After 18 years flying as an airline for the price conscious, Allegiant Travel Co. wants to add real estate development to its list of corporate activities. The company is embarking on an audacious plan to build a 22-acre resort compound with a hotel, condominiums, bars, and restaurants on the Florida Gulf Coast in Port Charlotte.
The real estate offshoot, called Sunseeker Resorts, will have a 75-room hotel, along with about 720 condo units, ranging from $650,000 to $1.1 million based on size. The property, when finished in late 2019 or 2020, will also include North America’s largest private-resort swimming pool.
Longer term, Allegiant wants to tout its success with the Sunseeker property as a bid to begin managing other leisure-destination hotels for fees, further diversifying its revenue, President John Redmond said Tuesday. It also sees lucrative opportunities in developing new food and beverage brands and restaurants it can use at other locations, plus meeting and banquet space, a marina with boat slip leases, and the ability of owners to rent their condos as part of the hotel operation.
All this new business development is, of course, far afield from the core operation of running an 88-jet airline with nationwide, less-than-daily service from small burgs to leisure destinations in Florida, Las Vegas, and Phoenix—a model that has proved wildly profitable. The airline is simultaneously working this summer to improve its operational reliability, which suffered earlier this year, while also shifting to an all-Airbus fleet by 2020.
“They’re not playing on their home field anymore”
It’s hardly revolutionary for an airline to own or build traveler accommodations— Pan American Airways did it right after World War II, when founder Juan Trippe opened the carrier’s first hotel in Brazil. The chain expanded into the InterContinental brand under Pan Am ownership for 35 years before the airline’s financial pinch caused it to sell the hotels in 1981.
In the 1980s, United Airlines’ parent briefly became the Allegis Corp., a full-service travel conglomerate that aimed to meet the full range of travel needs by piecing together the airline with its ownership of Hertz rental cars and the Westin and Hilton hotel chains. (United had acquired Hilton from another airline, TWA.) The conglomeration effort died ignominiously in 1987 amid a shareholder battle, two years after the Hertz acquisition and almost 20 years after the company had bought Westin. United’s parent sold off everything but the airline.
A few carriers—including All Nippon Airways Co. Ltd and Icelandair Group—still own hotels, perceiving them as a natural commercial fit. But that’s about it.
Investors have shaved 29 percent off Allegiant’s share price this year
The fear among Allegiant investors is that the project could prove to be both costly and distracting. Allegiant spent $35 million to acquire 20 parcels from 15 owners to stitch together its development site. The company says it will fund the project with presale deposits, collecting roughly 30 percent of a condo’s sale price before the particular unit is completed. As units are finished and sold, Allegiant aims to roll that income into financing further construction and keeping project costs away from its balance sheet. Owners’ fees are expected to cover operating costs and future maintenance on the hotel rooms and condos.