Vacation, all I ever wanted: 5 PE deals capitalizing on post-pandemic travel boom

As the covid pandemic recedes, travel has been on an upsurge. According to a study conducted by the US Travel Association, travel spending was 4 percent above 2019 levels in January. Private equity firms are betting big time on the vacation and leisure space, which can run the spectrum from resorts and spas to amusement parks and vacation rental platforms. Whether you’re a snowbird riding out the winter in the Caribbean or a ski bum enjoying the slopes of Aspen, it’s safe to say that the sector is no longer a seasonal trend. It can be year-round.

Starting from a year ago, PE Hub looks at five notable deals that have leveraged the boom in this sector since the lifting of pandemic travel restrictions. The common denominator in nearly each deal was the target company’s growth.

1. Trinity and Oaktree Capital acquire Hyatt Regency Indian Wells Resort & Spa

Last April, Trinity and Oaktree Capital generated industry chatter with their acquisition of Hyatt Regency Indian Wells Resort & Spa, a top resort hotel located in the Greater Palm Springs area.

For Trinity and Oaktree, the acquisition had a pronounced appeal for them as the area hosts several popular events that attract travelers from all over the world, which include the Coachella Valley Music and Arts Festival, the Stagecoach Festival and the BNP Paribas Open tennis tournament. Also, figuring significantly in the deal’s allure were the demographics of those who tend to gravitate toward the region – retirees and high-net-worth individuals.

At the time the transaction was announced, John Brady, managing director and head of the global real estate group at Oaktree, referenced the latter two groups while praising the “growth of the greater Palm Springs hospitality market.”

Interestingly, this is not a simple takeover as Trinity and Oaktree are planning on undertaking a “multi-million-dollar capital improvement plan to reposition the resort.”

2. HIG invests in Family Entertainment Group

Three months later, during the middle of the summer, HIG Capital also went bullish in this space when it bought Itasca, Illinois-based Family Entertainment Group, an amusement facilities operator that has nearly 60 locations throughout the country.

According to the Miami-based private equity firm, FEG’s status as an undisputed leader in its market was a powerful incentive for the acquisition.

Said Ryan Kaplan, managing director at HIG, “We are looking forward to partner with [FEG Founder and CEO] George Smith, an industry pioneer, and the rest of the executive team as they look to accelerate the company’s growth.”

FEG owns and operates standalone family entertainment centers under the In The Game, Max Action, and Bonkers brands.

3. BlackRock-led investor group invests $550 million in Virgin Voyages

A month later, as the dog days of summer continued, a powerhouse investor group led by BlackRock invested $550 million in cruise brand Virgin Voyages. Other participants in the financing included Bain Capital Private Equity and Virgin Group.

Although a relatively new entrant in the cruise sector, having launched in August 2021, Virgin Voyages’ growth was hailed as an enticement for the investor group. Ryan Cotton, a managing director at Bain Capital, noted this when he said that Virgin Voyages, despite its youth as a company, has “proven its appeal to both the traditional and non-traditional cruiser, allowing the brand to tap into new markets and re-imagine this travel category.”

This is an especially intriguing transaction considering how badly the cruise sector was hit by the advent of the pandemic. Since then, the industry is “exhibiting a powerful rebound,” remarked Brendan Galloway, a director in BlackRock Global Credit. The investment in Virgin Voyages is proof that the investors “see a positive outlook and impressive growth on the horizon for the company.”

4. Fort Point recaps ROX360

The start of 2023 ushered in Boston buyout shop Fort Point Capital taking a significant minority stake in ROX360, an Eastpoint, Florida-based vacation rental managing platform.

Like the cruise space, vacation rental management companies also “faced unprecedented operational challenges,” said Fort Capital Vice President Michael Duffy. But it also has seen “substantial growth” thanks to the short-term vacation market.

For Fort Point, that growth, combined with ROX360’s technology backbone and scalable operations, were huge draws for the investment.

5. Court Square Capital invests in Five Star Parks & Attractions

The recent Ides of March saw New York City-based mid-market PE firm Court Square Capital investing in Lexington, Kentucky-based Five Star Parks & Attractions, a developer and operator of family entertainment centers. Among the attractions Five Star offers are go-karts, arcades, bowling, thrill rides, laser tag, mini golf and other family-oriented entertainment.

With this investment, Five Star’s existing shareholders, which include Fruition Partners, Taubman Capital, and management, will remain significant minority investors in the company.

For Joseph Silvestri, co-founder and managing partner at Court Square, Five Star’s “unique platform” and formidable positioning in the market were attractive to the PE firm. “Five Star has many of the characteristics we look for when partnering with founders, families, and manager-owners,” he explained.

With travel rebounding from the covid downturn and more vacationers taking off to sights unseen, PE Hub predicts deal volume in this space to continue to be active and robust.