Andrew Harrington, partner at AHV Associates, gives an overview of the last month’s financial activity across the hospitality sector.
The AHV Hospitality Index increased by a remarkable 22% in the last month, surpassing the Pre-covid-19 levels, and outperformed the broader European indices. This reflects investors expectation of a significant rebound in the hospitality sector due to the wide distribution of vaccines and the announcement of plans to ease restrictions in the UK and other countries in the next few months.
Several big hotel groups announced their full-year earnings in February, which were materially impacted by the Covid-19 pandemic. Firms such as Wyndham, Hilton, Accor, Hyatt, Scandic and Pandox reported a decrease in the full year’s RevPAR ranging from 39% to 75%.
Nevertheless, there was expressed positivity for the short-term future, with Hilton reporting an approximately 5.1% net unit growth since 2019 and Wyndham Hotels & Resorts reporting an operating profit for the fourth quarter and announcing a 100% increase to its dividend.
There was a material increase in sovereign bond yields, which had a short-lived effect on global stock markets. Simultaneously, the spread between sovereign and corporate bond yields decreased. This further confirms the renewed investor confidence in the outlook for the economy, and if sustained, should ripple through to lower borrowing spreads for all hospitality companies.
The M&A market continued to show activity, focusing on trophy hotels in major cities and holiday destinations. Some of the most interesting transactions announced in February were:
• The purchase of the upcoming Edition hotel in Madrid, Spain by Archer Hotel Capital for
€205 million.
• The acquisition of the Baglioni Hotel Luna in Venice by the Reuben brothers for €100 million, alongside the strategic partnership between them to facilitate the rollout of Baglioni-branded hotels globally
• The acquisition of Croatia’s Sunce hotels by KSL well-known hospitality fund for an undisclosed amount, giving the firm ownership of 13 hotels in the country; we understand it was a very competitive process
• The acquisition of Bourne Leisure, which is a premier UK holiday group, by Blackstone.
We are aware of others in the pipeline, including some portfolios, expected to close in the next few months.
Andrew Harrington is a partner at AHV Associates, a London-based boutique investment bank focused on advising private companies across a range of M&A and capital raising assignments.
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