The Eden Playa hotel in Playa de Muro, as I have previously mentioned, has been sold to a German hotel chain. Financial pressures may have forced the sale, but does it represent the beginning of a change to hotel ownership not just in Playa de Muro but also in other resorts in Mallorca?
The Eden Playa is a four-star hotel. One could consider it the jewel in a small crown that is Eden Hotels. Modern and airy, it opens out directly onto the beach. There is another four-star in the Eden portfolio, the Eden Lago just over the border into Alcúdia, but this isn't a beachside hotel. The company has lost what was really its flagship establishment.
The acquisition via the Allsun hotel group by the German tour operator Alltours is most unlikely to be an isolated case of foreign purchase. It is being reported that German and Russian buyers are on the lookout for hotels in all of the main resort areas in Mallorca - Alcúdia bay, Calvià and Playa de Palma, Cala Millor and Cala d'Or.
The type of establishment these investors are said to be interested in conforms very much to the Eden Playa. Four-star, relatively large (the hotel has 298 apartments) and preferably with some financial issues. When the hotel association for Alcúdia and Can Picafort refers to investment which depends on a particular hotel's financial situation, it isn't implying that this situation has to be strong. Quite the opposite.
On the bay of Alcúdia, I can think of a number of hotels that might fit the bill, certainly where size and star rating are concerned. What is unknown (unknown within the public domain, that is) is the financial health of specific hotels or hotel groups. But Eden is not the only group with financial concerns which may find it necessary to divest itself of at least one property.
Mallorca's hotels are primarily Mallorcan or Balearic-owned by any number of hotel groups, some of them, like Eden, comparatively small with few establishments within their portfolios. Behind the scenes, there is foreign ownership and investment, and there has long been foreign involvement. Riu, now 50% owned by TUI, is an example of such involvement. Another of Mallorca's hotel chains, and one I won't identify, makes a virtue of drawing on foreign investment; it is said to actually put relatively little of its own capital into ventures.
On the face of it, though, hotels are Mallorcan and can be pointed to, with justification, as being representative of local entrepreneurship and business acumen. They are symbols of island pride and perhaps also a certain parochialism. There is, one often feels, an ambivalence, not to say antipathy, towards foreign investment and ownership in Mallorca.
Such attitudes are, however, going to have to change. Away from the main resort areas, there are clear examples of foreign investment, as with the Jumeirah in Sóller and the Middle-Eastern money that is meant to be behind the village hotel complex in Canyamel together with the involvement of the US Hyatt group. These are specific luxury developments, though. They are not the more regular bread and butter of the resorts, the target of German and Russian investors who can sense potential bargains.
We are witnessing a shift in the hotel scene in Mallorca. Larger hotel chains, such as Melià, are clearly committed to ongoing investment in Mallorca, but they also have plenty of opportunities overseas, so offering the possibility of greater inward investment to Mallorca from abroad. But this investment appears to be interested only in the higher end of the middle market, i.e. the four stars. So, where would this leave all the three stars?
If smaller hotel groups, without major financial clout, are unable to fund the types of modernisation that the new tourism law envisages and are also unable to attract buyers either locally or from abroad, then their futures might be uncertain. The foreign investment that is being spoken about in the main resorts is one of cherry-picking.
Would this investment mean a change also to the overall tourism profile of Mallorca? Possibly it would. Russian investment is already established, as with TUI's largest single shareholder being Russian, while more direct investment in hotel real estate would be with an eye on the anticipated huge expansion of Russian and eastern-European tourism.
Greater foreign ownership might not play well with an insular mentality, but it shouldn't come as a great surprise were it now be a feature of Mallorca's tourism. This tourism is in its mature stage of a classic product life cycle. There are only certain ways in which tourism can continue to develop in such a circumstance, and one of these is what appears to be happening - acquisition by foreign investors, seeking to exploit the new tourism markets that will fundamentally change Mallorca.
Any comments to andrew@thealcudiaguide.com please.
Showing posts with label Hotels for sale. Show all posts
Showing posts with label Hotels for sale. Show all posts
Tuesday, June 12, 2012
Tuesday, July 12, 2011
For Sale: Hotel, Needs Work
The possibility that the Posibilitum investment group, the owners of Alcúdia's Bellevue complex, might acquire the Hotasa hotels of the troubled Nueva Rumasa conglomerate should be viewed as welcome news by those running the hotels. I am told that the hotels are experiencing difficulties in providing services they should be. When the hotels opened for the season, and at one point it looked as some might not, suppliers made it clear that they would supply only on a cash-on-delivery basis.
The Hotasa hotels, which include three in Can Picafort, are an extreme case, but they are far from alone in having owners seeking buyers. Much of Mallorca's hotel stock is up for sale. And there are very few buyers.
The accord between tourism minister Carlos Delgado and the hoteliers that should pave the way for reform of the tourism law and so facilitate hotel conversion and change of use has been sought by the hoteliers for some years. The antiquity of many hotels makes their redevelopment a pressing necessity, but even with agreement and legal reform, a question would remain. How would these conversions be funded?
Delgado has said that the days of expecting grants, especially from central government, have passed. The banks have all but turned the taps off. The markets are reassured by this summer's rise in tourism numbers, but the leading hotel chains - and those which would be listed and more attractive to investors - have tended to look overseas for growth potential.
The hype of all the talk of hotel renovations and changes of use and the unions getting hot under the collar and threatening protests as a consequence may therefore be just that - hype. Some hotels and hotel chains are in good enough shape to effect changes, but many are not.
