Allegiant Travel Company’s $700MM gamble into the resort business is struggling to take-off, but will Allegiant offload it before it has a chance to get airborne?
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A Tough Start
In the face of financial turbulence, Allegiant’s Sunseeker Resort may soon see a change in ownership. Following a rocky second quarter, Allegiant has revealed a new strategy that hints at the possibility of selling the resort. This move comes as the company grapples with the economic challenges that have beset the travel and hospitality industries.
The massive investment for Allegiant came just before a massive exposé on the company’s safety protocols on 60 Minutes. The program continued in 2019 but then stopped for an extended period during COVID before opening in December of 2023.
The nearly 700-room property was intended to turn the airline’s concentration city, Punta Gorda and Port Charlotte, into the destination rather than send travelers off to Fort Myers (about 35 minutes south) or Bradenton/Sarasota (an hour north.) Estimates for revenue have swung from a $15MM profit this year to a $15MM loss this year.
Financial Woes: A Shaky Second Quarter
Allegiant Travel Company, known primarily for its budget airline services, has faced significant hurdles in its venture into the luxury resort market. The second quarter of the year proved particularly challenging, with financial reports indicating weaker-than-expected performance for the Sunseeker Resort, losing $2MM. Despite initial optimism, the resort has struggled to meet revenue targets, largely due to ongoing economic uncertainties and fluctuating travel demand.
The losses for Allegiant are not dramatic, but the proposition of filling the mega resort in between tourist behemoths but residing in neither could be wearing on investors.
Revising the Strategy: A New Approach
In response to these challenges, Allegiant has announced a shift in strategy aimed at stabilizing its financial footing. CEO John Redmond emphasized the need for a more pragmatic approach, focusing on cost management and operational efficiency. This revised strategy includes a thorough review of the resort’s current operations, marketing efforts, and overall business model.
However, the most striking element of this new strategy is the potential sale of the Sunseeker Resort. Redmond has not ruled out the possibility of divesting the property to refocus on Allegiant’s core airline business. This potential sale is being considered as a way to mitigate financial risks and ensure the long-term viability of the company.
Some have projected the resort could be sold for a profit which would help the company seek alternative approaches.
Exploring the Market: Potential Buyers and Interest
The potential sale of Sunseeker Resort has sparked interest in the market, with several potential buyers reportedly showing interest. Real estate investors and hospitality giants are closely monitoring the situation, considering the resort’s prime location and luxurious amenities as valuable assets.
While no formal offers have been made public, industry experts suggest that a sale could attract significant attention from both domestic and international buyers. The resort’s waterfront location in Port Charlotte, Florida, and its state-of-the-art facilities make it a highly attractive investment opportunity.
For whomever purchases the property, a partnership with Allegiant should remain a priority. Every year, the airline brings more and more passengers to the area growing from 836,000 in 2016 to 1.9MM last year and pacing above that number for 2024. The only other airline that flies from Punta Gorda is the Minneapolis discount airline, Sun Country flying only to its hub in the Twin Cities. Any investor who wants to fill the resort will need a steady flow of customers from Allegiant.
Impact on Stakeholders: Employees and Local Community
The possibility of a sale raises concerns among the resort’s employees and the local community. Sunseeker Resort has been a significant source of employment in the region, and any changes in ownership could potentially impact job security and local economic stability.
Uncertainty surrounding the resort’s future continues to be a source of anxiety for many.
Curious critics wonder if the resort has had enough time to evaluate its potential. While this year has been an all-time peak for travel both domestically and globally, the property is also new. Even if sold for double the suggested profit of $30MM, the six years of development, inflation of more than 20% during the period, and a gamble of $700MM or just over $100,000/key for a discount airline would hardly seem like a win. The one quick gain would be the liquidity injection minus whatever financing it had in place, but that could help in an impending slow down.
Still, it seems too soon to cut and run.
Looking Ahead: What’s Next for Allegiant and Sunseeker Resort?
As Allegiant navigates the challenging period ahead, the future of Sunseeker Resort remains uncertain. The company’s commitment to exploring all possible avenues, including a potential sale, indicates a strategic shift towards securing financial stability. For Allegiant, this move could allow the company to refocus on its core operations and strengthen its position in the competitive airline industry. But shareholders are already sold on the concept of a vertically integrated operation with a resort as a key component.
In fairness, of all the Allegiant focus cities, this is the best target for this product. Las Vegas and Orlando are Harvard case studies in hotel saturation, and while other cities are less saturated, they aren’t nearly as opportunistic: Mesa (Phoenix), Arizona, St. Petersburg (Tampa), Florida, Austin, Texas, and Myrtle Beach, South Carolina. The two others that might have been an opportunity were Sarasota/Bradenton, Florida, or Destin, Florida.
