Europe’s Hotels will take Four Years to Return to their Pre-Crisis Profitability, says Barclays

Analysts at the British bank expect large European hotel chains, such as IHG and Accor, to see a 50% reduction in their revenues.

The European Union’s hotel industry will take three to four years to return to the profitability levels recorded in 2019, according to a report by Barclays.

“That forecast is based on the sharp deterioration that private investment and employment are expected to suffer in the short term, which are the factors that most affect profitability. It will be compounded by the fact that borders will now be closed for longer than originally expected in order to guarantee safety during the health crisis”, stresses the study.

Hispania Acquires ‘Holiday Inn Bernabéu’ Hotel

14 October 2015 – El Confidencial

Hispania now has its own flagship building in Azca. The financial heart of Madrid has been one of the main battlegrounds for the large real estate companies in recent months, and their appetite means that there are now barely any opportunities left in the area. Nevertheless, the Socimi led by Concha Osácar and Fernando Gumuzio has managed to find a way in. (…).

The company has taken advantage of the voluntary bankruptcy filed in February by Leading Hospitality, owner of the Holiday Inn Bernabéu Hotel in Madrid and the Maza Hotel in Zaragoza, to take control of the company and, as a result, take over the reins of the only four-star hotel in Azca.

In reality, this transaction confers the Socimi ownership of just 52% of the establishment, since that is the stake held by Leading Hospitality in the property that houses the hotel. However, it has taken over 100% of the management of the property, which signed a 25-year franchise contract with IHG (InterContinental Hotel Group), an agreement that is still valid.

By sheer coincidence, the former owner of Leading Hospitality and the man who purchased the Holiday Inn Bernabéu, is an old acquaintance of Azora, the management company of Hispania. He is César Losada, the hotel businessman who also created the fund Losan Hotels World, now called Carey Value Added, which had the backing of the savings banks through Ahorro Corporación.

This investment vehicle ended up owning 14 hotels and 2,000 rooms, spread across the world’s main capital cities. The operation of these establishments was granted to brands such as Marriot, Steigenberger, NH Hoteles, Hotusa and Barceló. But the plans did not evolve as expected and in 2011, Azora received a mandate from Ahorro Corporación to take over the management of Carey and restructure it. (…).

Since its creation, Hispania has been clearly focused on the hotel sector and, in fact, it was a pioneer in the market with the creation of Bay, the first 100% hotel Socimi, which it launched together with Barceló back in February.

But, the entity managed by Azora also has its own hotel portfolio that sits outside of this vehicle; in fact, the first operation that it closed following its debut was the purchase of Hotel Guadalmina, another well known name in the tourism market, which it acquired through the back door and, on this occasion, by purchasing its debt.

That was only the starting point. Hispania is now the owner of NH Pacífico and NH San Sebastián de los Reyes in Madrid, Hotel Hesperia in Las Ramblas, in Barcelona, Gran Hotel Bahía Real and the Suite Hotel Atlantis Resort in Fuerteventura, Meliá Jardines del Teide in Tenerife, and Vincci Málaga.

In total, hotels account for 31% of the gross value of the Socimi’s asset portfolio; another 45% relate to offices and the remaining 24% relates to homes. Hispania’s hotel activity generated revenues of €3.25 million during the first half of this year. In total, the Socimi has 1,439 rooms, plus more than 300 rooms in the Holiday Inn Bernabéu and 6,097 rooms in the Bay portfolio.

Original story: El Confidencial (by R. Ugalde)

Translation: Carmel Drake

Holiday Inn Bernabéu Files For Bankruptcy

20 April 2015 – Expansión

Madrid / The hotel, which continues to be operational, filed for voluntary bankruptcy at the beginning of this year in order to renegotiate its debt.

Leading Hospitality, the company controlled by the businessman César Losada, which owns the Holiday Inn Madrid Bernabéu hotel and the Hotel Maza in Zaragoza, has filed for bankruptcy to try to restructure its debt and forge ahead (with its business). On 13 January, Leading Hospitality voluntarily adopted this legal status and almost a month later, Commercial Court no. 9 in Madrid declared the procedure open, according to the company’s annual report for the financial year 2014.

