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Hotel Investment

MANCHESTER: luxury hotel design scene shows no signs of slowing

730 565 Hamish Kilburn
MANCHESTER: luxury hotel design scene shows no signs of slowing

Ahead of Meet Up North 2019 in Manchester, Hotel Designs takes a peak at the northern city’s hotel design scene to establish why it is considered as one of the most fast-growing design hubs in the UK. Editor Hamish Kilburn investigates… 

Manchester has a lot to be proud of. Not only is it home to two of the country’s most celebrated football teams (one of which is adjacent to a luxury football-themed hotel), the city’s property market has sky-rocketed in recent years.

With no signs of slowing, the market in Manchester for hotel development has recently been described by real estate experts JLL as being “in a league of its own”. With new hotels planning to pop up to join the hive of activity, Manchester has become a magnet for designers aiming to disrupt conventional hotels and make their mark on the city. Some of the most recent openings include Hotel Indigo Manchester and the highly anticipated arrival of Dakota Manchester – but there’s still more to come.

In 2019, according to research carried out by Top Hotel Projects, there will be six new hotel openings in Manchester, adding 835 guestrooms into the city. From the year 2020 to 2021, a further 11 more hotels are slated to open, which further indicates that Manchester is anything but at capacity for hotel development.

Hotel Designs is coming back to Manchester!

Following the success of Meet Up London, Hotel Designs will take its next Meet Up networking event to Manchester’s Hotel Gotham on July 1. The hotel, which in a few years will become the older and wiser sibling of the brand’s latest hotel that is on boards, The Brooklyn, has been an epicentre of the city’s action since it opened in 2015. The general manager of the hotel and brand, Mario Ovsenjak, and the owner, Robin Sheppard, were both listed in The Brit List 2018 as being among the top hoteliers in the country. Located on the rooftop, Club Brass will transform on July 1 from a private members’ bar  into a premium networking evening for designers, hoteliers, architects and suppliers alike – and here’s how you can get your hands on a ticket.

Designer, architect and hotelier tickets: £20 + VAT
– 
If you are a designer, architect or hoteliers to the industry and would like to attend Meet Up North, click here.

Supplier tickets: £150 + VAT
– 
If you are a supplier to the industry and would like to attend Meet Up North, click here.

There are also various sponsorship opportunities and packages available for Meet Up North. If you would like to discuss these with our team then please contact Zoe Guerrier by either emailing z.guerrier@forumevents.co.uk or calling 01992 374059.

Image credit: Hotel Gotham

The inaugural Meet Up North took place last year at King Street Townhouse and was attended by more than 200 designers, architects, hoteliers and key-industry suppliers.

About Hotel Gotham

Hotel Gotham is sheltered in what is arguably the city’s grandest properties and is an exclusive city-centre sanctuary, previously a bank that was designed in 1935 by none other than architect Edwin Lutyens.

The hotel prides itself on offering a modern and comfortable experience in a unique and luxurious environment, with exquisite service all within a bespoke private club in the heart of Manchester.

Main image credit: 20 Stories Manchester

More than USD 500m raised for new hospitality fund dedicated to Sub-Saharan Africa

730 565 Hamish Kilburn
More than USD 500m raised for new hospitality fund dedicated to Sub-Saharan Africa

In a region that offers robust growth opportunities, the fund raised by Kasada Capital Management will target both greenfield and brownfield projects in Sub-Saharan Africa… 

Sub-Saharan hospitality investment platform Kasada Capital Management has reached a first close on its maiden fund Kasada Hospitality Fund LP with equity commitments of more than USD 500 million.

This is in line with a first announcement disclosed in July 2018 by Katara Hospitality and Accor who are respectively contributing USD 350 million and USD 150 million.

“This is the best structure to address the needs of the region” – CEO, Olivier Granet

The hospitality market is currently one of the most promising and yet underserviced sectors in Sub-Saharan Africa where growing economies and emerging middle class are creating high-growth markets that are left largely untapped. “There is an incredible opportunity ahead to try out an innovative hospitality investment platform in the region,” said CEO Olivier Granet.”While in other parts of the world such initiatives are already thriving, they do not exist with critical size and integrated structure in Sub-Saharan Africa. The time is now for bold strategies to be implemented. Thanks to Accor and Katara’s support we benefit from a unique competitive advantage supported by a strong portfolio of brands enhancing our ability to raise debt efficiently from local banks and international financial institutions. This is the best structure to address the needs of the region, develop attractive products and reach critical mass quickly to take a leadership position. I believe that our team of professionals combining experts from project financing to hotel management all with a solid local knowledge is exceptionally well placed to succeed.”

The first platform of its kind in Sub-Saharan Africa, Kasada Capital Management intends to bridge the gap between the local hospitality market players and international investors. The team is co-led by Granet and David Damiba, CIO and Managing Partner who collectively have more than 50 year’ experience in the hospitality industry. They will put in place a unique team of professionals combining world class experience from the hospitality industry, private equity and financing sectors underpinned by track record in the African market.

