VOULIAGMENI, Greece—Mediterranean resorts have not loss their appeal to hotel chains and investors, but being successful in the market takes fortitude and involves risk, according to sources.
Speaking at the Mediterranean Resort & Hotel Real Estate Forum, Navneet Bali, chairman of Meininger Hotels, said on the whole the resort market is not friendly to investors. He added his German-based, Indian-owned hostel-hybrid flag is actively considering entering the resorts market.
“You need a (resorts) model that works both for guests and investors,” Bali said.
Speaking on a panel titled “Re-imagining leisure hospitality for today’s market,” Andreas Andreadis, CEO of Sani Resort and Ikos Resorts, agreed the resort market is not taken seriously by investors.
“The main reason is its seasonal basis,” he said. Some onlookers “could not believe we could make money from a six- or seven-month operation, but (the dynamics are) changing dramatically in the last three or four years due to resilience in demand for short-flight, high-value holidays. There is a limited supply of product, and it is underinvested, with the commoditized approach being the all-inclusive product via travel operators.”
Bali said Meininger is a designer-budget brand catering mostly to leisure travelers and educational groups, and he sees that guest profile moving increasingly into resorts.
“We’re looking at resorts in the future, for groups, hen and stag nights, for those attending Champions League football matches,” Bali said.
He said the company has reasons to believe resort destinations will remain popular with young travelers.
“Spain, Portugal, Greece, these markets for Generation Y and Z provide many reasons for travel, but definitely for celebrations that combine seeing the destination—Barcelona, Madrid, Lisbon—and meeting like-minded travelers,” Bali said.
For Andreadis, a push for more resorts and properties in resort markets on lower chain scales represents an opportunity to position his properties higher.
“Ikos is all-inclusive, but we do not like that term,” he said. “It is very personalized, high-end, and this is where this market is moving. We see a big opportunity in the Mediterranean.”
Andreadis said as an owner-operator, he needs to deploy significant capital.
Bali added Meininger opened three hotels in Italy in 2018, and brand executives are looking at Greece, Turkey and Israel.
“The key is to get into the right market and find a personalized experience. We are low on the value chain, but this is good for customers and investors,” Bali said.
Mediterranean mildness
Finding the right spots to invest in resorts is complicated, panelists said, as some Mediterranean markets are likely to have softer years in 2019 and 2020.
“That is natural given the success of the last few years. There definitely is a bipolar market in the Mediterranean,” Andreadis said, referring to the strengths of such markets as Spain, the burgeoning ones such as Greece and Portugal and others that have less international limelight. Our business is 40% direct, 60% through (approximately) 600 operators and travel agencies. We work with everyone, and we are very transparent with our rates.”
The Mediterranean provides both these CEOs with models that work, panelists said.
“We do long-term leases, but also have a partnership agreement with a (real estate investment trust), Covivio, which would be owner of any assets, with us as the operator via a lease. We do not deploy capital from our side,” Bali said.
He said the ownership community is focused on yield, adding the talk at recent real estate conference Expo Real was of hotel industry yields of approximately 3% or 3.5%.
Andreadis sees another opportunity in the region due to what he called a scarcity of companies investing in integrated resorts.
India and China will provide the resort markets of the future, Bali said, who added one perhaps unlikely demand generator.
“The latest Bollywood (movie industry) theme is to make films based in destinations, and Spain is the leader of that,” he said.
Bali outlined the plot of one recent Bollywood film, a friend going on his last holiday and inviting a group of his friends who take off to Spain and immerse themselves fully in the culture, tomato-throwing festivals included.
“Spain saw a doubling in Indian visitors,” Bali said.