Going Global: Hotel Investment Helps Investors Beat the Brexit Blues

Brexit and the Property Market

January’s ‘Boris Bounce’ saw the residential market rebound following Boris Johnson’s majority win in December and the clarity it offered on the government position on Brexit. While the outlook for UK property is certainly looking up, the market is still facing an 11-month ‘transition period’, with questions pending over the eventual shape the UK’s departure will take. We’ll have to wait until the end of the first quarter of 2020 to see whether January marked the start of a UK market recovery, but the outlook for UK residential property is looking up.

Over in the alternatives, operational property types are also charting well. This class includes hotel, student living, PRS (private rented sector) and healthcare. This sector is driven more by need, and transactions in these markets are less susceptible to geopolitical pressure as a result. Those who don’t need to may hold off from selling or buying a home during a period of uncertainty, but they will still travel. Likewise, students will still require accommodation during term-time, and those in need of greater support and assisted living will take action to secure it more immediately. As such, these need driven markets enjoy some buffer from Brexit uncertainty, and boast more regular returns since they are revenue-generating.

Hotel Investments

The hotel market is increasingly attractive to larger investors, who helped push global hotel transaction volumes to $66bn last year (2019)[1].

Even against the shadow of Brexit, the European market performed well. Property advisor CBRE puts the total value of European hotel investments at €24.3bn for the year to June 2019, an increase of 5.3%[2] on the year before.

These figures are heavily skewed by large portfolio investments. For those interested in the operational asset class, hotel investments typically fall into either single assets (lone rooms) and portfolios (groups of hotels). Individual investors normally invest in single assets, while the portfolio market has historically been the domain of institutions. Until now.

Cogress recently signed a landmark deal with the global hospitality chain, Selina. The exclusive partnership gives our investors the opportunity to invest in a selection of portfolios of Selina hotels, bringing the operational property market to Cogress investors for the first time. Featuring hotels in multiple countries, this latest diversification by Cogress gives our investors an opportunity to participate in an investment that is less susceptible to the machinations of Brexit.

 

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What is Selina?

Valued at $850m, Selina is a technology-focused hospitality company that identified an underserved market: millennials. Targeting 24-39 year olds, Selina creates hubs where freelancers, travellers and locals can work, stay and play. This is a target demographic seeking unique experiences: 78% would prefer to spend money on experiences rather than material goods[3], and Selina understand and deliver this.

The exact makeup of each Selina is unique and targeted to the location, but they all include a range of accommodation, coworking spaces, food and beverage (F&B) venues and an entertainment programme, which could vary from a surf school to art classes to gigs and live music performances depending on the locations.

The brand has successfully expanded globally by identifying underperforming hotels and refurbishing those them to ensure every square foot generates revenue. The millennial market accounts for 35% of the travel market, and account for $200bn revenue a year[4].

A Proven Model

Selina’s agile model has seen the brand scale quickly. Boasting 128 properties in 19 countries, the company can refurbish and renovate most new acquisitions within 12 weeks, reducing downtime and ensuring they’re operational and revenue generating quickly. By maximising the revenue potential of every square foot of space through its range of retail, F&B and co-working offerings, most Selina properties can break even at 45% occupancy, significantly lower than many competitors.

It’s an approach that has attracted a lot of interest from investors; Selina’s most recent funding round in 2019 raised $100m, pushing the company’s post-money valuation to $850m and adding the likes of Access Industries and Grupo Wiese to a list of investors that already included Sir Ronald Cohen.  

Diversifying to Offset Market Uncertainty

By partnering with Selina, Cogress is providing our investors an opportunity to take part in a property market that’s normally reserved for institutions and the super wealthy. Featuring portfolios comprising international hotels, this latest product spreads investors’ exposure across multiple countries. This operational asset class also delivers regular income and is less reliant on capital growth than traditional development projects. We believe both give our investors great property investment opportunities, hedging against market volatility at a national level.    

We’ll be launching regular portfolios throughout the year, each featuring a collection of hotels in markets including the U.K, U.S, Portugal, Germany and Austria. Investors will be able to choose whether to invest directly, or via SIPPS or SASS. As with all Cogress investment opportunities, our registered community will be presented with a thorough summary of our due diligence on each portfolio, giving investors all the information they need to decide whether a portfolio hotel investment opportunity is right for them.

To find out more about Selina and view our past and present portfolio investment opportunities, sign up below to receive more information.

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[1] JLL, 2020. Hotel Investment Outlook 2020. Available from here.

[2] https://news.cbre.co.uk/european-hotel-investment-volume-bucks-the-trend/

[3] 2020, Selina. Selina Corporate Investment Deck.

[4] 2020, Selina. Selina Corporate Investment Deck.

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