Once a specialist hospitality category, resorts have been thrust into the investment mainstream more recently, particularly as European investors have switched from large corporate hotels focused mostly on international business travellers to resort locations geared towards the leisure sector. The reason? The duration of the business week, and particularly the travel business week, is reducing while the leisure weekend is extending.The trend is global but talking about the US market specifically Michael Bellisario, a senior research analyst at Baird, explains: “The weekends are now three days or four days in some cases, and the business travel week is now two or three days instead of three or four days. People continue to shift from goods to services, going out to restaurants, and going on vacations.”
As the leisure market in Europe continues to expand, resort hotels have demonstrated that they are a stable investment, and with the majority of European resorts still unbranded, there is also a growing opportunity for investors to add value through a brand, also making funding and refinancing easier.
A number of post-pandemic transactions underline this trend, including the luxury Greek beach resort portfolio Sani Ikos Resorts, which saw Singaporean sovereign wealth fund GIC become the major stakeholder for €2.3 billion (€840,000 per key) in September 2022.
Europe a global target
GIC chief investment officer Lee Kok Sun made clear the company’s ambitions for Europe upon announcing the deal, saying: “We believe this investment will generate resilient returns and is testament to our confidence in the Greek and wider European tourism sector over the long term.”
In 2021, The Cheval Blanc Randheli was acquired by Alpha Dhabi Holding for $216 million ($4.8million/villa). The resort hotel opened in 2013 and was Louis Vuitton Moët Hennessy’s second hotel venture after establishing the Cheval Blanc Courchevel in France.But probably the most significant deal was Hyatt’s purchase of Apple Leisure Group (ALG) in late 2021 for $2.7 billion, which expanded Hyatt’s global brand presence in luxury leisure travel. The move saw Hyatt double its global resorts footprint through the addition of ALG’s AMR Collection portfolio, comprising approximately 100 hotels and resorts across 10 countries, as well as a pipeline of 24 executed deals in the Americas and Europe. As a result, Hyatt now offers one of the largest collections of luxury all-inclusive resorts in the world, including Acapulco, Curaçao, the Canary Islands, Menorca and St. Martin. Hyatt also added properties in 11 new European markets and expanded its European brand footprint by 60 per cent.
Hyatt had been eager to plug its supply gaps in Europe, especially with resorts and luxury properties, and the deal means it has become the fourth-largest hotel group in Spain by room count. Hyatt’s European president, Javier Águila, is a Spaniard who found investors to create the European chain Alúa, which grew to 53 hotels and was bought, ironically, by ALG.
Luxury resorts pipeline
In addition, luxury brands such as Rosewood and Nobu Hotels have entered Vienna and Warsaw respectively, while the pipeline of luxury resort projects scheduled to open across Europe in 2023 includes The Son Bunyola Hotel, Mallorca, Spain, which is part of Sir Richard Branson’s luxury collection of hotels, plus the Nobu Hotel and Restaurant, San Sebastián, Spain.
In Greece, the Mandarin Oriental Costa Navarino, One&Only Aesthesis, Athens Riviera, and One&Only Kéa Island are all scheduled to open this year while, away from the Mediterranean, 2023 should see the opening of the Six Senses Crans-Montana, Switzerland and Rosewood Schloss Fuschl, Austria.
Familiar names are also looking to expand within the luxury resorts sub-market. Meliá Hotels International is Spain’s largest hotel and resort operator, and aims to grow its portfolio across the Mediterranean, the Caribbean, and Asia Pacific by 40 per cent in the next three years. The Mallorca-based company is also believed to be open to selling a stake to a world player like Hyatt or Marriott.Meliá currently has about 340 hotels in operation, and has 62 properties with 15,000 rooms in its pipeline — nearly all in the luxury, lifestyle, and upper segments. In December past, it launched its latest brand, Zel, in collaboration with Spanish tennis star Rafael Nadal.
About 80 per cent of its portfolio comprises hotels and resorts in the Mediterranean and the Caribbean for short-haul leisure travellers and while a publicly listed company, Meliá is 56 per cent owned by the Escarrer family. When Meliá reported its financial results for 2022 the company confirmed a healthy profit of €110.7 million on operating income of about €1.69 billion. About half that revenue came from Spain.
“We’re the leader in both regions [Asia and Europe],” Gabriel Escarrer Jaume, CEO and vice-chairman, said. “And we aim to become the leader in Southeast Asia. We don’t want to do anything to jeopardise our leadership in Spain, a country that’s the second- or third-largest tourism destination in the world. Having said that, 92 per cent of our development pipeline is outside the country.”
“We want to consolidate all our leadership in countries such as Spain, Cuba, Mexico, Portugal, and Vietnam. But at the same time, we want to also grow in places like Albania, Malta, Saudi Arabia, and Seychelles.”
Global investment in resorts
Major global investors have also been circling the market. In June last year, Blackstone completed the acquisition of Crown Resorts in its largest transaction in Asia Pacific.The transaction comprised three premium resort and casino properties in Melbourne, Perth and Sydney and, as one of Australia’s largest entertainment groups, Crown’s core businesses include two of Australia’s leading integrated resorts, Crown Melbourne and Crown Perth, as well as premium hotel resort and dining precinct Crown Sydney.
“Australian tourism has entered a recovery phase, and we believe this trend will continue. With Blackstone’s investment and expertise, we’re confident Crown will cement its place on the global stage as one of the world’s leading owners and operators of integrated resorts,” says Steve McCann, Crown Resort’s CEO.
Goldman Sachs is also reportedly investing around €150 million to €200 million in three seaside resorts in the north of Greece, according to the Wall Street Journal.
Meanwhile, Hyatt could yet expand further in Europe through acquisition. It intends to sell about $1.3 billion in hotel real estate by the end of 2024. Those sales, plus roughly $1 billion in available capital, might enable it to acquire a strategic stake in a business like Meliá, although a strategic partnership rather than an outright acquisition could be an easier approach.
More players might also be interested in expanding into Europe’s resort markets — which could mean more market consolidation — especially US-based companies looking to add inventory that can be used boost their rewards-based loyalty programmes, such as Marriott and Wyndham, or UK-based IHG.