Madeira: Golden Gate will be an 80-room hotel

Source: Jornal da Madeira

Photograph source: Joana Sousa | JM 

The hotel at Golden Gate will be ready in just two years 

Miguel Gomes, general manager of Mercan, a Canadian group that bought the building from the Region for 7 million euros, and will invest another 10 million euros for a final product with 80 rooms.

To JM, Miguel Gomes reveals what will be the first hotel unit of the Mercan Properties in the region, also completing his information with the sharing of his knowledge and experience, about some current issues in the tourism sector and intersection with the hotel industry.

Asked whether this would have been an acquisition at a fair price [7 million euros], the 'General Manager' of the Mercan Group recalled that "it was the price of the public auction, last year, and we had to respect it". “But, yes, I think it is a fair price for a property that has a privileged location in Madeira and Funchal. Yes, it will have been the right and fair price for both parties. It will certainly always be better for the Government, which sold it, and for the Region, but also for us, if we manage, in fact, to promote the project there that makes this investment profitable”, he adds. 

The option for the Region, the city, and the building in question, seems to be easier to justify. "Mercan is a Canadian group that invests in hospitality and already has 30 projects in Portugal, some operating and others under construction. We had not yet entered the islands, but it had been our intention to enter Madeira for over a decade, in which we had been trying to find an asset that would suit us and that would fulfill all our pretensions. Okay, it was a long process and we ended up identifying this property.

We are very fond of city center hotels and this is a property that meets all these requirements. We also really enjoy doing building rehabilitation. In fact, most of our hotels are made in building rehabilitation”, as he explains.

In terms of project specifications, Miguel Gomes explains that the first studies have already been done, albeit “very basic”. “Now we are going to develop a preliminary project to define the parameters of the hotel, which will also help us to define the category of hotel that we manage to have there, between four and five stars. We will use architects from Madeira and the entire design team will be based in Madeira. What kind of services we managed to include is also yet to be defined, in a first approach, as well as what international brand will accompany us in this hotel. All our hotels operate according to international brands, and this one will be no exception.”

As for the calendar, he shares, then, that there is “a commitment, which was requested by the Regional Government, that within a maximum period of one year, we start building the hotel, and we want to respect that commitment. Then it will be, eventually, another 18 months, until we have the hotel ready. That is why I would say that in two and a half years, at most, we will be in operation. But I believe that in two years it will be possible to achieve all this”.

As for the total value to be invested in the project, “in these first studies, an investment of between 16 and 17 million euros is estimated, already including the seven million for the purchase of the building”. Regarding the return time forecast, Miguel Gomes explains that “it should be in line with all the other hotels that we have in the group, which is also in line with the hotel market in Portugal and which will be around in a dozen years, more or less”.

Entering the dwelling will be inevitable

Miguel Gomes clarifies that "the group is now starting its access in the residential market, with one single project, still embryonic. Though "Yes, we will do housing marketing probably all over the country." Having said that, Miguel states that "afterward we will also make a residential investment in Madeira", although without defining stages. 

Besides the inflation, that does not make the investment more risky. "I would say that it is more appetizing. The current situation has diversified everything and all the models and therefore today it is more appetizing," he emphasizes. 

50% of American occupation rates

When asked about which are the most significant countries in the group's hotels, Miguel Gomes explained that it is very verifiable. "Right now we have eight units opened and more than 20 under construction. And we have several properties from three to five stars, in and out of the city. 

Even so, "I would say that the national market always operates substantially in Porto, where we have more units, as well as the Spanish market which is very interesting. However, and maybe because our hotels operate under American international brands, we have hotels with more than 50% occupancy rate of Americans."

Local Housing is not an opponent

Yes, there is a proliferation of Local Accommodation. But no, it is not a competitor to traditional hotels. This is the view of Miguel Gomes, who explains his point of view: “I know that there are other hotel operators who have a less favorable opinion of AL. I would honestly say that I have a very good impression of AL. There are features that AL offers that hotels can never offer and there are things that hotels offer that AL also can never offer. And therefore, there is a market for everything, what seems to me is that it is not a threat, it is, rather, something we have to live with and know that each of the areas has its customers, market and you have to know how to work with it”.

"The investment on the island is to continue. We are looking. We have already identified one and another property that we are studying. If the viability of these studies goes well, we will continue to invest in Madeira. Always in the hotel business, at least at this stage.”

Regarding the forecast of the return for the investment, Miguel Gomes explains that "it should be aligned with all the other hotels that we have in the group, which are also lined up with the hospitality sector in Portugal, and which will be in a dozen years, more or less.

As for the features of the final project, Miguel Gomes still has some reservations, but he already underlines many certainties. "We know that we’ll have, more or less, 70 to 80 rooms, closer to 80. What we have not yet been able to define is whether it will be a four- or five-star hotel. Because it also depends on the services that are included, which influences the product category. We expect to have, for sure, a swimming pool on the roof, two bars, and a restaurant", according to the statement. 

Two additional notes on the hotel features, one is to acknowledge that "not having a parking lot is a problem. The building is an existing one and we cannot have parking space there at the moment. We’ll have to use the public parking lots that may be in the surrounding area, in which of course, we will reserve our necessary places. This is a common practice of the hotels in the city center. We have, for example, that case in a hotel in the center of Porto, on a pedestrian street [Rua das Flores]. they are very premium hotels, but the buildings have this limitation, which we will have to deal with." The other has to do with the increasingly common exploration of another aspect within the hospitality industry: the event's organization, which Miguel Gomes claims will not have a large dimension. However, "yes, this project will have something along those features, but it won't be very big, we don't have that much area. We will include something, even if it's a small multidisciplinary room, for various purposes."

Miguel Gomes also clarifies that the phenomenon, which has been increasing in recent times, of direct customers without intermediation, is common practice in his group: “we only work with direct customers. We do not do vacation packages. I know this is very common in Madeira, but on the mainland, it is not so much and we do not work with these packages. We work with the customer directly to us, via online and a lot also via the engines of the brands we partner with, which alone generate a lot of traffic”.

Finally, there is a projection for around "60 to 65 jobs will be created in the operation of this hotel new, and during construction, we aimed for 70.

Expand the business to other markets

Miguel Gomes has no doubts that the current tourist boom in Portugal is here to last. “My expectation is that the boom will continue and even grow. I think that there are world tourist markets that are still not very explored by Portugal, and naturally also by Madeira. For example, the Asian market, which is also a very strong market, which came out of the pandemic later, and which will surely increase the number of visitors we will have, both on the mainland and on the islands”, as he responds. , with this additional finding that “there is no doubt that there is a great trend of occupation by an increasingly younger group”.

17 MILLION EUROS including 7 million paid in public spending, this investment will be around 17 MW

65 EMPLOYMENTS. The first hotel on the islands will generate 65 workplaces.