Rocco Forte Hotels has confirmed that Saudi Arabian sovereign wealth fund Public Investment Fund will acquire a “significant minority stake” in the London-based hotel brand.
The stake PIF has agreed to acquire is the full stake currently owned by Italian investment fund CDPE Investimenti since 2015. That stake is believed to be 49%, but executives at Rocco Forte declined to state an exact percentage figure.
The Financial Times, which also said PIF’s stake is 49%, reported the deal as being worth £590 million ($750 million), which would value Rocco Forte Hotels at £1.2 billion.
In its latest earnings’ report issued April 30, the privately held Rocco Forte Hotels reported revenue of £293.5 million, up 76% year over year and up 17.6% compared to 2019.
That revenue was spearheaded by its Italian portfolio of eight hotels, for which revenue was up 85.7% compared to the same period last year.
In the PIF deal, the Rocco Forte family retain the firm’s majority shareholding. There is also no change to management, with co-founder Sir Rocco Forte remaining executive chairman and Olga Polizzi, the other co-founder, remaining deputy chairman.
The next generation of the Rocco Forte family also continue in their roles, with Irene Forte continuing as director of wellness; Lydia Forte continuing as group director of food and beverage, and Charles Forte continuing as director of development.
The deal also includes a substantial amount of private equity funds that will permit brand expansion in the hotel firm’s existing markets and into new ones, a news release stated.
PIF’s deputy governor and head of international investments, Turqi Al-Nowaiser, said PIF executives are confident in international tourism, especially in the luxury hotel sector in which Rocco Forte operates.
“[That segment has] sown remarkable resilience in recent years. As active long-term investors, PIF will continue to invest strategically in promising sectors to achieve sustainable returns globally,” he said.
Piers Schmidt, founder of luxury hotel advisory firm Luxury Branding, said the deal can be perceived from two angles.
“On the buy side, it’s more of the same for PIF. It needs to diversify more from oil, we know that, and, hither to that, acquisitions and investments outside of [Saudi Arabia], where of course it is heavily invested in the giga-projects and Vision2030,” he said.
Schmidt said the Rocco Forte deal also gives PIF more insight into the operator side of the industry, noting that Al-Nowaiser is fascinated by this business model, one in which he can own but operators run the business and secure income.
“He probably wants fingers in all the pies, and I think we will see more of this kind of deal from PIF, especially in the lead to Expo2030 and the FIFA World Cup coming to Saudi Arabia. This is part of the culmination of tangible stuff done, and of course [PIF has] money,” he said.
Rocco Forte Hotels has 14 hotels in operation, along with 20 private villas, and has three hotels opening in the next 24 months — the Rocco Forte House, Milan, in 2024; and The Carlton, Milan, and A Rocco Forte Resort, Porto Cervo, Sardinia, in 2025.
Schmidt said when luxury brands reach a portfolio size of 10 or 12 hotels, there's a requirement to share risk.
He said boutique hotel firms of Rocco Forte’s size are sandwiched between the huge and the barely surviving, and now is the time in which the Rocco Forte family has decided it wants to monetize and take some capital off the table.
Schmidt said this deal reminds him of when French fashion and lifestyle firm LVMH Moët Hennessy Louis Vuitton SE acquired hotel firm Belmond in December 2018.
He added running a hotel firm such as Rocco Forte continues to be an expensive proposition.
“Development is not cheap, and a great deal of money goes into structuring deals, with many a potential deal falling off. Sales and distribution are not cheap either,” he said.
Standing out from the growing luxury crowd is another consideration, Schmidt said.
“The luxury segment is growing ever more in ‘niche-ification,’ and with very narrow niches. It is difficult to justify your existence if you are just a regular luxury hotel brand. 'La Dolce Vita,' if that is how Rocco Forte would describe their brand, is very appealing to New World investors. If that is its narrative, I think many owners would see that as very investible, and then the question is, how scalable is it?” he said.
“We might see Rocco Forte move away from its origin story. There is definitely a play there. Maybe the next one to go this route is Auberge Resorts, certainly as I do not think firms such as the PIF are interested in buying into the big hotel groups.”
Hotel News Now contacted Rocco Forte Hotels, but as of publication time has not received a response to questions.