Why have you made the choice to position EXTENDAM in the hotel industry and especially in business hotels? Could you explain us this market’s specificities?
Jean-Marc Palhon : The hotel industry represents the 4th largest commercial real estate asset class in Europe after office, retail and logistics. This asset class, still little known by investors, has very favorable fundamentals yet.
Demand for accommodation structurally grows year after year and faster than supply. The business trips’ flows recorded an average annual growth over ten years of +5%, compared to an average annual increase of hotel accommodation capacity of only 1% over the same period.
Finally, Europe is the most visited continent in the world. Europe has been number one in international arrivals for years, with three times as many visitors as the Americas and twice as many as the Asia-Pacific region. Europe is thus number one in the global hotel market, with 32% of available rooms, representing 2.5 billion night stays in 2018. The business hotel market represents 48% of the total number of hotel night stays, almost one out of every two nights.
EXTENDAM is now the European leader in private equity dedicated to business hotels. Which fundamentals have supported you in reaching this position in a decade?
J-M P : Over the years, our strategy has been to prefer majority or minority shareholdings in hotel operating businesses through investment in SMEs who most of time also own their own real estate. Our portfolio, with assets worth nearly €2 billion, is today made of 202 hotels in France and Europe, each of them located in safe and strategic locations: city centers or big urban areas’ peripheries, or near railway stations or airports.
For each of our investments, we mainly target already existing business hotels, with a 2 to 4 * positioning. These hotels are already profitable but still have many imbedded sources of value creation. Their performance can therefore be improved through a repositioning, a refurbishment, the implementation of up to date management processes, new contract management...
How do you identify your investment targets?
J-M P : While the hotel transaction market is deep and growing, access to it is not structured like for other asset classes; indeed, beyond the investment capacity, only a very good knowledge of every players allows access to deals, which are essentially "off market". By relying on our close proximity to the leading European hotel brands and managers, EXTENDAM has become an actor and producer of its own deal flow. This allows us to participate very early in the definition of the strategic repositioning to operate.
EXTENDAM has also been investing outside of France for several years. In which countries are you investing?
J-M P : EXTENDAM is already investing in 6 major territories in Europe: France, Germany, Italy, Spain, Portugal and Benelux. Our first European foreign investments are dated 2014. For instance, we have already invested in Porto, Lisbon, Madrid, Berlin and Brussels. We have now identified new investment projects in other countries in order to continue our European development.
Why did you choose the European market?
J-M P : We have chosen to deploy our activity in Europe as the continent is at the very heart of travel and business trip practices. Nearly one out of two travelers in the world is hosted in Europe. All indicators are pretty good: Europe should reasonably remain the most visited destination in the world in the next decade.
As the increasing accommodation demand is not satisfied by current offers, occupancy rates for European hotels are the highest in the world.
In this context, we are convinced that the European market is the most resilient market, and it offers the most promising performances to investors.