What might be a better opportunity is to see about breaking up the resort. Of the 680 keys, 180 are extended-stay which could make an interesting opportunity for a timeshare operation or even to sell off as condominiums. The lesson here is either that it takes more time to launch a resort for which is mostly your airport and a residential area, or that without supporting attractions, a smaller resort would be a better place to start.
For employees and managers of Sunseeker Resort, a change in ownership could bring new opportunities for growth and development. Potential buyers with expertise in the hospitality sector may introduce fresh perspectives and innovative approaches to enhance the resort’s appeal and profitability.
Conclusion
Allegiant’s Sunseeker Resort Florida is at a crossroads, facing an uncertain future amidst broader financial challenges and strategic reevaluations. The potential sale of the resort marks a pivotal moment for Allegiant, as the company seeks to stabilize its finances and refocus on its primary business. As the situation unfolds, stakeholders and industry observers will be keenly watching to see how this potential change in ownership could shape the future of Sunseeker Resort and Allegiant Travel Company. How will the airline proceed forward in the future? Will they try for another market, exiting this one unscathed, or perhaps stick it out and market it beyond their own existing customer base.
I consider myself exceedingly lucky because the world is literally my oyster and I don’t have to fly to Punta Gorda and go to a resort owned by Allegiant. I’m sure people enjoy their time there, but my goodness, that doesn’t sound fun.
IIRC, the afflicted golf course is 10 miles away from the resort. Also, the nearest beach is 15 miles away and the airport (Punta Gorda) is nine miles away. The resort is jammed on a narrow slice of land and the main attraction are two pools and a spa. By the third day, folks are looking for something else to do. It lacks the all inclusive property format like Disney. I would imagine many of the visitors will be once and gone as opposed to The Mouse which built its reputation on repeat visitors.
Gorda = overweight female ; Gordo =overweight male .
I would image there are plenty of those at the resort as well.
You certainly wouldn’t want to mistype Punta either.
This resort made zero sense from the inception. Expensive nightly rates, expensive restaurants, NO BEACH, and in a town with no tourist attractions.
I don’t see how Allegiant ever was able to conclude that this was going to be a win for their target market.
Trying to understand the concept this hotel. The drive to a beach can take a half hour. The restaurants are in a food hall, with little local choice. For far less money, fly into Tampa and visit Tarpon Springs. At least it is a charming small town with terrific Greek cuisine, beautiful natural sponges and only a mile to the beach. Of course if you want a lovely holiday visit Sanibel or Captiva
I have been rooting for this project to fail spectacularly because I despise Allegiant, and this never seemed to make sense to begin with.
Exorbitant prices for what looks like a huge Fairfield Inn on the side of a major highway. It’s located on the water, but has no beach. Paradoxically the nearest decent public beach on the gulf is 45-60 minutes drive from the “resort”. You can rent a better place directly gulf-front in the surrounding areas for significantly less than this hotel charges. Who wants to fly on a cheap, terrible airline and then pay dramatically overpriced hotel rates for a Florida beach vacation with no beach?
And then there’s the scam that is Allegiant Airlines… service to 50+ cities from Punta Gorda– but how many of them have daily service? Is the answer zero? That’s important on Allegiant because they have no qualms about running routes that have a 25% cancellation rate, and when your flight gets cancelled, they’ll put you on the next flight, if it isn’t full of course, and the next flight out is…. let me see…. oh it’s 4 days away… and will they compensate you for anything while you wait for 4 days? No, they will not.
This whole deal never made much sense to me – a nominally waterfront resort with a high price tag in Florida WITHOUT AN ACTUAL BEACH. It would be one thing if Sunseeker were actually close to one, but it really isn’t. What they probably should have done is bought an actual beachfront hotel that needed some work on the cheap, then added in airport transfers to meet both departing and arriving flights. Or at least put something together on Charlotte Harbor itself, rather than the Pease River, with a man-made beach. I could at least see a market for that. As it is, I’m not sure how this will ever work.
As part of the renovations, they should have a tie-in or purchase a nearby golf course.
Lots of golf fanatics out there who appreciate a voucher to go play.
However, some will spend time on the 19th hole, so a courtesy van would be imperative!!
No beach. No on-site golf course. No marina. A brackish-brown mud-floored harbor. A modestly-incomed county with a high number of fixed-income retirees. And an exhorbitantly-expensive luxury hotel built in a strip-mall community with no downtown and nothing to do (Port Charlotte). Who thought even for a second this was a good idea?
And no matter what the article said…Allegiant has zero chance that it will sell the property, whole or in part, for a profit. At best, it will face 200-300 million in losses, probably more. Perhaps the stupidest business venture I have ever seen.