London-based Luigi Caruso, the COO of Blackstone Real Estate in Europe and a senior managing director at the firm, said that hospitality remained “a high conviction theme globally”, due to positive supply/demand dynamics, and secular trends “that have remained pretty consistent”. He pointed out that annual growth in Southern Europe had exceeded 7 percent in recent years, while hitting around 4 percent across Europe. “Interest rates coming down, strong appetite from credit funds and leverage being accretive again for buyers like us have all been strong drivers,” he confirmed.
Blackstone in turn has approached the continent through diverse entry points, including via Hotel Investment Partners (HIP), the platform it co-owns with Singapore’s GIC, which continues to “look for assets in great locations” where it can deploy accretive capex. Southern Europe has appealed time and time again due to “seasons getting longer” alongside occupancy continuing to rise, he said.
In the UK, however, the firm has sought to capitalize on “different drivers and trends”, for example through its June 2024 acquisition of Village Hotels, which owns and operates 33 “all under one roof” leisure destinations, offering hotel stays, fitness clubs, F&B and co-working spaces. “Through Village we are not only benefiting from the secular trends of hospitality, but also health and wellness,” he added.
Blackstone also acquired Bourne Leisure in the UK post-Covid, the owner of holiday parks operator Haven and adults-only hotel chain Warner Hotels, as the firm explored the phenomenon of UK citizens returning to domestic travel, “challenging the idea that they always jump on a flight”, he added.
Caruso said that despite all the positives, there were some challenges ahead for the industry. He referenced the inflation that has dogged real estate and consumer-facing markets in recent times, contributing to higher employment costs, plus the complex macroeconomic outlook. “The focus is always on the margin,” he underlined, being able to pass “some of those costs to the customer, while making sure they are getting what they want”. He underlined that the firm had seen evidence that clients will pay higher rates if the offer is right, which has been supported by Blackstone being “focused on building the supply in Europe that was missing”.
On the cost management side, he added the firm tries to leverage these “large platforms, and we approach procurements in the same way to get synergies. It’s about being as lean as possible and as focused as possible, while keeping in mind that this a service-based asset class.”
Looking again at the UK market, he said that while consumer spending was softening a little, offers like the Village had resonated with clients. From a business perspective, the everything “under one roof” formula had created captive spend across all the amenities of each asset, he added, including “weight rooms, somewhere to run, but also pools, cold plunges… plus the F&B and retail side”. He added that “people are in a very different mindset around spending in these locations” and were taking the opportunity to share their experiences on social media in curated corners of each property.
Caruso said that Blackstone, largely an asset class agnostic investor, continued to transpose successful tools from hospitality to other sectors. He referenced flexible office company Fora, which the firm rebranded from The Office Group, which has “a very strong hospitality feel and customer care”.
Looking forward, he said that the outlook for Europe remained positive, while conceding that there were “several things that we can’t control… so it will be key to find somewhere you can deploy [ROI] capex to feel more comfortable about the scenario that is out there.”