The 2023 edition of the Resort and Residential Hospitality Forum brought almost 400 senior decision makers together for what is Europe’s only resort-focused investment conference.
Across the two days of sessions we heard speakers from across the industry discuss investment, debt, asset management and technology. Here are our top five takeaways.
Investors eying family-owned hotels
One of the reasons investment activity in the likes of Spain, Italy and Portugal hasn’t fallen off a cliff as much as it has elsewhere in Europe is perhaps because of the volume of owner-operators that remain in the market. These family-run businesses are under more pressure because of rising costs and so are pricing fruitful targets for investors. “There are a lot of improvements that can be made on family-owned assets. It is tough to be competitive with the high interest rate market, looking at the exit strategy, which gives us a bit of pause. But it’s hard to price to perfection,” said Brian Betel, head of direct assets at Activum.
Debt market becoming more competitive
Post-Covid many traditional lenders in Northern Europe pulled back their lending to hospitality investors in the face of uncertainty in the travel market. The fact that demand came roaring back meant that some have dipped their toe back in the water. The same wasn’t necessarily true in Southern Europe where the strength of the leisure market meant that many of the big banks have kept lending. Nevertheless there is now more competition in the credit market thanks to the emergence of new players and the keenness of private equity to move into the debt market. KSL Capital Partners is one of those players and the firm is now looking to expand the footprint of its European Capital Solutions offering. "We’re seeing a lot of idiosyncrasies among various geographies but hopefully we’re going to expand our footprint,” said Matteo Sutto vice president at KSL.
Follow the planes
One of the more longstanding issues emerging from the pandemic was the impact it had on the airline industry. Route networks were reset, aircraft retired, and the shortage of pilots only increased. Countries like Portugal are still battling to get more airlift in the hope of serving the demand that is there from overseas tourists. For the hotel industry it can sometimes be hard to predict which destination is going to have an adequate number of flights. Hence the advice of Wyndham Hotels & Resorts’ Dimitris Manikis who told delegates to “follow the planes”. “I get the IATA report every month to see where the new routes are introduced – it’s the Ryanairs and easyJets that change the way we travel and how destinations grow,” he explained. “We see how China is going to increase their flights into Europe next year, we see what’s happening from a new routes perspective – that’s where we see new opportunities... be strategic, be opportunistic, but at the same time read the signs.”
Hotels still need OTAs
Back in the early days of the internet the hotel brands made a catastrophic error, the effectively handed over their distribution to third parties aka the online travel agents. It took them a while to realise the mistake they had made but since then they have been working hard to build up the number of direct bookings they get. This doesn’t mean they can rely on their own eco system entirely (unless perhaps you’re Premier Inn) most need the OTAs to help get rid of unsold stock. As Jorge Rosillo, development director Iberia, Yotel said: “The most expensive room is the unsold room. Better to have that room full than empty... you need to have a certain occupancy. If you are not reaching that occupancy, best to sell cheap or with more cost than not sell it."
Big brands want a bigger piece of the resort market
As the big hotel brands continue to get bigger many investors as well as smaller operators have asked the question: can we do without them? This was especially true in the resort market where the power of the tour operators meant that having a recognisable brand wasn’t really important when you could pretty much guarantee you’d hit your guest quota for the year. Times have changed, however. The tour operator market is not as strong as it once thanks to the demise of the likes of Thomas Cook. Enter then the brands who have been adding to their resort portfolios in recent years and a still keen to expand in the area. Hylko Versteeg, Head of Development Southern Europe, IHG Hotels & Resorts said that although IHG had been later to the resorts market than some of its peers, it was a sector that it is “now moving heavily into”.