Limestone Capital is launching a fund to capitalise on opportunities in hospitality, with a focus on luxury.
The group said that it would focuses on companies with an enterprise value of between €5m and €20m, looking at groups overlooked by the institutions.
March saw the group close its fourth hotel transaction in 18 months, with the acquisition of the Locanda del Prete in Umbria in an off-market transaction. Benjamin Habbel, founder & CEO Limestone Capital, said: “This deal is a prime example of Limestone's sweet spot of an underperforming/distressed hotel asset in need of tech-powered distribution and a fresh, differentiated hospitality concept. And of course, it's absolutely authentic & unique: A historic village, turned with much care into a luxury country retreat.”
The group has not revealed its target for the size of the fund.
Habbel said: “Investors able to identify the cracks in the market and invest at discounted valuation, will be the big winners in the growth cycle that lies ahead of us. Risk takers, that can see beyond the panic machine of the media, and make long term investments for a new travel reality, will be outperforming the mainstream
“Here at Limestone, we have the mission to invest in sustainable luxury real estate that caters to the modern, conscious traveller of the future. We create homes for the urban, creative crowd, as well as leisure and business travellers coming to town or a unique destination to seek a sanctuary. We recently acquired a unique asset in central Lisbon that stands apart from the traditional city boutique hotels, with gated, lush oasis-like gardens that offer privacy for members & guests. Still this year we will open our first hotel in Italy, a remote but easily reachable suite-only destination outside of Rome. We strongly believe in destinations that are boutique in size, offering guests to retreat and disconnect.
“As an industry, we will come out of this stronger than before, as the change of the guards is now drastically accelerated. While this process is painful for everyone as a whole, it’s also an exciting fresh start and a monumental opportunity for entrepreneurial private equity investors and entrepreneurs carrying out a new vision and being well prepared for a new paradigm in lodging, real estate and consumer behaviour.”
Commenting on the potential changes driven by the pandemic, Habbel said: “Large hotels, with long check in lines, impersonal disinfection-stations, and lots of personnel wearing PPE - will become ever less appealing to the modern traveller.
“Boutique hotels that can offer a more personalised experience, away from the crowds, will be winning and taking from large hotels that are dependent on tour operators. New lodging & experience concepts, that take into consideration the desires and concerns of tomorrow's traveller, will be taking market share from legacy players that will struggle with their re-opening positioning. Again, all of the above were trends already underway for niche audiences, however they will become more and more mainstream moving forward.”
Prior to founding Limestone, Habbel was founding CEO of Voyat, an e-commerce optimisation software in hospitality. He also served as non-executive board member at Mövenpick Hotels.
The upper-tier and luxury markets have seen little demand since the onset of the pandemic, and the market segment is not likely to see a meaningful recovery in the near-term, according to Fitch Ratings.
The group has increased the recovery timeline for both luxury and upper-tier properties, predicting that upper-tier performance would lag through mid-2021.
Fitch predicted a 60% decline in revpar for upper-tier properties, a slow start to 2021 and a recovery of 60%of 2019 revpar numbers in the second half of 2021.
The company said: “In addition to dramatically reduced demand, the lodging sector is also pressured by new supply. A significant number of hotels were in the planning stages or already under construction prior to the pandemic. These hotels may be completed and ready to open as the economy recovers, compounding weak occupancy rates as demand will likely not be sufficient to absorb the added supply.
“New hotels under construction are expected to lead to a 4.3% increase in new guestrooms above existing inventory. By comparison, average annual new guestrooms as a percent of existing supply was 1.9% from 2014-2019. Luxury hotels have the highest proportion of new supply with more than 15,000 guestrooms under construction or roughly 18% of existing inventory. Conversely, there are only 3,586 guestrooms being built in the economy segment, or 0.5% of current supply.”
Insight: The wall of money is now so solid that it is no wonder the sector feels a shadow cast across it. And as for those looking to be nimble and find a distressed asset which they can cash cash on by turning around? Take a ticket.
But here in Europe land, there will be pickings to enjoy and for those not looking to scrape up a whole hotel group, picking off individual sites - particularly if you’re happy with obscure locations - may be easier than one might have though.
Markets such as Spain and Italy have been hard to access by investors, riddled as they are with family owners with no appetite to sell. They may find themselves more motivated by long months of closure and a lack of high-spending international visitors. Enter Limestone.