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Successful funding rounds of $245m have driven an audacious international expansion for co-working hotel chain Selina, but is its expansion sustainable? Alex Irwin-Hunt investigates.

Selina, the brainchild of two well-travelled Israeli real estate entrepreneurs, has come far from its humble beginnings of one hotel in Pedasi, a Panamanian surftown, which was opened in 2014. The hotel-hostel company, originally concentrated in Central and South America, now boasts 43 locations globally, including in North America and Europe following recent openings in Miami, New York and Porto.

Its sustained international expansion has propelled the company to feature among the 10 most active global investors in 2018, investing in 44 greenfield FDI projects across 17 countries for 2018, according to data from greenfield investment monitor fDi Markets.

Digital nomads

Selina’s open-plan hostel-hotels, inspired by its founders’ travelling experiences and the co-operative Israeli Kibbutz movement, have wide appeal and provide their guests with traditional amenities, such as bars, pools and communal kitchens, as well as co-working spaces and coffee stations. Its accommodation options range from $10 dormitories all the way up to five-star suites, meaning that customers across all budgets and segments of the market can work while travelling across the globe.

The company’s mission is “to inspire meaningful, authentic connections between people”, according to Yoav Gery, Selina’s president, as quoted by travel industry media company Skift. Its main target market is what it terms “digital nomads” - people who can work remotely wherever they have internet connection – but the company’s hotels could become a one-stop shop for travellers, especially millennials seeking a unique travelling experience.

In 2017, about 1.27 million people used co-working spaces worldwide, with figures set to grow further according to market research company Statista. Those in the co-working accommodation industry hope that the growing popularity of co-working could draw customers away from traditional hotels and hostels towards options such as Selina-branded hotels, as more travellers search for alternative places to meet, work and collaborate with others during their vacations.

Thriving together

Selina aims to “always be connected to the local community while inviting national and international visitors to come and share space with locals, to learn together, to drink together and to grow together”, Yoav Gery tells fDi Magazine.

By using locals to both decorate their properties, and run various wellness programmes on offer – including yoga and meditation sessions – there is both community engagement and a ‘localised’ feel to each of Selina’s properties. Various other activities on offer at Selina-branded hotels, such as surfing, white-water rafting and nature walks, combined with their open-plan designs and collaborative workspaces, mean the hotels provide a rare holistic experience for their guests.

By opening ‘experience-focused hotels’ in up-and-coming locations, and having a business model that aims to remove at least 60% of the time required to refurbish a traditional hotel, Selina has been able to expand rapidly.

“Our model is driving higher returns than other real estate investments in part due to our speed to convert a property into a Selina, in part due to our superior operating model and in part due to our product mix and programming making us more of a content production house and experience provider than a bed for the night”, says Mr Gery.

Taking on the world

Selina’s rapid expansion followed a successful round of funding in April 2018 which raised $95m from backers including Dubai based private equity firm Abraaj Group and WeWork founder Adam Neumann. A further $150m in real estate funding secured from DD3 Capital Partners, which was announced on December 5, 2018, will facilitate the further expansion of Selina’s growing portfolio of hotels worldwide.

Selina has both an office in New York and corporate headquarters in London, as it looks beyond its Latin American focus. Some of its underperforming hotels– for instance, in Nicaragua, where tourist numbers plummeted by 61% from April to July 2018 due to riots and political unrest – will require propping up by some of its new locations

Selina invested in its first New York property located at 138 Bowery in December 2018, which will span 5855 square metres, and will feature 90 rooms, an outdoor terrace, a rooftop bar and 280 square metres of retail space. This expands Selina’s US presence, having opened its first site in Miami in September 2018, with plans to open another four locations in Miami in the next two years, as reported by New York Business Journal.

At the same time, its European presence continues to grow with two upcoming Portuguese locations, one opening in Ericeira in March 2019 and another opening in Lisbon in April 2019.  Selina also plans to build 5000 to 7000 beds in Israel over the next five years, following a joint venture signed with Ampa Real Estate in May 2018, according to Israeli newspaper Haaretz.

Overall, Selina expects to be present in 100 locations and grow by 54,000 beds by 2020.

A profitable business?

Success stories in the co-working space and hospitality industry have shown how lucrative the business plan can be on a global scale, with shared office space provider WeWork valued at $42bn, and peer-to-peer accommodation platform Airbnb valued at $31bn.

WeWork was the world’s most active global investor in 2018, having invested in 219 projects across 32 countries in 2018, according to fDi Markets. However, WeWork losses surged to $1.2bn in the first nine months of 2018, as expenses mounted in the expansion of its portfolio of buildings, while simultaneously awaiting revenues from its buildings that are due to open.

When asked about Selina’s profitability, Mr Gery says: “It’s difficult to measure overall profitability in a business that is growing at an average of one new opening per week."

However, Selina’s two successful funding rounds show investors believe in the potential of the company to grow to a global success story – like Airbnb or WeWork – and offers yet another example of the persistent evolution in the way in which people are working and travelling.

This article is sourced from fDi Magazine
fDi Magazine

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