“Initially a real estate investor and owner, we are now a hotel operator”

By diversifying geographically, moving upmarket and investing in business and premises, Covivio is structuring its development through solid partnerships with major operators in the sector, as well as through its WiZiU hotel management platform.

We meet with Tugdual Millet, Chief Executive Officer, Hotels, and Sébastien de Courtivron, Deputy Chief Executive Officer, Hotels, who look back on 2024, a year marked by strategic operations and renewed ambition.

In 20 years, how has the role of the hotel industry changed at Covivio?

Tugdual Millet: I’d say that Covivio and the hotel industry is the story of a gradual discovery of this asset class, a strong initial conviction that has evolved in its application.

Despite 5 complicated years between the Covid crisis and changes in interest rates, the sector has demonstrated its resilience. For 20 years, we had been convinced that the hotel industry was an asset class whose fundamentals offered excellent growth prospects. The 2020-2025 sequence and the exceptional rebound that followed have reinforced this conviction. Despite the crises, the sector is outperforming inflation! This is why we are going to continue to increase the proportion of hotels in Covivio’s portfolio. A few years ago, it represented 15%; today it represents 20%, and the aim is to reach 1/3 of the Group’s assets in the medium term.

Since 2005, our strategy has been to create long-term partnerships with hotel operators and to position ourselves as their preferred partner in order to create long-term value and support them in their development. In 2016, 10 years after we began investing in hotel leases, we decided to go one step further and expand into business and premises, based on the principle that we had control over the underlying assets and access to quality managers to support us in running them. At that time, we bought the SLIH portfolio of 12 hotels, mainly in France, which laid the foundations for the transition we made in 2024 with the creation of WiZiU, our hotel management platform. With WiZiU, we now manage 24 hotels directly.

The diversification of our portfolio is perfectly understood by our shareholders, who support this strategy, which aims to balance the portfolio between resilience through long-term leased assets, and performance through our property assets and funds with higher profitability and greater value potential.

Could the secret of Covivio’s performance be to take the time to master it, to go step by step?

Tugdual Millet: We are indeed a long-term investor, adopting a test & learn approach. We tested investing in hotels. We learnt from the operators and wanted to do things ourselves and take more risk. We are increasingly bringing our expertise in-house so that we can master all the elements involved in creating value. We also took this approach for our office assets, with the creation in 2017 of our operated office brand, Wellio. There is a real conviction within Covivio around operated real estate, which makes it possible to combine higher profitability with greater flexibility.

2024 was a pivotal year for Covivio’s hotel business. How would you sum it up?

Tugdual Millet: It’s been an intense year of change. There are 3 main things I’d like to highlight, and they form the basis of what we’re going to do tomorrow.

The first significant event is obviously the deal signed with AccorInvest. As a result, we are transforming 43 hotels that we had leased from AccorInvest into 43 hotels that we now own outright. We are taking back full ownership of each hotel and implementing targeted renovation and transformation plans to reposition the hotels and create value. It’s a major change that is changing the mix of our portfolio: we’re going from 25% to 40% of assets under business and premises. Balancing our portfolio between leased assets and other in business and premises gives us greater profitability.

The second key moment in 2024 is the rotation of our assets, with the aim of rebalancing our portfolio geographically between Northern Europe (30% of assets today) and Southern Europe (17% of assets today).

For example, we have acquired a resort in the Canary Islands for €80 million, located in Spain’s leading tourist destination. This asset is leased on a long-term basis to Iberostar, one of Spain’s leading players in these leisure destinations.

Sébastien de Courtivron, Deputy CEO Hotels, Covivio: The repositioning of our assets is the 3^rd element to remember from 2024.

We started with the complete renovation of the Novotel in Bruges. We worked not only on operational performance, but also on environmental performance. Post-renovation, we cut our CO₂ emissions by more than 40%. We also went from an average price per room of €120 to €160. This is also what we have implemented at the Lille Hilton, where we have seen an improvement in performance

These two renovations have enabled us to increase our average prices, and this operational excellence reinforces the value of our assets. We intend to continue this approach within the portfolio acquired from AccorInvest.

How are the first few months of your WiZiU hotel management platform going?

Sébastien de Courtivron: This platform was created as a continuation of everything we’ve just been talking about. The aim is to have a tool to better manage our assets held in terms of business and premises in France and Belgium.

WiZiU enables us to manage hotels directly or via franchise agreements with well-known operators – Accor, Hilton, IHG, Marriott. To date, we manage 24 establishments in France and Belgium, representing over 3,000 rooms.

It’s also a brand that enables us to unite our teams and our sales force, and to welcome new talent to enrich our in-house expertise. Since launching WiZiU, we’ve had twice as many applications for our job vacancies. Candidates are particularly attracted by the possibility of working for different European and international brands.