Hotel Repositioning: Unlocking Asset Value
PHG outlines the key drivers of hotel repositioning in Spain
Success case study
As part of its hotel asset investment strategy, the publicly traded U.S. group, Oaktree Capital, acquired the Dolce Sitges hotel, a 5-star luxury resort located in Sitges. This iconic property, featuring 263 rooms, a spa and wellness area, 2,175 sqm. of meeting space, two restaurants, and three bars, represented a significant opportunity for value creation. The hotel had previously hosted international events such as the Bilderberg Club conference in 2010.
However, the asset faced significant operational and commercial challenges that were hindering its value and needed to be addressed in order to maximise its appreciation potential and prepare it for a future re-entry into the market.
Oaktree Capital conducted a selection process for specialised hotel asset managers at its London European headquarters to delegate control of the hotel’s operations. All major hospitality advisory firms based in Spain participated in the process, and ultimately, PHG emerged as the winner for this project. We were awarded aone-year contract to carry out this assignment, side by side the Oaktree real estate team.
PHG conducted an initial analysis of all areas of the hotel within the context of the Sitges market and the European MICE segment.
Once the conclusions of this report were extracted, we rolled out an action and value-enhancement plan for each department of the property, as well as for the overall strategic positioning of the hotel.
Over the following 12 months, we carried out a thorough optimisation process and implemented corrective measures across all areas of the hotel. This included regular site visits, progress meetings with Oaktree Capital, and close collaboration with the hotel staff to implement our proposed solutions.
The positive outcome of this turn-around plan not only maximised the value of the asset during its subsequent divestment—which proved to be a great success for Oaktree—but also established a strong relationship of mutual trust between PHG Hotels & Resorts and several Oaktree Capital teams, leading to new consulting assignments in the Spanish market.
In this project, we achieved the following key milestones:
Reducing inefficiencies and seizing opportunities across all hotel departments
Identifying high-potential employees as agents of change
Significantly strengthening the commercial department and getting more wins in the MICE segment
Extracting greater value from the operator’s role, despite the existing weak management contract, in place prior to acquisition
This operation demonstrated the importance for a North-American investment fund of hiring local asset managers with real operational hotel experience to unlock the value of assets in Spain.
Our capacity to delve into the most intricate details of hotel management highlighted the significant added value that PHG brought throughout these 12 months, thanks to its extensive operational expertise.
Eventually, the sale multiple of the exit transaction meant a historic milestone for Oaktree’s hotel activity in Spain.
