CityHub plans to expand from two to 10 sites in the next five years after agreeing financing with banks NIBC and ABN AMRO
The hostel/hotel brand recently announced the opening of its first international site - and third overall - in Copenhagen in September.
“Young leisure travellers are expected to be the first to resume travelling when lockdowns ease,” said CityHub co-founder Sem Schuurkes. “Our financial partnership with ABN AMRO and NIBC recognises CityHub’s position as the go-to option for Gen Y and Gen Z. We can’t wait to bring CityHub to the most exciting leisure cities in Europe.”
The concept combines shared facilities with private sleeping units. CityHub’s technology allows guests to check in and out themselves, serve themselves at the bar, as well as providing 24/7 customer service via the CityHub app.
“With its game-changing concept, CityHub created a new category that has huge potential for the next generation of travellers. We are proud to be part of the team and excited to support CityHub’s growth across Europe,” says Brigitte van der Maarel, head of NIBC Mezzanine & Equity Partners.
“We are proud financial partners of CityHub from the very start, providing financial facilities since the opening of its first hotel in Amsterdam five years ago. We are pleased to be able to facilitate CityHub’s innovative and disruptive concept to grow throughout Europe,” said Peter Sleper, ABN AMRO.
The Netherlands Enterprise Agency acted as a guarantor of the loans through the Dutch Trade and Investment Fund, a government agency aimed to support businesses’ international ambitions.
The group said that its modular concept made it “easy to repurpose existing buildings in up and coming urban neighbourhoods”. In line with this, CityHub Copenhagen will be located in a space that was previously used for retail. Co-founder Pieter van Tilburg said: “CityHub thrives to encourage responsible tourism, which in turn generates life and economic benefits for a city. We like to think that CityHub’s model is the smartest alternative for a hotel or hostel for guests, municipalities and investors alike.
“We want to open up cities to a global community of travellers. CityHub combines human and tech expertise to provide guests with the smartest local service, at the best price.”
The investors’ comments echoed Brookfield’s Laura Brinkmann, who told attendees https://www.hospitalityinsights.com/content/crisis-accelerating-trends of In Sync last month: “I would expect to see the hostel sector bounce back sooner rather than later.
“The winners in Covid response will be those who manage to navigate the landscape to allow for social distancing rules and to allow for assets to operate. There is a large part of the population that it not at risk of Covid, the young travellers who have had to make such sacrifices will be the first to rebound as governments lift travel restrictions. Medium to long term, hostels, serviced apartments, those catering to young travels or the leisure space are likely to be winners.”
Existing hostel operators were confident of growth, with Safestay commenting https://www.hospitalityinsights.com/content/safestay-sees-opportunity-virusthat a large number of small hostel operators were under pressure as a result of the pandemic, which “may well create unique opportunities” for the group.
The company was planning to reopen its hostels on a staggered basis through 2020, when it believed they could be profitable, targeting each country’s domestic market.
Larry Lipman, chairman, said: “Navigating the re-engagement of the business will require us to be highly flexible as we test and match demand in individual markets, however, we are confident of being able to do this and making sure that we balance increased operational cost with increased income. From an industry perspective, the hostel market is highly fragmented with a large number of small operators who are under pressure as a result of the pandemic and this may well create unique opportunities for Safestay.”
Insight: Things have not always been easy for CityHub - there had been talk of crowdfunding back in 2014 - but now is very much the time for hostels, somewhat counter intuitively given the image of pile ‘em high. It would perhaps be more accurate to say that now was the time for hostel-hotel hybrids - places where you could socially distance while asleep in private rooms.
So with safety taken care of, investors can consider themselves cheered at tapping into one of the groups expected to return to travel first, but also benefit from the existing attractions of the hostel model - limited staffing costs - and the easy expansion needs of this model - conversion from other uses.
This is one of the growing trends of the pandemic, with Fleurets commenting earlier this week that some hotel owners may be looking for alternative uses for their assets. The group said: “Hotel owners, operators and investors face a multitude of challenges over coming months. Pre-opening plans will be made and implemented, marketing strategies for the ‘new world’ are being devised and most businesses will aim to reopen in alignment with anticipated guest demand as businesses strive to revive their dormant hotels and return to profitability.”
One of these alternative uses is expected to be hostels. The Generator generation is making its presence felt.