(Corrected on Oct. 26 to amend a quote in the 15th paragraph.)
Investment firm Pro-invest Group is expanding from its Australian base into Southeast Asia, the Middle East and Europe, with a new London office leading the way.
Founding partner, chairman and co-CEO Ronald Barrott said the company currently has 16 hotels in nine cities comprising 3,586 rooms. Two are in New Zealand, and 14 are in Australia.
Barrott said the firm is targeting an operating portfolio of 5,000 rooms by the end of 2021.
He regards the firm’s vertical integration — development, asset and fund management and hotel management — as its biggest advantage and one that permits strong returns.
He said other public-equity companies have taken notice and structured similarly.
“Not to be so concentrated on the financial end, but rolling your sleeves up. In the U.S., it ticks over differently. There is a form of integration, but I have not seen it done the way we are structured,” he said.
Sabine Schaffer is the other co-founder and co-CEO of the firm.
All of the group's hotels are franchised in partnership with IHG Hotels & Resorts, with the one exception being a New Zealand property flying the flag of Accor’s Sebel brand.
We’re poised for growth with the expectation of compelling returns, Barrott said.
“Pro-invest is actively engaging with investment partners and asset allocators as the conduit to enable successful investments throughout the region, with a particular focus on the United Kingdom and Germany,” he said.
The Nordics is another region of interest, he said.
“We have conviction in early-cycle hospitality investing and will be looking to develop platforms in markets expected to experience strong and prolonged" gross domestic product growth, he added.
Pro-invest was set up a decade ago to roll out IHG’s Holiday Inn Express brand across Australasia, and the strategy now is to do the same in other markets.
Europe Enthusiasm
Barrott’s partnership with IHG goes back to its days when it was Bass Hotels & Resorts.
“It was always [Pro-invest’s] intention to go into Europe once Australasia was bedded down and sorted out. Expect a lot more press releases,” Barrott said.
The focus is not just on developing gateway cities, he said.
“We are interested in other major cities. If the market is there, we’d be interested. Ninety-five percent of our investors are outside of Australia,” he added.
“We may bring in our Holiday Inn Express prototype from Australia,” he said, adding that while it is largely the same, there are differences in general areas and that the firm is brand-agnostic despite its heavy, current IHG involvement.
“Australasia was very scalable [for the brand], at least 50 to 55 prime hotels. They are a lot larger, 170 rooms to 350 rooms, than those than Europe,” he said.
“The right brand on the right asset to gain maximum returns,” he said. “Our return to the U.K., the timing is perfect. It was always the timing that we arrive now, it is just that the pandemic arrived before us, which has been a plus in some ways,” he said.
Barrott is British by birth and started his career in the U.K. before moving to international roles, including the running of Abu Dhabi-based real-estate firm Aldar, which he turned public in early 2005.
“When I stepped away from Aldar, I did what I do best and built companies, so the idea I and [Schaffer] had for looking for a market to roll out Holiday Inn Express again was a natural one."
Another focus will be on investing in what Barrott said are a great number of dated hotels that haven't received sufficient capital expenditures to remain competitive even before the pandemic.
“One of our principles is to keep our hotels as fresh as the day they opened. There has been reluctance to spend money on CapEx. Yes, everyone was faced with losing guests, virtually overnight, but what was good to see is that when [in Australia] border state restrictions were lifted how quickly markets came back,” Barrott said.
“Rates are returning, too, and that includes on the corporate side, which I believe are saying ‘our teams will be traveling less but staying longer.’ That’s good for hotels," he said. “We have been getting just above 50% average occupancy just before the second lockdown, and rates were sensible."
He said the firm will look at markets and opportunities individually to see whether it makes more sense to invest in development or refreshing existing assets.
“We also see opportunity for quality, limited-service, new builds. Some tired hotels are well-positioned and have good bones, if you like, but need sorting out, and our added-value proposition and virtual integration puts us in a good position for our investors,” he said.
Competition for Assets
Barrott said competition is heating up for investing in the hotel sector.
“There is a lot of interest from institutions and public funds. Retail is not flavor of the month, and investment in office is quite cautious. Hospitality is a very good alternative, and I think one of the best asset classes. With the risks lower, the returns are greater. Our toolbox of virtually integrated businesses is refreshing, in that there is no one else who does what we do,” he added.
He said Pro-invest is close to signing its first acquisition in Europe, via the firm’s second fund, worth 300 million Australian dollars ($223.8 million).
Its first fund, invested in eight assets in Australasia, also raised 300 million Australian dollars, with another 80 million Australian dollars of co-investment.
“We also have directly managed accounts for investors who like our company and what we do but cannot invest into the funds,” Barrott said.
He said the company's investors appreciate that Pro-invest is a one-stop shop.
“Our investors benefit from all aspects from the food chain, whether we are buying and improving, rebranding, refurbishing or managing. We carry it all in-house, so all is benefit, none to third parties,” he added.
The firm is continuing its Australian investment, with two more hotels coming to Melbourne — one with 300 rooms to open by the end of this year and another hotel on the country’s Sunshine Coast.
“They are all new builds where we have identified the location and redeveloped,” he said.
It is also introducing IHG’s Kimpton Hotels & Restaurants brand to Australia, with a Sydney property due to open in January. Pro-invest opened the region's first Indigo Hotels-branded property in the first quarter 2021 with an asset in Adelaide.
Sebel will soon debut in Australia, with a hotel to be opened in the country’s capital, Canberra.
Barrott said he's proud the firm's Holiday Inn Express Newcastle in Newcastle, New South Wales, has been awarded the first-ever NABRES (National Australian Built Environment Rating System) certification for environmental, social and corporate-governance practices.
“We’re leaders in ESG by a long way. It is the right thing to do, and we could see the writing on the wall from a long time ago,” Barrott said.
He said those efforts require a holistic approach
“We’ve received ... green loans from our banks, and our investors are very supportive of that as they see it adds value. It is all about how you operate, not just the physical building, but both working in unison,” he added.
Barrott is confident the scope of his business will grow significantly in the near future.
“We have 2 billion Australian dollars ($1.5 billion) under management, and in the next five years that will be between 8 billion Australian dollars and 10 billion Australian dollars,” he said.
Alex Garrod is the London office’s managing director of hospitality and asset management, while Keith Griffiths, formerly managing director of Atlas Hotels, is the firm’s head of hotels. Scott Wolfe, formerly vice president of investment analysis for Europe, Middle East, Asia and Africa at IHG Hotels & Resorts, recently came on board as director of investments for the U.K. and Europe.