5 questions with LMEY Investments' Marc Sontag

Mediterranean Resort & Hotel Real Estate Forum

Marc Sontag, COO of LMEY Investments, will be a featured speaker at the Mediterranean Resort & Hotel Real Estate Forum, which will be held in Tarragona, Spain, from Oct. 16-18. 

Sontag joined LMEY Investments as COO in 2015 after 25 years of developing hotels and mixed-use resorts as well as managing landmark hospitality assets. He holds a bachelor's degree from the Hotel School The Hague, The Netherlands.

Ahead of the conference, HOTEL MANAGEMENT talked with Sontag about what investors should look for when considering a Mediterranean hotel.

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1. What brought you to the world of hospitality investment?

After having had a relatively traditional international hotel career through [food-and-beverage] to general manager at both private and chain hotels, in 2003 I was asked by Sander van Gelder, the owner/developer of the well-known luxury resort Vale do Lobo, in the Algarve, Portugal, to join his team. This resort was, at the time, one of the largest European private mixed-use resorts encompassing 400 hectares, 1,500 villas, two championship golf courses, and dozens of F&B and retail outlets. 

Here, I had my first experience with holiday real estate, with rental and investment schemes and has laid the foundations for the rest of my professional career focussing on mixed-use hotel and resort development and asset management, where from a developer and owner relation perspective I have had the opportunity to work with landmark brands such as GHM/The Chedi, Hilton, Conrad, but also with the all-inclusive German family clubs Aldiana and Robinson, besides other internationally known hotel operators at our current hotel development projects.

2. How do you think the hospitality investment market has changed in Europe and/or the Mediterranean in the past year?

Marc Sontag

Besides some ski and leisure destinations in Switzerland, Austria, Germany and The Netherlands, a significant part of our hotel portfolio is located at beach locations in the Mediterranean, through owned and managed hotels in continental Spain, the Balearics, the Canary Islands, Crete, Cyprus and Tunisia with further development projects in Italy.

Southern Mediterranean destinations have flourished recently. Spain’s tourism hotspots are overheating due to limited real estate offering, Portugal and Greece are on the rebound, whilst Turkey and Tunisia are having their challenges, but remain strategically important tourist—and so investment—destinations in the long term. 

This circumstance, on the other hand, also creates opportunity in the short term for acquisitions of distressed assets, which makes part of our dynamic business model where we actively cherry-pick for redevelopment opportunities and are constantly on the lookout for fitting properties.
 
Due to the nature of our business, which also includes a tour operator, we strongly focus on opportunities at destinations that are frequented by German holiday makers such as the Baleares, the Canary Islands, the Greek Isles, but also at long-haul destinations in the Indian Ocean and Caribbean.

3. When assessing a property, what are your main criteria to decide whether it will fit in your portfolio? Have those criteria changed in the past year or do you expect them to change?

Our primary focus is to drive value throughout our real estate portfolio through opportunistic acquisitions, development and operational turn-arounds, while purposefully maintaining a conservative capital structure.

Our multibrand hotel portfolio consists of different assets with each having their own investment, operating criteria or agreements. The majority of our hotels operate under distinct club brands connected to German tour operators. Here, the plot size to fit our extensive leisure, sport and entertainment program and a minimum requirement of 900 beds in beach destinations, direct beach or ski lift access, imminent vicinity to an international airport with German tourism feed and a low-rise structure are the most important criteria, whilst mixed-use development opportunity weighs very much into the equation.

New or redeveloped mixed-use hotel projects in leisure destinations are also developed in partnership with international luxury hotel brands. Besides the yield potential, balancing out our winter and summer destinations and its geographical spread, evaluating financing opportunities, but also subjects related to operator selection, leases versus management agreement models are important criteria we deal with extensively.

4. What Mediterranean resort(s) or hotel(s) have caught your attention recently as great examples of successful products?

With still great personal interest and affection I keep regular track of the successes of those developments from past tenures such as Vale do Lobo, which has been a frontrunner in mixed-use resort development in Europe, but also the The Conrad Algarve, which has received many international awards such as the world’s and Europe’s leading leisure and luxury resort. 

Furthermore I keep an eye on the Monte Santo Resort, also in the Algarve, which I opened in 2008, which was recently awarded “Europe’s Most Romantic Resort,” but also here in Switzerland where the Mediterranean mixed-use resort concept was applied by Samih Sawiris, chairman of Orascom Development, for the master planned resort of Andermatt Swiss Alps. In 2013, we opened the exclusive The Chedi Andermatt with its branded residences, which received numerous national and international awards since.

More recently I keep in general an eye out on creative hotel concepts that attempt to meet the demands of the millennial generation, new upscale hostel concepts and holiday residence or apartment style hotels that meet in concept the aforementioned and market tendencies as reflected by Airbnb in holiday makers seeking individuality, principally in a social or family environment, besides new mixed-use resort developments.
 
[There are] many challenges on various levels from how to attract qualified staff, on how to deal with the various complex legal, fiscal, financial, regulatory aspects of a mixed-use environment and balancing this with various stakeholders' interests being the resort developer, hotel operator or individual investors in holiday homes, cross-border financing for geographically diversified asset portfolios, but also just merely how to create with creative marketing campaigns occupancy and equitable returns for both operator and asset owner in destinations that suffered from terrorist attacks. Here, sustainable employment might prove instrumental.

5. What is the main message you would like to share with the audience at MR&H and what are you most looking forward to at the event?

I think both questions are largely interrelated. I really look forward to exchanging experiences, discussing opinions with participants and learning from each other’s challenges. Furthermore, I wish to showcase our projects and start new business relationships over the entire cycle of developing our hotel asset pipeline and so creating acquisition, (re)development and asset-management opportunities. The program and scheduled workshops are instrumental and have varied and most interesting subjects, which will make it for participants positively difficult to make their choice on which to attend.

The Mediterranean Resort & Hotel Real Estate Forum (MR&H) is October 16 to 18 at Portaventura in Tarragona, Spain.

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