Institutional investors are expected to turn their attention back to the leisure hospitality segment in 2025, according to a panel of experts speaking at the Resort and Residential Hospitality Forum.
“We expect that we will see more liquidity coming, especially in 2025, so we should see more activity I hope from institutional investors and private equity over the next year,” said Javier Arús, senior partner at European hospitality investor Azora, speaking at the event which took place at the Anthenaeum InterContinental Athens on 19 November.
Tina Yu, partner at travel and leisure investor KSL Capital Partners, which owns the Pig group of hotels in the UK and recently sold Davidson Hospitality Group to Nautic Partners, agreed: “As base rates go down, there should be more liquidity unlocked for institutional investors next year.”
Hotel Investment Partners (HIP) is one of the largest owners of holiday hotels in southern Europe with more than 22,000 rooms in Spain, Italy, Greece and Portugal. This year, HIP sold two hotels in Spain to Catalonia Hotels & Resorts and acquired three hotels in Greece. Investments senior director Luis Picas said the group had been “less active” mainly due to financing costs, but that activity is expected to pick up next year.
Opportunities in leisure hospitality
“The challenge for us now is to convince LPs [limited partners] that there is still opportunity in this sector,” explained Arús. “We need to convince them this is not short-term play.”
He highlighted the importance of investors working closely with operators and that there was “still space there to grow GOP [gross operating profit]”, for example by properly sizing the workforce. “If you work together with your operator and view it as a true partnership, there are ways to improve the profitability of the partnership,” he said.
Azora, which manages more than 26,300 keys across 106 hotels, believes in the strength of the leisure segment, where it remains highly active across Southern Europe’s main cities, targeting traditional sun and beach resort destinations as well as assets benefitting from proximity tourism. This year alone, the group has acquired two hostels in Brussels, as well as in Dublin and Barcelona, and the Praia d’El Rey Resort in Óbidos, Portugal. “There’s a lot of value to capture in the top line still in this segment,” added Arús.
Yu said that resorts had become more institutionalised, even though urban hotels have historically had more liquidity and larger buyer pools. “The last five to seven years show resorts have become very institutionalised, particularly in certain markets,” she said.
Improved certainty for 2025
Panellists highlighted that with this year’s elections in both the UK and the US behind us, despite political instability in Germany, improved certainty across key markets should support continued strong consumer spending and therefore the increasing attractiveness of leisure assets.
Picas said revenue per available room (revpar) across HIP’s resort portfolio was up around 10 per cent this year. Meanwhile, the first quarter of 2025 is already seeing a 25 per cent uplift in business on the books, mostly in the Canary Islands, driven mainly by occupancy but also by rate. “It’s looking very positive,” he said.
Added Arús: “If the unemployment does not increase, or there’s not a perception that you’re going to lose your job, people will still travel... today we don’t anticipate that happening in Europe.”
The post-Covid demand recovery in the leisure segment has been remarkable, and this has no doubt been one of the drivers of increased investor interest in resorts. According to JLL's Global Hotel Investor Sentiment Survey, 2024 has seen a notable increase in new investors entering the hotel sector, with a record 27 per cent of year-to-date September investment volume driven by first-time buyers. The survey also found that a record 80 per cent of investors intended to maintain or increase their capital investment in the hotel sector over the coming year.