Allegiant’s hotel play: Sunseeker Resorts

“If you build it, they will come.”

That’s not the exact quote from Field of Dreams but perhaps it is more applicable to the latest move by Allegiant. The travel company best known for its Allegiant Air ULCC flight operations is set to invest heavily in a resort on the Gulf Coast of Florida. The 20 acre Sunseeker Resorts complex will feature condominiums and a resort hotel, plus grocery, marina and “a property-spanning resort pool designed to be the largest in North America.”

The airline already operates significant (by Allegiant levels) service into the Punta Gorda Airport. Those 40ish destinations will help feed an estimated 300,000 additional visitors into the region once the complex construction is completed. Investors are invited to buy a 1, 2 or 3-bedroom condominium to live in or to place in the resort rental program, allowing the property to earn income as a rental for visitors.

“This project builds on Allegiant’s profile as a leader and innovator in leisure travel,” said John Redmond, Allegiant president. “Our growth and success with air service in Punta Gorda, visitor trends in the region, and this unique, spacious waterfront property all point to an exceptional opportunity for a resort that vacation home owners and hotel visitors will love. In my years of experience developing resort properties around the world, it’s rare to find such a perfect alignment of factors.”

Allegiant joins a long line of airlines that chose to invest in the hotel market, offering accommodations for the passengers they carry on board. Icelandair’s hotel arm operates eight branded properties in the country, with the first built in 1964, plus higher end properties under the Hilton brand. ANA hotels in Japan operate as a joint venture between the airline and the Intercontinental Hotel Group (IHG). SAS used to be a majority stakeholder in the Carlson Group, with its branding evident in the Radisson SAS chain of properties; those are now Radisson Blu hotels since SAS pulled out of the partnership. And, of course, there was a period in the 1970s when United Airlines owned the Westin brand.

A lot of skepticism on Allegiant's call about its new resort. Analyst: If there's so much demand, why hasn't someone else done it?

— Ghim-Lay Yeo (@ghimlay) August 29, 2017

Allegiant is far more than just an airline, to the point that this announcement might not be quite as crazy as it appears on the surface. The parent company has the air operations, of course, but also a technology company to help develop solutions that serve its airline operations. When Allegiant wanted to launch mobile boarding passes for the airline side it was the Allegiant Systems arm that built the service and helped coordinate the implementation. Ditto for a digital passenger manifest offering. The company makes a significant portion of revenue on selling 3rd party products such as tours, rental cars and event tickets. And, of course, hotel rooms.

Will we have to check in/out on arbitrary days/times and pay extra for everything but a bed of questionable construction?

— Mike Folf (@MikeFolf) August 29, 2017

Even for travelers who do not book package deals the upsell opportunities are significant and lucrative. There is risk, of course, that this is too great a build out in an area that cannot support so many visitors. Or that no one really wants to spend so much time in the Punta Gorda area. If the company can secure sufficient upfront investment in the condos to offset the bulk of the construction costs the overall risk should remain relatively low with a significant potential upside.