Staycation demand resulting from the COVID-19 pandemic has benefited the niche, alternative accommodation option of holiday home rentals, and investors have taken note.

The latest move in the sector is the Aug. 5 600-million-pound-sterling ($835-million) merger between Away Resorts and Aria Resorts. Away’s owner, private-equity firm CVC Capital Partners, purchased Aria from New York City-based investment firm Angelo Gordon.

In an email to Hotel News Now, Aria Resorts CEO Bobby McGhee said the merger provided Aria with a bright future.

“The enlarged group of parks will offer our guests even more choice, and, together, our parks will continue to be transformed in new and exciting ways,” he said.

Luxembourg-based CVC has $114.8 billion of assets under management and $162.7 billion of funds committed across numerous real-estate classes and industries, according to its website.

The two companies predominantly operate United Kingdom holiday home rentals, but Aria also operates boutique hotel Gara Rock in Salcombe, Devon, and Priory Bay Hotel on the Isle of Wight.

The Halifax Building Society, owned by Lloyds Bank, stated in its May 2021 Seaside Review that Salcombe has the most expensive coastal real estate in the U.K., with an average residential house price of 950,325 pounds sterling.

In March, Starwood Capital Group and Blackstone Capital Partners completed the 1.8-billion-pounds-sterling acquisition of another U.K.-based holiday-home operator, Bourne Leisure.

The deal, split evenly between the two buyers, gives the partners three brands — Butlin’s, Haven and Warner Leisure — that combined have approximately 25,000 holiday homes attracting 4.5 million annually.

Michael Johnstone, sales director of consultancy Perfect Parks, said the alternative accommodations sector is flourishing, but might still have a perception problem in terms of where such assets are located.

He said many think of holiday home rentals as being abroad — "in Spain, Corsica and other places" — but some are in the most sought-after locations in the U.K.

The usual business model is that individuals buy and sell units, paying rent or a fee to operators that also charge a 10% to 15% commission on sale profits, he said. Some rentals are open for eight months a year, others all year, and some might stipulate occupancy can only be for owners or their friends and family.

Johnstone said the sector has been increasingly attractive to private-equity capital, and that started before the pandemic.

“They are conscious of what will happen in the future. We are creatures of habit, and COVID-19 has resulted in a boon to the U.K. holiday industry and also a boon in the purchasing of holiday homes,” he said.

“Good profits have always been there, but what has happened is that the bigger parks have grouped together, become streamlined, and it is their bigger profits that have got the attention of bigger players,” he added.

Another factor is that some buyers are not sure about buying abroad because of Brexit, Johnstone said.

Martin Taylor, director of planning and leisure at business consultancy Avison Young, said he believed the sector already can be considered a “mini asset class.”

He said following the Great Recession of 2007 to 2008, many looked to home rentals for their vacations. The sector also grew in 2016 with the merger of Park Resorts and Parkdean Resorts, which resulted in an offering of 71 resorts throughout the U.K.

“That was pension finance,” Taylor said of the deal, “and it is this type of investor that has shown interest in this market.”

As well as the revenue opportunities, he added development and management are key parts of these value-add buys.

“The hope is that the right due diligence has been done. Additional holiday homes can be added through the planning system, and it is also about the management team you are bringing in," he said.

“Away has a young, vibrant team, and they do sell a lot of caravans and holidays. They also have a focus on customer care and offer quirky lodges, some imprinted with unique design, and excellent central facilities such as cinemas," he added.

Away Resorts and CVC Capital were contacted for comment, but at press time neither had responded.