HomeHotelHotel transactions will not experience their best year in 2024

Hotel transactions will not experience their best year in 2024

This year, circumstances come together that will generate a perfect storm that will make it difficult for hotel transactions to come to fruition. This has been confirmed by the experts gathered at the table that, under the title of “Vision of the hotel sector 2024, investors and operators” has been held in Hotel Trendswithin the framework of HIP 2024. They have participated in it Juan Antonio GutierrezCEO of Mazabi; Harry Serrapartner of Solomon 1965; Alejandro ScholtzHead of Development for the Iberian Peninsula at Wyndham Hotels & Resorts; Beatriz Menendez-ValdesInvestment Director of Navis Capital; and Christopher MartinezGeneral Director of Investment Banking Arcano Partners; with Bruno Hallé, managing partner of Cushman & Wakefield as moderator.

Beatriz Menendez-Valdes has detailed in this sense what factors will make hotel transactions difficult this year, taking into account that “the hotel chains return to the role of buyers because they have made money again in the last two years, they have liquidity and have regained confidence, so we have to compete with them in a asset-light market because the hotels are doing very well. Added to them is the return of the institutional investorsso it’s not going to be easy.”

Furthermore, financially the situation is simplified, as he added, “in an environment with falling interest rates, which are already being discounted. The good hotel results have caused the market to wake up every time more interest in Europe and the forecasts are along the same lines, so it will not be a good year in terms of the number of hotel transactions.”

From left To the right, the moderator, Bruno Hallé, of Cushman & Wakefield; Juan Antonio Gutiérrez, from Mazabi; Harry Serra, by Salomon 1965; Alejandro Scholtz, from Wyndham Hotels & Resorts; Beatriz Menéndez-Valdés, from Navis Capital; and Christopher Martínez, from Arcano Partners. Source: Hosteltur.

In this he has agreed with Christopher Martinezwho highlighted how “the super positive structural trend of the sector has allowed hotels to transfer part of the increase in costs to prices, thereby released pressure on margins due to inflationary environments. This gap will moderate even more because some more moderate environmentswith interest rates falling especially in the second half, so it will depend on how invested the assets are for the year. price support”.

However, Menéndez-Valdés has pointed out the three challenges that are posed to the investor this year:

  1. “Keep the balance between high liquidity and opportunities in the market.
  2. Be able to comply with the ESG criteria (environmental, social and governance) and that its application is profitable for the investor.
  3. The problem of lack of labor It is not resolved and it will not be solved just by opening the borders, but artificial intelligence has to help us solve it, taking care of the jobs that do not add value and that no one wants to do. But we must find a solution to be able to continue growing.”

Investment models

Solomon 1965

Solomon 1965as Bruno Hallé has defined it, “is a fund multi-asset, multi-model, very open, with residences, hotels and restaurants.” His partner, Harry Serra, explained that “we are looking for a route because for us the scale is not good. It is an investment of our own funds and since the pandemic we have bought four or five hotels and leased another four or five. They are mostly from hotel families who have dedicated themselves to management and cannot find answers to adapt to the new reality, with a new audience, new brands, etc.”

From Salomon 1965 they thus offer them “a friendly solution, one on one, giving them that trust and affection so that they can make the divestment, if they sell, or lease the property to them, in a closer way as it is also an investing family. But we are no Einstein, we really like to travel and eat, explore, and we saw the goldmine, always with a vocation for return on investment,” according to Harry Serra.

“We carry out the analysis of opportunities sent to them by their network of suppliers by hand. We study about 1,000 operations per year and we are constantly traveling working with yields. The hotel fixed income has been sold at a yield of 4-5%, but as interest rates rise, more profitability is required from hotels and the spreads must be adapted to generate value up to 7.5-8%. When we achieve that profitability, at 12, 24 or 36 months, we rotate the asset to funds, SOCIMIs, etc., with a price difference but offering the new owner a secure income. Last December we made two sales on the Costa Brava and Seville at 6%, maintaining the hotel operation.”

Salomon News 1965:

– Chic&basic and three partners create a €100 M investment vehicle

– Salomon 1965 invests €14 million in 4 hotels in Seville and Barcelona

– Salomón 1965 and Majestic Hotel grow in Seville

Mazabi

Mazabi’s model, with 20 years of experience behind it, responds, as its CEO has stressed, to “70-80% of stable assets that are generating income that we invest in value-added projects in southern Europe, Eastern countries, the United Kingdom… We stick to the brick, but not all assets are good: there are some that are easy to replace and others that are not so easy.”

Mazabi latest news:

– Snö Hotels will manage the last hotel purchased by Mazabi

– Mazabi will invest around €100 million this year in the purchase of two or three hotels

The permanence in these assets, according to Juan Antonio Gutiérrez, “is not long-term because we cannot control them, and it depends on the financial component. If the multiplier rises sooner than expected, you have to sell because they are good assets, and re-enter other markets. We look for new trends and new products where we can create value and rotate.”

Navis Capital

A similar strategy is the one followed at Navis Capital, as explained by its Investment Director: “We enter hotels to develop their opportunities in operational repositioning and Capex (investment in productive assets), and as soon as our role ends, we rotate. We are looking, for example, for a hotel manager like THB to exit the fund and move it to a more rent-seeking owner. It does not depend so much on deadlines but rather when the investment criteria are met, we divest.”

Wyndham Hotels & Resorts

Alejandro Scholtz has recognized that “Spain is a rental market, but there are still many hotel families, with their own brand or not, that respond to the prototype of a franchise. And there are two options: with our 24 brands and sub-brands we meet 99% of the franchise expectations of professionals and owners; or, in an opportunistic process, we offer them the possibility of growing with us. In Spain we will see multi-franchisees, that is, several franchised hotels with different brands but all with the same person at the helm.”

Source: Hosteltur

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