Resort Investors Playing a Waiting Game


With countries across the world starting vaccination programmes, the travel industry was looking at some kind of normality in time for the key European summer holiday months but things haven’t quite gone to plan. Although the multiple vaccines are great news, there is talk of restrictions continuing for much of the year. Governments are paying special attention to quarantine meaning that tourism might be restricted to domestic or regional markets. There’s also the emergence of new Covid-19 variants, which potentially pose a greater threat than before.

All this has meant the cautious optimism that surfaced at the end of last year has been replaced by an acceptance that summer 2021 is going to be tough. This uncertainty is also playing out in the hotel real estate market where there is still a disconnect between buyers and sellers.

Although deals are being done, agreeing a suitable price is proving difficult in many cases.

“The price gap between buyer and seller continues to be an issue for many. Examples of true distress are limited and only those who have to sell are selling right now. Investors looking for genuine bargains may have to wait a while. Much of the control is still in the hands of the lenders,” said Philip Bacon, Senior Director at Horwath HTL.

In many countries, governments are helping out cash-starved resorts that have seen their business decimated by the pandemic. At the moment this means many are living in a type of suspended animation and are happy to hold on — even if they are interested in selling — and ride things out until they can get a better price.

“There's a lot of owners that, through the furlough process, government subsidies, were able to make it through. And at the moment in time, there's no incentive for them to exit because, the investment market is looking for a significant discount,” said Roger Allen, Group CEO at Resources for Leisure Assets.

Even with this pricing disconnect there still remains plenty of interest especially when you factor in the attractiveness of the market compared with other areas in the hospitality sector.

“Investors who might previously have wanted to focus on traditional commercial hotels in gateway cities now realise that the impact on MICE and corporate business has been significant and that there is still a great deal of uncertainty about how these segments of the market will deal with the post-pandemic environment,” Bacon said.

“Therefore, the resort sector is looking more and more attractive, especially for those investors with hands-on, operational experience in-house who can seek out value-added opportunities and exploit them in the short term.

Will Branding Be More Important?

The perceived unifying power of the big resort brands is also something to watch for in the coming years. Will a large number of resorts go this way in a bid to entice customers who are more interested in the safety of standardisation that comes with a familiar name?

The story of the last few years had been of the big hotel companies losing their power to online travel agencies but maybe the pendulum will swing back the other way?

“I think now what will happen is that the consumer will look to brands as a place of safe haven that they the brands will have all of the necessary hygiene safety precautions in place. And that will give some sense of trust,” said Allen.

Some well-known leisure brands are continuing to expand despite the challenges of the pandemic.

Apple Leisure Group’s AMResorts brand, for example, more than tripled its European portfolio in 2020 adding a total of 36 hotels, representing a combined investment of more than €100 million from owners Hotel Investment Partners (HIP), Blantyre and Stoneweg.

“Our business model has proven to resonate with owners and investors in Europe, leading to our rapid yet steady growth in that region,” said Javier Coll, the Group’s President for Global Business Development.

“Despite the challenges of the past year, we are optimistic about the opportunities to continue executing a successful global expansion strategy which will take our portfolio of AMResorts branded properties to more than 100 resorts by the end of 2021.”