March 2019 | Interview: Oriol Gimenez | Partner, CPG Hospitality
SAHIC e-News Latin America - March 2019
Partner, CPG Hospitality
1- How would you define the focus of CPG Hospitality within CPG?
CPG Hospitality is the hotel division of CPG Real Estate, which is an American private equity real estate company founded over 20 years ago to invest in Latin America and the Caribbean. CPG Hospitality evaluates and executes all of the company's hotel investment opportunities and oversees the existing hotel portfolio.
2- In which countries of the region do you have operations? What are the expansion plans?
We currently have hotels in Costa Rica and Puerto Rico, after divestments throughout 2017 and 2018 in other countries such as the Dominican Republic, Panama, Aruba and Trinidad and Tobago. We are open to explore operations throughout the region. Although our natural environment is the Caribbean and Central America, in the last twelve months we have evaluated operations in Mexico, Colombia and Peru, among other markets.
3- What do you evaluate when investing in a hotel project?
At the destination level, we look for markets with good air connectivity, stable democracies, with growing economies or with a hotel sector highly dependent on North America and, if possible, with limited exposure to currency risk (destinations that quote rates in dollars, for example), unless the results justify a greater risk. At the project level, we tend to partner with local partners to execute our investments, so in addition to traditional factors such as good location, good market position and asset quality, we focus a lot on identifying local partners with whom we feel very comfortable working. We prefer the acquisition of assets to development since in general we see that they are investments that generate better risk adjusted returns, but we are not afraid of development and in fact we have several development projects underway within our current portfolio that we believe will add a lot of value to our assets.
4- What are the trends in hotel development in both the Caribbean and Latin America?
At the urban level, the clearest trend of the last 10 years has been the development of hotels with limited services or select service, a very competitive sector because the entry barriers are lower, which we do not like. This happens because developing full-service hotels is very expensive compared to the offered performance, although there are exceptions. We are currently witnessing the boom of soft brands and the non-luxury lifestyle sector that allow us to anchor or complement mixed-use projects. In terms of leisure destinations, mainly beaches, the most attractive and growing product are all-inclusive hotels, which generally offer superior performance. We also look at lifestyle projects for the same reasons as in the urban sector (and with smaller format stand-alone derivates in more remote destinations and products focused on millennials), as well as luxury projects in premium destinations that are justified through the sale of residential products in condo-hotel format. Something that I think will have a strong impact on the vacation sector will be the effects of the shared economy, as Airbnb penetrates the market and hotel brands launch their own concepts to compete against Airbnb.
5- Which markets look more favorable for investment today?
Those that meet our investment criteria, as mentioned above. We like Costa Rica very much, where we have invested a lot, for its stability and unique positioning focused on ecotourism. Regarding Puerto Rico, we think the U.S. government aid after the recent Hurricane Maria and other tax incentives will give Puerto Rico a boost in the coming years. Other top-of-mind markets would be Mexico, Dominican Republic, Colombia and Peru.
6- In your opinion, how does foreign capital see Latin America?
It depends a lot on the country. Large real estate investment funds, which seek to invest larger amounts of capital, focus on investing in platforms in Mexico and Brazil with local partners. These two countries account for two-thirds of the region's GDP, so that's understandable. The rest of the markets, which are much smaller, are mainly for local investors, dominated by local and regional hotel groups or family offices. I honestly don't see much foreign capital entering these destinations, with the exception of Spanish capital which by cultural affinity understands each of these markets very well. Oh, and us!
7- You have been a speaker at the 2017 edition of Costa Rica Sustainable Hotel & Tourisim Investment Conference organized by SAHIC. In your opinion, how does this type of conference contribute to the hotel industry?
SAHIC conferences are very well organized because their format allows you to interact with many people in the industry in a relaxed atmosphere. They are certainly worthwhile for those who want to know more about hotels and the most relevant players. At CPG Hospitality we are passionate about sustainability and believe that the industry has a long way to go in that area, so we thought it was a fantastic conference and I hope there will be more on the subject.
8- Which social network do you use most often and why?
I don't use social networks, just WhatsApp to contact our teams and I don't even know if that counts as a social network...
9- When you travel for pleasure, where do you choose to stay: in a hotel or in an Airbnb?
It depends. I tend to stay in hotels. If it's not one of ours (which are in fantastic destinations), we usually explore remote destinations in boutique hotels to disconnect a bit. I've used Airbnb half a dozen times with very good results, but only staying in Superhosts houses. I believe that for trips with friends and/or in larger groups, renting houses usually offer a better solution than hotels, but you must have references, otherwise the risk of a bad experience is not worth it.
Oriol is founding partner of CPG Hospitality, a private equity company that invests and manages hotel assets in the Caribbean and Latin America derived from CPG Real Estate, of which Oriol was a member for seven years.
The company's partners have managed approximately 3,500 hotel rooms in the region over the past 10 years, with a current portfolio of more than 1,000 rooms and several projects under development.
Previously he was Manager in the Hospitality & Real Estate Advisory group of Ernst & Young, where he specialized in resort development, strategic advice and due diligence of real estate operations.
Mr. Gimenez began his hotel career working at Intercontinental Hotel Group, Marriott Hotels & Resorts and Leading Hotels of the World in both Europe and the United States.
To learn more about COG, visit: cpgrealestate.com