How to Convert a Historic Building into a Hotel
Spain’s extraordinary historic architectural heritage offers a unique opportunity to develop distinctive and highly
Success case study
PHG was approached by the shareholders of a family-owned holding company. The company owned an old 3-star resort in Benidorm that was managed by some of the shareholders. The board of directors did not have a strategy on how to maximise asset value for the holding company.
The shareholders were not hotel industry professionals and were not managing the hotel in accordance with the latest hotel practices. The performance of the hotel had a very high reliance on tour operator distribution. The hotel’s rating on Booking.com was sub-standard, and the property financial performance revealed a massive opportunity for improvement.
Some shareholders were in favor of continuing with the current management, others preferred to sell the property and cash out, and others were considering perhaps re-investing in the asset to reposition it, following modern professional hospitality trends.
PHG delivered the conclusions of its initial evaluation to the company’s board and presented the case that it made far more economic sense for the shareholders to generate additional value to the hotel, rather than selling the property in its current state. This approach would avoid a significant discount on the sale price due to the hotel being in a sub-standard condition (both from a product perspective and from a performance point of view).
The board approved PHG’s proposal, which consisted of (1) professionalising the management staff by appointing a new executive team and (2) strengthening the hotel’s commercial strategy by signing a franchise agreement with a global hospitality brand. These two initiatives would be complemented by the implementation of many other operational recommendations outlined by PHG in its analysis report, and, of course, a complete overhaul of the property’s product standard. A whole new hospitality concept had to be created for the destination.
At PHG, we carried out a Brand Search & Selection Process, fully aware that we were about to introduce the first ever global brand to enter the destination of Benidorm. This type of value generation opportunity proved to be extremely effective, and replicable, in classic outdated Spanish destinations such as Benidorm, Torremolinos, Magaluf, Lloret de Mar, Salou and others.
We run interviews the leading hotel groups from the global top 10 ranking and ultimately selected French multinational Accor, and its brand, Mercure Hotels, as the best fit for the client’s requirements and the product vision that we intended to roll out.
In practical terms we had to reduce the number of rooms, create additional room types, a new restaurante concept, we had to introduce interior design, landscaping, etc.
PHG supported the owning company by developing a business plan that enabled the shareholders to secure financing from a top-tier Spanish bank. PHG also provided guidance in the selection of an interior design firm, a landscape architecture studio, a construction company, and a project management firm.
The construction work progressed successfully, despite the usual complexities associated with this type of projects and the added challenges of the Covid period.
The objective of creating a new lifestyle product and F&B concepts was achieved, the number of rooms was reduced, and the hotel evolved from a single-product model to offering multiple room types, among many other quality improvements.
In conclusion, the ambitious goal set by PHG of increasing the hotel’s revenue by more than 100% was successfully achieved. We also managed to position the property as the highest-rated hotel in the destination of Benidorm and also as the top-performing example of the Mercure Hotels brand in the Iberian Peninsula.
