“We are constantly evaluating new business opportunities”
Although the transaction market is still characterised by a cautious approach, Pandox has managed to benefit from its strong balance sheet, flexibility and expertise to make profitable acquisitions. Jacob Rasin, SVP Transactions at Pandox, talks about the differences between geographical markets, what drives interest in hotels as an asset class and how Pandox’s strategy and good reputation create opportunities even in a cautious environment.
Jacob, when we interviewed you two years ago you described the transaction market as reticent. How would you describe it today? What distinguishes the various geographical markets from each other?
I would describe the market as cautious in general, but with clear signs of increased activity in certain regional markets. In 2023 activity was particularly high in the Mediterranean region, while the UK has taken over as the most active market in 2024.
In Germany activity has been very low, but we believe that this market will come to life in 2025 and 2026. Activity has been somewhat higher in the Nordics, driven mainly by interest among actors outside the region. This is due to favourable exchange rates as well as attractive capitals, such as Copenhagen.
In recent years it has been almost exclusively single assets sales, but in 2024 we saw several portfolios come onto the market, signalling a possible trend. Supported by favourable development in inflation and interest rates, I believe this trend will continue.
What is driving the transaction market today?
Lower inflation and interest rates have made it easier to secure financing and bring home transactions, which has injected energy into a previously lethargic transaction market. This has also contributed to a better price balance between buyers and sellers.
Interest in hotels as an asset class has increased thanks to strong post-pandemic development in the sector. Buyers have realised that the hospitality and tourism industries not only have good growth potential but are also resilient against various types of external shocks.
In the present situation the transaction markets are at an early stage in their cycle and are characterised by opportunistic transactions. The most active buyers are specialists and private equity firms. Before the pandemic bidding attracted a wider group of actors, but that dynamic hasn’t yet returned.
Pandox has been relatively active on the acquisition front in recent years – particularly in the UK – and has been able to make acquisitions with a good yield. Why is that?
There are several reasons. During and after the pandemic we had a strong balance sheet, which allowed us to make acquisitions when others had limited resources. This has resulted in lower competition in bidding processes and more attractive opportunities.
Another important factor is our flexibility and broad expertise. We can carry out various types of acquisitions, whether it involves operating the hotel ourselves, implementing extensive renovations or repositioning a property. We like it when things are a little complicated because that’s when our business model and hotel expertise get put to the best use. Also, we are not limited to a specific market, but can allow opportunities to guide us. This is a good position to be in.
One final but very important factor – which I’m particularly proud of – is our good reputation as a reliable and appreciated counterparty. We are clear about what we want and we keep our promises. That may sound obvious, but in an acquisition situation it can often be a decisive factor for a seller.”
What are your thoughts on Pandox’s role in the transaction market in the years ahead?
We are keen to continue being active and see more opportunities emerging as the transaction market thaws in more markets beyond the UK.
We are also open to selling hotel properties where we no longer consider ourselves to be the best owner. This creates opportunities to reallocate capital to investments that may provide a higher return. The flexibility to both buy and sell is an important aspect of our long-term strategy to maximise the value of our portfolio.
Why do you enjoy working on transactions?
It’s the best job in the world! Completing a transaction is an enjoyable challenge because things can vary depending on which hotel it is, where it’s located and what opportunities exist in that specific market and jurisdiction.
We also have a very strong team spirit within acquisitions. We work really well together and are constantly learning new things. And finally, nothing beats the feeling of making an acquisition when something inside tells you it’s going to be a great deal. It’s almost addictive.