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Investors rediscover a passion for golf resorts, says HVS report

With the Ryder Cup underway this week at Gleneagles in Perthshire hotel investors are rediscovering the appeal of European golf resorts as the sector starts to regain its momentum.
This year has seen in excess of €386m (£322m)-worth of major (over €10m) single asset transactions in golf resorts compared with none in 2013 and €128m (£107m)-worth in 2012.

A new report from global hotel consultancy HVS London, European Golf Resort Investment, says economic recovery is now encouraging institutional investors and private equity organistions to invest in golf resorts. These properties are now being viewed as attractive investments as they offer multiple revenue streams as well as potential for future development. Many have the benefit of well-built hotel properties with highly regarded golf courses and a diverse guest profile.

Much of the new investment comes from the US, where golf has a huge national following.

“American investors are seeking high profile trophy assets on the back of the high level of home demand, a familiarity with the business and intense competition for assets signalling lower returns stateside,” commented report author Harry Douglass, associate, HVS London.

HVS recently collaborated with Troon Golf EMEA on a UK-based golf resort project. The Geneva-based company currently has 41 courses in 16 countries and is committed to expanding across Europe, the Middle East and Africa.

“We have found the difference now is that today’s golfing clientele demand very exacting standards of golf course, facilities and food & beverage. To be successful resort owners need to invest in these, maintain them and continue investing to stay ahead of the competition,” added Douglass.

Following a boom in the 1990s Europe’s golf resorts were subsequently thought to be over-supplied in many locations. A reduction in both corporate and leisure spend drove RevPAR (revenue per available room) down, along with food and drink sales. The withdrawal of debt from the market and lower loan-to-value ratios decreased values even further.

Hotel performance stabilising over the past 12 months has prompted a number of high profile resort transactions such as the sale of both Ireland’s Doonbeg Lodge in County Clare and Turnberry to the Trump Hotel Collection for €10m (£8.3m) and €43.2m (£36m) respectively, and the sale of Spain’s Hotel Guadalmina in Marbella to the George Soros-backed Hispania Activos Inmobillarios for €21.5m (£18m). More recently the Wentworth Club in Surrey was sold to the Beijing-based Reignwood Group for €162m (£135m).

While the development of existing resorts continues apace including Rocco Forte’s Vedura scheme in Sicily, the Castelfalfi Club in Tuscany and Trump International Aberdeen, potential acquisition targets across Europe include the €25m (£20.8m)-sale of the Adare Manor estate in Ireland’s Co. Limerick.

“Scotland and Ireland have proved key places to invest in golf resorts but France and Spain now have a number of large scale destinations with the benefit of a strong leisure and commercial market base. Our clients are likely to be part of further transaction activity in the European market as we move into 2015,” said Douglass.

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