Tag: tour operators

Deloitte: Hotel Inv’t Will Exceed €3bn in Spain in 2017

28 November 2017 – Expansión

Spain is going set a new record in terms of hotel investment this year, with a forecast figure of more than €3 billion. Moreover, one quarter of that investment is going to be concentrated in the Canary Islands (almost €0.8 billion).

In Las Palmas, this week, Deloitte presented the white book on the sector, together with the Association for Progress and Management, led by Francisco Torres (Renta 4). Javier García and Ignacio Medina, Partners at Deloitte, highlighted the competitive strength of the Spanish tourism sector – the country receives 80 million visitors per year and has a legal and climatological environment that “make it unique”. “We are not able to be a destination for those with the highest purchasing power because the hotel stock is very obsolete. We need to invest just a little, if at all, to meet the requirements of tour operators”.

Nevertheless, Deloitte remains optimistic ahead of the upcoming challenges. “We are facing an exciting cycle because the map of players is changing, with new roles in terms of investors, financiers and hoteliers”.

Average daily rates are experiencing increases of 30%, with occupancy rates of 87%, but Deloitte warns that the “favourable wind is not going to last forever”. “We cannot resign ourselves to being such a cheap place”.

The incidence of falling prices is especially significant in the Canary Islands. The autonomous region has a supply of 350,000 beds, but, with the exception of a few establishments, such as Carlton Ritz Abama (Tenerife), the market is a long way from luxury tourism; its average tariffs range between €60 and €90. “They don’t even come close to the €300 or €700 per night that guests pay for certain hotels on the Costa del Sol”.

Deloitte proposes six axes for the investment challenge over the next few years: innovation, sustainability, digital transformation, renovation, brand enhancement and tailor-made experiences (…).

Javier García places particular emphasis on the role of financing, where entities are boosting hotel activity. Guarantees from the banks are conditioned by the presence of an international operator, the business plans and the ownership of the land.

Deloitte revealed that international operators such as the fund Blackstone have become some of the most capable in terms of proving that a renovation process can result in tariff improvements of up to 40%.

In October, Blackstone acquired the hotel division of Sabadell in Spain (HI Partners) and, in the case of the Canary Islands, it is not the only player. Private equity firms such as KKR and Hispania are very active at participating in the “substitution effects”, as Deloitte defines them. “As Don Emilio Botín always used to say, the best business involves being the first to enter and the first to leave”.

Original story: Expansión (by José Mujica)

Translation: Carmel Drake

Deloitte: Hotel Inv’t Will Exceed €3,000M In 2017

7 November 2017 – Expansión

The extraordinary tourism data in Spain, the interest from investors in real estate assets and the purchase by international funds of hotel portfolios has catapulted investment in the Spanish hotel segment so far this year to €2,600 million. That figure is 21% higher than the total amount recorded in 2016, and is very close to the record figure of €2,700 million recorded in 2015, according to The Hotel Property Handbook report, prepared by Deloitte España.

In this way, the hotel sector now accounts for 35% of total real estate investment in the tertiary sector (non-residential assets) in Spain. The firm forecasts that, by the end of this year, the investment volume figure will have easily surpassed the €3,000 million threshold.

In terms of the main operations of the year, the purchase by the US fund Blackstone of the HI Partners hotel portfolio, comprising 14 establishments, from Sabadell for €630 million and the acquisition by the British fund London & Regional of four Starmel hotels – a joint company formed by Meliá and Starwood Capital in 2015 – for €230 million, have given the investment figure a real boost.

Record operations

These operations have been accompanied by several one-off hotel transactions, such as Edificio España, which was acquired by RIU in June for €272 million (…).

Other noteworthy operations so far this year include the purchase of Hotel Silken in Barcelona by the British fund Benson Elliot for €80 million and the acquisition of 55% of Hotel Diagonal Mar in Barcelona by Axa for €80 million.

For Javier García-Mateo, Partner at Deloitte Financial Advisory, institutional investors are seeing the opportunity to build large portfolios of holiday hotels in Spain, to integrate them into their international platforms in the Caribbean, South America and South-East Asia, developing a direct channel and obtaining greater negotiating power with tour operators. “In the end, Spain is establishing itself as the world’s main tourist market”, he says.

In this sense, we are seeing the natural migration of traditional hotel owners, who are divesting property to focus on management, such as in the case of the Meliá chain, which is making way for overseas investors who have greater financial muscle and so can launch more ambitious projects, explains Patricia Pana at Deloitte Financial Advisory.

In this context, the large tour operators are also participating in the investment fever and are buying assets in order to carry out a vertical integration of their business (…).

Interest from investors is partly driven by the record number of visitor arrivals – more than 84 million international tourists are forecast to visit Spain this year – and the strong evolution of key performance indicators such as the average daily rate (ADR), revenue per available room (RevPAR) and the occupancy rate.

