In a recent interview with Hotel Management magazine RLA Global CEO, Roger Allen shares his insights for the "Med" region. Originally published in Hotel Management magazine.
How do you see the current hospitality and leisure investment climate across the Mediterranean?
RA: The hospitality and leisure investment climate in the Med is positive and spurred by the opening of new destinations and new resorts. Such growth, [while cause for optimism], is making the sector increasingly more competitive and consequently putting pressure on current resort and destinations to further invest in order to remain competitive. Obtaining and retaining the market position in a dynamically changing environment is a challenge and [causing] new and exciting products to be developed. For instance, new luxury lifestyle products that are environmentally conscious and evoke a more holistic wellbeing experience. Investment in senior living real estate, particularly from private equity is seeing a huge surge and we are pleased to be playing a role in its evolving landscape.
In light of the recent demise of Thomas Cook, the oldest travel company in the world, how do we create economically sustainable resorts and destinations?
RA: That’s the million-dollar question. Whilst everybody in the hospitality industry can only be saddened by the loss of so many jobs and many customers losing money from booked holidays, we must also remember that this is what happens to businesses that do not adapt to changes in market dynamics.
There are so many moving parts [involved in] conceptualizing, forecasting and achieving an economically sustainable resort and destination. Take a moment to consider this: Guests are changing with Gen X, Y, Z and Millennials (and don’t forget the Alpha Gen) having completely different experiential preferences. Their lifestyle and wellbeing choices must be addressed and thus have a direct impact on the concept classification. Year-round airlift and convenient accessibility always play a role in the success of an asset and can never be underestimated. The attractiveness and desirability of the destination and its year-round climate is fundamental to the overall proposition. And we have not even mentioned the influence of technology on how consumers engage and then book such trips, which increasingly adds to the complexity of how resorts and destinations compete for consumer spend. The size and configuration of the asset in relation to delivering a positive IRR has got to be realistic, particularly when such assets usually take longer to achieve financial stabilization.
The preamble is for sure a caveat given there are so many variables to achieving economical sustainability, however, if I was to simplify it to three key success factors, I would go with:
- Desirable location with convenient accessibility;
- Sniper-like focus on your target market with a finely tuned and honed concept;
- Astute performance forecasting and financial planning. In an increasingly complex market where the competitive set benchmarking is proving more difficult, new approaches are required to evaluate viability.
In an increasingly complex market where the competitive set benchmarking is proving more difficult, new approaches are required to evaluate viability. Branded residences and villas are now a regular component of resort development. Why is this and what purpose do they serve?
The stakeholders all love branded residences. Developers like them because branded real estate has been proven to sell at a premium and because of the significant contribution residences can make to the cash flow of real estate investment. Operators love them because of increased key count. Resident owners get to own a property in their desired location, whilst [making] a fixed return on their investment. It’s a win-win.
Which specific areas of the Mediterranean are attractive to the investment and development community?
Emerging markets, including Montenegro and Albania, continue to show some of the largest growth spurts. Israel has had something of a resurgence of late as more favorable airlift is making the destination more accessible. We see development in Spain, Italy and Greece to be more in isolated pockets of the market. I know Portugal is not a Mediterranean country, but it’s a market we know well, and we cannot disregard the volume of resort and hotel development in the country because it does have a relevance to investors in the Mediterranean.
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