'Hotel acquisitions are not simply real estate deals'

The “acquisition” of Dutch hotel chain CitizenM by US hotel giant Marriott is not simply a corporate takeover, as some Dutch media would have you believe, but rather a purchase of the brand and its business model. This is according to Rob van Ginneken, senior lecturer in Hospitality Finance and Accounting at Breda University of applied sciences.

’The real estate and operation of existing hotels will remain in the hands of the current shareholders,’ Van Ginneken clarifies. ’This recent transaction is an excellent example of how hotel deals can sometimes be mistakenly labelled simply as ”a take-over”. In reality, however, this is not an acquisition of the entire CitizenM chain, but one limited to its brand name, business model, and intellectual property.’

This type of deal regularly causes confusion with the un-initiated, Van Ginneken continues. ’CitizenM has been working with a mix of ownership, leased hotels, and management contracts. This makes it even more important to clarify what exactly is being sold. The purchase price, which is estimated to be between $355 and $465 million, is based purely on brand value, which contrasts sharply with experimental valuations of between two and even four billion euros, where real estate and income from operations and management agreements were also factored in.’

Van Ginneken sees the hotel industry increasingly adopting a model that separates brand, ownership, and operation. ’In this case, Marriott expands its portfolio with a strong brand, while CitizenM continues to grow through the much larger Marriott network. They each play a different role, but with a shared interest in brand equity and scale.’