Peak returns

Specifically, the ADR in Spain reached an average of €82.30 in 2016, up by 5% YoY; the occupancy rate rose by four percentage points to 66%; and RevPAR increased by 10% to €53.90.

The challenges for the sector now include improving the hotel portfolio to allow for an increase in prices. “If we compare our hotels with those in other urban and vacation destinations, the price per room of Spanish hotels still has a lot of potential, provided that renovation and transformation projects are carried out with the help of the main operators”, says Ana Granado, Director at Deloitte Financial Advisory (…).

Original story: Expansión (by Rebeca Arroyo)

Translation: Carmel Drake

Hispania Invests €190M To Reposition Its Hotel Portfolio

25 September 2017 – Expansión

Hispania is going to invest €190 million to reposition its hotel portfolio between now and 2019 to maximise its value. At the end of the first half of the year, the Socimi managed by Azora owned a portfolio of 39 hotels and 11,059 rooms, most of which are located in the Canary Islands.

Some of the most strategic hotels, according to the presentation to investors submitted by Hispania to the CNMV on Friday, include the Hotel Club San Miguel (Ibiza), on which it is going to spend capex of €50 million; and the Hotel Holiday Inn in Madrid, acquired in 2015 and in whose modernisation, the Socimi is going to invest €34 million. In parallel, Hispania has another €100 million of capex budgeted for other potential projects.

In addition to the investment in the modernisation and repositioning of the establishments in its portfolio to superior categories, Hispania is basing its model on a diversified portfolio of operators – it works with Barceló, Meliá, NH and Vincci, amongst other hotel chains – and it has lease contracts that combine fixed and variable components. Its roadmap, according to the presentation, forecasts achieving cost savings through economies of scale, as well as enhancing direct sales.

Currently, 69% of the revenues from its hotels come through tour operators. Thanks to its asset optimisation strategy, Hispania expects to increase the value to its shareholders by more than €30 million in the Guadalmina and Holiday Inn Hotels. Meanwhile, in the portfolio as a whole, it hopes to generate €60 million of additional cash.

The company, which has not detected any impact on demand following the terrorist attack in Barcelona in August, expects revenues per available room (RevPar) to grow by more than 10% this year.

Original story: Expansión

Translation: Carmel Drake

Hotel Financing: Sabadell’s Market Share Rises To 31%

26 January 2017 – Expansión

Sabadell was the only Spanish bank to have its own stand at Fitur. The entity’s decision to physically attend the tourism sector’s major annual meeting reflects its desire to consolidate its position as the key player in this business segment, which is so strategic for the Spanish economy.

Two years ago, the bank chaired by Josep Oliu decided to launch Sabadell Negocio Turístico, a specialist division that has allowed it to secure a market share of 31% and increase the volume of financing it has granted to the sector to €4,500 million.

Over the last two years, the granting of loans to tourism companies has grown by €1,500 million, according to José María Martín Rigueiro, Director General of this business unit.

According to the executive, 90% of this volume is used to finance hotel purchases and the remaining 10% corresponds to loans used for renovation projects and energy efficiency improvement plans in tourist establishments. Nevertheless, in terms of the number of transactions, the proportion is inverse, in other words, 90% of the loans (by number) are granted for renovations and 10% for acquisitions.

More than 13,500 clients

“We have positioned ourselves as a key player in the whole sector, given that we are the only bank to offer a specific value proposition for financing tourist services and products. Moreover, it is suitable for large hotel chains, as well as the smallest of rural hotels”, said Martín Rigueiro.

Thanks to its specialist agents, Banco Sabadell is growing its client portfolio by 7% per annum and is now collaborating with 13,500 companies, including hotel groups, campsites, travel agents and tour operators. Moreover, its net investment balance is increasing at an annual rate of more than 10% and the volume of client resources managed is growing by more than 25% each year. The objective for this year is to grow its client portfolio by 8% and to increase its credit investment by 10%.

“At Fitur, we were breathing an environment of maximum optimism; the hotel sector is expected to grow this year, in terms of both occupancy rates, as well as average room rates”, explained the Director of Sabadell Negocio Turístico.

The banker also attested to the strong interest from international funds keen to invest in hotel assets in Spain. Investors are managing returns of between 9% and 18%, said Martín Rigueiro. (…). The greatest interest is being seen in the vacation hotel segment, as well as in the urban segment, in major capital cities.

Financing for hotel purchases is being provided across the board: to investment funds, Spanish family offices, individual investors, as well as hotel chains. 90% of the sectors largest players are clients of Banco Sabadell, and the bank now also has a market share of 45% in the SME tourism segment.

According to Sabadell, the default rate of new loans granted to hotels since the crisis is very low, given that operations are no longer being leveraged on the basis of the value of the underlying real estate assets, but rather on the basis of the business plans and income statements of the establishments. (…).