Kasada believes its positive social impact is key to becoming the number one sustainable hospitality fund dedicated to Africa. Co-investments with local partners will support local job creation and further local business opportunities throughout the hospitality value chain, from investors to constructors and equipment suppliers.

Main image credit: Max Pixel

Why UK hotel investment is booming

730 565 Hamish Kilburn
Why UK hotel investment is booming

Real estate professionals from Fieldfisher believe that the low sterling exchange rate is why UK hotels have becoming more affordable, while Colliers  International UK identify mass investment in tier-two cities…

Despite the political landscape of the UK hanging in the balance at the moment, hotel development experts and real estate professionals have identified that UK hotel investment is booming, with a major focus on tier two cities.

European law firm Fieldfisher, which represents hotel developers such as Dominvs Group, Easy Hotel, Millennium & Copthorne Hotels, Morgans Hotels and Searni Hotels as well as their investors has identified some of the reasons why UK hotel investment is performing particularly strongly at the moment.

The low exchange rate, the genuine shortage of stock in real estate investment sector and the rise in budget brands are among the main factors identified by the firm and real estate experts Fieldfisher.

Paul Houston, a real estate partner and head of the hotels and leisure practice at Fieldfisher, has produced announced a comment on why UK hotel investments in particular are performing so strongly at the moment – although we are also seeing very strong growth in Spanish hotels as well – which is partly to do with innovation in the sector and offering new kinds of services tailored to the needs of business travellers and guests on tight budgets.

In a statement, Houston said: “The hotels and leisure sector is very buoyant at the moment.

“The low sterling exchange rate has made UK hotels that much more affordable – both for tourists to stay in and for international investors to build – and because hotels are prime real estate, they are good investments for people who want long-term capital growth.

“The genuine shortage of stock in the real estate investment sector has led institutions to look at alternative asset classes and hotels have been one of the main beneficiaries. Where funds would have traditionally invested in office, retail, logistics or industrial assets – they will now look at hotels.

“Hotels are also fighting back against the big accommodation sharing sites with more budget brands. They are re-engineering the hotel offering with more basic, more affordable accommodation which often provides a better, more consistent product than alternative short-term rentals  – which is important for business travellers. And there is a lot of business travel happening right now.

“The acquisition of a hotel may be a pure property transaction, but quite often hotels sit within a corporate wrapper, meaning the transaction involves the full gamut of property, finance, franchising, employment, tax and corporate legal matters – which is good news for advisers to this sector.”

The comment from the law firm follows another report that was published this from Colliers International UK Hotels Market Index highlighted that Edinburgh remains the number-one location for hotel investment.

Marc Finney, head of hotels and resorts consulting at Colliers International, stated: “The UK hotel market adds about 10,000 new rooms each year and this has increased in pace recently, with almost 18,000 new rooms expected to open in 2019. This leaves hotels as a rare bright spot in a property market that is facing challenges in other sectors.”

The top 10 UK spots for hotel investment and development are as follows:

1 Edinburgh
2 Belfast
3 Liverpool
4 Chester
5 Bath
6 London
7 Glasgow
8 Brighton
9 Cambridge
10 Leeds

To have your say on this topic, please tweet us at @HotelDesigns.

LOCATION SPECIAL: Mexico sees significant increase in hotel investment

1024 576 Hamish Kilburn

Investment management company JLL has released findings, proving that hotel investment in Mexico is sharply on the up… 

Following the opening of Viceroy Los Cabos and the awaited arrival of Nobu Hotel Los Cabos, Mexico’s lodging market is being viewed as more sophisticated and liquid, reflected by a 26 per cent transaction volume increase year-over-year, a study from JLL has shown.

From bustling urban locations to relaxing resorts, Mexico’s lodging market has experienced strong growth over the past six years, averaging an annual compounded revenue per available room (RevPAR) growth of nearly 5.3 percent in U.S. dollar terms, which illustrates the country’s resilient tourism industry and ability to weather unforeseen situations such as hurricanes or travel advisory warnings. Although investors are exercising caution due to the uncertainty regarding the political environment and policies, investors are anticipated to continue exploring strategic lodging opportunities in Mexico.

Light and bright guestroom

Image credit: Nobu Hotels/Studio PCH

“In recent quarters, Mexico’s lodging market has been viewed as more sophisticated and liquid,” says Carolina Lacerda, JLL Senior Vice President, Investment Sales. “The quality of lodging supply has improved and investors, particularly domestic groups such as FIBRAS, funds, and local families, are increasingly active.”

