the hotel property handbook - deloitte us€¦ · the hotel property handbook investment &...

@ 2016 Deloite Financial Advisory 1

The Hotel Property HandbookInvestment & Financing Keys

Balearic Islands Snapshot

Financial Advisory I Real Estate - Hospitality

October 2017


The Hotel Property HandbookBalearic Islands Snapshot

Javier García-Mateo, MRICS

PartnerFinancial Advisory ‖ Real Estate

[email protected]: +34 659 90 02 15

Ana Granado, MRICS

DirectorFinancial Advisory ‖ Real Estate


Jose María Espejo

Senior ManagerFinancial Advisory ‖ Real Estate

[email protected]: +34 918 232 692

Jordi Schoenenberger

PartnerHospitality Industry [email protected]: +34 932 543 932

Fernando Baldellou

PartnerHead of Financial Advisory – Hospitality [email protected]: +34 914 432 514


5 Key Factors

Full Due Diligence required to perform the optimal deal analysis:

► Financial Factors: Understanding of GOP vs. NOP.

► Business Performance: Analysis of market and income sustainability.

► Legal Factors: Analysis of all intervenient contracts. Comprehensive legal risk analysis.

► Tax Factors: Analysis of tax risks and potential tax structuring alternatives.

► Technical Factors: Functional use (Back of House vs. Front of House), equipment condition, legal compliance and the hotel design (BREEAM + LEED certifications).

Key Investment and Financing Drivers

► High Liquidity for both Equity and Lending due to the improvement of KPIs throughout

Spain.

► Increasing financing demand for prime development projects, including refurbishment, repositioning and greenfield

► Location, category, performance and hotel brand significantly impact on financing terms.Market

Overview

1

► GDP growth: +3.3% 2016 (+3.2% 2017 F), Tourism grew over 3% and accounts for 11.2%

of total Spanish GDP (2017-1Q)

► Unemployment fell to 17.3% 2017YTD.Tourism-related employment accounted 12.3%

of all employment

► 75.3 million visitors in 2016 (+11%), 57.3m as at Aug. 2017 (+9.9%)

► Balearic Island Tourism GDP accounts for 45% share and 32% share of total employment

► For the second year running, Spain holds the leader position in the WEF Travel & Tourism Competitiveness Report

2015 vs 2016

Tourism is one of Spain’s growth Key drivers

► From 2013 to 2016, ADR grew on average by 14% in Spain. In addition, occupancy rate has significantly grown from 57% to 66% (+840bps).

► Balearic Islands is a Top 5 ranked destination

in Spain in terms of visitors; in 2016 the islands registered 13m visitors with a +11% growth compared to the same figure in 2015. As at Aug 2017 the islands already registered >9m visitors and are expected to beat all times highs.

► Balearic Islands average RevPAR grew +37%

from 2013 to 2016 due to the ADR growth of +27% and occupancy rate increases +600pb

► 11 new hotels have opened in 2017 with a total of +1,707 new rooms, furthermore 15 refurbishments have been executed accounting for +2,622 rooms.

► The main chains´ priorities are innovation, sustainability, asset renovation, brand repositioning, the client experiences and digital strategy to become the market leaders.

2Supply &

Demand

4

3Hotel Real Estate Investment Market

The Hotel Property HandbookBalearic Island Snapshot

EXECUTIVE SUMMARY

► The EMEA region accounts for 27% of the total Hotel Real Estate Investment volume. Spain accounts for 12%

► In Spain, Hotel Investment volume increased by 5% in 2017YTD (€2,253m) and accounted for 31% of total non-residential investment

► Balearic Islands register €281m investment market figure Mallorca registered the lions share with 68% of total Balearic

Island Investment.

► Spain is the leader in Real Estate valuation growth in Europe. In 2016 Madrid and Barcelona RE valuations increased by 11% and 14%, respectively.