In parallel to this specialist business unit, Sabadell also operates in the hotel sector through HI Partners, a hotel investment and management company.

Original story: Expansión (by Sergi Saborit)

Translation: Carmel Drake

INE: Overnight Hotel Stays Reached 46.4M In August

26 September 2016 – Expansión

Overnight stays rose by 3.8% and revenues increased by almost 9% in August 2016, boosted by visits from overseas tourists. Nevertheless, domestic demand only increased in Cataluña.

Although the summer season does not officially end until October, Spain’s hotels can already say with some satisfaction that the summer of 2016 has been one of the best of their lives. The average occupancy rate reached 79% in August, the best figure since analysis of this data first began back in 1999, according to a report published on Friday by the National Institute of Statistics (INE).

In the eighth month of the year alone, 46.4 million overnight hotels stays were recorded, up by 3.8% compared with August last year, thanks to a 6.3% increase in stays by foreign tourists; overnight stays by Spanish tourists decreased by 0.3% YoY.

But it was not only a quantitative increase, given that establishments also increased their revenues. They obtained €79.57 for each available room, compared with €73.10 in August 2015. The Hotel Price Index (IPH) carried a lot of weight in that YoY increase of 8.8%. The IPH is prepared on the basis of prices that businessmen in the sector receive from all of their clients: households, companies, tour operators and travel agents. The IPH stood at 6.9% in August, which represents 1.9 points more than a year ago.

Over the last twelve months, revenues have increased by 5.2% on average, with the most acute increases being observed for three-star (9.01% YoY in August) and four-star accommodation (6.97%).

INE’s information reveals that overnight stays in July and August grew by 5.4% compared with the same two month period in 2015, thanks both to record levels of international tourists (9.6 million visited in July, up by 9.3%) as well as the gradual recovery of domestic demand. In this aggregated period, overnight stays by foreigners and Spaniards rose by 7.2% and 2.4%, respectively (…).

Original story: Expansión (by Yago González)

Translation: Carmel Drake

Cinven Offers €1,300M To Outbid EQT In Auction For Hotelbeds

27 April 2016 – Expansión

The private equity firm Cinven, which has invested heavily in Spain over the last two years, may take a leap forward if its bid for the Hotelbeds group goes ahead. TUI AG put the company up for sale at the end of 2015.

Sources close to the sales process indicate that Cinven has put an offer on the table, which values the tourism company at €1,300 million. The Nordic fund EQT is also participating in the bidding and sources do not rule out the possibility of other interested groups participating in what now seems to be the final stretch of the sales process of the Hotelbeds Group.

The company, a subsidiary of the Germany group TUI AG, works with 75,000 hotels all over the world and offers rooms to tour operators and travel agents around the globe. Hotelbeds, which receives more than 25 million hotel bookings per year, is one of the companies that emerged from the tourism sector thanks to new technologies and it has high growth projections.

Entry into the hotel segment

This would be Cinven’s first major foray into the hotel segment, but it would represent a return to the tourism business. Cinven, a fund headquartered in London, was created in 1977; it went on to acquire Amadeus in 2005, together with BC Partners.

The tourism sector’s technology provider, which was acquired from the major European airlines, was then delisted. In 2010, Cinven and BC Partners returned the company to the stock exchange and sold their shares.

Since its creation, Cinven has made acquisitions amounting to more than €70,000 million, specialising, above all, in investments with a significant technological component and always with holdings that exceed €100 million. (…).

Meanwhile, Hotelbeds has been on the market since last Autumn. Financial sources valued it at around €1,000 million. TUI had hoped to complete the sales process during the first three or four months of the year, and so a final agreement could be very close. Nevertheless, the emergence of the fund EQT in the process will intensify the Hotelbed operation.

Similarly, financial sources do not rule out that other funds may be preparing their own competitive offers.

Diversified portfolio

EQT, of Swedish origin, has assets under management of €29,000 million and its investment portfolio is very varied. In Spain, it holds stakes in two companies, Islalink and Parkia, which operate in the telecommunications and car park sectors, respectively.

EQT opened an office in Madrid in the middle of last year with the aim of looking for new investments in the Spanish and Portuguese markets. The fund hired a specialist team led by Fernando Conte, the former Chairman of Iberia and the tourism group Orizonia.

At the beginning of February, EQT bought the Swiss tourism group Kuoni for more than €1,100 million and, according to sources in the sector, it plans to integrate that business with the Hotelbeds Group.

For TUI AG, the sale of this company will mean saying goodbye to the online sector to focus on its traditional businesses: hotels and cruises. During the year to 30 September 2015, TUI AG generated revenues of more than €20,000 million, with an EBITDA of €1,069 million, up by almost 23%. Its shares closed at €13.09 on the stock exchange yesterday, up by 0.47%.

Original story: Expansión (by M.Á.Patiño and Y.Blanco)

Translation: Carmel Drake