The tourism economy is currently experiencing a positive ‘sun and beach’ tourism increase which makes investors especially interested in hotels with a beach hotel profile and more than 100 rooms.
The market of hotel transactions is very active. Daily, news about acquisitions and sales of hotels are published. Even with more than one hotel involved in the same transaction. Either if you are a buyer or a seller, it seems like the perfect moment to carry out a transaction.
Due to the present good period that the “sun & beach” tourism is going through, hotel profitability has increased in 13% in july, hotel overnight stays +7,4% and ADR +6,3%. The profile of a beach hotel, front line or not, from 3 to 4 star and with more than 100 rooms, is usually the most demanded by investors interested in purchasing hotels
The most requested destinations for the purchase of hotels are directly related with the destinations that appear the most in news concerning prosperity and the positive situation in which tourism is. These destinations are: the Canary Islands, Balearic Islands, specifically Mallorca and Ibiza, and Andalusia.
The objective in many of these cases is to carry out an important repositioning of the hotel, accordingly with the latest tendencies and styles, including in some cases a category increase, and obtaining due to this better cost-effectiveness, either through management gradually recovering the investment made, or selling again for a higher amount that allows a return on investment other than obtaining benefit from it.
The main parties involved in this market are, nowadays, Investment funds, family offices, Socimis, Tour operators and hotel chains, in addition to other private investors, international in most cases.
In Asset Management we can find other strategies that appear as an alternative to trading operations. This strategies are leasing contracts or operation/management. Facing what used to happen in previous seasons, in which there was typically a unique owner per hotel, nowadays, leasing contracts are strategies that are allowing a faster expansion of hotel companies, even allowing the incorporation of more than one asset to a chains portfolio in one transaction, versus trading, that usually only allows one operation in a certain time. ¿Which one is best? It depends on the risc that the owner of the hotel is willing to take and until what point he desires to participate in the management of the asset.
In management contracts, the benefits for both parties, owner and manager, depend directly on the hotel’s outturn. In this manner, it can be assumed that there would be a higher participation from the owner and, therefore, the need of a good understanding between the parties. However, in leasing contracts, the benefit of the owner originates, in most cases, from the rent, fact that means a lower risk for the owner and the tendency to disregard the management of the hotel. As it happens in other sectors, in the contracts of hotel leasing, we can also find the variable leasing contract.
Furthermore, nowadays, because of the frenetic activity of Hispania, HI Partners or Starwood Capital, Sales & leaseback operations have become popular. This is a financial strategy of sales of real estate with a posterior rent, a modern technique used by companies for fast and easy procurement of liquidity, transferring their assets to cover debts or to allocate credit to expansion policies, as in the case of hotel chains.
Whatever the strategy followed, there is no doubt that the hotel transaction market is on the rise. In sources such as Hosteltur or Preferente, we can find almost every day news about hotels that have been sold. The hotel sector is, without question, a more than attractive market, able to attract famous athletes such as Cristiano Ronaldo or actors like Michael Douglas and Catherine Zeta Jones.