Total transaction volume at year-end 2018 reached $980 million, a 26 per cent increase over the prior year. Additionally, 2018 recorded a price-per-key average of $466,000 – the highest annual average in the past 10 years, driven by several luxury hotel sales, such as the September 2018 sale of JW Marriott Mexico City, which JLL brokered for $183 million.

“Mexico’s hotel market is estimated to deliver nearly 23,000 new, quality rooms over the next five years.”

Travel to Mexico is driving much of the growth, with the majority of visitors heading to locations like Mexico City, Los Cabos and Cancún. According to Tourism Secretary Miguel Torruco Marques, tourists are anticipated to spend approximately US$23.2 billion in 2019, a nearly four percent increase over the prior year. Three hotel assets seem to be the current preferred types among investors and owners:

  • Hotels with a mixed-use component located in cities with a strong corporate presence, such as Mexico City, Monterrey, and Guadalajara. Beyond capturing the business travel segment, having a retail or office component is viewed as a diversification strategy.
  • Hotels located in vacation destinations such as Cancún, Riviera Nayarit, and Los Cabos. Additionally, some of these hotels with a branded residential or rental component allow developers and investors to achieve more attractive returns.
  • All-inclusive resorts in international destinations with a strong vertically-integrated business model.

In response to strong tourism numbers and in turn, strong hotel fundamentals, Mexico’s hotel market is estimated to deliver nearly 23,000 new, quality rooms over the next five years, per Smith Travel Research (STR) data1. Cancún/Riviera Maya, Los Cabos, Riviera Nayarit and Mexico City are slated to see the largest increases in total incoming supply, predominately in the upper-upscale and luxury segments.

“Mexico is witnessing unprecedented growth in branded lodging supply across major resort markets and gateway destinations,” says Wendy Chan, JLL Senior Vice President, Strategic Advisory and Asset Management. “The arrival of new and different-tiered brands to the marketplace is improving the quality and maturing the overall tourism and lodging infrastructure nationwide.”

Chan also points that continued international and domestic route development and infrastructure investment in key gateway cities will be essential, as this will contribute to the further growth of the lodging industry, especially with the anticipated supply increases in the near term. “While the investor sentiment in 2019 is generally cautious given recent changes in the political landscape and growth in incoming supply, the industry should start witnessing RevPAR growth across select markets in Mexico in the coming years.”

“Driven by revenue growth in U.S. dollars and operating expenses in its devalued Mexican Peso currency, investors are able to find attractive high margins,” says Lacerda.

[1] Reflects hotels under construction or final planning only (Jan 2019). 

Main image credit: Viceroy Los Cabos

Amsterdam named top city for hotel investment for third year in a row

Hamish Kilburn
Deloitte’s European Hotel Investment Survey 2018 reveals that Amsterdam is the number-one hot spot hotel investment, as London climbs to second…

Investors have named Amsterdam as the most attractive European city for hotel investment for the third year in a row, according to the 2018 European Hotel Investment Survey from Deloitte. The findings, based on responses from 122 senior hospitality figures from across the world, are revealed ahead of the 30th annual European Hotel Investment Conference taking place in London this week.

The news comes in after Independent Hotel Show announces its 2019 Amsterdam arrival. The European design hub continues to be seen as the most attractive hotel investment destination in Europe, with more than a third of respondents (34 per cent) ranking the Dutch capital top. London (24 per cent) has climbed back to second place from fourth in 2017, ahead of Paris (22 per cent) and Madrid (19 per cent). Dublin (18 per cent) and Barcelona (16 per cent), which featured in the top three last year, have slipped to fifth and sixth, respectively.

London’s rise comes despite 70 per cent of respondents saying that the UK is at a ‘peak’ or ‘downturn’ in its investment cycle. By contrast, investors identified France (50 per cent), Greece (48 per cent) and Spain (46 per cent) as the European markets that are currently on the ‘upturn’.

Andreas Scriven, head of hospitality and leisure at Deloitte, comments:  “When it comes to hotel investment, Amsterdam is head and shoulders above the rest of Europe. It remains a standout destination for business and leisure, and is strategically placed as a gateway city. Given the investor appetite and lack of supply in the Dutch capital, we expect to see further inbound investment in 2019.

“It is reassuring to see London climb back up the rankings, and somewhat curious considering the uncertainty around the manner in which the UK will exit the EU in less than five months’ time. For London to continue to remain attractive to hotel investors, it will need to address concerns around over-supply and high pricing. Investors will be keeping a close eye on currency markets in the coming months, as sterling’s weakness is likely to be a key driver of inbound investment into the UK capital.”

Investors still expect top-line growth in the Regional UK hotel market

Respondents were also asked about their investment appetite towards the UK regional hotel landscape. For the fifth year in a row, Edinburgh has been named the most attractive UK regional city for hotel investments in the next 12 months, according to 39 per cent of respondents. Second-place sees Cambridge (30 per cent) overtaking Manchester (28 per cent). All three cities are also expected to see the highest growth in RevPAR (revenue per available room) in 2019.

