FAST ACQUISITION CORP. II (FZT) – MERGER WITH FALCON’S BEYOND IS PENDING, – We visited the Punta Cana project in the Dominican Republic. – MELIA’ PROVIDES A LESSON IN HOSPITALITY!
We wrote in late July about the substantially improved SPAC structure at FZT and in late August provided our interpretation of the Investor Presentation. In summary, we believe that, opposed to many other SPACs, this Business Combination will be consummated, due to the fundamental attractions of Falcon’s Beyond artistic creativity and theme park design/operating skills, combined with the operating and financial strength of their Joint Venture partner, Melia’ Hotels International. Our previous articles can be accessed with the SEARCH function on our HOME Page. (Use “FZT”). As we wait for the S-4 filing, which will obviously provide a great deal of quantitative information we thought it would be productive to fill out the qualitative mosaic of this unique “entertainment/hospitality” venture. We therefore visited last week the first site to be developed by Falcon’s/Melia’, at Punta Cana in the Dominican Republic.
Development of the Katmandu Theme Park is well along, with heavy construction largely completed, mechanical and electrical support installed, predictably still with a great deal of finishing work to be done. Equipment, some of it on site, is yet to be installed. Flooring, wall coverings, final lighting, all kinds of finishing treatment is still to be done, but the project seems on track to be completed by late this year or very early in ’23.
The 2018 built five star hotel that Melia’ Hotels (founded 65 years ago) has contributed to the Joint Venture, currently called Paradisus Grand Cana, to be renamed Falcon’s Resort by Melia’, is a standout. Whether you call it the “hospitality quotient” or “customer pleasing culture”, it was outstanding. Every staff member seemed to be wearing a smile, and that does not happen by accident. There was always somebody nearby, eager to help. Every surface was spotless and the maintenance of the landscape was impeccable. Labor is obviously available at an acceptable wage and happy to be employed by Melia’. It’s fair to say that our previous article describing the Falcon’s/Melia’ Joint Venture did not emphasize adequately what Melia’, managing 380 hotel properties worldwide, brings to the table. Our trip was obviously instructive in terms of Melia’ operating skills. Melia’s financial strength seems important as well, and we will address that more completely in the near future.
Below we provide pictures, from the Melia’ Hotel website, that show important aspects of the resort experience at Punta Cana. As you scan them, think about what this might cost at resorts you’ve been to and we will provide the relevant cost/day at the end of this article. We should emphasize again that the pictures were matched, in terms of visual appeal, cleanliness, and the quality of the food service, by our personal experience.
MORE THAN TEN RESTAURANTS ON SITE
THE COST
RATES ARE CHARGED “PER PERSON”, AND ARE “INCLUSIVE” of ROOM, FOOD & BEVERAGE (INCLUDING ALCOHOL), BASICALLY “ALL YOU CAN EAT AND DRINK”. Melia’ has a reward system in place, with 14 million members, that provides a discount up to 20% for repeat customers. The “rack rate” quoted to me today, without discount or promotions, for the One Bedroom Suite pictured, is $370/night, “all inclusive” for two this time of year (“off season”). The rate in February (“peak season”) would be about 35% higher or about $500 per couple per night, all inclusive. Considering that food and beverage for two on vacation could normally run $200-300 per day, the remaining room cost “off season” would be $170-270/day “off season”, 35% higher in February or March, at “peak”. That’s pretty good, but Melia’ Reward Members, with a 20% discount would only pay $296/per night per couple today, almost nothing for the room after deducting the normal cost of food and drink. At peak season $500 per couple per night leaves a net room cost of only $200-300, also outstanding value when there is snow on the ground in New York City.
TAKEAWAY FROM THE TRIP
While noting that Paradisus Grand Cana, to be renamed Falcon’s Resort by Melia’, is among the highest priced facilities within the Melia’ portfolio, the hospitality skills demonstrated are likely in place at lower priced facilities as well (at a proportionate level). We’ve discussed before the attractive ROI for both Falcon’s Beyond and Melia’ as a result of the Joint Venture. Now that we have visited Punta Cana, we can better appreciate the hospitality expertise of Melia’ and its complement to the creativity within Falcon’s Beyond.
It is worth recalling that Melia’, in Mallorca, was able to charge 11% higher room rates, with free access to the Katmandu Park. There seems to be similar pricing power in this situation, considering the current price/value equation and reports that the hotel is already at capacity “in season”. Previous cash flow generation should be materially improved within the Joint Venture because of higher room rates and occupancy, also augmented by lower food cost since guests will eat some of their meals at the Katmandu Park rather than the hotel. As we’ve reported, the Punta Cana project will be followed within eighteen months by similar developments in Tenarife (in the Canary Islands, off the coast of Spain) and Playa del Carmen (in Mexico). Beyond that : Melia’ manages a portfolio of 377 other hotels, many of which are in “priceless” locations.
We will report further once the S-4 is filed.
Roger Lipton