Private equity group Extendam had acquired the largest Holiday Inn in France with Catella Hospitality Europe, which will operate the hotel under franchise.
The hotel was sold for an undisclosed sum, which was described as having seen “a value adjustment related to the impact of the Covid-19”.
The 262-room Holiday Inn Paris - Porte de Clichy, was located at the gates of Paris, near the newly-built Judicial Court in the 17th arrondissement. The hotel, built in 2006, will now undergo a programme of renovation work.
Jean-Marc Palhon, president, Extendam, said: "In addition to these factors, the identification of extremely strong additional rebound capacities at the end of the crisis has been added. Our experience of more than 10 years as a pure player in European hotel investment and our support over the long term for players in the sector has shown us on several occasions that periods of crisis are periods during which investment in this sector is not only necessary but also strategic because, paradoxically, these periods open up the best vintages of private equity when we know how to identify them. It is in this context, and during the spring lockdown, that we seized this investment opportunity.”
The group said that the deal confirmed its strategy of investing in properties and funds within existing business hotels with strategic premium locations to capture the main business travel flows in city centres or on the outskirts of large conurbations.
The founding partners of Catella Hospitality Europe, said: "Despite the uncertainty surrounding the sector's return to normal, CHE believes that high value-added opportunities will emerge during the current crisis for investment firms with a clear strategic vision and a willingness to take disciplined risks. The Catella Hospitality Europe team is therefore delighted to begin work on repositioning this iconic asset to capture the full potential associated with the market recovery and Paris' exceptional prospects in the coming years.”
Christie & Co’s brokers, Emmanuel Aubrée, Jean-Christophe Charolle and Alexis Morcaut, who acted on the deal, said:”Despite the current period, marked by a deteriorated operational situation and unprecedented uncertainty, we are convinced that the buyers will be able to write a new page for this emblematic hotel, by exploiting its full potential.”
Paris was expected to see a strong recovery, according to HVS London, benefiting from the Olympic Games in 2024, in addition to plans to invest €2bn in Disneyland Paris.
Maria Coll, consulting & valuation analyst, HVS London, said: “The characteristics of the Paris hotel market from its demand sources to its transport links and supply dynamics will play a significant role in the recovery of the hospitality industry once travel returns.
“We expect domestic demand to recover faster largely due to growth in ‘staycations’ which will shift the balance in the short term. While this will help initially, the gap left by international tourism will present a challenge until international visitors can return. Traditionally high rates in Paris might give hotels operators some room to manoeuvre, with tactical discounting to boost demand, although the city may well miss out on leisure travellers on a budget, who might opt for cheaper destinations.”
While Paris ranked first in the world for its meetings business in 2018, as with most European cities group business and MICE demand is likely to take longer to return. However, visitation will be boosted with the staging of popular events in the city such as the Tennis Open, the biennial Air Show, and the haute couture fashion shows once they resume, although this may well be into 2021.
Paris has a high number of hotel rooms in its pipeline - some 4,000 rooms by 2022. While those under construction are expected to open at some point, the pandemic was likely to delay many new openings, which will be of benefit to existing hotel supply.
“Paris has remained one of the most attractive hotel markets over the past decade, both for visitors and investors and, following a paced return once demand can resume, should continue to be one of the top tourism destinations worldwide.”
Insight: There has been much written about the changes to the world of corporate travel in recent weeks and Bill Gates’ comments about a 50% fall in road warriors certainly spooked many.
Despite this, interest in markets such as London, Paris and New York has remained steady with investors as their long-term potential is seen as unchanged, whatever the slings and arrows delivered by the pandemic.
And for those hotels which have some value-add potential - as the renovation here indicates - as well as being in the coveted budget segment, c’est le win-win.