Growth – Collective Hospitality

Growth Story

company with business operations across Southeast Asia. We have grown steadily across the region, beginning in 2012 in Krabi, Thailand. Today, we hold 32 properties and are growing fast.

Destination Group (”DG”) became a shareholder of CH in 2019, bringing its principal’s 35 years of expertise in owning and operating 4-star hotels and branded restaurants in Southeast Asia, along with their high reputation in the region. DG owns and operates many global lifestyle brands, including Novotel Resorts, Swissotel Resorts, Hard Rock Cafe, Hooters, Scoozi Pizza, among others. CH utilizes and benefits from DG’s leadership team of professional executives with a wide range of skills in real estate operations, finance and hotel operations. The melding of the two makes a perfect combination.

Collective Hospitality’s major recent growth milestones include launching its new hybrid/hostel concept brand SOCIAL\TEL and the acquisition of Bodega Hostel Group. Collective Hospitality plans to grow rapidly over the next five years, with significant year- over-year growth and a projected target of 600 properties by 2027 across Southeast Asia, Asia, Africa, Europe, the U.S. and South America.

Why Now?

The time to act is now.

CH represents an attractive investment opportunity under any circumstance, and we believe that the COVID-19 pandemic has now presented us with a once-in-a-lifetime chance that demands urgency to move fast, take over distressed hostels, and expand our presence. Never before has the landscape been so available for the taking, and never before has the potential been so great. There has been a significant dislocation of previous industry players, and now is the time to go in for the kill.

Distressed Business:

Many of these businesses, either solo operations or smaller chains that have failed to weather the COVID-19 pandemic storm, are primed for sales. These acquisitions could quickly add substantial portfolio growth since the properties are already equipped for similar business operations.

Reduced Supply:

The market has been cleared, and the canvas is blank. Many of the so-called “cowboy” entrepreneurs have closed and gone home. Supply has dropped dramatically, with an “only the strong can survive” mentality proving true. This will result in even further reduced competition for an established operator to capture a majority of the market. Simultaneously, affordable, social travel is estimated to be a travel class that will bounce back quickly as many customers will be price sensitive and starved for interpersonal connection and vibrant, engaged experiences. Data shows that young people are anxious to travel, socialize, and have fun. This is what being young is all about, and this is what CH is all about providing our customers.

Desperate Landlords:

Landlords are offering long-term leases at highly favorable rates in prime locations never seen before, with heavily discounted rents compared to 2019 levels and generous grace periods. We are securing beach-front locations in major hostel markets that have never been available before. This opportunity to exploit highly advantageous offers in prime locations will allow for leases in buildings or areas that may have been out of reach previously, and have an obvious positive impact on our bottom line profit by reducing our fixed lease costs.

No Global Hostel Brand

The hotel party is over.

What was once a vast market ripe for the taking, with opportunities to acquire and consolidate independently owned hotels around the world, we are now left with an oversaturated market, with little opportunity for big consolidation plays. The number of branded vs. unbranded hotels is now near 54% globally as all major players pursue their growth strategies through acquisitions, organic growth, or diversification. Hotel operators are finding it more and more challenging to place their brands in an already flooded market of brands – they are creating new brands to grow their business. The incremental room rate premium that a branded hotel historically enjoyed is diminishing as more and more hotel brands under the same reservation system compete for the same customer in the same market. Hostels are different, as there is no global hostel brand and the potential to achieve premium bed rates in branded hostels over independent hostels is significant.

Hostels are the last bastion of the market that has flown under the radar, has been relatively untouched, and is set to explode with the right business model.

There is a significant gap left uncaptured in the current hostel industry, with only 1% of all hostels worldwide branded, as compared to 54% of hotel rooms, presenting the right investors with an overwhelming opportunity. The hostel market truly is the last frontier left in the hospitality industry to consolidate and establish predominance. With the pre- pandemic rate of growth in hostels worldwide and the unprecedented landscape presented by attractive post-pandemic investment opportunities, we feel the opportunity is one of urgency. This is a hot market with aggressive growth forecasted, waiting to be dominated by the right operator with the right resources and the right team.

Global Hostel Brand

We at Collective Hospitality have proven our ability to connect with and capture this key demographic of travelers, by infusing vibrant life and soul into the core of our brand identities. We are building aggressively on our existing brand recognition and diversifying within our existing brand portfolio to cast an even wider net to capture subdivisions within the market.

This brand expansion will benefit us by:

Establishing Trust: Consumers will almost always prefer an established brand because they know what the standards are. Particularly in dealing with a consumer profile that is often funded by their parents, it is highly beneficial to be well-known and regarded for safety and quality.

Driving Sales & Cross-Sales Between Sub-Brands: By developing trust with customers through our parent brand, we will be able to further expand among sub-brands to capture more of the market and drive sales through cross-selling and referral/loyalty programs.

Acquiring Lifetime Value: By nature of their age, our customers are at the infancy of their lifetime value. By acquiring them into our brand funnel from the start, and retaining them as they evolve and mature through our sub-brands, we will maximize their lifetime value, which will be advantageous to our exit planning.