Nittka said: "For GBI, the new mandate is a perfect addition to its development activities. In terms of brand positioning and location requirements, this is an ideal fit. Now we can supplement further locations with exactly the right brand."
While citizenM’s arrival is to be welcomed, there’s no doubt that the market in Germany has otherwise been reconciling itself to the unwelcome fact that it is likely to take another three to five years until the turnover per hotel room will return to 2019 levels. Sales of existing hotel projects have effectively come to a standstill as a result of the pandemic.
The German hospitality consulting firm Treugast is predicting revenue declines in the range of 40% to 60% year-on-year for the overall business in 2020. "Industry participants assume that the situation will have normalized in two years at the earliest," says Stefanie Salwender, Director Consulting at Treugast in a recent media interview. "We at Treugast expect that the pre-crisis level of 2019 will only be reached in the years 2023 to 2025."