One reason why owners want to sell hotels and why it is proving difficult to do so and would also prove difficult to convert them is because they are that old that the cost of conversion would be nigh on prohibitive. Buyers are unlikely to take on hotels that demand significant investment in addition to what are sales tags which are too high. Like with many restaurants or bars that are for sale, the expectations of owners are unrealistic, based on past or expected performance and divorced from the circumstances that now obtain.
Bellevue, though taken on by Posibilitum, is a case in point when it comes to old stock. The complex, all 1400 apartments of it, is nearly 40 years old. Its sheer size is a constraint on renovation as is its age, but renovation is badly needed. Bellevue has acquired a more diverse market over the past few years - it isn't the ultra-Brit complex it once was - but it tends to be hotels for the British market in the resorts of Alcúdia and Magalluf that are the oldest and which attract less profit because of the very nature of the particular market they cater for. Another reason, therefore, why prospective buyers might be wary.
A further reason is the complexity of financing arrangements and ownership issues. The travel and hotel group Orizonia had, still has as far as I am aware, a mortgage on Bellevue which was raised as a guarantee against a debt to the company run up by the previous owners, the now bust Grupo Marsans. And there is a similar story with Hotasa.
Bank funding requires security, and in the case of Hotasa, the house has well and truly been bet. The court bankruptcy proceedings relating to Nueva Rumasa have revealed the scale of the mortgages that hang over Hotasa. One hotel alone, Santa Fe in Can Picafort, has been used as a guarantee four times, to which can be added the embargo slapped on it by the Hacienda in respect of a debt of some 120,000 euros. In total, the seven Hotasa hotels in the Balearics have mortgages valued at just short of 138 million euros, three and a half times the size of the mortgage debt said to be owed to Orizonia.
The judge presiding over the proceedings has been obliged to appoint five administrators because of the sheer complexity of the hotels' affairs. The labyrinth of different companies in addition to the various mortgages would surely make a purchaser riding to Hotasa's aid, be it Posibilitum or any other, pause while the administrators try and unravel the affairs. Hotasa may be a specific case, but who's to say what complexity might apply to other hotels or hotel groups and which might add to deterring prospective purchasers.
Outdated, unprofitable, underfunded, debt-ridden: the reasons why there are so few buyers for hotels and why the much-hoped-for conversions may yet never take place.
Any comments to andrew@thealcudiaguide.com please.
The Hotasa hotels, which include three in Can Picafort, are an extreme case, but they are far from alone in having owners seeking buyers. Much of Mallorca's hotel stock is up for sale. And there are very few buyers.
The accord between tourism minister Carlos Delgado and the hoteliers that should pave the way for reform of the tourism law and so facilitate hotel conversion and change of use has been sought by the hoteliers for some years. The antiquity of many hotels makes their redevelopment a pressing necessity, but even with agreement and legal reform, a question would remain. How would these conversions be funded?
Delgado has said that the days of expecting grants, especially from central government, have passed. The banks have all but turned the taps off. The markets are reassured by this summer's rise in tourism numbers, but the leading hotel chains - and those which would be listed and more attractive to investors - have tended to look overseas for growth potential.
The hype of all the talk of hotel renovations and changes of use and the unions getting hot under the collar and threatening protests as a consequence may therefore be just that - hype. Some hotels and hotel chains are in good enough shape to effect changes, but many are not.
One reason why owners want to sell hotels and why it is proving difficult to do so and would also prove difficult to convert them is because they are that old that the cost of conversion would be nigh on prohibitive. Buyers are unlikely to take on hotels that demand significant investment in addition to what are sales tags which are too high. Like with many restaurants or bars that are for sale, the expectations of owners are unrealistic, based on past or expected performance and divorced from the circumstances that now obtain.
Bellevue, though taken on by Posibilitum, is a case in point when it comes to old stock. The complex, all 1400 apartments of it, is nearly 40 years old. Its sheer size is a constraint on renovation as is its age, but renovation is badly needed. Bellevue has acquired a more diverse market over the past few years - it isn't the ultra-Brit complex it once was - but it tends to be hotels for the British market in the resorts of Alcúdia and Magalluf that are the oldest and which attract less profit because of the very nature of the particular market they cater for. Another reason, therefore, why prospective buyers might be wary.
A further reason is the complexity of financing arrangements and ownership issues. The travel and hotel group Orizonia had, still has as far as I am aware, a mortgage on Bellevue which was raised as a guarantee against a debt to the company run up by the previous owners, the now bust Grupo Marsans. And there is a similar story with Hotasa.
Bank funding requires security, and in the case of Hotasa, the house has well and truly been bet. The court bankruptcy proceedings relating to Nueva Rumasa have revealed the scale of the mortgages that hang over Hotasa. One hotel alone, Santa Fe in Can Picafort, has been used as a guarantee four times, to which can be added the embargo slapped on it by the Hacienda in respect of a debt of some 120,000 euros. In total, the seven Hotasa hotels in the Balearics have mortgages valued at just short of 138 million euros, three and a half times the size of the mortgage debt said to be owed to Orizonia.
The judge presiding over the proceedings has been obliged to appoint five administrators because of the sheer complexity of the hotels' affairs. The labyrinth of different companies in addition to the various mortgages would surely make a purchaser riding to Hotasa's aid, be it Posibilitum or any other, pause while the administrators try and unravel the affairs. Hotasa may be a specific case, but who's to say what complexity might apply to other hotels or hotel groups and which might add to deterring prospective purchasers.
Outdated, unprofitable, underfunded, debt-ridden: the reasons why there are so few buyers for hotels and why the much-hoped-for conversions may yet never take place.
Any comments to andrew@thealcudiaguide.com please.
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