The majority of hotel investors are optimistic about 2019 growth prospects in the Regional UK hotel market, with 52% of respondents expecting RevPAR growth to be between one – three per cent across the UK, although this is down from 70 per cent last year. Hotel investors were less confident when asked about 2019 expectations for gross operating profit per available room (GOPPAR), however. One in four respondents (25 per cent) expect GOPPAR to enter negative territory in London over the next 12 months, while 21 per cent expect negative GOPPAR in the Regional UK.

The research also revealed growing concern around pricing multiples, with expectations on EBITDA multiples for both London and Regional UK falling year-on-year. Despite the majority (53 per cent) expecting multiples of 11-14x in 2019, one in four respondents (25 per cent) expect less than 10x multiples across Regional UK, up from 11 per cent last year. Around a third (32 per cent), however, still expect to see EBITDA multiples of over 16x in London, falling slightly from 36 per cent in 2017.

Two-fifths (41 per cent) of respondents expect the primary source of investment into the Regional UK market to come domestically. More than a third (36 per cent) of hospitality leaders expect to see inbound investment coming from Asia Pacific (excluding China and India), increasing from 26 per cent last year. The perceived importance of North America and China as a source of investment has continued to decline, falling by five and ten percentage points respectively year-on-year.

Nikola Reid, director and head of UK hospitality at Deloitte comments: “The majority of hotel investors anticipate continued RevPAR growth in the Regional UK in 2019. However, one only has to scratch away at this surface to reveal clear concerns and intensity in operational cost pressures caused by inflation, staffing challenges and Brexit uncertainties. With significant headwinds to profitability, UK hotel owners and operators will need to continue to be more innovative with efficiency and productivity to preserve the bottom line whilst having to adapt to ever changing consumer habits and value expectations.

“Despite this, we’ve seen no shortage of capital chasing the exceptional level of portfolio activity this year fuelled by a number of new players in town and ensuing aggressive pricing. With a number of portfolios and large single assets still expected to come to market next year, and, as we move closer to a resolution on the Brexit negotiations, the strength of the transaction market may be tested.”

Economic backdrop fuelling concerns around talent retention

According to the research, 38 per cent of respondents identified ‘lack of economic growth’ as the number one strategic risk facing the European hotel industry over the next five years. Terrorism, which was last year’s number one risk after a series of high-profile attacks across Europe in 2017, has slipped to second place (34 per cent, down from 67 per cent).

In order to address the staffing issue prevalent in the European hospitality sector, three-fifths of hotel investors believe increasing pay would help attract the top talent over the next three years. Ensuring a faster career progression (48 per cent) and improving employee benefits (43 per cent) would also help attract and retain employees, according to respondents.

Scriven added: “Hotel investors are understandably concerned about the macroeconomic environment, which has exacerbated fears about attracting and retaining talent. Understandably, hospitality leaders are thinking about how they can keep hold of their staff. This is why we are seeing evidence of the need to increase pay and improve benefits packages, in order to mitigate factors out of their control.”

Main image credit: Pexels

Scotland doubles hotel investment in 2018

800 534 Hamish Kilburn

Criton’s CEO & founder comments on how hoteliers must continue this momentum in Scotland…

Real estate advisor, Savills, has announced that in the first six months of 2018, hotel investment in Scotland reached £389.67 million, doubling the total investment volumes recorded in 2017 at £195 million. It indicated that UK buyers were the biggest buying group, accounting for 41 per cent of activity, while the rest were overseas investors. This news comes after Scotland invested in better overseas links, such as Hainan Airlines running direct return flights between Edinburgh and China from June 2018.  

“It’s fantastic that Scotland’s hotel investment in the last six months has already surpassed the annual investment figures for 2017 – it shows the strength of the visitor economy in Scotland which is currently worth around £6BN of GDP to the Scottish economy, five per cent of the total,” said Julie Grieve, CEO & founder of Criton. “Investors are clearly seeing the future potential in Scotland and what it has to offer the tourism industry, as well as the wider economy – and I am particularly delighted that Edinburgh, where my own company is based, is becoming a priority for investors in the UK and across the globe.

Put simply, it is the responsibility of Scotland’s hoteliers to welcome visitors with open arms

“While hotel investment in Scotland is strong, the impact of Brexit is already being felt as it becomes harder to recruit and retain good staff. Scottish hoteliers can counter this by investing in technology, allowing them to continue to deliver with less staff and therefore grow profits. Of course, improving the guest experience will be critical, and as we move forward in the digital era, it will be the hoteliers that offer guests hospitality how and where they want it using technology that will succeed. Put simply, it is the responsibility of Scotland’s hoteliers to welcome visitors with open arms – and those that are ahead of the game will be able to capitalise on the recent investment boost.”