In a further demonstration of the attractiveness of hospitality businesses to private equity, Blackstone is in talks to buy privately held Bourne Leisure.
The business, combining brands Haven, Butlins and Warner hotels, could be valued at up to GBP3bn in any deal. It also has substantial growth potential, buttressed by the strength of the UK staycation market.
According to reports in the Financial Times, the valuation would represent a more than 11 times valuation, based on Bourne’s 2019 ebitda of GBP255m. Full year revenues in 2019 were GBP1.1bn, up 4.9% on the previous year. Any deal would reportedly combine investment from Blackstone’s private equity and real estate funds, a model it has previously used when acquiring Center Parcs, which it sold in 2019 to Brookfield.
The UK business combines three parts: caravan holiday parks under the brand Haven; holiday resorts under the Butlins brand; and a portfolio of Warner leisure hotels.
Haven has 37 holiday parks around the UK. These are a mix, offering accommodation in everything from tents to static caravans and permanent villas, as well as providing pitches for visiting caravans and motorhomes. The Butlins brand has three family-oriented resorts, in Bognor Regis, Minehead and Skegness.
The Warner hotels business has 14 properties around the UK, combining country house hotels and some seaside locations with chalet accommodation, and is marketed as a strictly adults-only offer, and featuring on-site nightly entertainment. The company claims 60% of customers rebook.
The business is predominantly controlled by three families, each connected with Peter Harris, David Allen and John Cook, who created a holiday park business in the 1970s. The trio floated Leisure Caravan Parks, which was then acquired by Rank, before starting again and later buying back the Rank business with the backing of Legal & General and Candover. During a period of acquisitions and disposals to restructure the business, the team sold a site in Cumbria to Center Parcs.
Ahead of the pandemic, the group planned further growth, not least in its Warner business. At the end of 2018, Warner acquired an additional property, Heythrop Park in Oxfordshire, to be its fifteenth property. The former bank training centre, which had operated as a Crowne Plaza, has more than 300 rooms and its own golf course, and was due to launch in 2020, following refurbishment.
In 2019, the company said it was looking for further sites to expand. In an interview, managing director Simon Thompson said regions of interest include southeast England and the Lake District. “There is a big demand for our adult-only hotels but our guests don’t want to travel for more than an hour so we need to offer more locations. There are lots of areas in the UK where our guests say they would love to have a Warner – we are a long way from reaching our limit. The 55-plus demographic is growing; staycations are clearly growing, people don’t want to travel for a day and a half or go to an airport for a mini-break, and we need to expand to give this market more options.”
The news of the buyout comes shortly after Bourne dropped a bombshell on the travel agent community, announcing it will discontinue sales through agents. In a December announcement, the company said it will be letting existing agreements run their term, but would in future be pursuing more direct sales channels instead: “At this time we need to focus our investment in other areas of guest sales and communication.” The missive also suggested the three brands would, in future, behave more autonomously in their marketing.
Tim Stoyle, head of UK hotels at Savills noted: “Holiday parks have had an outstanding year, being a beneficiary of us not being able to get away abroad. I’m expecting this coming summer the figures will be equally good.” He said that for major private equity players, a business such as Bourne is desirable not just for its potential, but because of its size: “For an organisation like Blackstone, there’s a critical mass issue.”
And Tom King, head of hospitality investment at CBRE, said that the many income streams of park operators are a fundamental attraction. Alongside rental income, unit sales are also valuable, while operators also collect annual pitch fees and have a revenue stream from on-site food and beverage operations – while the longevity of the park home marketplace has seen it
He said sales had proved particularly strong during the pandemic: “Operators were able to start selling in June, and experienced latent demand – anecdotally, demand came from people they wouldn’t have expected,” evidence of a broadening demographic interest in the park home marketplace.
Rental operations were strong through the 2019 periods when trading was permitted, with demand lifting rates.
Buoyed by the strong summer, King said the investment market opened up once more in the autumn: “We saw deals move in September, at previously agreed prices. There’s a lot of optimism around the market for this year – forward bookings are very strong.” King said asset sales in coming months may also be boosted by private sellers opting to retire from the business. Smaller businesses have faced a tough year managing to implement covid-19 regulations around social distancing, coping with sudden booking cancellations and enforced closures, giving them reasons to reconsider their futures.
Will Duffey, head of EMEA hotels and hospitality at JLL, sees a continued appetite for such businesses, from private equity investors. He was involved with KKR’s USD1.1bn acquisition of Dutch holiday park operator Roompot in a 2020 deal. “They’re looking for more acquisitions in mainland Europe, to bolt onto the platform,” he told Hotel Analyst. “Everyone’s trying to find a home for their money.”
HA Perspective [by Chris Bown]: In Spain, repositioning is all about buying a two or three star non-branded family-owned hotel, refurbishing and signing up with a four or five star brand to deliver higher returns. In the UK, buying a holiday park is all about upgrade potential too – not least as British planning laws make growing such a business a time-consuming process. Just ask Center Parcs.
Ah, yes, Center Parcs. After a successful exit, one of Blackstone’s biggest takeaways must be how painful it is to try and expand a UK holiday park business. So why not buy one with lots of sites, and work out how far upmarket you can spin them. Start with offering those three Butlins to Brookfield, and then see which of the Havens have potential.
As for Warner, the group’s management already knows how much that could grow. Many of Warner’s target market are about to get their vaccinations within the next couple of months, and have cash to spend on a staycation. And it’s already a well-regarded brand, with coveted Which? recommendations.
With plenty of country house hotels poised to go up for sale, it feels like it might be Warner’s time to shine – so long as it has the funds to buy up those country piles. In Blackstone’s hands, Bourne has substantial potential.