Why CitizenM sold out to Marriott, and what's next

INTERNATIONAL REPORT – Being asset-heavy and newbuild-focused proved unfavorable for citizenM when the 2019 pandemic struck and seems to have been a key factor behind the sale of the brand to Marriott International, which is expected to close this year.

“As we continue to operate in a challenging macroeconomic environment, the company faced headwinds as we pursued ground-up developments,” Robin Chadha, son of founder Rattan Chadha and co-founder/chief brand officer of citizenM, told Hotel Investment Today. “citizenM originally sought to secure additional growth capital and instead explored an alternative investment structure [with Marriott].”

In 2021, when citizenM had around 24 open hotels, existing shareholders Singapore sovereign wealth fund GIC, Dutch pension fund manager APG Asset Management and Founder Rattan Chadha reportedly raised $1 billion to add new hotels, complete existing ones and replace revenue lost due to COVID-19. The brand expanded to the current 36 operating hotels, plus three others under construction scheduled to open by mid-2026, giving it more than 9,100 rooms.

But issues such as rising labor costs in markets such as the U.S., along with supply chain constrictions and higher construction prices, appeared to hit home, even though citizenM uses modular construction for guest rooms. Moreover, many citizenM hotels were built entirely from ground up rather than less expensive conversions.

By last March, the chain started exploring a sale of the business, with Morgan Stanley and Eastdil Secured as financial advisors.

Alternative investment structure

The alternative investment structure with Marriott enables the seller to continue managing the 39 owned or leased assets under long-term franchise agreements with Marriott. It also promises the seller to earn up to $110 million more if the brand grows and does well over the next few years, on top of the $355 million Marriott is paying to acquire the brand and related intellectual property.

As well, Marriott’s distribution capabilities, loyalty plan, and development engine will open doors to new customers for the brand’s biggest hotel owner.

But while the 39-strong stable of citizenM hotels managed by the founding company is a critical mass that assures brand image and consistency is upheld, future growth lies in the hands of the global behemoth. Although Marriott has professed to preserve the brand’s ethos, this is clearly a wait-and-see.

While Rattan Chadha continues to be the chairman of the existing real estate, the remaining company will be restructured to reflect the fact that a lot of the activities will be taken over by Marriott, including key individuals on the leadership team, said Robin Chadha, who is leading the brand integration with Marriott and is dedicated until the end of the year.

When asked if the seller intends to own/lease more CitizenM hotels in the future, he budged the question, saying “both Marriott and citizenM see the prospect for meaningful expansion globally over time.”

It's hard to tell what “meaningful growth” is at this stage. “It’s still early days,” said Marriott President Asia-Pacific, excluding China, Rajeev Menon, when asked for more specifics on Marriott's expansion targets for citizenM. In announcing the deal, Marriott only hailed “the prospect of significant additional growth across Marriott’s global regions over the next decade.”

“We see a global opportunity, with particularly strong prospects in EMEA and Asia,” Menon added.

A disrupter when it launched in the Netherlands in 2008, citizenM is present in key European cities including Paris, Rome, London, Geneva and of course its birthplace Amsterdam. Likewise, its footprint in America is strong, in cities such as New York, Los Angeles, Miami, San Francisco, and so on.

Asia, however, remains a non-event so far with only two open hotels. A joint venture with Shun Tak Holdings’ Artyzen Hospitality Group announced in 2016 was dissolved in January 2019. Artyzen was to introduce the brand to Asia, with the first opening in Taipei in 2017 and Shanghai to follow afterwards. But the Shanghai hotel did not happen, although a property in Kuala Lumpur did.

At press time, Artyzen did not respond to Hotel Investment Today’s request for a comment.

Marriott’s Menon is eager to scale the brand in Asia Pacific, excluding China, in convenient locations across primary and secondary markets. His strategic vision is for citizenM to be a predominantly managed upscale brand in the region, although Marriott will remain open to franchise and conversion opportunities.

Owners in the region are increasingly looking for brands that combine smart design, operational efficiency, and distinctive identity, said Menon, adding “we are already seeing strong interest from potential partners across Asia Pacific.”

As well, the brand matches evolving Asian consumer preferences, he said.

“What sets citizenM apart is its tech-savvy in-hotel experience, thoughtful use of space, grab-and-go food and beverage options, and a focus on art and design. The brand combines tech-enabled convenience, bold aesthetics, and vibrant communal spaces, creating a distinct offering that aligns with shifting traveler expectations across Asia-Pacific,” Menon said.

Meanwhile, when asked what’s on his wish for citizenM going forward, Robin Chadha said “the ambition is for the values and culture that have been in place at citizenM from the beginning to be upheld.

“citizenM will strive to continue on the same path in working with local communities across the world; this distinction is one of the many reasons Marriott decided to purchase the brand. We also know Marriott will bring the brand to new heights on a global scale,” he said.