Room Mate looks to expand portfolio to resort segment
 
Room Mate looks to expand portfolio to resort segment
10 JANUARY 2017 8:31 AM

Room Mate Hotels President Kike Sarasola revealed plans to add resort properties to the company’s portfolio as soon as summer 2017.

MADRID—As Room Mate Hotels continues its rapid expansion both in its domestic Spanish market and abroad, President and Founder Kike Sarasola has set his sights on the resort market.

If all goes well, Room Mate’s first resort property could open this summer, and Sarasola said the company has several properties in mind for premier resort destinations both in and outside of Spain.

“We’re planning on a dozen resort properties along Spain’s mainland Mediterranean coast, the Balearic Islands, the Canary Islands and Mexico’s Riviera Maya,” Sarasola said. “In the Balearics, we’re looking at places like Ibiza, and on the mainland somewhere near Barcelona and also down around Marbella on the Costa del Sol.”

Sarasola said Room Mate’s guests are interested in a resort product from the company.

“All these years my guests would say to me: ‘You’ve got a great idea here and you should open seaside resort hotels,’” he said. “And I finally said: ‘Why not? Let’s give it a shot.’ It’s a good moment right now with tourism booming, especially in Spain, and even setting records for foreign visitors.”

Kike Sarasola, CEO,
Room Mate Hotels

The resort prototype
Sarasola said Room Mate will design its resort model to mirror the chain’s hotel product and added that executives are now engaged in talks with prospective owners of properties which will be refurbished at their expense to Room Mate’s specifications.

“We’re looking for good buildings which fit our requirements in proven and popular destinations. Hopefully, our first seaside resort hotel could open this summer,” Sarasola said, but he declined to reveal where that might be.

Initial plans call for a total of around 2,000 rooms among the 12 properties.

Sarasola also said he wants to maintain the current business model in which Room Mate rents or leases hotels and pays owners a fixed rent or a variable percentage of gross revenues.

“We might for example, pay the owner an annual rent of €10,000 ($10,405) per room or 20% or more of gross income,” he said.

At a later date, Room Mate plans to open the Riviera Maya resort, which could present challenges, according to Ivar Yuste, a founding partner of the Madrid-based hotel consultancy PHG Hotels & Resorts.

“Mexico can present problems for first-time operators in that particular resort sector because these places are typically very large with between 500 and 1,000 rooms. The ratio of staff to guests is higher than in urban hotels, and there are environmental issues,” Yuste said.

When asked about concerns with operations, Sarasola noted Room Mate has local experience and knowledge from operating a hotel in Mexico City and that many other Spanish chains have been successful in that market.

“I don’t really see a problem,” he said.

But Yuste said Room Mate has several advantages in pursuing a resort model, including the reputation of its flagship brand and the unique design of its properties.

“Room Mate also has a built-in client base with the business travelers who stay at their city hotels during the week wanting to try the brand’s resorts on the weekend or on holiday,” Yuste said. “And there is a gap in the market for this type of reasonably priced resort in Spanish coastal mainland and island destinations. Meliá has its Sol brand and that’s it.

“And with the record international tourism numbers we’ve been seeing over the past several years, this is certainly the time to do something like this.”

Development pipeline
While its resort project moves forward, Room Mate will be opening seven new urban hotels in Europe this year: two each in Madrid and Barcelona, one each in new markets Paris and Rotterdam, Netherlands, and a second property in Istanbul.

“We’re also looking at San Sebastian in northern Spain, Dublin and Frankfurt, and I’ve just had a meeting about an opportunity for a city hotel in Havana, Cuba,” Sarasola said. “And, of course, we’re still planning to add to our three hotels in the United States and we’re very interested in Los Angeles, San Francisco and maybe several more in Miami.”

Sarasola said the company is in the perfect position for expansion as 2016 billings are expected to close at between €70 million and €72 million ($73.2 million and $75.3 million), an increase of 32% over the previous year.

Average occupancy in 2016 was 87%, and Sarasola predicted that the chain’s average room rate would close 2016 at €133 ($139.08), which is up from €117 ($122.35) at the end of 2015.

Sarasola opened the first Room Mate hotel in Spain more than a decade ago and has since expanded to more than 20 properties in 12 cities in Europe and the Americas, with most named after a person, or “roommate.” Madrid boasts the Room Mates Alicia, Óscar, Mario and Laura; New York City has the Room Mate Grace; and Florence has the Isabella and the Luca. Only the chain’s properties in Miami—the Waldorf Towers and Lord Balfour—carry traditional hotel names.

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