Israel’s Fattal Hotels & Resorts is on the search for hotel acquisitions, which executives say likely will include assets and even portfolios in the U.S.
On July 11, Fattal agreed to acquire six hotels in Spain from KKR and Dunas Capital in a transaction worth more than 165 million euros ($165.7 million), with the hotels on the islands of Ibiza and Mallorca likely to be rebranded under the umbrella of the firm’s Leonardo Royal brand. The six seafront assets — four resorts and two aparthotels — have a combined 1,119 rooms. The properties are in two clusters, one on each island, and were formerly branded with Alua Hotels & Resorts.
Fattal also owns and operates brands Leonardo, Leonardo Suites, NYX and U Hotels, and co-owns and operates Jurys Inn.
“We’re definitely a buyer,” said Ronen Nissenbaum, Fattal's CEO of the United Kingdom, Ireland, Benelux, Spain, Portugal and U.S. In his career, Nissenbaum was president and CEO of Dan Hotels Israel and managing director at the Waldorf Astoria New York when the hotel was sold to Chinese firm Anbang Insurance for $1.95 billion to Blackstone in October 2014. He also opened Singapore’s Marina Bay Sands, where he was senior executive vice president.
Nissenbaum joined Fattal in April and immediately was charged with getting the latest deal across the line.
“If we believe in the market, the city, the level of hotel, we’ll be an active player in the market,” he said.
The deal is a joint venture between owner-operator Fattal — the largest shareholder — insurance firms Harel and Menorah Mivtachim, capital market firm Leumi Partners and two other insurance firms, Hachshara and Shlomo.
Nissenbaum said it is the second time founder and CEO David Fattal has completed a large fund.
“The first was 10 or 12 years ago, with institutional capital in Germany, and everyone came out smelling of roses. Now, [Fattal] has put in 100 million euros, and so have the other partners. We’ve raised 400 million euros, and when all is said and done that should equal approximately 1 billion euros in spending power,” he said.
The capital for the six-asset portfolio buy comes from the 165-million-euro fund, which has been in the works for approximately a year, and approximately 80 million euros to 90 million euros of debt, Nissenbaum said.
In April, Fattal acquired a 53-room asset in Mallorca and 207-room asset in Málaga for approximately 40 million euros before the launch of the fund, but their acquisition cost has been rolled into it, Nissenbaum added.
In July 2021, Fattal acquired 72.5% of boutique hotel chain 7Minds, formerly owned by two entrepreneurs Ben Braverman and Oren Pascal, while in December 2017 it assumed management of 37 Jurys Inn properties in a partnership with the portfolio’s new owner Pandox AB.
Spending Spree
Now, Fattal is eager to buy more hotels, including both urban and leisure assets, Nissenbaum said. Fattal is working on several other opportunities, and the plan is to spend the entire current fund by the end of 2022.
Nissenbaum said Fattal is confident in its investment strategy with global travel demand resurging and resorts and island hotels are booming.
“We see that confidence in the numbers, especially in the last few months, since April. Business has been booming, occupancy is back, close to the same levels as the peaks of 2019, and average rates have exceeded that in many cases," he said. “The latest craze is all-inclusive, and we are there. There also has been a focus by Fattal on Spain. Destinations such as Ibiza and Mallorca, flight destinations, yes, but easy ones, have done incredibly well through the pandemic, perhaps because resorts there are very seasonal. They are used to being closed for five or six months a year, so lockdown was not such a shock to the system."
Another focus of Fattal's is on creating multiple hotels and brands in each location, or "clustering," Nissenbaum said.
“We will ask ourselves do we want to create an adults-only resort [or] a family-only one? We have that flexibility,” he added.
City hotels also are on the company's agenda.
“There are multiple opportunities in London, some in Holland. The majority of hotels, 80% to 90%, will be urban ones,” he said, adding that in terms of spend it would be a 50-50 split between the two hotel types.
“We’ll not be spending [the 1-billion-euro fund] irresponsibly,” he said.
The real push, though, will be to break the U.S. for guests and investors, Nissenbaum said. He added Fattal considered this move seven or eight years ago, but it was decided the company lacked the elements necessary to make this a success.
“To do this from Israel is complicated. From London is it possible,” he said.
New York City is likely to be its first port of call for Fattal.
“It is the U.S. city that suffered the most. It has not fully recovered, but we see that as opportunity,” he said, adding that spend in the U.S. will not be part of the latest fund.
“Fattal understands the value of having brand recognition in the U.S., and New York City is the No. 1 destination for Israelis," Nissenbaum said. “If hotels there are realizing 80% occupancy, we’re saying with Israeli travelers, and we own the largest travel agency in Israel, we can add 5% or 6% more, and that makes a big difference."