Patron Capital is exploring options for its €600m (£466m) Generator Hostels business, including a possible sale.
It has held early-stage discussions with prospective advisers and investors for the 7,000-bed European portfolio, although no appointment has been made or formal marketing launched.
The Generator Hostels business aims to provide a boutique product aimed at the higher end of the hostel market in city centres but still at affordable prices.
A sale of the firm would likely include the operational business as well as its assets.
When Patron acquired Generator in 2007, it was a family-run business with two assets in Berlin and London. At the time, the deal marked the first private equity investment into the hostel sector.
The business has since expanded. In 2013 Patron put in €150m to fund the acquisition of further sites.
It now operates 12 hostels across key European cities, including Copenhagen, Venice and Barcelona. Hostels in Amsterdam and Madrid are expected to open this year. It has a target of owning 20 sites by 2020.
In January last year one of its investors, Invesco, injected €60m into the business to promote the growth of the brand across Europe as well as US expansion.
The hostel sector has seen impressive growth since Patron first acquired the assets, and a sale of this scale would represent one of the largest opportunities in the sector.
Market researcher Euromonitor estimates that in the UK alone the hostel market will post £216m of annual sales by 2018.
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