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Saudi Arabia’s $700bn Public Investment Fund is buying a 49 per cent stake in Sir Rocco Forte’s luxury hotel group and planning to double the chain’s size over the next five years with new hotels in the Middle East, Italy and the US.
The deal, announced on Monday, values Forte’s group of 14 hotels across Europe at £1.2bn and implies an enterprise value, including debt, of £1.4bn, according to people familiar with the details. As part of the deal, Italian sovereign wealth fund CDP Equity, which owned a 23 per cent stake, will exit the business, along with four of Forte’s five sisters.
Forte, alongside his sister Olga Polizzi, will retain a controlling 51 per cent stake. The PIF will also invest tens of millions of pounds in the group to double the size of its hotel portfolio over the next five years.
In an interview with the Financial Times in Brown’s Hotel in London’s Mayfair, Forte, who chairs the group, said he was “very bullish” about demand from US travellers, which account for more than a third of turnover, and that he expected “a lot more business” from visitors based in the Middle East thanks to the partnership with Saudi Arabia.
It is not the first time that Forte has promised expansion but he said the backing of Saudi Arabia would give the business more financial firepower this time.
“We’re in a good position in the right industry at the right time,” said Forte, arguing that the luxury hotel sector was “quite protected [from an economic slowdown] compared to the rest of the economy”.
Rocco Forte Hotels plans to open three new hotels in 2024 and 2025, including one in Dubai, which will mark the group’s return to the Middle East after its management contract with a hotel in the Saudi Arabian city of Jeddah ended in 2019. Forte said he was planning a trip to Saudi Arabia to look at locations early next year.
The group already has eight hotels in Italy.
The deal is the latest in a long line of investments in the luxury hospitality sector by the PIF, as part of a push by the fund to diversify Saudi Arabia’s economy away from fossil fuels. Last year, it bought minority stakes in luxury hotel groups Aman Resorts and Habitas.
Turqi Alnowaiser, deputy governor at PIF, said the investment reflects the fund’s belief in the “current potential of the hospitality and tourism industry”. PIF will be given two board seats and the Forte family will have three.
“Having a partner like PIF gives you much more solidity to the outside eye . . . banks love you much more,” said Forte. But he added that the business, which he built after losing the Forte Group owned by his father Charles in a hostile takeover, was still at heart a family-run company. “We’re in the hotels on a regular basis: people see us, they hear from us directly . . . they see how much we care about the details.”
The investment comes after a summer travel boom in Europe despite rising hotel and flight prices. The luxury sector did particularly well. Average daily room rates in the European luxury hotel sector are 48 per cent ahead of 2019 levels, according to industry data tracker CoStar, compared with a 24 per cent increase for the wider sector.
In the year to the end of April, Rocco Forte Hotels recorded group revenues of £293.5mn, up from £166.5mn a year earlier when coronavirus restrictions affected trading. Earnings before interest, tax, depreciation and amortisation were £64.2mn, up from £18.1mn a year earlier.
