Business management & development
The main concern for everyone in the investment sector is ensuring that a hotel still attracts enough guests.
2024
The year Russell Kett expects global transactions to return to pre- pandemic levels. HVS
500m
The amount raised by ActivumSG, a Berlin investment fund, to target
distressed real estate across Europe. ActivumSG
20
That begins, Kett suggests, with inflation. It could, he argues, have a major impact on hotels. That’s true both from an operational perspective – soaring prices potentially mean fewer guests – and in terms of the investment market. For if the ending of Covid support schemes could yet force some hoteliers to sell, Kett argues that inflation could ultimately prod them in a similar direction. “Now that they’ve got inflationary pressures mounting – and perhaps those aren’t as well managed as they might be – I think we might see some distress dispositions with some of these hotels.” There are certainly signs that this is already happening. In the US, the Atlanta-based Peachtree Hotel Group has acquired over $1bn in distressed assets since June 2020. It’s a similar story on the other side of the pond too: ActivumSG, a Berlin investment fund, has raised €550m to target distressed real estate across Europe. That comes in the wake of other moves, including the 2020 acquisition of the Dutch-based Odyssey Hotel Group and Nobu Hotel Barcelona. Yet, if the rise of distressed sales would mark a change from recent years, Kett is similarly keen to emphasise that some trends look set to remain the same. In particular, he believes that traditional hotspots like London, Barcelona and Madrid are likely to remain popular, a situation that could in fact be self-sustaining. “Somebody does a deal and all of a sudden a particular location gets prominence,” is how he puts it. “But I would have thought nothing new is going to emerge.” The same is true, he adds, of established business centres like Frankfurt.
Not that investors or managers can necessarily expect everything to return to the pre-2019 model in the months and years ahead. While Kett says that “people are social animals” – meaning the corporate sector will revive sooner or later, as people are excited for in-person conferences and the socialising that goes
with it – he nonetheless argues that the “profile of hotel demand” is bound to change. To explain what he means, Kett uses the word ‘bleisure’. A portmanteau of ‘business’ and ‘leisure’, he notes that corporate travellers increasingly want to blend hard-nosed meetings and more relaxed pursuits too. That, it goes without saying, will force investors to think more carefully before signing.
Going green?
Another area of shift flux may well be ESG. Long a watchword across hotel investing, Kett notes that he’s “heard a lot” about its rising importance in investment circles. Among other things, he says there’s been talk about framing hotel management agreements with sustainability in mind. Not that any of this is a done deal just yet. “The brands or the operators might be happy to see more in there – providing the owner is going to bear the financial cost,” is how Kett frames it, adding that the ultimate concern for everyone in the sector is to ensure that a hotel can be run profitably, especially given the past, traumatic few years.
One further change Kett considers worth mentioning is the move towards investments in resorts, especially in places like the Mediterranean. Apart from giving eager buyers more markets to invest in, he suggests it could presage a broader change in the sorts of deals being done. This is fundamentally a question of scale. Major hotel groups – your Radissons or Hiltons – tend to operate in urban areas. But resorts are often smaller-scale affairs, implying that some larger portfolio deals may fall by the wayside. The point, at any rate, is that opportunities are undoubtedly there for investors bold enough to find them – surely welcome news given the struggles the industry has faced of late. ●
Hotel Management International /
www.hmi-online.com
TZIDO SUN/
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