With Rocco Forte Hotels new strategic partner in Fondo Strategico Italiano (FSI), Sir Rocco Forte has been newly emboldened to state he wants to at least double the size of today’s 10-hotel company within five years. An injection of £60 million (US$95 million) from the Italian state-backed sovereign fund 80% controlled by Cassa Depositi e Prestiti (CDP) and 20% by Bank of Italy in exchange for a 23% equity stake would certainly give any European luxury brand renewed stimulus and Sir Rocco is already in discussions concerning a development in Venice and is actively pursuing projects in Milan, Naples and Sicily.
At the same time, Forte is not preclude from working with other partners on individual projects as well as with CDP, which is setting up a fund specifically to invest in the hotel sector.
HOTELS spoke to Sir Rocco after the deal was finalized to get more details about his plans.
HOTELS: The injection of capital really takes the edge off of your debt burden.
Sir Rocco Forte: With the US$95 million coming into the business, it changes my whole balance sheet and puts me in a very strong financial position. Obviously, the interest burden is reduced and I have capacity to make further investments. I could have carried on without this, but this gives me a much stronger position to move forward much faster and quite aggressively, which excites me a lot.
HOTELS: How is your existing portfolio rebounding since the financial crisis began?
Forte: In the initial period after Lehman collapsed, my sales for the next two months dropped 40% compared to the previous year and then settled down at 20% below. We’ve now got back to levels ahead of where we were at that time, but it’s taken five years to get there.
HOTELS: Tell us about FSI’s hotel investment philosophy.
Forte: The Fondo Stretegico Italiano is effectively a government-controlled body and has a very long-term horizon, which is very attractive to me because I’m not someone who likes to get in and out of things quickly to make a turn.
One of the aims is to help Italian tourism in Italy, and so they selected us as their luxury hotel partner. They will invest in hotels, which will then be leased back to us.
HOTELS: Why did you invest with this group?
Forte: From my point of view, Italy is a very attractive market. It’s a market that is very difficult to operate in, and you’ve got to know your way around. I have three hotels there, so I’m sort of familiar with it. And obviously, with my Italian background I can find things easier in Italy than most people. But with FSI as a partner, it will make things even easier for us in Italy.
Italy is a country with a number of cities with high occupancies and high room rates. It is, in a way, the ultimate tourist destination in Europe. It’s very attractive to the American market, and therefore, having more properties in Italy would actually enhance my business, in terms of my existing properties, at the same time. I want to be in Venice. I want to be in Milan. I want to be in Naples. I want to be more in Sicily. And eventually, there’s a possibility of doing more in the smaller cultural cities, like Siena and places like that.
HOTELS: Will these Italian opportunities be new development or existing properties?
Forte: It’s a mixture of things. I’m planning on doing what I’ve been doing so far. Where there is the opportunity to take on an existing property, which needs refurbishment and repositioning in the marketplace, that’s ideally what I prefer. Where there’s not that opportunity in a city I want to be in, then I’d look at a new development. That is how I’ve built my business so far, and that’s what I will continue to do.
But I’m also getting very proactive now in cities where I’m not at present, and New York is very much a prime destination for me. I’ve already started being active looking for the right opportunity there.
HOTELS: You have mentioned Paris, Madrid and Shanghai. Is there anything active?
Forte: Yes, in Shanghai there is new development where I’ve signed a memorandum of understanding. It is a completely new area of Shanghai, which is being developed by the local government and they wanted a European partner because no European operator at the luxury level is involved in Shanghai at the moment. We’re talking about end of 2017 for that property.
HOTELS: How did this deal with FSI come together?
Forte: I knew about FSI when it was first set up in 2011, but there was no mention of tourism in its brief. Then more recently, they widened to include tourism, and when I read about this, I approached them and that’s how we started.
They had already talked to one or two other people, but I think in me they found an ideal partner because for a company the size that we are, we’re very well structured. We have the processes and good governance, which is not the case, necessarily, with a lot of smaller Italian companies. And there are no major hotel companies in Italy and they preferred to deal with someone who has an existing presence in Italy.
HOTELS: What does this deal mean for the evolution of Rocco Forte Hotels?
Forte: It enables me to move forward much more quickly than I would’ve otherwise done. It makes me much more attractive for other partners to work with me because they know there’s a very strong financial base, and they’re dealing with someone who is going to be around for a long time. Otherwise, it doesn’t really change very much because I don’t want to become the biggest hotel company in the world. I want to continue to do projects, which are well thought out, which fit into the ethos of what I’m doing already. So, I don’t want to expand for the sake of expanding. I want to expand with projects, which add value to the whole group.
HOTELS: How long will it take before we start hearing about your new deals in Italy?
Forte: We’ve started now and in the next 12 months you should be hearing a lot from us.