The cost of holidays at Center Parcs could rise if the chain is sold by its Canadian private equity owner for up to £5billion, financial and travel experts warned today.
Brookfield bought the UK resort group from US firm Blackstone for £2.4billion in 2015, and it is thought to have been looking to sell on its investment since last year.
Investment bankers appointed by Brookfield are claimed to have been speaking over the past week to potential buyers which include other private equity firms.
The owners are trying to cash in on Britain’s staycation boom that began during the pandemic, and it also comes as they returned to profit after lockdown rules eased.
Experts said today that there is interest from US lifestyle brands and private equity groups wanting to get a foothold in the UK outdoor adventure-based holiday market.
They added that any new owner of Center Parcs is likely to want to improve facilities, but it could also mean pricier holidays as they seek to recover their purchase price.
People swimming in the pool at Center Parcs Sherwood Forest in Nottinghamshire (file image)
Many UK holiday park chains are already owned by foreign private equity groups – such as the Bourne Leisure brands Haven Holidays and Warner Leisure Villages, which were bought by New York-based Blackstone for £3billion in January 2021.
Who owns Britain’s holiday park sites?
- Center Parcs – Brookfield (Canada)
- Haven Holidays – Blackstone (USA)
- Away Resorts – CVC Capital Partners (Luxembourg)
- Butlins – Harris Family Trusts (UK)
- Aria Resorts – CVC Capital Partners (Luxembourg)
- Park Holidays UK – Sun Communities (USA)
- Parkdean Resorts – Onex Corporation (Canada)
- Coppergreen Leisure – CVC Capital Partners (Luxembourg)
- Warner Leisure Villages – Blackstone (USA)
- Pontins – Britannia Hotels (UK)
Away Resorts, Aria Resorts and Coppergreen Leisure were all bought in sequence by CVC Capital Partners of Luxembourg in 2021 – in June, August and December of that year respectively.
In addition, Parkdean Resorts was bought by Canada’s Onex Corporation in 2016 for £1.35billion; while Sun Communities of Michigan purchased Park Holidays UK for £950million in April last year.
There are few remaining UK holiday park chains owned by British companies – although these do include Butlins, sold to its former owners the Harris family for £300million last September; and Pontins, owned by Britannia Hotels which is based in Hale, Greater Manchester.
Brookfield is now seeking to raise between £4billion and £5billion from the sale of Center Parcs.
Paul Charles, chief executive of travel consultancy The PC Agency, told MailOnline today: ‘Center Parcs is a very impressive, mass market, lifestyle brand and has grown successfully in the UK in recent years.
‘The owners want to take advantage of the enormous demand we’re seeing for family-focused, outdoor and adventure-based holidays and sell at the top of the market.
‘There is much interest from American lifestyle brands and private equity groups in particular to have a slice of the growing UK market.’
He added that for consumers, it ‘should only be good news if there is a new owner’, explaining: ‘They would likely invest further as part of any sale, and improve facilities markedly across the various Center Parcs sites’.
The Center Parcs site at Woburn Forest in Bedfordshire is among its five locations in the UK
Mr Charles continued: ‘A sale would also give a fresh impetus to senior management and incentivise them to build the brand further.
ANALYSIS: Prices for breaks in high demand school holidays could now shoot up further
Holidaymakers appear to have fallen back in love with the great British break, but risks remain to sustained growth particularly as the lure of the overseas trip is strengthening post pandemic.
Any bidder would want to be confident that it can add further longer-term value to the Center Parcs chain which is likely to mean selling off some real estate assets in the group and potentially reinvest some of the proceeds into upgrading facilities at the most popular parks.
This could see prices for some breaks, particularly during high demand school holidays, shoot up further.
Consumers also appear still willing to pay some hefty prices for add-ons like luxury spa treatments, ringfencing budgets for expensive treats and this may still be seen as an area of under-tapped potential.
Parkdean Resorts ditched is plan for a sale earlier this year, amid economic uncertainty, but with expectations that interest rates may be near a peak, and forecasts of cuts to come next year, private equity firms might be more inclined to borrow to invest in a slice of parks business.
Blackstone, which took over Bourne Leisure and still has Haven holiday resorts in its stable may be an interested party but may be cautious given Center Parcs is being priced post its pandemic boost and it’s unclear how the holiday trade will evolve.
Susannah Streeter is head of money and markets at Hargreaves Lansdown
‘Of course, the downside is also that it might mean higher prices for holidays there as the new owners seek to recover their purchase price.
‘The good news is that this highlights the high demand for family-based holidays in the UK, as there are some fantastic luxury and mass market sites available.’
