MILAN (Reuters) – International investors are taking a look at some of Italy’s largest hotels, whose family owners may be convinced to part with properties that can be renovated in time for tourists to return.
General view of the five-star Grand Hotel de la Minerve in Rome, Italy, March 18, 2021. REUTERS / Guglielmo Mangiapane
The number of guests staying at Italian hotels more than halved in 2020, and the chances of recovery this year have diminished as the country battles a third wave of the COVID-19 pandemic.
The Italian tourism agency ENIT sees visitor numbers rise again by 2023 to surpass pre-pandemic levels. However, investors are hoping the wait will prove to be too long for many troubled owners.
“M&A activity is focused on trophy facilities, for which the pandemic has played a crucial role: family owners who would never have thought of selling in the past are now ready to hold talks,” said Marco Zalamena, Head of Hospitality at Consultants EY.
According to two marketable sources, at least four luxury hotels are currently for sale.
These include the family-run five-star Hotel Majestic and the Grand Hotel Via Veneto, which are only a few minutes’ walk from each other on the famous Via Veneto in Rome.
In the north, Hotel Britannia is for sale on the shores of Lake Como, while real estate investment company Aina Hospitality has put the Four Points Hotel in Milan on the block on the condition of anonymity as the information is not public.
Hotel Britannia owner Ross Whieldon confirmed that he and his wife were scouring the market for a possible sale, but added that they would like to keep it. “It depends on how good the deals are, we haven’t made a decision yet,” he told Reuters.
The other hotel owners did not respond to requests for comments.
In Venice, which made up the lion’s share of investments in the Italian hotel sector in 2020, the private owners of the Hotel Palace Bonvecchiati next to St. Mark’s Square held preliminary talks with an investor last year.
Eligio Paties, one of the two owners of the hotel, told Reuters that the talks had ended quickly and that they had no interest in selling for the time being. “People call us every day,” he said.
ITALY IN DEMAND
Last year, fewer hotels changed hands in Italy when the pandemic raged and rooms were empty. According to EY, deals have more than halved in 2020 to 31 for a total of 1 billion euros (1.2 billion US dollars), after a high of more than 3 billion euros from 67 transactions in 2019.
This trend was reflected across Europe. The real estate consultancy CBRE pointed to a decrease of 75% in France and a decrease of 60% in Spain and Germany.
But there are signs that are changing and Italy is high on investors’ wish lists.
“Italy is the most sought-after country when it comes to hotel goods,” said Raimondo Gaetani, business development director at real estate private equity firm Patrimonia.
“That’s because there are more high-end destinations than other European countries, which means investors can build hotel portfolios and benefit from higher margins.”
Patrimonia advised British private equity firm Reuben Brothers on the purchase of the historic Luna Baglioni hotel in Venice earlier this year for 100 million euros.
According to Francesco Calia, Italy’s hotel manager at CBRE, a fragmented market and fewer brands make the large Italian hotel sector more attractive.
WAITING GAME
According to the Federalberghi industry association, 90% of Italian hotels are currently closed. The expectation is that more family-owned hotels will need to be brought to market, lowering prices that have so far proven resilient.
Marco Michielli, chairman of the northeastern Veneto region in Federalberghi, said he got three or four calls a week from European mutual funds interested in Italian real estate, compared to two or three a year before the pandemic.
“They’re sitting on the fence waiting to find hotel owners to give in,” he said.
In February, the Italian Billi family sold the Grand Hotel de la Minerve in Rome to the domestic investment fund Arsenale.
Board chairman Paolo Barletta, who started Arsenale with jewelry billionaire Nicola Bulgari, told Reuters he expected competition for Italian assets to intensify.
Barletta predicts that large hotel chains, which currently only account for 7% of the Italian hotel sector, will own 25-30% of the market within a decade.
MOMENT OF RECKONING
With over 32,700 hotels and 1.1 million rooms, Italy has the largest hotel portfolio in Europe according to Eurostat, ahead of Germany (32,200 hotels) and Spain (19,700 hotels).
The broader moment of billing for an industry fraught with heavy borrowing could come with the winding down of government support measures that have saved hotels most of their staffing costs, and with the end of debt vacation programs.
In order to support smaller and family-run hotels, the Italian state investor CDP has set up a EUR 2 billion fund advised by EY to invest in the sector.
This could help hotel owners trying to hold their own in anticipation of a strong rebound.
“The sector has been hit hard, but it’s not on its knees. As soon as we start traveling again, the recovery will be dramatic, ”said Bernabo Bocca, chairman of Federalberghi.
($ 1 = 0.8379 euros)
Additional reporting by Riccardo Bastianello in Venice. Adaptation by Keith Weir and Mark Potter
