Business still may not normal for citizenM, but the company is moving forward with its growth plans. CEO Klaas Van Lookeren Campagne explains in this video how the company is planning to make the most of the $1 billion it raised.
CitizenM has received a lot of acclaim for its innovative use of technology, which CEO Klaas van Lookeren Campagne believes has helped the Dutch-based hotel chain improve the visitor.
But van Lookeren Campagne told Skift Senior Travel Tech Editor Sean O’Neill at March 24 at Skift Forum Europe 2022 that the citizenM faces challenges such as international business travel, which the company relies heavily on, still not recovering to pre-Covid metrics. However, the company has been buoyed by the $1 billion it raised last year, which it intends to use to expand in the U.S.
Watch the full video of the conversation, as well as read a transcript of it, below, to hear what van Lookeren Campagne said about citizenM’s successful digital strategy, its future growth plans, and much more.
Sean O’Neill: So citizenM is in the spotlight today because it stands apart from a lot of hospitality companies. It is asset heavy at a time when asset light is very trendy. It focuses on business travel at a time when leisure travel is rebounding quickly after the pandemic. It has very compact guest rooms at a time when apartment style lodging is very popular on social media, but it also says it has the most profitability per square foot of any of its hospitality peers. So we’re going to find out about its strategy.
Klaas, when I told you were going to be speaking at this particular time and it was going to be right after an Expedia executive and right before a booking.com executive, you said that as a hotel, you’re used to being squeezed by the online travel agencies. So you were going to be cool with this. So thank you for joining us. I wanted to talk about the news first. In November, you raised more than 800 million euros, about a billion dollars worth of capital. How are you planning to use that at citizenM?
Van Lookeren Campagne: We have a very live active development portfolio in the Europe and in the U.S. where we are building hotels, so it’s quite challenging at the moment, but we want to finish them. We are opening, this year, six hotels, next year, six hotels. So roughly half of the money is going into just building our hotels, and the other half is …
We really had a very smooth, easy conversation with our shareholders. Do we only take the pain of the pandemic, or do we also get the gain? And do we believe in further growth? And we have long term shareholders, we have a long term vision, and we are absolutely believers that in the long term, citizenM has a phenomenal opportunity, and therefore we want to grow.
And we are growing, and we are growing in the U.S. and we are growing in Europe, and doing deals again. That was also for some time difficult, but we are in good spots to build future hotels.
O’Neill: That’s great. So that’s six hotels this year, gets you about to more than 10,000 rooms. So one thing that we hear at Skift from time to time is that some people believe digital kind of replaces good hospitality, true hospitality. Is that true?
Van Lookeren Campagne: That is definitely one of our favorite subjects, and I cannot believe that in today’s world, still a lot of people have this question, because we fundamentally believe that digital…
A lot of the digital is the salt and pepper on the table. You have to have that, and it enables much better service and much more interaction with our guests. So two nice examples we have, and of course the app for our guest, and we have an app for our staff in the hotel, and they are connected. And especially the app for our staff that releases them from a lot and a lot of manual work that they used to do. And now with that app, they can make a room key or a room move anywhere. So you can do it at the bar with our staff and have a nice chat, and they make room a key for you.
O’Neill: Oh, wow.
Van Lookeren Campagne: So I think that we were the first to come with a check-in kiosk, and I think we are the first who will be able to ditch them again, because you can do it on your app and you can do it at the bar with one of our ambassadors.
O’Neill: Ambassadors are what you call your staff?
Van Lookeren Campagne: Yeah. Yeah. Yeah, yeah. And I think that you see it, that the joy of our ambassadors is there, and it will be also an easy way for them to communicate. So if you are, as a guest, you walk up to one of our ambassadors and you want a tip for a restaurant, we will be able to do that via the ambassador app to the guest app, and you don’t have to have, “Okay, what was the name? What was the street of it?” You immediately have it in your app. So all those kind of functionalities we will bring, and that is, I think, what nowadays guests, and nowadays employees, expect from you to deliver.
O’Neill: They may expect it, but I would think a lot of companies, we’re going to hear from Accor CEO later today, IHG, Marriott, they don’t really have the tech that kind of layer all across their property. So why is it… If this is such an obvious move, why is that the case?
Van Lookeren Campagne: Yeah. If you have such a huge portfolio and a complicated tech stack, then making the promise and delivering on that is quite hard. So probably they are a little bit more careful in that promise, but you just should ask him later. But for us, we can deliver that. We own our full portfolio, we have a modern tech stack, so if we want to implement something that we is a guest need, yeah, we can pretty fast do that globally over all our hotels.
O’Neill: Okay. So the owner model makes a real difference in how you do
Van Lookeren Campagne: Absolutely. Absolutely. Yeah.