Cap

ital

Val

ues

Gro

wth

(%

)2

01

5-2

01

6

Capital Valu

e p

er

room

(2015-1

6)

(8.1%) (13.9%)

(6.2%)

(4.0%)

0.5% 1.7% 6.6% 13.9% (3.7%)

(1.1%)7.9% 11.0% 4.6% 15.5% (6.7%)

18.2%

€800k

€600k

€400k

€200k

€100k

-

€200k

€400k

€600k

€800k P

ari

s

Lo

nd

on

Zü

ric

h

Ge

nev

a

Ro

me

Flo

ren

ce

Am

ste

rda

m

Ba

rcelo

na

Mila

n

Mu

nic

h

Co

pen

ha

ge

n

Mad

rid

Eu

rop

e

Du

blin

Ed

inb

urg

h

Palm

a M

allo

rca


EXECUTIVE SUMMARY

Drivers increase in cross-border

investments:

2

3

1

4

Yielding Assets are more attractive than Investment Grade Bonds

Strength of the dollar (For American investors) and weakness of the Euro since 2014

Political and financial uncertainly in certain countries is favouring Spain

Cap

ital

Val

ue

per

ro

om

Tr

end

20

06

-20

16

Max. Min (2006-16) 2015 2016

Source: HSV London

The Hotel Market: Unitary Values Analysis (€/room)

The outstanding tourism performanceis expected to continue improving in 2018.

Returns expected in Spain through hotel investment are above the European average

10 Year Bond

2016-2017(1 March 2017)

Yield 2016 – Dif. 10 years bond

2,12%▲ 50 bps

1,67%▼ 17 bps

1,15%▼65 bps

0,92%▼4 bps

1,15%▼65 bps

0,23%▼ 34 bps

0,91%▼16 bps

2,12%▲ 50 bps

2,12%▲ 50 bps

1,67%▼17 bps

1,67%▼17 bps

0,34%▼ 43 bps

0,62%▼ 22 bps

-0,22%▼ 22 bps

-0,22%▼ 22 bps

363 bps 433 bps310 bps408 bps 360 bps477 bps 509 bps388 bps 388 bps433 bps 458 bps516 bps 538 bps522 bps547 bps


€627m

€221m €200m €184m €183m

United KingdomUnited KingdomGermanyUnited KingdomSpain

Source: Deloitte Data Base

EXECUTIVE SUMMARY

Hotel Ritz-Carlton Abama

12% of the Total Hotel Investment of the analysed

countries

European Investment MarketHotel Ritz-Carlton Abama (Spain) with €183m of Investment Volume was the main transaction in Spain and the fifth in Europe in 2017YTD.

Source: Deloitte Data Base and third party sources

For more information see CHAPTER 3 (Investment Market)

VENDORAzure Property Group

556 units

BUYERWenaasgruppen

Radisson BluHotel Hamburg

Hotel

VENDORBlackstone

460 units

BUYERWestmont

Doubletree Westminster

Hotel

VENDORSahara India Pariwar

494 units

BUYERAshkenazy Acquisition

Grosvenor House Hotel

Hotel

VENDORPPHE Hotel Group

494 units

BUYERCBRE Global

Investors

Park Plaza London

Waterloo

Hotel

VENDORHI Partners

461 units

BUYERBlackstone

Hotel Ritz-Carlton Abama

Hotel

United Kingdom34%

Germany21%

Spain18%

Netherlands10%

France8%

Italy3%

Sweden2%

Poland1%

Switzerland1%

Ireland1% Norway

1% Belgium0%

Russia0%



European Yields & Capital Values (2016):

For more information see CHAPTER 4 (Key Investment and Financing Drivers)

in the full report.

Source: Deloitte Data Base

EXECUTIVE SUMMARY

3 Spanish transactions are included within the Top 10

European deals.

Amounting to €987m, these Spanish transactions account for 30% of the

Top 20 investment volume

European Investment Market: Spain still countsSpain, with €2,253m of hotel investment volume in 2017YTD, is playing a main role within the European Market.