The Financial Times reported that the sale of Center Parcs would include £2billion in existing debt, which is likely to appeal to interested parties given that raising new financing would be tough amid current market anxiety.
Center Parcs runs five holiday villages in the UK and one in Ireland, drawing millions of visitors to its forest locations and offering accommodation, together with activities such as water sports, quad biking and tennis.
It was originally part of a Dutch business, which opened its first site in the UK at Sherwood Forest in Nottinghamshire in 1987.
After adding further sites, the UK arm was spun off and floated on the stock market in 2003 before Blackstone bought it in 2006, and then sold it to current owners Brookfield in 2015.
The firm’s real estate was independently valued at £4.1billion last month.
And Susannah Streeter, head of money and markets at Hargreaves Lansdown, told MailOnline that some of its real estate assets could be sold off in the event of a successful bid.
She said today: ‘Holidaymakers appear to have fallen back in love with the great British break, but risks remain to sustained growth particularly as the lure of the overseas trip is strengthening post pandemic.
‘Any bidder would want to be confident that it can add further longer-term value to the Center Parcs chain which is likely to mean selling off some real estate assets in the group and potentially reinvest some of the proceeds into upgrading facilities at the most popular parks.
‘This could see prices for some breaks, particularly during high demand school holidays, shoot up further.
‘Consumers also appear still willing to pay some hefty prices for add-ons like luxury spa treatments, ringfencing budgets for expensive treats and this may still be seen as an area of under-tapped potential.’
She added that Parkdean Resorts ditched is plan for a sale earlier this year amid economic uncertainty, but with expectations that interest rates may be near a peak and forecasts of cuts to come next year, private equity firms ‘might be more inclined to borrow to invest in a slice of parks business’.
One of the five Center Parcs sites in the UK is at Longleat Forest near Warminster in Wiltshire
Ms Streeter added that Blackstone, which took over Bourne Leisure and still has Haven holiday resorts in its stable, could be an interested party.
However she also said Blackstone may be cautious ‘given Center Parcs is being priced post its pandemic boost and it’s unclear how the holiday trade will evolve’.’
The Center Parcs sites in the Republic of Ireland and UK have been open since April 2021 after the pandemic had forced them to close.
The chain hosts more than 2million guests a year with 98 per cent occupancy, according to Brookfield.
The Canadian firm’s investment in Center Parcs since its acquisition has included £100million on tech upgrades alone.
Revenues for the year to April 21, 2022 hit a record £503.4million and profits returned to the black, with a £245.6million haul following a Covid-induced loss the year before.
Profits were £66million last year, up from a loss of £157million the year before.
However it scrapped plans to build a brand new resort at Worth Forest in West Sussex earlier this year amid a backlash from wildlife campaigners.
The £5billion price tag is double what the resort was bought for in 2015, and could make the sale the biggest real estate deal this year.
Gervais Williams, head of equities at Premier Miton, told BBC Radio 4’s Today programme this morning that private equity had previously been a ‘big beneficiary of falling interest rates’.
Waterside Lodge accommodation at the Center Parcs site in Elveden Forest, Suffolk
He said: ‘If we think back in 2015 when this business was acquired, it was bought for about £2.5billion. And a lot of that finance was actually raised by low cost debt and it was a relatively cheap way of funding a large business.
‘Clearly with inflation the cost of debt has now increased and therefore you can’t have as much and it’s more expensive. And now the price of the business has gone up, the valuation has moved up, it’s more difficult to finance now with inflation.
‘And I think that’s going to be a common pattern. Clearly global inflation is peaking out at the moment, it may not be there for ever, but it’s going to peak, kind of returning, in our view.
‘And these private equity businesses we think are going to struggle to finance some of these kind of acquisitions at the same kinds of levels they did in the past.
‘So I think we’re going through a period of revaluation now, the same way we’ve had with stock markets around the world, and Center Parcs is just a good example of that coming through now.’
Last year, Center Parcs faced a backlash after it said its five UK sites would close from 10am on September 19 for 24 hours ‘as a mark of respect’ for the funeral of Queen Elizabeth II. However it later made a U-turn after a backlash from guests.
Brookfield – which is chaired by former Bank of England governor Mark Carney – has so far declined to comment.
A study by consumer experts at Which? that looked at 18 UK holiday park brands found Center Parcs was the fourth most expensive for an average stay per person per night at £71 – behind Waterside Holiday Group (£80), Shorefield Holidays and Potters Resorts (both £72, although the latter was an all-inclusive price).
Center Parcs was also placed at joint 11th out of 18 for Which? customer score.