Leisure properties need specialist expertise to operate multiple amenities and deal with the challenges of seasonality and local supply chains. So how can investors find the best partners, what experience and track record should they look for, how do you align interests to drive the best commercial outcome, and how do you measure the effectiveness of the management team?
What makes a good partner?
“Having partners who have already managed hotels in that market or a similar market, or in a similar resort area, is very important, because the specifics of operating resorts are very different to a city,” explains Miguel Casas, managing director of Stoneweg Hospitality.
“We like alignment. That means when we have a hotel, we have a business plan, and we look for brands or operators that want to follow that business plan. That means we are all aligned.”
Stoneweg looks for operating partners with knowledge of the local suppliers that can improve the quality and efficiency of operations, as well as experience in and understanding of the seasonality of resort properties and the temporary employee contracts that come with that. In Spain, for instance, seasonal workers now come under ‘fixed-discontinuous’ contracts, adding further complexity to the labour challenges the hospitality industry is struggling with.
Casas says staffing has been particularly tough at the group’s Palladium Hotel Don Carlos in Ibiza, which it bought earlier this year, despite the group’s ability to offer far-reaching career opportunities through its brand partners.
To brand or not to brand?
“We always find the best solution for each hotel. We look at each property and think, ‘do I need a brand to increase distribution or guarantee quality of service? Or should I keep it independent, maintaining the personality and character of the property?’”, says Rita Pereira, SVP strategy & business development at hospitality management company Amazing Evolution, which has a 20-strong, resort-oriented management portfolio.
“We don’t have our own brand, we never will have, we are an independent management company, we only do management agreements. We don’t even lease. But because of that, it’s very important to us to guarantee that each project is going to follow the strategy that is suitable for that hotel and the owner as well.”
Stoneweg is open to the “whole spectrum” of brand opportunities, says Casas, and created its own brand, Casa Lit, for its Barcelona property. “It’s a matter of destination, what do you want to get out of the hotel?” he says.
This has also seen the business bring in more than one operator, for example at the group’s Hard Rock Marbella hotel, which the group bought last year, an external F&B operator has been appointed to manage one of the restaurants.
He suggests that the resort sector is starting to see a “second renaissance” of the bigger brands, particularly in the Mediterranean. Hyatt’s acquisition of Apple Leisure Group last year, including AMResorts, was a loud message to the market that the big branded operators are looking to take up more space in this segment, with Marriott and Hilton aggressively developing resorts in the Caribbean. IHG Hotels & Resorts and Accor, meanwhile, have been developing lifestyle brands which Casas says, “could very easily be implemented into resorts”.
He adds: “A lot of investors like us are actually considering big brands, HMAs or franchise agreements with brands that, five or 10 years ago, you probably would only think [about] for the city business.”
Pereira emphasises the importance of brands offering flexibility, including in their standards, for example creating softer brands that allow for the resort experience to be tailored to each destination – something she says is already happening in the market.
“You have to look at each property and decide what the strategy is for that property,” she stresses.
At Amazing Evolution’s Algarve Race Resort, which attracts guests out of peak season due to its proximity to the Algarve International Circuit, “it was not the brand that made the difference, it was the product itself,” she says.
“You don’t need a brand there to increase your occupancy with the tour operators during the whole year, because if you tailor your product to that strategy, to that segment, it will end up giving you the results that you want.”
How to define a comparative set
As for measuring the effectiveness of a resort’s management, Pereira says Amazing Evolution uses three criteria to identify comparable properties: location, product and aspiration.
“It can be in a different market, but usually it is in a higher positioning, or we think we should target the same segment or client,” she says. “You can outperform or underperform in one category [if you’re comparable with] the others. We always need to have a balance between those criteria.”
Casas says the definitions of success should be in the business plan, and if a product is underperforming, Stoneweg likes to have some asset managing rights. “When there’s no success, there need to be ways in which both parties, owner and operator, can discuss ideas to make the business better,” he explains.
The seasonality split
Despite seasonality being both a major driver and challenge in the resort space, the split between on- and off-season for resorts is perhaps becoming less dramatic. Pereira says seasonality has reduced “a lot” over the last 15 years in the Algarve and that being able to maintain teams all year round has helped with labour challenges.
Stoneweg is targeting this trend from the development stage: “When we’re doing space planning now, we’re trying to give a lot of areas to people [to] sit down and work in a resort,” says Casas.
But he points out, “you need to have things around that keep it open”. Stoneweg encourages its operating partners to have relationships with local leisure activities such as golf courses and to have “lively” F&B onsite to be able to offer “more than good weather or a hotel”.
Although, operating off-season, he adds, needs careful cost management to ensure the resort can open profitably.
All those quoted in the article appeared on stage at the Resort & Residential Hospitality Forum held in Portugal between October 17 and 19, in a session called: Operating Strategies: Finding the Right Partner to Manage a Leisure Property.