O’Neill: So for anyone who hasn’t stayed at a citizenM, we’re going to call a video now to give a little illustration of what the experience is like real briefly.
And because I’m a super cool dude, I’m now going to call a TikTok video that was just going to give you a condensed version of what the ambassador app is that he just referred to. So this is without sound here, because we didn’t have rights to play the music, but you can see, they can very quickly check a guest in. They can help change, as you say, the rooms. The process is very fast as a user interface.
And I want to remind people who are watching online, if you have any questions and if you’re here in the audience, feel free to ask a question in the app and we’ll get to it at the end of our talk. So when I see that experience, it reminds me of the digital first native apps, like Uber, Amazon, Netflix. In Uber, I can see a little information about my driver. I can maybe choose what I want tog up to something more lux or have a quiet ride. So is that the kind of experience that you’re trying to benchmark for?
Van Lookeren Campagne: Not benchmark. So let me take one step back. I always like to understand in which world we are living in. Why am I wearing sneakers, and why I’m not in a suit? In the 80s, the banks, they dictated how we were dressing, how we were speaking, what we like. And some 10, 20 years ago, silently, there was a whole different crowd, took over the world, and I call it revenge of the nerds.
O’Neill: Revenge of the nerds.
Van Lookeren Campagne: For people that lived in the 80s that know that high classic movie. But that is what the world is now dictated by all the tech boys. That’s why we were sneakers, we are relaxed, we have different preferences, and they just dictate what consumers, but also employees want.
And yeah, I think you have no choice. You have to do that. So whatever they deliver on an app and in digital service and what convenience is, we have to do that. And of course we like to do that because it is also easy for us to do it.
And we are also living, especially after the pandemic now, in a fight for resources. I think that everybody is struggling for good employees. Guess what? If you have this, guess if you have the highest guest satisfaction, and you have these cool tools, of course, they like to work for you. [inaudible 00:08:09] completely different.
So I think that for many ways, it works for you to do it. And if you look at our company, there’s hardly any hotelier. And look at our website, we are only looking for data engineers, and that is I think the direction that you move to, where you can constantly try to surprise and improve your guest experience.
O’Neill: It’s interesting. I hadn’t considered the recruitment aspect of some of this, how it would help with that as well. The tech glow that you have seems to be helping. Facebook has picked this citizenM in order to help build a…
You’re building a hotel on their campus, partly for the employees, partly for visitors. On the business travel side, you have a lot of clients that come to your 26 hotels, 24 hotels, you have the Globals, the Deloittes of the world, but the Siemens and the Microsofts of the world, but you also have small and medium size businesses.
If you have to choose of those two groups… I know you love the money from everyone, but if you had to choose from the globals or your small and medium businesses, which are your favorite kind of customer?
Van Lookeren Campagne: Nah, the customer, wherever they work, if they fit our profile or reverse it, if they like our product, then that is our preferred guest.
Van Lookeren Campagne: And they are everywhere. And obviously from a business point of view, you want to diversify. So we like to be squeezed and we sometimes are squeezed, like I think the entire hotel industry between the Expedia and the Booking.coms.
And of course we still like to work with them, but we also like the business from all the big companies, and we like the business from the small companies. And I think it’s ultimately, and opposite sitting here is Leonard young in our company, he says it is the guest that has to determine what they want. And it is for us and booking.com and Expedia to say, do I deliver value to them? And we, of course, believe we will deliver a lot of value, to the app, to the unique experience, et cetera, et cetera.
And it is for the others to see if they also can deliver value to that entire journey. But yeah, we like to own that journey and we like to service that guest, whether it is a guest, someone from Facebook or Amazon, or a small company, First, that is the same. And it is a little bit harder to build up your whole network in all those small companies, but they are a bit more resilient. So it is a you which push that we are going to do to find also all our small companies.
O’Neill: So you mentioning Booking and Expedia, they can spend like 30 percent of their revenue a year in a typical year on marketing, including a lot of digital. Hotel year, can’t usually do that. How can you compete in like get your brand and push for direct booking?
Van Lookeren Campagne: A nice example is you show the movie of TikTok, and TikTok is also delivering business to us. And I think that more and more people are looking at those kind of device, those kind of movies and those kind of apps. And so we want to be everywhere where our guest is, basically, and that will drive us. And we will also do it… I am not allowed to disclose it completely, but we are exploring subscription.
O’Neill: You can trust me. I’m a journalist, fair.
Van Lookeren Campagne: In the previous conversation, it is also all about subscription, and subscription is also a direction that the guest and the whole society’s taking. So obviously…
O’Neill: Well, tell us a bit more about subscription. Subscription is dear to our hearts at Skift. We’ve been covering, as Dennis was mentioning, eDreams, Trip Advisor, Inspirato, Selina, a lot have been doing it. So what is citizenM going to do with subscription?