City CountryCapital Value

(€k per room)

Lease Yield

2016

Paris France €644k 5,00%

London UK €601k 4,25%

Zürich Switzerland €506k 5,25%

Geneva Switzerland €440k 5,00%

Rome Italy €394k 5,75%

Florence Italy €375k 6,00%

Amsterdam Netherland €371k 5,50%

Barcelona Spain €327k 6,00%

Milan Italy €318k 6,00%

Munich Germany €297k 5,00%

Copenhagen Denmark €276k 6,00%

Madrid Spain €268k 6,25%

Europe €267k 6,00%


# Country Asset RoomsPrice

(€m)Buyer Vendor

1 United Kingdom Grosvenor House Hotel 494 627 Ashkenazy Acquisition Sahara India Pariwar 02 United Kingdom Doubletree Westminster 460 221 Westmont Blackstone 03 Germany Radisson Blu Hotel Hamburg 556 200 Wenaasgruppen Azure Property Group 04 United Kingdom Park Plaza London Waterloo 494 184 CBRE Global Investors PPHE Hotel Group 05 Spain Ritz-Carlton Abama 461 183 Blackstone HI Partners 06 United Kingdom Hilton London Olympia 405 131 HPL Hotels Oaktree, Westmont 0

7 Italy Nova Yardinia Resort 790 120 Serenissima SGR Valentino Village / SO.F.IN. (Sofin), Greenblu 08 Spain Hotel Villaitana 455 114 HI Partners Xeresa Golf 09 Germany Hotel Pullman Munich 337 102 CDL Hospitality REIT Event Holding GmbH, Grove International 0

10 Spain Jardin Tropical 390 101 Blackstone HI Partners 011 United Kingdom Hilton London Heathrow (T4) 398 91 Pandox Arora Hotels 012 Spain Sol Príncipe 799 89 London & Regional Properties Starmel (joint venture Starwood Capital Group y Meliá Hotels) 013 Germany Holiday Inn Leuchtenbergring 279 86 Real I.S. AG Munchner Grund 014 Spain Hotel Silken 240 80 Benson Elliot Bank of America Merrill Lynch 015 Spain Hilton Diagonal Mar Barcelona (55%) 238 80 Axa IM Iberdrola Inmobiliaria 016 United Kingdom South Place Hotel 80 79 Tian An China Investments Frogmore Estates 017 Spain Ritz-Carlton Abama 50% 461 75 HI Partners Familia Polanco 018 Spain Sol Palmanova 653 73 London & Regional Properties Starmel (joint venture Starwood Capital Group y Meliá Hotels) 019 Germany Nikko Hotel Dusseldorf 386 68 Event Holding GmbH, Art Invest Benson Elliot 020 Germany Holiday Inn 316 66 Union Investment Munchner Grund, Lambert Holding GmbH 0

26 Spain Melia Villaitana 455 49 Blackstone HI Partners

28 Spain Silken Puerta de América 315 48 Bank of America Merrill Lynch Grupo Urvasco (Silken)

29 Spain AC Malaga Palacio 214 48 Blackstone HI Partners

30 Spain Abora Catarina 410 47 Blackstone HI Partners

18 Mallorca Sol Palmanova 653 73 London & Regional Properties Starmel (JV Starwood Capital y Meliá)

51 Ibiza Intertur Hotel Miami Ibiza 365 32 KKR y Dunas Capital Intertur Hotels

54 Ibiza Sol House Ibiza 275 31 London & Regional Properties Starmel (JV Starwood Capital y Meliá)

67 Mallorca Intertur Hotel Hawaii Mallorca & Suites299 27 KKR y Dunas Capital Intertur Hotels

82 Mallorca Fergus Tobago 275 20 Hispania n.d.

TOP 5 Balearic Islands


Top 10 Spanish single asset transactions:

