Leisure continues to lead hospitality investment opportunities, with resorts attracting an increasing number and range of investors. How can resort assets be positioned to benefit from the leisure boom while it lasts?
Omer Kemal Isvan, president of real estate development company Servotel, says there has been a “huge shift” over the last decade, with institutional investors now showing an interest in resorts in what he describes as “predictable destinations”.
“They've seen the shift and the resilience of the leisure product,” he explains.
Predictable destinations
Such European destinations include Spain, Portugal, Italy, and Greece, at least for NH Hotel Group, part of Minor Hotels. Yuan Fang, senior vice president of development, Europe and Americas, says investors looking to identify priority markets should consider infrastructure and connectivity, for starters.
“Secondly, the liquidity of the assets: when they are repositioned, how and to whom you want to sell the asset, how liquid it is,” she adds.
Servotel is similarly looking at France, Italy, Spain, Portugal, and Turkey – what Isvan describes as the “obvious and most risk mitigated” markets. However, he adds that the sector is seeing more “off-grid” interest.
“Creating an experience in a totally new grid, an ‘off-grid grid’, is the new frontier, if you like. And we see, not so much institutional, but definitely meaningful capital going into those areas as well,” he says.
While IHG Hotels & Resorts is also focused on the obvious destinations, vice president development for Europe Willemijn Geels says the Balkans is “an interesting area that is developing where we see quite a lot of activity” – and IHG is keen to be there, too.
She says that IHG sees resort potential across multiple categories: not only coastal destinations but mountain and urban areas, and not only in luxury but also the premium and upscale segments. The group opened its first Kimpton resort hotel in Europe in Mallorca in 2022, with another Kimpton in the pipeline in Marbella, an InterContinental opening in Chantilly this year, and an existing Holiday Inn resort in Bodrum. IHG thinks of resorts as being defined by the facilities and elements a guest would expect, rather than the location.
Seasonality: friend or foe?
However, the location of a resort will impact its season, which is key for investors to consider. Francisco Moser, hospitality CEO of asset manager Arrow Global Portugal, says making resorts year-round destinations is the biggest challenge – being on a beach in Europe will still only make it a destination for four months of the year. “We have to try to integrate the maximum number of amenities possible,” he says.
Destination management is also critical to making a location attractive for longer. “What is the airlift, can people actually get to your resort? Because you can do whatever you want, if they can't get there, what's the point?” adds Geels.
Isvan, meanwhile, argues that seasonality is not the enemy: “Don't try to change its dynamics and DNA and mutate it so that you can extend the season... You'll probably dilute the product, and that product is not going to actually be successful.”
He adds: “If you can do it, stay with it, and call the natural seasonality the real product. And there's nothing wrong with it... That's a business model and it can be a very solid business model.”
Repositioning and investing
Given the lack of greenfield development opportunities in Europe, many investors will be looking at investing in, converting and repositioning existing resorts, and will need to consider the guest profile accordingly. Fang points out that an existing clientele may have different needs as they age, or an owner may want to look at appealing to a younger demographic.
“When you're thinking about repositioning these assets, what do you want? Do you want to keep the same database of clients who have been very loyal to your assets the last 20 years? There's nothing wrong with keeping the same clientele,” she says.
It’s a tricky balance to strike, positioning a resort for the future while also making the most of a boom in the market. While we're currently experiencing a “bonanza” for resorts and leisure, says Isvan, this won’t last for 25-30 years without the right product: “There will be an element of cycle, where ill-conceived resorts are going to suffer. And when that suffering comes, then the institutions will pull back again.”
All those quoted in the article appeared on stage at the International Hospitality Investment Forum Europe, the Middle East and Africa (IHIF EMEA), held in Berlin between April 15 and 17, in a session called: Leisure-Makers- Identifying and Executing Successful Investments in Resorts.