Private equity group Patron Capital is looking to provide financial backing for hotels, having raised a total of €2.3b (£1.9b) from institutional and high net work investors in Europe and the USA since its launch in 1999.
At a time when hotels and other hospitality companies are struggling to secure support from banks to fund expansion, it is rare to come across a body that is so eager and enthusiastic about investing in the industry.
"With a successful track record in the hospitality sector and a strong in-house hospitality team - combined with a strong, liquid fund, we are able and willing to support and underwrite hotel investments," said Josh Wyatt, director of hospitality and leisure for Patron.
Evidence of Patron's willingness to invest across all levels on the industry is highlighted by its successful completion of two major deals during 2011 - the acquisition of 24 hotels, primarily within the three-star category, from the administrators of Jarvis Hotels, and the backing of Halcyon Hotels and Resorts' purchase of seven luxury family hotels from the beleaguered Von Essen portfolio, off a guide price of £40.5m.
The deal for the Jarvis properties - carried out as a £40m joint venture with West Global, part of the Global Restructuring Group of the Royal Bank of Scotland - resulted in the formation of Jupiter Hotels, which is now operating the properties, rebranded as Mercure, under a franchise agreement with Accor.
Wyatt sees enormous potential in breathing new life and value into the 24 Jupiter hotels. "We are investing in the physical state of the properties, which had been largely neglected for a decade, and reinvigorating the management team with the appointment of Andrew Gill, formerly of the InterContinental Hotels Group, as chief executive of the group," he said.
Meanwhile, the joint venture agreement with Halcyon - resulting in the revitalisation of the Luxury Family Hotels brand - will lead to the newly purchased properties being restored to their former glory. "We are creating the best physical product and service levels within the family market, with a strong emphasis on technology, design and food and beverage," said Wyatt, who expects the group - under the guidance of Nigel Chapman - to add another two or three hotels to the portfolio.
Patron has also invested in what Wyatt describes as the most exciting growth sector of the industry - the hostel market - with the acquisition in 2007 of Generator Hostels, which currently operates six properties across Europe, including the 900-bed hostel in Russell Square, London. Two more hostels will open in Berlin and Barcelona by the end of the year and Wyatt is actively looking for a further five sites.
"We have reinvigorated the brand through a focus on good interior design, comfortable beds and the introduction of mobile phone and iPod charging stations alongside every bed," said Wyatt.
In looking for new hotels to invest in, Wyatt said that it was essential that Patron teamed up with savvy and flexible operators. "We are looking to do business with partners who have a high level of experience - such as Andrew Gill or Nigel Chapman. We are also keen to work in a challenging environment and will takes risks which other investors may shy away from - as with risks there are good rewards."
"Our investments are for the long term - around 10 years. It will generally take three years to fix a business, then another three years to stabilise it before we would even consider exiting."
Wyatt warns that 2012 will be a challenging year for hotels, with revpar in London that will remain flat or even fall," said Wyatt. "But I am cautiously optimistic for the long term. Businesses will survive if they are excellent at what they do - those that coast will no longer be able to get away with it as they may have done in the past."
By Janet Harmer
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