A total pipeline investment volume of €800m is expected to be traded in Spain

Spanish Investment Market

Source: Deloitte

Source: Deloitte

EXECUTIVE SUMMARY

Total Hotel investment volume in

Spain as at 2017YTD: €2,253m

Short Term Medium Term Long Term TOTAL

75%100%

17%

8%

In 2017YTD the Hotel investment volume has exceed by 5% the investment volume of 2016. Hotel typology represents 31% of the total investment volume



750 576 519 607 932

2,702 2,145 2,253

150 279 88 120

596

674 930 428

1,467 591

571 751

2,242

1,263

660 595 644

687 365

867

2,297

1,894 3,769

2,277

1,460

1,056

544

807

2,520

5,313

4,895

1,781

4,470

3,189

2,087

3,151

8,587

11,845 12,398

7,334

-

2,000

4,000

6,000

8,000

10,000

12,000

2010 2011 2012 2013 2014 2015 2016 2017YTD

31%Hotel

5%Source: Deloitte Data Base

Hotels

Logistic

Retail High Street

Retail Shopping Centre

Offices

# Asset UnitsPrice

(€m)Typology

1 Ritz-Carlton Abama 461 183 Vacational

2 Hotel Villaitana 390 101 Vacational

3 Jardin Tropical 390 101 Vacational

4 Sol Príncipe 799 89 Vacational

5 Hotel Silken 240 80 Urban

6 Hilton Diagonal Mar Barcelona (55%)238 80 Urban

7 Ritz-Carlton Abama 50% 461 75 Vacational

8 Sol Palmanova 653 73 Vacational

9 Silken Puerta de América 315 48 Vacational

10 AC Malaga Palacio 214 48 Urban


Balearic Islands

€281mMallorca68%

Ibiza32%


100

102

110

123

100

106

104

124

100

108

140

161

80

90

100

110

120

130

140

150

160

170

Mallorca Island Menorca Island Ibiza & Formentera Island

100

111

124

137

100 105

113

124

100

105

115

126

100

106

119

137

100

110

117

130

95

100

105

110

115

120

125

130

135

140

2013 2014 2015 2016

Andalusía Catalonia

Community of Valencia Balearic Islands

Canary Islands Avrg. Vacational dest.

EXECUTIVE SUMMARY


GROWTH

EMPLOYMENT

Tourism-related employments

accounts for 12% of Spain’s

employments

In contrast to previous estimates, 12% more UK tourists came to Spain during 2016

BREXIT

Tourism Business Confidence close

to max. levels since 2016

BUSINESS CONFIDENCE

CCI has experienced an

Uptrend since 2012 and is close to

max. levels

CONSUMERCONFIDENCE

The Spanish Tourism Industry is benefiting from the current geopolitical context

GEOPOLITICAL CONTEXT

grew by 3.2% during 2016.

Tourism accounts for 11.3%

of Spain’s GDP

SPAIN’S GDP

75.6 million tourists came to Spain in 2016 spending €77.6k million

RECORD FIGURES 2016

Spanish Tourism industry

acknowledged as the world’s most

competitive

TOURISM COMPETITIVENESS

Hotel assets are in greater demand as the tourism industry

is surpassing historical records

every year for a significant profitability increase

Balearic Islands Hotspots

RevP

ar(€

) Evo

lutio

n b

y ho

tsp

ot

(2013

=10

0)

VACATIONAL Main Touristic Areas

For more information see CHAPTER 2 (Supply and Demand)

Spanish hotel properties performanceRevPar increased by 31% on average in Spain from 2013 to 2016.

KPI’s evolution (2013 to 2016)

ADR RevParOccupancy+ =SPAIN +14% +840bps +31%

B. Islands +27% +602bps +37%


82 62 68 57 56 34 54 48

6,907

5,3965,745

5,120

3,124 2,825

5,6974,964

0

2000

4000

6000

8000

10000

12000

-

20

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014 2015 2016 2017 YTD

New Hotels # rooms

New openings25,4%

Refurbishment22,8%

Chain/Brand Conversion

51,9%

EXECUTIVE SUMMARY


Hotel openings trend increased since 2016. Year

to date (Jan.-Sep.2017) 48 hotels have opened and c.18 hotels expected to open until December 2017.

