Hybrid hostel operator YellowSquare has won significant backing to grow its brand from its native Italian market base.
Private equity investment group Invel Real Estate has agreed a strategic partnership with YellowSquare, aiming to invest around EUR200m in buying, developing and managing properties across Europe, allowing the YellowSquare brand to grow. The target markets for growth are destination cities in Italy, Spain, Greece and Portugal.
Expanding from an Italian base
Currently, YellowSquare has hostels in Rome, Milan and Florence, plus pipeline properties due to open soon in Bologna, Turin and Venice. The business launched at the Rome property, the bright idea of brothers Fabio and Marco Coppola, when they were still teenagers. It traded for over 20 years before adding a second site in Milan in 2021, and Florence a year later. The brand sets its sights on being more than a great value place to stay, creating a place for locals to meet and mingle with modern urban travellers.
“Our goal has always been to create authentic links between travellers and local communities, transforming each property into a real meeting point, a ‘square’ where people can share experiences, work, have fun and feel part of a global community,” said Fabio Coppola, co-founder of YellowSquare. “Thanks to this partnership, we will be able to expand our network, bringing our hybrid hospitality model to new cities and creating new spaces for all guests seeking a travel experience that goes beyond a simple overnight stay.”
Under their agreement, the two companies will set up a new investment vehicle, which will be 100% owned by Invel, to acquire property assets for transformation into hostels. YellowSquare will then manage the new properties. Invel will subscribe to a capital increase in YellowSquare, becoming a key shareholder and providing headroom for expansion of operations.
The company is already enjoying the benefits of growth from new openings. In full year 2023, it welcomed more than 100,000 guests and delivered revenues of EUR14.4m, a 37% increase on 2022.
A hospitality-focused investor
For Invel, backing a hostel-oriented operator is just a short step away from other areas of the accommodation space where it already has investment experience. Among the group’s portfolio interests is management of around 2,000 hotel rooms across the Mediterranean, via its operating platform that looks after high end hospitality and residential projects. Established for more than a decade, Invel has already deployed more than EUR1.5bn of capital, executing real estate investments on behalf of clients including global institutions.
Gabriele Magotti, Invel’s chief investment officer, explained: “The agreement with YellowSquare allows us to address the growing demand for hybrid hospitality solutions in southern Europe’s leading tourist destinations. This joint venture marks a milestone in our investment strategy for the hospitality sector, aimed at identifying and developing assets capable of meeting the evolving needs of an international and experience-driven clientele.”
