It’s time to check into the hospitality industry.
As one can imagine, the pandemic hit tourism — and hospitality, in particular — hard. Occupancy limits, safety precautions, and low guest counts were only a few of the challenges hotels had to contend with. In 2019, this sector accounted for more than than 10% of jobs globally.
So now, hotels that were thriving just over a year ago are up for sale — either in part, or in total. There are a number of reasons for this — profit losses, expensive upgrades and changes needed to meet post-pandemic travel demands, and burnout, to name a few. And big name investors are already taking advantage.
Take Spain, for example. Amancio Ortega, one of the world’s richest men, acquired the Senator Playaballena hotel this Spring for roughly 25 million euros. This four-star hotel in a popular tourist area will expand the investor’s real estate portfolio, where hotels currently account for 5–10% of its holdings. And, last month, TUI group sold its 49% stake in Spain’s RIU Hotels SA to its co-owners for 670 million euros — bringing the joint venture an enterprise value of 1.5 billion euros.
Companies are also taking advantage of this moment — and lower real estate prices — to open new locations. Marriott Bonvoy, for example, is launching “one-of-a-kind getaways” all over the world — including unexpected cities (like Nanjing and Bergen), upscale islands (including The Maldives and Ibiza), and eco-retreats (in Jackson, WY and Bogotá).
There are a few factors that are driving investor confidence in hospitality right now, including:
- Vaccination levels are rising worldwide, giving consumers confidence to travel
- Travel restrictions are easing for those who are vaccinated
- Low-prices on flights and accommodations are attracting travelers
The moves made by Marriott also indicate an important trend in consumer preferences: increasing demand for untraditional vacations. This includes destination, accommodations, and environmentally focused trips.
I believe the pandemic has also breathed new life into the real estate arm of the hospitality industry. As more organizations are allowing remote work, consumers can now establish their offices anywhere in the world — even from their favorite vacation destinations.
In short, the hospitality industry is showing signs that it is on the brink of a new era. Of course, necessary adjustments will need to be made to accommodate the “new normal” left by the COVID pandemic (including cleanliness, and an increase in consumer consciousness). But I believe these adjustments will help to fortify the industry for the long-term.
Danilo Diazgranados is an investor, collector, and lover of fine wines and a member of the prestigious Confrérie des Chevaliers du Tastevin, a fraternity of Burgundy wine enthusiasts.