For more information see CHAPTER 2 (Supply and Demand)

Spanish hotel new openingsSignificant hotel openings during 2017YTD

Hotel openings trend (2010-17 YTD) (number of hotels and rooms)2017 YTD openings by type of project:

Source: Censo Alimarket Hoteles

Source: Censo Alimarket Hoteles

• New Openings

• Refurbishment

• Chain/Brand Conversion

11 Hotels1,797 Rooms

15 Hotels2,622 Rooms

21 Hotels

Balearic Islands Figures


P&L reconstruction Restructuring of the Financial Sector

Improvement of fundamentals

Alternative to the fixed income / bond yields

Senior Debt: Yielding assets:

gathering momentum

MAIN DRIVERS FOR THE INCREASING LENDING DEMAND

Monetary Policy: QE, low funding costs, etc.

Excess of Liquidity: Increase in transactions

Entry of new sponsors

FINANCIAL SECTOR

REAL ESTATE INVESTMENT MARKET

MACROECONOMIC ENVIRONMENT

Yielding assets: Increasing lending demand due to the outstanding tourism industry performance

Financing MarketThe Hotel Property HandbookBalearic Island Snapshot

EXECUTIVE SUMMARY

Source: Deloitte


Main

Conditio

ns

LTV (1)

Upfront Fee

Spread

45-50% 45-55%

2015 2016

150-250bps 125-175bps

225-400bps 200-250bps

Framework

Main Players

Balloon (2) 60-80% 65-100%

Credit Access Constraints

Financing Upturn

Institutional Investors / Debt

Funds

Banking / Insurance Companies

2013-14

50-60%

100-150bps

175-225bps

70-100%

Location, category, performance, type of operating contract (and mandatory period duration)and hotel brand significantly affect financing terms.

2017YTD

50-65%

90-135bps

150-225bps

70-100%

(1) Sustainable LTV to deal with the debt service with high funding costs (A higher LTV will result in a greater debt service)(2) A Balloon is required to cover the high funding costs during the loan´s life (a lower balloon will result in a greater annual debt

service). Estimated balloon for a 5-7 years loan.

Development loans: Traditional lenders are

coming back


The Most active players are expected

to stay active in 2017:

Main Players:

Equity

Debt(€m)

2015 2016THE CORE PROFILE STILL DOMINATES THE MARKET:

Source: Deloitte


EXECUTIVE SUMMARY

Source: Deloitte


Main Chains

More than 10,000 rooms in Spain

Core79%

Core+

11%

ValueAdded

10%

Core56.3%

Core+

30.0%

Value

Added13.7%

€mCore 1,522

Core+ 811

Value Added 369

€mCore 1,702

Core+ 234

Value Added 209

NPLs portfolios



EXECUTIVE SUMMARY

Hotel

Property

Digital strategy

RenovationCustomised experiences

Brand repositioning

Innovation

SustainabilityBREEAM & LEED

BREEAM and LEED certifications are the

most significant sustainability certifications

worldwide. Both standards are

regularly updated in line with the market.

LEADING SUSTAINABILITY CERTIFICATIONS



EXECUTIVE SUMMARY

“Expectativas 2017The Experience Revolution”

Most significant value drivers for CEOs in 2017

Select the two most significant drivers to improve capital and asset efficiency in 2017#1

Incomeincrease

#2Operating margin improvement

#3Talent and brandmanagement

#4Asset and capital efficiency

35%

33%

28%

25%

23%

17%

15%

15%

7%

2%

Investment repositioning

Optimise and invest in asset maintenance

Systems investments

Non-profitable asset sales

Cash Management

Funding sources renegotiation

Accounts receivable and payable management

Acquisitions

Supplier and debtor management

CapEx optimisation



EXECUTIVE SUMMARY

Gran Hotel Velázquez Madrid

Gran Hotel Velázquez will be upgraded to a 5 star hotel with 111 rooms.

