• Owners look to buy

The hotel sector’s owners used earnings season to emphasise their enthusiasm for purchasing assets.

With the transactions market remaining buoyant, flexibility and opportunism were watchwords as 2017 progresses.

At Host Hotels & Resorts, James Risoleo, two months into the job of president & CEO, told analysts that the Reit would continue to take advantage of its scale. Size gave it “a competitive advantage to pursue large complex transactions”, adding that he expected the group to become much more opportunistic when looking for deals.

Risoleo said that the group would take a similarly opportunistic approach to disposals, commenting: “We are open to selling any asset, whether it be iconic or one of our prime suburban properties, if we believe it materially increases shareholder value. We are not implementing a systematic sales programme in 2017, but every asset in the portfolio is for sale”.

He said that the group was prepared to acquire sites outside its top 10 to 12 locations, adding: “Our ideal preference would be to acquire bigger, chunkier assets where we can use our scale and our information to add value”.

Since the results announcement, the group paid USD219m for the W Hollywood.

Full-year revpar growth increased by 2.7%, with revpar for 2017 predicted to be flat to up 2%. Full year adjusted Ebitda is expected to be in the range of USD1.42bn to USD1.49bn, against USD1.47bn.

Fellow Reit Park Hotels & Resorts, newly spun-off from Hilton, was also bullish about its purchasing options, with chairman, president & CEO, Tom Baltimore describing the Reit  – the second largest lodging Reit – as offering an attractive alternative to investors.

Baltimore said: “The scale of our portfolio provides a strategic advantage for future growth through targeted single-asset and portfolio acquisitions. We have a portfolio of irreplaceable, iconic assets that we are focused on maximising and are well-positioned to grow and diversify our portfolio with upper-upscale and luxury hotels in our target markets.”

Speaking at the Citi Global Property CEO conference, Baltimore said that the Reit was looking to expand its presence in target markets “with a focus on brand and operator diversification, while reducing exposure to slower growth assets and markets”.

Revpar was up 0.5%, with Ebitda margin of 27.7%, a decrease of 110 bps. Looking ahead, the Reit said it expected revpar growth flat to 2%, with Ebitda margin down 100bps to flat.

At Belmond, Roeland Vos, president & CEO told analysts that the company had expanded its development team as it looked to grow its footprint, and had, as a result, “seen an increase in both the quality and the quantity of the opportunities that fit the Belmond brand”.

Vos said that the group had identified “a number of attractive deals that fall along the spectrum from third-party management agreements to outright acquisitions” and was assessing several deals, which it expected to sign this year.

The company reported full year revpar growth was 3% on the year. Total adjusted Ebitda was up 8%. The group’s five-year CAGR target – announced in June – for growth from the existing properties is for 3% to 5% for revpar, and 7.5% to 9.5% for adjusted Ebitda.

Looking ahead to the full year 2017, the company is looking to revpar growth of between 1% and 5% growth negatively impacted by the comparison to the Olympic year in Brazil. Excluding the impact of the Belmond Copacabana Palace, revpar guidance would be 5% to 9% growth.

At PPHE president & CEO Boris Ivesha described a “year of transition” with several new hotel openings and soft openings, debt restructuring, the acquisition of a controlling interest in its Croatian operation.

Ivesha said that, whilst trading in the early part of the year was softer than expected in some of its markets in the build up to the Brexit referendum and in the wake of various terrorist attacks, the second half of the year was “more encouraging. Improved market conditions have continued into 2017 and we expect to make further progress, particularly as we benefit from our new room inventory in Nuremberg and London where our market position will be strengthened significantly”.

Like-for-like revpar increased by 7.2% to GBP85.4 as a result of the consolidation of the Croatian operation and the weakening of sterling against the Euro. This year will see the start of renovations at Park Plaza Victoria Amsterdam, Park Plaza Vondelpark Amsterdam, Park Plaza Utrecht and Park Plaza Sherlock Holmes London.

HA Perspective [by Katherine Doggrell]: The traditional owners are seeing the benefits of diversification, with Belmond in particular taking an all-options approach to its growth, which will rely on being able to convince owners that the ex-Orient Express has value.

But what to buy, and where? PwC released data during IHIF which reported that, although European hotel deal activity fell by nearly 10% to c. EUR19bn in 2016, this was still the second highest level ever recorded. The group forecast similar levels of European hotel investment activity in 2017.

Chat in the bar with this correspondent and the assorted brokerage houses suggested that there was a renewed vigour for secondary locations, particularly amongst Asian investors who were looking not just for an investment, but the chance to export a brand name and management expertise.

Opportunism will be key. Colliers International reported that Paris had reached the top of its inaugural Hotel Investment Attractiveness Index. Dirk Bakker, head of EMEA Hotels, Colliers International said: “Paris scored highly in terms of valuation exit yields and hotel investment volume between 2007 and 2016. Paris also saw over 15 million international tourists visit the city in 2015 and witnessed average hotel occupancy levels of over 77% from 2012-2016.”

There has never been any doubt that the City of Light would recover from its current woes, but, for those on the hunt to buy now, there is some leeway to be had in pricing until the recovery is complete. Brussels too has seen interest in buying hotels pick up as KPIs fell. With owners playing the long game, geo-political events are playing an increasing, if unfortunate, role when shopping.

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