Feature: INVESTING IN HOSPITALITY
In it for the
long haul A
lthough cancelled travel and vacant hotels remain an enduring memory of the pandemic, the real estate investment community is actively checking into the hospitality sector with a palpable sense of excitement. According to Patrick Saade, senior managing director of hotels & hospitality JLL, a significant majority of recent global hotel transactions — some 85% by value in 2021 — have been struck by private equity funds. “Investors are competing on a limited number of deals, which are being won by capital with strategic business plans and an edge,” he says. Meanwhile, in the continued absence of distress, lenders have been refinancing and acquisition-financing deals, aided by low interest rates. “If you don’t want to sell, you have a lot of debt options right now,” he says. Yet there are a few investors who are willing to divest hotels, and they include both family offices that are particularly exposed to
the sector, and rather opportunistic sellers. “Family offices realise that they are going to have to increase their capital injection and pack more liabilities into those assets as time goes on, including employee payments, while a few opportunistic funds are selling because prices are holding up so well,” Saade says. On the buyer side, there is no shortage of fresh capital queuing up, in anticipation of the travel industry’s full recovery. “Leisure travel is pretty much back to normal,” he adds. “It’s only being impacted by government-imposed rules, including testing obligations. The moment that you allow people to travel freely, trains and planes and hotels are full.” Dieter Kornek, head of project scouting at TUI Hotels & Resorts, agrees. “The last months have shown that tourism is coming back powerfully and that tourism is still a growth market. Especially leisure hotels are benefiting from this trend and hence lot of investors, both institution-
al as private investors, are more and more interested in leisure hotels and the resort hospitality in general.” Kornek adds: “We noticed that clients are booking superior grades of hotels and rooms as well as booking already before departure optional extras and services for spending authentic holidays. We also observed that the average length of stay is slightly increasing. We are very optimistic for the future, and also look forward to the return of long-haul destinations, especially in South East Asia.” It’s not just far-flung resorts that have a sunny outlook. Marc Vieilledent, chief development officer of super budget brand easyHotel says that his firm’s Europe-focused urban and affordable formula proved resilient throughout the pandemic, and has significant room for growth. “In December, shareholders pledged to more than triple our estate by 2026 with a cash injection of €50m,” he says. The brand currently boasts 42 hotels with
Guests can’t wait to fly in to the TUI Blue Bahari in Zanzibar once more
3,977 rooms, and while leisure travel is the leading driver, the group has continued to welcome business travellers, largely domestic in nature, throughout the crisis, according to Vieilledent. “These customers are often entrepreneurs who need to move city to city to meet with clients. Its’ a resilient and evergreen sector which performed well during the pandemic and is set to grow further.” The findings reflect Saade’s view that investors are optimistic about a broad variety of opportunities in the hospitality sector, “from ambitious resorts to shuttered, city-centre hotels” and even the beleaguered conference segment. Adds Saade: “Although the meetings, incentives, conferences and exhibitions (MICE) sector was hard hit at the height of the pandemic, there are plenty of investors who are now taking a contrarian position. It’s a segment which boomed in the middle of the last decade, offering re-
MIPIM PREVIEW • 70 • February 2022 MIPIM_Hospitality_+D_+S.indd 2
02/02/2022 10:37
[Photo credit: Sandrine Roudeix]
With pent-up customer demand promising a wave of fresh reservations in the coming season, hotel owners and operators are optimistic they will soon be fully booked. Isobel Lee reports
