The transformation of the resort market: Q&A with Horwath HTL's Philip Bacon


The resort sector was already high on the radar of hospitality investors and has gained ever more attention as leisure travel is expected to lead the market’s recovery. Philip Bacon MRICS, FCA, Senior Director of Planning & Development, Valuation at Horwath HTL, has been following the transformation of the market from his location in Spain. He shares his thoughts on trends and innovation in resorts, guest expectations and the importance of the residential component.

Hospitality Insights: The COVID-19 crisis is lasting longer than anticipated. What is keeping you positive for the future of the sector during this time?

Philip Bacon: I believe that the difference between where we were about a year ago and where we are now is, on the whole, very positive, and that the natural optimism of the hospitality industry will continue to show resilience and produce innovation, just like it always has. 

It was always going to be a question of time, and it is important to bear in mind that this new strain of coronavirus is not simply going to disappear; we will all have to learn to live with it. The good thing is that this is not a crisis of demand; it is a crisis of supply, and what has been keeping me positive during over a year "at home" is that I haven't stopped for a single minute working with our clients, helping them plan for the future and in many cases adapt their plans to some of the changes in consumer behaviour that the last year has highlighted.

This sometimes quite bizarre and certainly very difficult situation has served to accelerate trends that had already been underway before 2020. A focus on health & wellness; combining work, travel and private lifestyles, not just in cities but anywhere in the world; the power of technology to connect people more efficiently and effectively; the importance of truly sustainable values, especially those related to the production and consumption of energy and food; and understanding that you can't take anything for granted in the hospitality business - that there are still only two types of hotel: the one that needs to change, and the one that you need to tear down.

Hospitality Insights: A number of hotel groups who have traditionally been more focused on the corporate or city market are now turning to resorts. What advice would you give them?

Philip Bacon: Firstly, please don't forget that taking urban hotels to the beach was a nice idea about 40 or 50 years ago, but that the world has moved on and 20 square metres of air-conditioned space arranged on several floors and along corridors is now a niche product in many parts of the resort world.

It is coincidental that the resort market in Europe and elsewhere was already going through a transformation following many decades that saw little change in the basic product formula. Lifestyles and generations have moved on. It is time to give people what they want, not what you happen to have available; and what people want in a resort environment, especially when families and small groups are involved, is a much more independent, residential style of accommodation, combined with excellent service when and where it is needed. It is no surprise that we are now seeing "residence-only" resorts being demanded by operators in some locations. The impact of coronavirus has simply helped people to appreciate the value of this approach. 

Second, take a new look at health & wellness and use it to create more reasons for people to travel to your resort so that your guests come away with something tangible from the experience; something more than Instagram moments. The breadth and depth of the health & wellness sector is so extensive today that there is no reason not to place it front and centre in creating measurable competitive advantage.

Hospitality Insights: Which regions do you expect will lead recovery for leisure hospitality in 2021 and beyond? 

Philip Bacon: At the moment, the ability to travel safely and without too many practical issues will, in the short term, dictate the rate of resurgence for individual destinations. We are already seeing the plans to create travel corridors between countries based on a bespoke set of rules. This may create some short-term shifts in travel patterns, and of course, the staycation will be very popular for many travellers. As a result, may rural destinations around the world that are easy to drive to will be recognised as being equally attractive, well able to compete with the more traditional sun & beach or mountain resort destinations.

Places that offer a sense of space and a clear health & wellness positioning will be what many people are looking for today, after so many months of confinement. This is natural enough in the short term, but I believe that many will experience a permanent change in their behaviour.

We will also see growth in more extreme or adventure-based experiences, with low environmental impact, especially to more remote regions of the world. This is partly down to a shift in generational attitudes that had already started several years ago, but what is interesting is a convergence of the older generation and the younger generation in terms of values and behaviour. I think we will see more of this, and less of a strict segmentation based on age groups. What brings people together are their shared values.

Hospitality Insights: How has the pandemic affected the residential market? What will be the impact on second homes, on rental?

Philip Bacon: Most of the development projects that have kept me busy over the last year have been either mixed-use (hotel and branded residences) or focused on serviced apartments, whether in urban or resort locations. Even before the pandemic, we knew that we could work at home, and the digital nomad was not invented last year. When travelling away from their primary place of residence, many will be looking for place where they can set up their home offices with ease. Some buyers are looking to stay for longer than just a holiday - months rather than weeks, and this will have an effect on the operation of such resort communities. We are also seeing a growth in interest for residential private members clubs, in both urban and resort destinations. The desire to know the people with whom you are sharing your vacation is stronger than ever.

Branded residences have for a long time been a great opportunity for the hospitality industry and this is why they are still finding willing buyers all over the world. It is also why operators not already doing it are quickly moving both into the branded residential space and into the short- and long-term rental market. We are seeing more and more developments that are not focused on the traditional hotel room but offer flexible, residential-style accommodation that can be used by multiple segments at different times of year.

Hospitality Insights: Now Brexit has happened, what are your expectations for the second home market in destinations that were attracting British buyers?

Philip Bacon: The long-established desire of the large parts of the population of Northern Europe, including the UK, to own property in Southern Europe is still clear. The demographics of an ageing population in many countries will ensure that the level of demand will stay strong. My experience of the second home market over the last 27 years is that people who want to buy one will always find a way to do so. The consequences of Brexit may have an impact on price and therefore on affordability, but in the end the rules of supply and demand never change. The need to obtain a visa is probably not a major obstacle and simply means that buyers are treated just like any other non-EU resident.

Golden Visa schemes were unlikely to remain unchanged over the longer term, and we are already seeing a shift in the way that governments use them to promote inbound investment in a tactical way. They will remain an important tool for certain destinations that have strong appeal to buyers motivated by pure residency and tax reasons, but we should not forget the emotional side of second home ownership. The ways to buy access to a second home have not been limited to outright ownership for several decades, and it may be that we see some growth in fractional ownership or property investment funds in their many guises.  

Hospitality Insights: When hospitality and travel reopen, what is the first trip you will take and why?

Philip Bacon: For work, I am looking forward to being able to visit Castello di Reschio with which I have been involved for the last few years, working with the owners to create an inspirational luxury hotel on the border between Umbria and Tuscany, complementing the private residences that have been developed throughout the Reschio estate over the years.

From a domestic point of view, apart from a very strong desire to escape to the country or the beach here in Spain for some serious time away from any kind of screen, I hope that I will soon be able to travel to the UK to see my sons, my daughter-in-law and, very importantly, my granddaughter, who was born nearly a year ago and whom I have only been able to see via Zoom. I would also like to travel with my family from Madrid to Düsseldorf to see my in-laws, whom we haven't seen since Christmas 2019.

Hospitality Insights: You will be participating in the Resorts & Residential Forum, taking place in Portugal in October. What are you looking forward to?

Philip Bacon: The choice of location for this year's R&R has turned out to be a very good one. In the last year we have been busier with projects in Portugal than anywhere else in Europe. I am therefore looking forward to being able to connect with the key players in the Portuguese market as well as people from other regions with an interest in the thriving resort and residential markets. Learning first-hand how people are adapting to change and how they see the future will be an important part of the experience. There are some things, just like meeting granddaughters for the first time, that ideally you shouldn't do via Zoom.