The refurbishment of Gran Hotel Velázquez is a clear example of an

upgrade strategy in order to

reposition the hotel as a world-class hotel to target an upper client segment.

Deloitte´s role:• Lender Multidisciplinary Due Diligence• Project Monitoring Services• RICS Valuation



EXECUTIVE SUMMARY

The 4 star hotel has 375 rooms and the Las Rocas Beach Club leisure area.

Jardín Tropical 4* Hotel

Costa Adeje, Tenerife -Canary Islands

Jardín Tropical hotel is a clear example

of the importance of a portfolio strengthening strategy to

consolidate the hotel as a market reference.

Deloitte´s role:• Full sell side advisory:

• Vendors Due Diligence• Transaction execution



EXECUTIVE SUMMARY

The hotel is a 5 star luxury hotel with 315 rooms.

Silken Puerta América Hotel Madrid

Silken Puerta América is a unique hotel. It demonstrates a niche

strategy and each floor is different.

Deloitte´s role:• Business Plan analysis & turnaround

advisory.• Technical and Town Planning review.



EXECUTIVE SUMMARY

The hotel is an ongoing project, a 5 star luxury Hotel & Residences with 127 rooms & 21 Residences.

Santa Marta Hotel Resort Marbella, Málaga

Hotel Santa Marta is going to be an

outstanding complex, achieving

an upper upscale 5* category.

Deloitte´s role:• Lender Multidisciplinary Due

Diligence.• Business Plan review



EXECUTIVE SUMMARY

Hotel Arts Barcelona

Hotel Arts Barcelona is a landmark in the city. The complex is an upper

upscale 5* luxury Hotel, and is composed by a base building and a high tower.

Deloitte´s role:• Lender Multidisciplinary Due

Diligence.




EXECUTIVE SUMMARY

Hotel Fairmont Rey Juan Carlos I Barcelona


The refurbishment of Hotel Fairmont Rey Juan Carlos I is a clear example of an

upgrade strategy in order to

become the leading MICE and Urban destination within it’s

influence area.

Deloitte´s role:• Lender Multidisciplinary Due Diligence



EXECUTIVE SUMMARY

Oh!tells IslantillaIslantilla, Huelva

The hotel is a 4 star vacational hotel with 346 rooms, focussed on families and senior couples / groups.

Oh!tels Islantilla 4* is a vacational hotel, which includes a Conference Centre. Thanks to the acceptable maintenance for the past years, the hotel has become one

of the leading vacationaldestinations within Islantilla,

especially for national visitors looking for good, attractive, and affordable holidays.

Deloitte´s role:• Multidisciplinary Buy-Side Due Diligence



EXECUTIVE SUMMARY

Hilton Sa TorreLlucmajor, Mallorca

The hotel is a 5 star luxury hotel with 104 rooms, the complex is located nearby two golf courses and counts with a convention centre

Hilton Sa Torre 5* is a

renowned clam luxury tourism resort. The Hotel benefits from its natural

surroundings and its attractive gardens, allowing outdoor activities and distinguishing from other competitors. It is placed around the noble and historical property of Sa Torre.

Deloitte´s role:• Multidisciplinary Buy-Side Due Diligence


The Hotel Property HandbookSpain 2017

Javier García-Mateo, MRICS

PartnerFinancial Advisory ‖ Real Estate


Ana Granado, MRICS

DirectorFinancial Advisory ‖ Real Estate


Jose María Espejo

Senior ManagerFinancial Advisory ‖ Real Estate

[email protected]: +34 918 232 692

Jordi Schoenenberger

PartnerHospitality Industry [email protected]: +34 932 543 932

Fernando Baldellou

PartnerHead of Financial Advisory – Hospitality [email protected]: +34 914 432 514

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