Hotel Investment: Opportunities in Troubled Mid-Market Hotel Sector
A buyer willing to invest time and money in re-branding hotels in the mid-market hotel sector may stand to gain in the future.
In the current financial climate the mid-market hotel sector is suffering. Cash conscious consumers are ‘trading down’, while luxury and boutique brands are enjoying a boom from overseas investment, wealthy consumers maintaining their lifestyles and the growth in UK tourism.
Russell Kett, Chairman of HVS London, the global hotel valuation and consultation business commented:
“The mid-market is a difficult sector to operate in…particularly those hotels which are not clearly branded.”
Mid-Market Hotel Chains For Sale
Mid-market hotel chains up for sale include:
- Principal-Hayley for £500 million, this could be purchased by a private equity company and used as a consolidation vehicle.
- The De Vere Group are selling non core hotels and re-vamping its Village Hotels chain with a view to selling in 2-3 years time. The group is planning to sell The Grand Hotel in Brighton after investing 4-5 million.
- Q Hotels is selling 6 of its smaller hotels with a view to refinancing in the near future. Jury’s Inns is also about to be sold to a private equity backer following financial difficulties.
An investor with a good head for business and strong branding abilities could make significant gains from the mid-market hotel sector by procuring more than one chain and re-branding more distinctively as Kett suggests:
“These companies could provide an interesting opportunity for an investor to gain a foothold in the provincial UK mid‐market, but there are additional possibilities for an investor with deeper pockets (possibly an existing hotel investor) to purchase, say, two or more of these groups. It could then carry out some overdue capital expenditure and then apply a more distinctive and recognisable brand to those which ‘fit’– dispose of those which don’t – and derive additional bottom line earnings and value from the economies of scale and branding benefits,”
Kett warns that the investment and time to accomplish what is required may be too long for many buyers but that there are significant opportunities to be had. Kett observes; “this might open the door for certain Asian investors whose investment horizons are significantly longer.”
Creating a reliable and recognisable brand identity is key in transforming the success of a particular chain or hotel. The challenges are great and varied but may inspire an ambitious and long term investor to take on hotels in the mid-market sector and remould them to make them an attractive prospect for today’s consumer. Mid-market hoteliers currently experiencing difficulties may also consider investing in their brand and creating a stronger identity and better provision in order to survive.