Despite the complexity, the outlook for resorts in Europe is strong

BERLIN — Leisure demand is fueling recovery around the world, but resorts need more than just strong leisure demand to succeed.

Owning and operating resort hotels in Europe adds additional layers of complexity, as resort products are not limited to just beachfront locations, and much of the segment’s overall success is based on parts third-party stakeholders, such as tour operators and transport providers.

Still, the outlook for resorts in Europe is encouraging, speakers said during an International Hotel Investment Forum panel on investing in resorts. Despite the challenges, sophisticated resort owners and operators are building expertise in their markets, managing performance and focusing on how to deliver value to their target customers.

“Leisure is extremely elastic; if you have a good product, the elasticity of the market is huge,” said Javier Arús, senior partner at real estate investment firm Azora. “This proves how strong the demand for leisure is and is a key benefit of resort destinations.”

With such a variety of resort products across Europe, the first key to success is knowing the market, panelists said.

“At the end of the day, [success] depends on the experience and location of the hotel,” said María Zarraluqui, Vice President of Global Development at Meliá Hotels International. “You can have beach hotels which are one segment, you can have mountain resorts which are another. In some places, “resort” means wellness and spas. You have stations for every type of market, but the common thread is having a value proposition.

Spain has long been a top resort destination in Europe, and hoteliers operating there are trying to balance overdevelopment with opportunity.

“Spain is not the Caribbean, that’s for sure,” said Bruno Hallé, partner and co-head of hospitality in Spain for Cushman & Wakefield. “There are no private beaches, and the building and land types are what they are. But the opportunities are definitely there. Some stations need to be repositioned. Take advantage of these assets, transform them, give them a mark – this is the future of seaside resorts in Spain.

Arús and Zarraluqui agreed that the Spanish resort landscape needed a product upgrade.

“It’s hard to meet the expectations of some customers,” Arús said. “We have the challenge of continuing to improve the current inventory. The whole landscape is on the rise – F&B, culture, entertainment – and we have to defend ourselves in the market share.”

Speakers emphasized that the key to finding an audience for resorts in Europe is to be hyper local.

“The bottom line is that no matter where you’re from, everyone loves a good product,” said Javier Coll, group president of global business development at Apple Leisure Group. “You have to tailor this product to a specific market, geography or customer. If you do it right, the demand is there.

Coll’s brands began in the Caribbean and moved to Europe less than five years ago, a process that involved adapting brand standards and value propositions to the European customer and European facilities, which, according to him, “are not the same” as in the Caribbean.

Next, Coll thinks about what it will take to bring brands to Asia-Pacific and the Middle East.

“We can go anywhere with these premium brands; it’s just a matter of adapting products and operations,” he said.

Part of that means recognizing how resort travelers and resort travel differ around the world.

“American customers are more loyal to the brand. In Europe, due to the historic role played by tour operators, customers are less loyal to the brand; they are more attached to the destination,” Arús said. “It makes a big difference because in the US and the Caribbean you capture a lot more value from customers. In Europe you capture a lot less value,” because a share goes to the tour operators.

Because of this added layer of tour operators, resort hoteliers in Europe are constantly looking for ways to appease these stakeholders while continuing to grow the customer base.

“If we’re looking to grow, a key point is to break seasonality,” Hallé said. “It involves more than just resort operators on board; it’s about convincing tour operators that off-seasons can be just as attractive, as well as pushing for an airlift if needed.”

But hoteliers are focused on adapting the appeal of their resorts beyond typical holiday seasons.

“It’s about what you put inside the hotel,” Hallé said. “Why go there in February or March? This is something we still need to work on. If we do this, we can be more profitable. Also, we need to understand the technology because it’s much better to give your employees a one-year contract.

Rosa Brand, Director of KKR, said: “It all comes down to having an operator who is really creative in working within the limits of what they have, and also thinking creatively about how to attract customers at different times of the year.”

Despite the hurdles of seasonality, European hoteliers are using data to inform yield management as steps towards greater profitability.

Brand said the stability of revenue streams for resorts in the Balearic Islands, for example, “has been very stable with predictable increases”.

“If you put a yield on that, it should be a tighter yield than a business hotel in a city with more volatile travel patterns,” she said. “It all comes down to location. That only applies if you’re in a good location with good flight connections and a short drive from the airport. Further afield there’s more volatility, and that needs to be integrated into performance.

“Destination is key and that’s what determines the value of the asset,” Hallé said.

Environmental, social and governance compliance plays a huge role in the process of investing in resorts in Europe, the speakers said.

“It’s a must and investors are very strict about it,” Hallé said. “When it comes to buying a resort and doing your due diligence, you already have ESG compliance or they’ll cut the price and give those investments to ESG.”

Brand said ESG issues influence his company’s investment decisions “tremendously.”

“We buy an asset and make improvements in preparation for selling to a long-term holder, so understanding what the long-term holder needs to underwrite and buy an asset is important to us,” she said. “What are the boxes that people have to tick? »

Arús added that the social element of ESG deserves a lot of attention from hoteliers because of the high volume of staff that resorts need, and especially because resorts often generate employment in a given place.

“Resorts have a huge impact on the environments they’re in, and they’re labor intensive,” he said. “They can have a huge impact on creating career paths for people. The longer we extend the season, the greater the impact on job creation in certain remote regions. We need to integrate this into our decision-making processes.

“It all pays off,” Hallé said. “If you focus on the ‘S’ of ‘social’, you focus on your staffing patterns. You have to have people working in a good environment where you take care of them. This positions you as a company that is good to work with.

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Mary I. Bruner