Brookfield Asset Management is setting its sights on expansion in the Mediterranean, particularly exploring opportunities in Greece and Croatia.
Speaking exclusively with Hospitality Investor, Li Zhang, senior vice president, investment at Brookfield revealed interest in the markets, driven by the potential for operational improvements and capital investment in existing resorts in both destinations.
“We have been exploring Greece which would be a new market for us, as well as Croatia. We’re looking to find existing resorts we can improve upon both operationally - whether that's bringing in a major brand to help with the distribution and the visibility of the property - and then also investing in the asset. So improving the product quality, perhaps expanding on the property as well,” Zhang said.
No limit
But while resorts in these destinations have caught the eye of the asset manager, the strong interest in the segment across Europe as well as the resultant increase in asset prices means Brookfield’s focus may shift slightly.
“Resorts will probably be a bit more challenging for us near term given the strong interest and how that has driven pricing. This means that while we're certainly going to continue to look at resorts, we’ll perhaps look a bit more at urban opportunities.”
Turning to extended stay, Brookfield’s interest in the segment, exemplified by their investment in edyn, remains strong.
“Extended stay is a segment we continue to like and we think there are longer term tailwinds there. It’s a younger industry and it’s not as institutionalized as the core lodging industry so I think there's a lot of room for growth there,” Zhang says.
Regarding the branded resi segment, Zhang says that while Brookfield hasn’t historically spent as much time on branded resi, that may change for the right project.
“Generally, we tend to do less development and so there hasn't been as much of a focus on branded residential. But there have been a good number of resorts and high-end hotels for which branded resi has been a critical profit-making component. So I think for the right projects, we will certainly look at it.”
Technology and sustainability
Technology is also playing a growing role in Brookfield’s strategy. Zhang says although it hasn’t done a lot to change how Brookfield views investments, the company is now more able to mine data better in order to inform its decisions.
“There is much more information out there, particularly when it comes to understanding consumer demographics a bit better and hone our investment thesis a little bit more in terms of ‘where do these consumers ultimately come from and what sort of age and wealth demographic they’re in’. And that helps us with how we think about the growth potential of that particular market. The information flow there has improved and our ability to filter and understand that information is getting better.”
And from an operational perspective, Brookfield is exploring technological innovations such as automated check-ins in order to improve the customer experience and reduce costs.
“We're doing a lot around automated check-in, or self-check-in similar to what citizenM has been able to achieve. Especially for that mid-scale/upper midscale product, there are a lot of consumers who just want to get to their room and don't need to have a five-minute explanation of the hotel and how it works. Getting that right and integrating that into certain aspects of our platforms creates a better consumer experience and a more cost-effective operation.”
Looking ahead, Zhang predicts growth in the number of sustainable brands as well as growth in terms of outbound tourism from India.
“Consumers are becoming more and more focused on sustainability. There are a few sustainable brands in the market today but none of a sizable scale or with a really large presence. I certainly see that growing over time.”
He notes that Brookfield is exploring various partnerships with sustainable brands in addition to the work it’s doing to improve its assets such as being Green Key certified and pursuing B Corp certification.
India
He adds: “From a target audience standpoint, India has been on a huge growth spurt and I think that’s where the next wave of upper middle class and upper class outbound travel will come from.”
This echoes sentiments from experts at IHIF EMEA 2024 who noted that 1.8 billion people are set to travel internationally by 2030, with India forecasted to be a gamechanger.
And Brookfield’s knowledge of India- gleaned from its 2019 purchase of Indian luxury hotel brand Leela Hotels and Resorts and its experience in the country since - may give it a head start.
“We have a presence in India already and that's given us some good visibility and insight into how those consumers think and what their preferences are. So we're looking to apply that to some of our investments here in Europe, adapt and gear our operations accordingly so that we're able to capture that segment.”
Looking ahead
While post-pandemic, there has been a lot of investment, particularly in the luxury space by high-net-worth family companies and individuals as well as growth/interest in the lifestyle space, Brookfield still sees some challenges, notably growing expenses and a scarcity of opportunities.
“There’s certainly been pressure from an expense standpoint, particularly when it comes to wages. There’s still a scarcity of opportunities for example in Spain which has gotten a lot of attention in the past year or so and has gotten quite competitive from an acquisition standpoint.”
However, positively, he notes: “But there's still quite a supply of interesting products across Europe that we can improve from an operational perspective and from a capital investment perspective. The underlying opportunities are certainly there, it's just about accessing them.”
It seems for Brookfield, it’s about playing a waiting game but keeping a watchful eye on various segments within the hotel sector.
“Ultimately, we’re long term bullish on lodging. The fundamentals for travel are unchanged and we’re quite positive. In Europe, the near-term outlook is quite good and it's actually stronger this year than in the US. There's a decent amount of tailwinds and for us, we're just waiting and trying to find the right opportunities to deploy again.”