Van Lookeren Campagne: It is what do you want to accomplish? And we are a long term player, and we want to build long term relationships with them. And I think it’s a perfect way to build a long term relationship.
O’Neill: With a customer, as a subscriber, it is…
Van Lookeren Campagne: Yeah. Yeah. And I think it’s a fair game. You have to continue to drive value to that customer, because otherwise they will walk away. And I think that citizenM is able to do that. And so therefore, we will go that direction to create those long term relationship and to focus on customer lifetime value, instead of only, what is my daily rate yesterday? We will definitely, definitely do that.
And subscription is a perfect tool for doing that, and an accepted tool in the world. So yeah, we will be a part of that. And again, as an owner operator, for us, it’s quite easy to deliver. We don’t have difficult discussions. We can deliver that. So execution is quite easy for us in that sense. And if you have the tech stack underlying it, then yeah, you can do it.
O’Neill: And so testing wise, you’re looking at maybe a mix of stays and workspace, meeting spaces offering as products could be in there?
Van Lookeren Campagne: We will move with our products where the guest is asking us to go. In the pandemic, we went to global passports. So that was offering… You can stay for us with a month for a very attractive price, because yeah, if you have those rental prices in New York, that was quite expensive. So we were doing that. That was an experiment. We had phenomenal, positive responses from that. Corporate subscriptions. So I think that whole spectrum, we will constantly move and see where the guests needs are actually.
O’Neill: Okay. So we heard from my colleague Wouter at Skift Research earlier gave some… talked a little about the overview coming ahead. Let’s say, Klaas, that this year, I tell you that for 2022 and for 2023, international business travel will remain down below, 15 percent below 2019 levels. Can citizenM stay profitable and meet all of your targets if that is the international business travel environment?
Van Lookeren Campagne: Yeah. Yeah, for sure, we can. And it is, of course, active management, and actively, you have to see where your channels and where your business is coming from. I had a conversation also yesterday. We have a live dashboards constantly from our entire portfolio.
O’Neill: So this is like a business intelligence tool that you have the pulls data in that your team
Van Lookeren Campagne: Yeah.
O’Neill: can look at, right?
Van Lookeren Campagne: And that goes all the way from NPS DEI scores to your real hardcore financial [crosstalk 00:14:31].
O’Neill: NPS is a net promoter score. It’s a measure of customer satisfaction. Your ADRs, your average daily rate, so you’re pulling in.
Van Lookeren Campagne: And that is a dashboard that is used on a daily basis by our teams telling you where your business is coming from. So that tells you, and I didn’t know that most of our business in the London hotels are still UK driven. So that is not business as usual pre-pandemic for us, but you have that information. Of course, your marketing teams, your eCommerce teams can immediately apply that. So I think that if you have that data available, you know where your business is coming from. And as long as there’s always sufficient business, then yeah, we will drive. And I don’t think it is underestimated that corporate business travel will still be, at the end of this year, below the ’19 levels. And again, we are growing the biggest part of our portfolios, and is quickly becoming the U.S. And the is one big domestic market, so that will be helpful-
Van Lookeren Campagne: … in that sense.
O’Neill: And you’re building some in Florida, is that right?
Van Lookeren Campagne: Yeah. We are about to open two hotels in Miami and [inaudible 00:15:42] construction. And Miami is… I was there last week, so that is pretty much on fire.
O’Neill: Yes, it is. It is a very different experience than many European cities right now. I’m wondering maybe about your competitors. How well do you think your competitors will do if it’s 15 percent down 2019 levels for the next couple of years?
Van Lookeren Campagne: I think that depends also on their distribution models, and especially the big companies like the Marriotts and the Hiltons, they will find their ways and it will be maybe more or less profitable business.
O’Neill: Is low cost leverage one of the themes that we’re trying to explore here is? What is the levers that are moving [inaudible 00:16:21]? So has consumer preferences this year changed, and is price no longer the thing that’s most important to them, it’s more a location or the experience or other factors/ how important is price right now for market share games?
Van Lookeren Campagne: I think that obviously when you go into a pandemic, then immediately everybody looks at prior crises and starts to compare, and you have great data on how each city comes out of a crisis and how long it takes. And therefore, we were also looking at the same statistics. And I think STR and CBRE Horizons report do the same. They all go to the same data.
And I think that gradually we’ll find out that this is not a financial economic crisis. It was just demand was gone. And you see in a leisure, demand, immediately when people were traveling, like a switch, it’s back. And I think that we have not seen in prior crises, and I think that we will see the same in business travel, say for some, of course, changes to business travel. So I think it will come back quicker, and therefore pricing will come back quicker.
And to my surprise, that also we see that already. When there is the big demands, yeah, your prices shoot up and people accept it, and it has no relationship to your guest review scores. So also the guests, they understand that. London is now busy. They understand pricing is high. I think that our type of guest, they will understand that.
