was a traditional five-year hold with more of a traditional servicedapartment vibe that needed a better operating platform . Then the pandemic happened , and plans changed . The good news is that Locke , Cove and its legacy SACO brands have done well during COVID as it supported a lot of essential workers and other remote workers .
McCall says the business never dropped below about 40 % occupancy and covered all its marginal costs throughout the pandemic . In March , it was running at about 85 % occupancy and RevPAR in some of its properties – back to pre-COVID levels . “ They ’ re super resilient and far less cyclical ,” he says of the edyn concepts . “ Investors are now slowly waking up to the fact that if you are an extended-stay model , where you can secure a base of business , which
An F & B space at the Locke in Lisbon , set to open in 2023 is very resilient to economic shocks , then you have the best of both worlds .”
With the pandemic slowly quieting down , however , McCall expects the business mix to moderate , which he says isn ’ t all that bad as the leisure business is more expensive to operate with higher distribution and commission costs . “ But the big question is when and how much corporate business comes back ,” he says . “ My CCO is a little bit pessimistic and said he thinks that about 10 % in corporate travel has disappeared forever . If that ’ s the extent of it , I ’ ll be quite happy .”
What has changed a lot is the increase in short-stay business , McCall says , and the lifestyle positioning also serves to attract locals looking for a place to work , eat and network , especially within the Locke brand . “ We took in quite a lot of short-stay business when corporate business disappeared ... It meant we could run at a high occupancy , and we could do it very effectively on pricing ,” he says . “ Our GOPs , like our operating margins , never really suffered very much . We will run GOPs north of 60 % when most hotels will be lucky to see more than 40 %. In my mind , the flexibility is most attractive .”
As a result , edyn wants to put a Locke into most of the European gateway cities with Brookfield supplying the equity and the edyn team going to the market to find debt such as that supplied by Blackstone and KSL . Blackstone usually supplies most of the main debt with KSL taking the junior mezzanine piece , according to McCall .
Not all future deals will be funded through Blackstone , however , as edyn will choose the best premiums in specific markets , as well as the best partners with which to work . “ It does help to have Blackstone as a partner as people immediately assume the degree of credibility and that you must be reasonably well run ,” McCall adds .
DEVELOPMENT SIDE While Cove and SACO are asset light , Locke is predominantly asset heavy and most of the value of the business is tied up in the real estate . It acquires assets and converts them by using its own service departments .
Room for room , development costs are more per square foot than a traditional hotel , according to McCall , with a lot of the additional cost coming with the kitchen fit out . But the advantage is on the operating margins because it doesn ’ t have big F & B costs and has
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