CORAL GABLES, Florida — Driftwood Capital is zeroing in on luxury and lifestyle hotels and branded residences. To oversee its new management, investment and development platform, the company brought in luxury veteran Alinio Azevedo.
Azevedo is charged with launching a dedicated new investment fund to seek luxury, lifestyle and branded residential deals, and oversee management of the hotels and resorts already part of the Driftwood portfolio that fit that bill.
In a conversation with CoStar News at the ALIS CALA conference here, Azevedo shared the company's investment goals, what markets are hot for luxury and lifestyle, and how travel trends are changing.
He's not a stranger to the company or the industry. Azevedo started his career in hospitality with Driftwood founder and CEO Carlos Rodriguez Sr., whom he calls "a friend and a mentor," when Rodriguez ran Cardel Hotels. His luxury hotel experience spans development and acquisitions roles at Four Seasons Hotels & Resorts and Loews Hotels. Most recently he served as CEO of Aspen Hospitality, leading management and expansion of the Little Nell and Limelight brands of resorts, hotels and branded residential.
Now he's in the process of scaling a new division — building everything from teams to investment dollars — all at the higher end of the hotel and resort spectrum.
"From a portfolio diversification perspective, it makes sense for us, but also over the past 10 years, Driftwood Capital has assembled an existing investor base of 1,200 individuals and those people were asking to partner with us" on higher-end deals, he said.
Today the new division has 12 hotels from Driftwood's existing portfolio in it, including The Scottsdale Resort and Spa, part of Hilton's Curio Collection; the Hilton Cocoa Beach Oceanfront; and the Hotel Rumbao, a Tribute Portfolio hotel, among others.
The goal, Azevedo said, is to "get the team in place, organize and establish a portfolio and create a track record that allows us to go to market" to raise funds. Fundraising will begin later this year.
Driftwood today is an integrated hospitality company: Its hotel management company operates 80 hotels in the U.S. and Puerto Rico, ranging from limited-service hotels to upper-upscale hotels. Driftwood Capital is what Azevedo calls "basically a private-equity shop," which raises capital then places it either via acquisition, development or more recently, lending.
"This specialized place we want to play in require a little bit of a different approach on the capital side of investment, and also on the management side," he said.
That being said, he acknowledged the "challenging" geopolitical atmosphere of the last few months, but said "in a way, it's helped us because it gives us the time to better prepare for the process and have the teams in place."
"We're focusing on what we can control, which is this strategy, the players, the operating model," he said. "The macro environment we cannot control."
Investors understand that too, he said.
"Nobody has a crystal ball, but the direction is very clear that the interest in luxury and lifestyle remains. The long-term trends for travel and high-end travel are very positive," he said.
And he has a clear vision for the division's strategy when it comes to locations and types of deals he plans to pursue.
First he looks at supply and demand characteristics, including seasonality, airlift and "all the things that allow you to generate the top-line revenue," he said.
Beyond that, Driftwood wants to be able to reposition hotels and resorts.
"What we'll do is a combination of acquisitions and development," he said. "Whatever we do will involve either renovation or brand-new construction," which he said is a Driftwood differentiator.
And he's open to more international expansion as well. He spoke specifically about Latin America and the Caribbean, since Driftwood's top executives Carlos Rodriguez Sr. and Carlos Rodriguez Jr. are from Costa Rica, where the company owns two hotels already. And many of the company's existing investor base hails from Latin American family offices.
"We are very comfortable and interested in Costa Rica, in Dominican Republic and in Mexico as well," he said. "For the first time, we're starting to look into Europe, specifically Portugal and Spain. They have incredible tailwinds and are at a point in the cycle with still very favorable development and operating costs relative to other parts of Europe."
Azevedo acknowledged that the seemingly meteoric burst of demand for luxury hotels and resorts in particular will hit the ceiling, and he's preparing for it.
While the cohort of global travelers who are not price-sensitive is still growing, he said recent economic factors like inflation are creating "some serious questions about value."
"I believe we're going into an era where the fight for quality from a product offering perspective will become even more important," he said. "From a consumer perspective, people will ask, 'What am I really getting? Is it worth the price?'"
"If we're asking these questions at the grocery store, why wouldn't we ask them around travel?" he said.