A potential bidding war for UK holiday resort group Parkdean that could include offers from Apollo Global Management and Blackstone underscores a revived appetite for hospitality and leisure—an industry that was on its knees just two years ago, but is now offering marked post-pandemic opportunities.
Apollo, which is reportedly eyeing Parkdean at a £2 billion (about $2.6 billion) valuation, isn’t the group’s only suitor. Bourne Leisure, a rival holiday business that Blackstone bought for around £2.7 billion at the start of 2021, is also said to be mulling a bid. Like Blackstone before it, Apollo is trying to capitalize on the “staycation” trend in the UK, where more tourists are favoring domestic vacations, which has accelerated over the course of the pandemic.
Last year saw a significant rebound in hospitality and leisure globally, with $55.14 billion transacted across 342 deals, according to PitchBook data. Blackstone’s Bourne Leisure deal was the biggest, as lockdown measures were eased or disappeared altogether both in the UK and around the world. By comparison, the previous year saw $35 billion across 223 deals, a big drop from a pre-pandemic peak of $59.75 billion across 363 deals in 2019.
As PE capital returns to hospitality and leisure, firms are tapping into trends that have been accelerated by the pandemic. In the case of Bourne Leisure and Parkdean, the rise in domestic vacations resulting from pandemic-related restrictions on international travel was the driving force.
“Business was stopped for most of the first half of 2021 because of the various lockdown restrictions, but once they actually reopened we saw consumers and holidaymakers really come back and it was very positive in the second half of the year,” said Haide Hong, a senior managing director with Blackstone in London, who worked on the Bourne Leisure deal.
Hong added that in the first year of investment Blackstone allocated additional capital to grow the business organically, spending close to £200 million building new pitches and upgrading restaurants and facilities in anticipation of reopening.
The growth of new opportunities in the wake of the pandemic isn’t confined to the UK’s staycation sector. Investors in the US have also been quick to capitalize on the reopening of businesses in the hospitality and leisure sector. One such investor is New York-based &vest, a brand marketing and investment firm that set up shop just before the COVID-19 outbreak. The firm, known for its &pizza restaurant chain, has a portfolio of hospitality investments and has launched two $200 million blank-check companies, Fast Acquisition I and II, in 2020 and 2021, with a view to targeting hospitality investments.
“The pandemic changed everything for a lot of industries, but particularly hospitality. Right at the beginning, it was a total disaster for anything in restaurant or hospitality because the doors were literally shut, no one could travel,” said Garrett Schreiber, a partner at &vest. “We launched with the thesis that there’s going to be a rush back into restaurants, hotels, travel and leisure. We didn’t know when, but [the pandemic] was not going to last forever, even as painful as it was and still is.”
Schreiber adds that technology has become an increasingly important part of that investment thesis, with the firm also investing in technologies that operate adjacent to hospitality businesses.
He cites the fast-casual restaurant industry as an example. There were already technology trends pre-COVID that allowed consumers to do things like order ahead and order online, or allowed businesses to optimize their labor or supply chains. These have accelerated through the pandemic.
“It’s pretty important to know what share of your revenues come from digital orders or who your customers are and what they order, " Schreiber added. “That was already happening, but that’s now critical and that kind of technology has accelerated.”
This point is echoed by Hong, who notes that in the case of Bourne Leisure, digitalization became a way to better serve customers. Contactless ordering and payment in resort restaurants has made it easier for staff not handling cash to work more efficiently.
“The step in digitalization was initially a hard adjustment because like a lot of businesses we weren’t used to it, but I think it’s become a permanent, positive shift,” Hong said.
However, the industry still faces new challenges beyond the pandemic. The most notable impacts are how rising inflation is likely to affect consumer spending and the potential impact of the Russia-Ukraine war, which has not only exacerbated pre-existing macroeconomic headwinds but has a more direct impact in the form of travel restrictions.
“It’s unclear how much it’s going to pass through to the consumer,” said Schreiber. “It’s a whole new set of factors that companies and investors need to grapple with.”
Featured image by Luis Alvarez/Getty Images
Learn about our editorial standards.
