GLOBAL REPORT— Majorca-based Grupo Barceló’s acquisition of Miami-based Occidental Hotels & Resorts was the culmination of three years of efforts to find a buyer, according to the latter’s MD Jaime Buxó.
“Occidental’s shareholders had been looking to sell since 2012 as they felt it was the right time,” he said. “At first there were 25 interested parties from around the world, which became six a year ago. By last September it was down to two, Barceló and Posadas of Mexico.
“In the end, Barceló accepted the conditions concerning the price set by the shareholders and the deal, which will help Barceló become a leading hotel operator in the Caribbean, was done,” he said.
Grupo Barceló is set to boost its presence in the expanding Caribbean market by 50% when it adds Occidental’s 11 all-inclusive resort properties, including six in Mexico, two each in Dominican Republic and Costa Rica, and one in Aruba, as well as management contracts for one hotel in Colombia and for an urban hotel in Haiti. The properties total 4,303 rooms.
Under the terms of the deal, announced 16 June and which still needs approval from Mexican anti-trust authorities, Barceló is to acquire 57.5% of the chain from Spanish banking giant BBVA following its purchase last month of a 42.5% stake in the company from minority shareholders.
No financial details were announced.
Barceló CFO Vicente Fenollar praised the agreement, saying the new assets would fit well with the group’s operations in the Caribbean, where it has 25 hotels.
“We already have an important portfolio in that region, and Latin America is performing very well at the moment. Also there are a lot of synergies between us and Occidental, which has very good brands and assets,” he told Hotel News Now.
Fenollar added he expected a “good and clean” OK within a month from the Mexican authorities as they had approved the earlier deal with the minority shareholders.
Grupo Barceló has 94 4-star and 5-star urban and vacation properties totaling 30,000 rooms and owns 40% of Crestline Hotels & Resorts of the United States.
This year it joined Spain’s leading real estate investment trust in creating the country’s first hotel REIT, which will focus exclusively on domestic resort properties, and the group also has rebranded its international network of travel agencies.
Contemplating conversion
Concerning the future of the acquired hotels, Barceló’s Fenollar said there would be some rebranding.
“We don’t plan to rebrand all the new properties to Barceló as we see that the market is happy in general with the Occidental name. However, some of the new ones will be rebranded to Barceló and some Barceló hotels will become Occidental.
“For example, the 5-star, adults-only Royal Hideaway Playacar Resort in Mexico is very well appreciated in the U.S. and Latin American markets, so we plan to rebrand four or five as Royal Hideaways in Mexico, Costa Rica and the Dominican Republic,” he said.
Barceló also plans to spend approximately $150 million to upgrade the properties during the next two years.
“There is a lot of be done,” Fenollar said, adding that Occidental staff, which he lauded as “great professionals,” would be incorporated into the group.
Analysts approve
Industry analysts said the Barceló latest move made sense.
“The Caribbean market is a natural for Barceló,” said Inmaculada Ranera, MD for Spain and Portugal at British-based hospitality consultant Christie +Co.
She noted the group already has familiarity in the region. Along with other Spanish chains, Barceló played a major role in developing the Caribbean hotel industry in places like the Dominican Republic and Cuba, she added.
“And with economies improving in key South American (source) markets, more and more travelers from those countries are eager to visit the region,” she said.
Parris Jordan, a VP at firm HVS in New York, said the Barceló deal was smart as the popularity of all-inclusive resorts is increasing and other big chains re moving into that sector.
“Also, the Caribbean as a market is doing very well after the crisis with (revenue per available room) growing for five years and occupancy rates averaging 70%,” he said.
During the first five months of the year, occupancy in the Caribbean is up 2.7%, while average daily rate and revenue per available room are up 2.4% and 5.1%, respectively, in U.S. dollar terms, according to data from STR Global, sister company of Hotel News Now.
“And it’s a good step because there is a limited supply of established hotels with no competition from new properties for various reasons: One, financing for construction is very hard to come by. And two, building from the ground up is a long process requiring lengthy approval processes and everything has to be shipped in,” he explained.
Jordan dismissed the suggestion that Cuba’s expected opening to U.S. visitors could draw a significant portion of the American market from the rest of the Caribbean.
“With Cuba, there will be a huge curiosity factor attracting U.S. visitors. But let’s not forget that you can’t just walk in and switch on the light as the existing properties are mostly not up to U.S. tourist standards and it will take a couple of years minimum to build new hotels or upgrade existing ones to meet that U.S. demand,” he said.
“I think that over the short term, Barceló has nothing to worry about regarding competition from Cuba, but there could be an impact over the long term.”