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European Hotel Investors Hiring for Growth - November 2015

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1) HotEls ate the hotels on a variable lease contract for an initial 10 years with a minimum guaranteed rent. The hotels are in the resort of Maspalomas and have 1,183 rooms. Hispania already owns Barceló Margaritas hotel on the island. Concha Osácar, founding partner of Hispania’s external managers the Azora Group, commented: “We have significantly reinforced our resort hotel strategy with the acquisition of singular assets in Gran Ca- naria and at an urban level with a unique asset right in Madrid CBD, as well as with our presence in strategic areas of the Madrid and Barcelona office markets.” He said these complex deals take companies out of receivership, reinforce their viability and give Hispania access to assets at very competitive prices. Listed last year Hispania has raised €861m and its assets include 684 dwellings and over 9,000 hotel rooms. pie ❙❙❘ guest column European hotel investors hiring for growth By emma Burnaby-Atkins, Director, Head of Hospitality europe, Ferguson partners europe, London W ith record levels of tourists visiting ing with, there’s gathering momentum in terms torical norm of 20%-30%. A combination of an- Europe from China, strong year-on- of brands utilising their own capital to secure nual and one-off performance-driven equity year deals growth in many Europe- deals to increase portfolio size and market share. grants, normally with a four year vesting sched- an markets and demand generally outstripping In many cases, the use of balance-sheet oriented ule, puts golden handcuffs on the top deal mak- supply, its unsurprising that we’re seeing most structures is a quick-fix solution to secure an as- ers. this necessitates a creative approach to facets of the hospitality industry enjoying vigor- set which, once developed or repositioned into sourcing attractable talent, often from less ex- ous growth. Ferguson Partners Europe is in- the optimum format and specification for the ploited targets such as the investment teams of creasingly active within this market and witness- brand, can be exited with a new management opportunistic private equity firms investing in ing growing demand for talented senior contract or franchise agreement in place. such hospitality, where executives have often worked executives across all hospitality functions with short-hold investments typically secure a trophy for a leading hotel brand, have owner relation- particularly intense competition for top per- building intended as a flagship first asset for a ships, are highly transactional by nature and can formers in development, asset management new brand or to springboard a new concept structure a contract and negotiate a deal. An- and investment. We have noted a number of launch. As growth strategies shift from manage- other worthwhile target can be the smaller trends emerging in our searches for top level ment contracts towards a hybrid structure incor- brands where senior developers, in a flatter employees. overall, there’s greater emphasis on porating an element of balance sheet investing, structure, are involved in all aspects of sourcing, hiring leadership talent that can help an organi- it can place strain on organisational structures. due diligence and execution. Although the sation define itself over the next 5-10 years. Fer- Based on dialogue with senior developers, the brand developer’s goal is ultimately to secure guson Partners has seen significant recruiting majority aspire to a broader role incorporating the management contract or franchise agree- for growth, with recent activity strongly biased balance sheet investing, but relatively few have ment on the most favourable terms, that is only towards development. significant relevant experience, so the challenge part of the equation. the best developers under- is to locate talent with broader functional skills. stand all aspects of a hotel’s functionality, can Whatever a brand’s positioning, tapping vigorous growth involves one of four routes, name- With growing demand for top quality, finan- enhance returns by integrating development ly management contracts, franchising, leasing cially sophisticated brand developers, forward- and acquisitions functions with asset manage- or, to a lesser but growing extent, the use of bal- thinking brands are revisiting their compensa- ment and operations and can underwrite both ance sheet. the obvious advantage of this route tion and value creation and the associated risks from a is the greater certainty it brings to the outcome increasingly employing long-term incentive returns perspective. such individuals are by no of a development pipeline in an increasingly plans linked to profitability rather than fee reve- means easy to find, but Ferguson Partners is competitive marketplace. Access to investable nue generation. our analysis of compensation proven in its ability to identify and secure such capital gives flexibility to secure developments structures at the most senior end of the devel- talent. eba or projects of significant complexity where se- opment talent pool shows equity as an increas- curing equity partners may be difficult. Based on ingly large percentage of the mix - up to 40% of The author can be reached at experience with global brands we are partner- total reward. this represents a leap from the his- EBurnabyAtkins@fergusonpartners.com structures for star performers, property investor europe l Edition 414 l November 2015 l www.pie-mag.com 59