ATLANTA — Despite both parties having a similar goal of providing a profitable guest experience, brands and hotel owners have tense relationships at times, and it's not getting any easier.
On a recent panel at the Hunter Hotel Investment Conference that focused on these relationships, Dianna Vaughan, senior vice president of global owner relations, support and benefits at Hilton, said that navigating the relationship is “a delicate balance.”
"As brands, we have to look at balancing what the customer is expecting with owner economics, and that's a huge part of every discussion we make," she said.
It's a daily topic of conversation, Vaughan said, and hotel brand companies need to ensure they have open lines of communication with owners and franchisees.
Bobby Molinary, chief development officer for U.S. select brands at Marriott International, said that these conversations are likely getting more difficult. It's an art of telling the right story and showing results to a hotel's stakeholders.
"We just want to demonstrate an ROI that's not only just on improving the asset, but in providing a great service to the guests, and what the return is on doing that," he said. "We spent a lot of time focusing on that. It's never easy, it's always a challenge, but it's important."
Brand options, alignment
When the hotel owners on the panel were asked to assess their relationships with their brand affiliates, Rinkesh Patel, president at Columbus, Georgia-based RAM Hotels, said it's a give-and-take. RAM Hotels is an owner and operator with 30 open hotels and more in the development pipeline.
“If we can agree on eight things, and two things we may not agree on, that's a win. That's absolutely a win any given day," he said. "It's going to make our life easier to offer this [brand] at our hotel, because that's why we paid to [be part of] a system. We wanted to come into the game plan, the game plan that's efficient and easy for us to run, so that we serve our common guests and then generate the cash."
But hotel owners voiced a concern that the volume of brands in the market is affecting their business.
“There’s just too many brands," said Pete Patel, founder and CEO of Atlanta-headquartered Nexera Capital, a hotel owner and developer with more than 20 hotels in its portfolio.
“It's hard from us, from our ownership standpoint,” he said. “If you've got a great market now you've got a new brand, hey, there's more competition. I mean, how's that gonna affect our property market?”
Rinkesh Patel said he recognizes the hospitality industry — and every industry — is dealing with brand-loyal consumers, especially with the newer generations, but securing big brands for hotels can be competitive. More brands might be more options.
“For me, I think it's more opportunity to grow because I can't grow with Hampton, and I can't get a Courtyard, and I can't get a Hilton Garden Inn, it's all represented already,” he said.
One challenge both sides of the table are facing is providing a specific level of service to hotel guests on par with pre-pandemic expectations. While other metrics have returned, Rinkesh Patel said he points to one reason service is still suffering.
"We let everybody go so that we could keep the lights on, and then maybe we have a chance of coming back. Well, when we brought everybody back, they were not the same people. The processes were out the door. The experience was out the door. ... There were completely new people coming in," he said.
What the future holds
Now hotel owners are facing new headwinds with the current presidential administration — namely promised and implemented tariffs. Pete Patel said it's time to budget for them, whether they go into effect and for how long.
“From a construction standpoint, we’re getting ready to get started on our Hampton/Home2 in Nashville. We met with our [general contractor], and this is the conversation we’re having now. Tariffs — we’ve got to account for them, if they are around or not, with the geopolitical environment, it could change next month," he said. "We’ve got to make room for it in the budget. … It could go away, and hopefully it does go away, but we have to account for it with financing. Lenders are going to start asking, ‘How are you accounting for tariffs?’ It’s here, and I think we’d better address it, and just deal with it.”
Unfortunately, its not too unfamiliar of a quandary for hoteliers who aren't too far from recovering from the pandemic. The panelists agreed that being nimble and having a contingency plan is key.
"It's a different challenge right now with the supply chain," Vaughan said. "We have had to be proactive and prepare for what-if. [We] are having those conversations right now with owners and with vendors and with brand tests on the what-if scenarios so that we are prepared.”
Molinary said maintaining active learning is also important when navigating uncertain times, and he admitted going back to 2018 levels would be ideal. When the market is up, the sky is the limit.
“When I first started working in development, we’d have a good year and everyone would say, ‘I don’t think we can repeat this. We’re going to run out of street corners,’” he said. “And guess what? Every year there are more street corners. If you stick to the fundamentals, you work on good projects in strong markets, on a great street corner with great brands, you put together a good partnership, that’s easy to work with.”