Boutique hotel group Experimental targets US after €350m investment

The owner of the Experimental Cocktail Club and the Hotel des Grands Boulevards in Paris will open its first hotels in the US after a €350m investment by one of the world’s largest real estate investors.

Experimental Group plans to open between 10 and 15 hotels by 2024, targeting New York and the US West Coast, as well as about five sites in the UK with the backing of Brookfield Asset Management.

The investment would treble Experimental’s hotel portfolio at a time when the industry is still struggling to recover from pandemic travel restrictions and lockdowns.

The emergence of the Omicron coronavirus variant and the reintroduction of curbs on travel and socialising across Europe and the US are taking their toll on the travel industry’s recovery. Airlines, holiday companies and hotels have all warned this week that demand is falling.

The Brookfield funding has prompted a restructuring of Experimental Group that will allow it to buy hotels outright. Previously the group, which operates six boutique hotels in mainland Europe and one in London, leased hotels and paid for full-scale renovations.

Brookfield has taken a majority stake in a new real estate business alongside Experimental founders Olivier Bon, Pierre-Charles Cros and Romée De Goriainoff and its original majority shareholder Jean Moueix, whose family own the Château Petrus wine estate.

At the same time, the asset manager has taken a minority stake in Experimental’s operating business with Moueix and the founders retaining the majority share. Other shareholders include the investment bank Bpifrance.

Cros said the new structure would allow the company to benefit from its investments: “[Before] effectively I created a lot of value for the landlord and in exchange the only right I have is to pay rent.”

Kenneth Hatton, head of hotels for Emea at property company CBRE, said private equity investment in the real estate and the operating business was becoming more common as investors looked to capitalise from property values and any business recovery from the pandemic.

“Brookfield is a classic investor into this type of space. They take a platform . . . and they provide the capital to grow it as quickly as possible. The reason they want to do that is to capture the recovery.”

The private equity group Fortress completed a similar investment deal with the Irish hotel operator Prem Group earlier this month.

Experimental has already signed terms to buy a hotel in Ibiza under the new structure and has two more under negotiation, one in Rome and another in Switzerland, according to an adviser with knowledge of the deals. It is actively looking for UK and US sites.

Cros said occupancy in its Parisian and London hotels was about 80 per cent and despite a 40 per cent drop in bookings at its Verbier chalet when Switzerland announced in November that all arrivals from the UK would have to quarantine, it had recouped all of the bookings and added more after the decision was quickly reversed.

To survive lockdowns Experimental took about €6m in government-backed loans in France, Cros said, as well as raising “several million” in equity. The company was started in 2007 when the three childhood friends opened the Experimental Cocktail Club.

He added that despite acute staffing shortages in hospitality, particularly in the UK and US, Experimental is aiming to increase its workforce from 600 to about 1,400 with the opening of the new hotels.

The group made €31m in turnover in 2019 but did not give revenues for 2020.