Between 15 and 17 May, more than 2,500 senior representatives from across the hospitality industry will head to Berlin for the International Hospitality Investment Forum (IHIF) 2023.
This year’s speakers include: the CEOs of IHG and Accor as well as senior representatives from Blackstone, Brookfield Asset Management, Goldman Sachs, and more.
The following interview is part of a series aimed at bringing you a flavour of the conversations you can expect on stage, highlighting some of the big-picture trends and themes ahead of the event.
Ever since Covid-19 plunged countries across the world into lockdowns, hotel operators have been dealing with a series of rolling crises. Now they need to manage bumper travel demand with rising inflation, staff shortages and technological and environmental disruption. While many have struggled some have worked out how to prosper in this brave new world. In a session entitled 'Driving Alpha: Efficiency, Productivity, Profitability' (Wednesday 17 May, 10:35am), Sabine Schaffer, co-founder and CEO Europe, at Pro Invest Group will join a panel to discuss the strategic and tactical tools available to ensure profitability of the hotel business, from the room to the whole property.
We recently caught up with Schaffer to get her thoughts on how the sector is changing.
Hospitality Investor: ESG considerations have never been more important when it comes to real estate investment but is it a challenge working with hotel brands when it comes to things like implementing brand standards?
Sabine Schaffer: Embedding ESG requires a holistic approach and a huge, concerted effort across all stakeholders. The key for us is being a fully integrated real estate business - acquiring assets and delivering active management, development and operations capabilities to create value across the whole lifecycle. This means we take accountability, and have the autonomy, to deliver on our ESG goals across all facets of the business. From embedding sustainability considerations in acquisition due diligence, to choosing green financial products and establishing community engagement initiatives.
Hospitality Investor: Is the impact of ESG registering more with the investor? Are they asking to see more data around energy efficiency etc?
Sabine Schaffer: We moved early to embed ESG in the way we do business and believe an active focus on impact in this area has direct competitive and financial benefits. So, it’s been really rewarding to see the role and impact of ESG gaining traction with investors – particularly over the last 5 years or so.
We take the view that it’s not about how much it costs us today – it’s about how much it costs us tomorrow if we do not implement ESG. The real estate investment community has come a long way and the conversations we have are no longer centred around dollars and cents required to implement ESG programmes. They now focus on the ramifications of not building ESG into the core of how a hotel is designed, built and operated.
Hospitality Investor: What stage are you at in fundraising for European investments?
Sabine Schaffer: We opened our London office in 2021 and that marked our re-entry into Europe. Ron Barrott, our Founder and Chairman, has had a long and successful track record in the region and with the collective experience of our team we’re partnering with leading Institutional, Private Equity and Family Offices seeking institutional grade exposure to hospitality and commercial real estate strategies that generate outperforming returns.
More broadly as Pro-invest Group we are actively engaging with investment partners and asset allocators to secure a series of successful investments throughout the region. We expect several high quality, but dislocated hotel opportunities to become available over the next 12 months.
Hospitality Investor: Last year you launched a new investment platform together with ICG Real Estate with a target to invest up to £500 million in UK hotel assets. In today's environment where deals are difficult to do has it been hard sourcing the right properties?
Sabine Schaffer: The target of our ICG JV is to invest up to £500m. In today’s environment we expect this to be approximately 15-20 properties, totalling about three to five thousand keys. Together with ICG we’re focused on value-add/opportunistic investments in UK hotel assets - a market which is experiencing a period of dislocation and repricing. With that in mind, we are in several active discussions which would lead us to build a diversified, institutional-quality portfolio of assets in London and other core-UK locations. Given the market dynamics, the majority of these are likely to be conversion properties. Conversions come with their own challenges and opportunities for maximising returns. As we determine the upgrade and refurbishment of these assets, ESG will be a key consideration for the long-term financial viability of these projects.
Hospitality Investor: Are you seeing any interest from different types of investor wanting to get involved in the hospitality space?
Sabine Schaffer: We certainly see a broader range of investors starting to understand the value of hotel real estate and how to maximise the opportunities. Hospitality presents unique investment opportunities right now, with robust fundamentals and strong tail winds. Covid-19 impacted hotel cash flows harder than any other real estate sector and there is now a rare opportunity to secure discounted assets at scale and preferred equity positions, on the back of financial stress due to select owners’ insufficient liquidity. These scenarios will be exacerbated, as banks re-evaluate their position and equity cures or refinancing is increasingly required.
Hospitality Investor: You are speaking on a panel about driving efficiency, productivity and profitability. The event theme is Fortune Favours the Bold. Are there any players, recent deals, or investment strategies within hospitality, that you feel embody this theme?
Sabine Schaffer: I would say that what differentiates us the most as an investment partner and our deals and strategies, is the deep experience we’ve gained over the last 30 years in hospitality as an asset class. Hotels require a specific skill set and even if you are investing in real estate you have to recognise that this is a people business.
We like to say we have a head for real estate and a heart for hospitality because at the end of the day the success of any real estate asset – hotels, offices, residential - are all about how you bring them to life for people to life, work and play. There is no better place to learn and hone those skills than hospitality.
Stay tuned for more preview interviews and if you still haven’t registered yet, you can do so here. You can also view the latest programme, here.