Gregorio de la Morena, managing partner at DLM Insolvia, has been appointed as the bankruptcy administrator, although Losada and his team continue to manage the hotel, which is still operational. Sources close to Losada explain that the company filed for bankruptcy because “it had cash flow problems, which prevented it from meeting its short-term debt commitments”. Nevertheless, the intention is that the company will avoid filing for liquidation and instead reach an agreement with its creditors and continue operating.

For the time being, the company is waiting for the bankruptcy administrator to prepare the list of creditors to start negotiations. In addition, Leading Hospitality expects to file a collective dismissal plan (‘expediente de regulación de empleo’ or ERE) to reduce its wage bill – the scope of (that agreement) is being negotiated with the bankruptcy administrators. The hotel employs around 150 people.

In 2013, Leading Hospitality recorded revenues of €7.33 million, but it generated a negative operating profit of -€2.32 million. Net losses reached -€1.92 million and last year, the company also ended the year in the red.

Debt

At the end of 2013, the company had long-term debt amounting to €7.62 million and short-term debt amounting to €1.55 million, as well as several mortgage loans on both of its hotels – with Bankinter over its property in Madrid. Staff salaries and compensation payments amounted to €4.17 million in 2013.

In the accounts for that year, approved in December 2014, the auditor warned that the company was experiencing on-going cash flow problems (to be able to afford to pay) its employees, suppliers and financial partners. And it pointed to the management team’s plan to continue the refurbishment of the hotel, which it says is worth €27 million, and reduce the number of staff.

At the end of 2012, the businessman César Losada became the majority shareholder in the Madrid hotel, after acquiring a 51% stake from the InterContinental Hotel Group (IHG). Losada, who is behind the hotel investment company Losan Hotels World, invested €22 million in the acquisition and refurbishment of the four star hotel, which has 313 rooms. The asset is also owned by other individual shareholders and Losada intends to acquire their respective stakes (over time). Following the change of ownership in 2012, the hotel retained the Holiday Inn brand, which is owned by IHG, though a 25 year franchise contract. In 2013, Leading Hospitality paid a €363,754 fee to IHG.

Original story: Expansión (by Yovanna Blanco)

Translation: Carmel Drake

Overseas Funds On The Hunt For Holiday Hotels

26 March 2015 – Expansión

Socimis (‘socidedades cotizadas de inversión inmobiliaria’ or listed real estate investment trusts) and the appetite of overseas investment funds are driving the professionalization of the hotel sector in Spain, to separate the ownership of properties from the management of establishments, in line with the Anglo-Saxon model.

That is one of the conclusions to come out of a conference held in Madrid yesterday about the evolution of the hotel sector over the last decade. The conference was organised by Magma Hospitality Consulting and the Intercontinental Hotels Group (IHG), the largest hotel group in the world by size.

Liquidity

“Socimis are an essential tool that Spain has needed for a long time, to provide liquidity to a portfolio of assets, respond to generational renewal and professionalize management”, said Luis Migual Martín, Investment Director at Azora.

This company launched a Socimi (Hispania), which formed an alliance with Barceló at the start of the year to create the first listed investment vehicle specialising in the hotel sector (Bay Hotels), which has assets of more than €420 million.

For his part, Alejandro Hernández Puértolas, CEO at HI Partners, the hotel fund driven by SolviaBanco Sabadell’s real estate arm – added that “the Socimis could bring together assets in Spain amounting to €8,000 million”. In the USA, the REITS – equivalent to Socimis – that specialise in the hotel sector have (assets under management amounting) to more than €70,000 million.

Nevertheless, there is still room for improvement. For Martín “there needs to be a change to the current legislation to reflect the management model, which now falls outside of (the scope of) the Socimis”. Arturo Díaz, CEO of Business Development at Renta Corporación, added that “other instruments will be created besides the Socimis”.

In the case of international funds, the focus has shifted from the city to the beach. “Institutional investors are starting to get involved into the vacation segment. The main difficulty is obtaining a portfolio of assets, but the appetite is there”, said Díaz, who called for restraint when it comes to changing the use of office buildings and homes into hotels.

Original story: Expansión (by Y. Blanco)

Translation: Carmel Drake