O’Neill: OK. That makes sense.
Van Lookeren Campagne: Yeah.
O’Neill: I want to go back to something that my colleague Wouter from Skift Research was saying earlier, which is about sustainability. He was saying that a lot of consumers are not yet… A large number of consumers express a preference for sustainable options, but not a lot are actually paying for it yet, but it seems like because of the climate change, that is going to change and consumers are going to start to recognize the need for that. And so it’d be good for brands to try to get ahead of the curve, be transparent about their sustainability offerings. At citizenM, you do a lot of prefab modular construction. Is there a sustainability component to that? And can you tell us a bit about that?
Van Lookeren Campagne: Yes, we do. And we are a big fan of that, and it definitely has a positive impact on sustainability to build modular. There’s a lot of less waste. There’s so much waste in construction, actually, so that is for sure. And I think one of the things we also quite quickly set in the pandemic what will change for longer term, and I think that our conclusion was quite quickly that everything that was already happening and very visible before the pandemic will be just be fast tracked.
Van Lookeren Campagne: And the pandemic… And now, again, I think the very sad war in the Ukraine will fast track your sustainability, for sure, and it will also change the supply chains.
O’Neill: So we have an audience question that ties into what you’re saying, Klaas. So Sally is asking whether your sustainability commitment contributes to employee retention and engagement.
Van Lookeren Campagne: Yeah, for sure. It’s the same as the… They have just a wishes for tech, they want to work for a company that has certain values that they also believe in. And I saw that changing after black lives matters. You were forced by your employees and your guests to make a position. Before that, as a company, you could stay neutral. Now, I think you’re not allowed to do it anymore, and I fully, fully wholeheartedly agree with that. You have to take a position. And we took a position on Black Lives Matters, we took a position immediately on this war, we took a position on sustainability. And I think I mentioned it, for those who have read The Financial Times, Nestlé were not listening, and they are in quite significant trouble now. And of course it is difficult. Of course, it is. You have to make tough decisions to walk out of Russia, whatever, but I think that is what you should do, and we are doing that. So employees definitely, definitely care, and our guests as well.
O’Neill: We have a question about a food and beverage. So the traditional boutique hospitality experience, like what Ian Schrager in the U.S. pioneered, very heavy. Turning your lobby into a sort of a nightclub disco at night is one example, but maybe how has food and beverage played a role in your business, because you have sort of a different approach?
Van Lookeren Campagne: Yeah, yeah, yeah. We see a lot of lifestyle brands always go into that heavy food and beverage party scene. I used to be really a fan of the W in the nineties, until they turned it into night clubs, and then yeah, for me, that didn’t work anymore. But for us, citizenM is all on triple A locations in the metropolitan cities, and therefore we believe there’s such a huge offering in restaurants. Let’s not compete in that game. So of course we have to offer great breakfast. We very much believe in offering a phenomenal bar and bar experience, but on the food, we are, yeah, not as extensive offerings.
O’Neill: OK. David has a question. How much does having a strong brand image matter in the direct bookings play, and how does citizenM brand sort of do that?
Van Lookeren Campagne: I think that is everything, because yeah, you want to appeal to your guest. And the more the guest can see from your brand who you are, what you offer, yeah, they will book more direct. And the more you can also display what value you bring to them, then that is truly important. And as a young brand, of course it is more complicated. And we are fast growing in America, so we are really putting a lot of efforts in that market. But I think that also America is a market where you can pretty quickly establish your name as well, so-
O’Neill: Why hasn’t anyone else sort of copied your asset heavy model? It’s so popular now to go with asset light. And I believe this as our last question.
Van Lookeren Campagne: You need a lot of money.
Van Lookeren Campagne: And that is not easy always. Despite the fact that there is an abundance of money at the moment in the world, that is not so easy.
O’Neill: For hospitality.
Van Lookeren Campagne: For hospitality. And deviating from that strategy took as so many discussions, because yeah, indeed everybody goes asset light, and we believed in controlling that entire guest journey and controlling the entire cash flows, but we are investing at least 500 million a year in our expansion. But from a real estate point of view, yeah, it offers phenomenal returns as well. So I think it is finding that money and that wallet that will support your cause, and we don’t see that many companies doing it. And at the same time, we see also in the lifestyle space, all the hotels are being bought by the big boys, so there’s hardly any. I think that we are the only independent global lifestyle hotel that is not part of Accor or Marriott or Hilton or IHG. They all are partly-
O’Neill: Are you for sale?
Van Lookeren Campagne: We are not for sale. For our guest.
O’Neill: OK. We’ll leave it on that point. Thank you so much, Klaas. Really appreciate it.
Van Lookeren Campagne: Thank you, Sean.