Occupancy and ADR are the least useful numbers in most resort offering documents. What experienced acquirers look at instead.
Every resort investment memorandum leads with occupancy, average daily rate and revenue per available room. They are the figures the market expects, and they are almost always the least informative numbers in the document.
Look at revenue mix before anything else
A resort earning ninety percent of its revenue from rooms is a fundamentally more fragile business than one earning half from rooms and the balance from a marina, a beach club, a clinic or an events programme. The second asset has demand drivers that do not move together.
We would rather underwrite a diversified asset at sixty-nine percent occupancy than a rooms-led asset at eighty. The first has more ways to be resilient and, usually, more ways to grow.
Distribution cost tells you what the brand is worth
The proportion of business booked direct is the single best available proxy for the strength of a resort's own name. An asset booking sixty percent direct at a high rate has real brand equity and low distribution cost. An asset filling the same rooms through intermediaries at fifteen to twenty percent commission is renting its demand.
That distinction matters enormously at the point of sale, because brand equity transfers with the asset and rented demand does not.
Read the tenure documents before the trading pack
Lease length, renewal mechanics, transfer restrictions, change-of-control provisions in the management agreement, water rights, mooring rights, concession terms — these determine what a buyer is actually acquiring, and they are routinely relegated to an annexe.
In our experience more resort transactions fail on tenure than on price. The trading pack tells you what the asset earned last year. The tenure documents tell you whether you can own it, improve it, finance it and eventually sell it.
Written by
Marcus Oyelaran
Director, Island & Resort Assets, Resorts International
This article is fictional editorial written for a demonstration site. It is not investment advice and describes no real market, transaction or property.
