MADRID — With branded hotel firms pursuing conversion opportunities, some owners are wondering if their best interests are fully part of that global plan for portfolio growth and distribution dominance.
Such zeal follows a period of bottom-line pain for hotel owners. During the height of the pandemic, several hotel firms announced their rents needed to be renegotiated.
Speaking at a panel at the Atlantic Ocean Hotel Investors’ Summit, Christophe Vielle, chairman and co-founder of GCP Hospitality, said brands must never lose sight of owners. The brand representatives at the panel said they certainly do not and have not.
“I am an investor, and if they do not focus on my hotel, I will remind them to do so very quickly,” Vielle said. “The brand is important in getting funding, as we do not use our balance sheet, but 90% of the value is in the value proposition, not in the brand.
“I like brands, but I know what they are doing, and I use them for my ends,” he said.
Dillip Rajakarier, group CEO of Minor International and CEO of Minor Hotels, said his company is not converting hotels to its brands merely for the sake of doing so.
Rajakarier said Minor renegotiated all its leases during the pandemic, and he added the second and third quarters of 2022 were record quarters for the company.
Panelists said it cannot be disputed that branded hotel firms increase marketing clout and distribution muscle on a global scale. This clearly helps owners, but both sides must do all they can to make sure everyone benefits equally.
Dimitris Manikis, president for Europe, Middle East and Africa, at Wyndham Hotels & Resorts, said he does not view hotel firms and owners — or even different hotel companies — as being competitors.
“We saw the solidarity between us all during the pandemic when the only objective was to get people traveling again,” Manikis said.
Omar Romero, chief development officer at Six Senses Hotels Resorts Spas, said owners of luxury hotels worry that an acquisition by a global hotel firm will see bottom lines hurt when they are rolled into loyalty programs.
IHG Hotels & Resorts acquired Six Senses in February 2019 for $300 million. Romero said he had been skeptical during the process, even though he felt the firm’s valuation — a four-times multiple of the previous full-year’s earnings before interest, taxes, depreciation and amortization — was unbelievable.
“We did not come cheap, and we managed to tailor loyalty in a way that suited us. We capped redemption and found comfort by retaining the DNA of a small, unique company,” he said.
The hotel industry's history is marked with mergers and acquisitions, and Vielle said the integration that follows those deals does not always work out for the affected hotel owners.
“How many Sheraton hotels are opening? None,” he said, referencing Marriott International’s 2015 acquisition of Starwood Hotels & Resorts and the parent company’s subsequent brand expansion.
“Whenever a branded hotel firm announces a new brand, they destroy a brand,” Vielle added.
Rajakarier, whose firm also owns and manages third-party branded hotels, said the Minor-owned JW Phuket in Thailand receives $120 through Marriott’s loyalty program when it could command average daily rate of between $250 to $300.
There is currently legal action ongoing in the Thai court system between Minor and Marriott over the hotel, with, among other issues, Minor claiming Marriott is “failing to protect the owner's interest.”
“The leakage is paid for by the owner, and then after five years Marriott tells you it needs renovating as it is being used too much, with of lot of that use being loyalty,” Rajakarier said. "And a gross revenue-related fee of say 5%, a profit-related fee of another 5% and maybe some marketing fees of 2%, well, that adds up, so why not go to Booking.com? The owner’s biggest weapon is the customer data we have."
On the other hand, brand presence does improve EBITDA, Rajakarier said.
“We understand not all can be tarred with the same paintbrush,” he said.
On the other side of his business, Minor’s acquisition of NH Hotels put NH on a global platform, a deal Rajakarier said was a “marriage made in heaven.”
“NH is opening hotels in the Middle East, four in Asia, so there is crossover. For me, it was the best deal ever,” he added.
Manikis said Wyndham is looking to expand, both with acquisitions and openings.
“There is a Zulu expression: ‘Eat fast and be full first.’ When we see an opportunity, we move the fastest. Of our 24 brands, we bought 19. We like owning,” Manikis said.
Last year, Wyndham spent $44 million to acquire European hotel brand Vienna House, and Manikis said Wyndham plans to expand the brand in the Middle East and other regions.
“With the acquisition of Vienna House, I felt like I went through the Spanish Inquisition. I received a call from the CEO [Geoff Ballotti] five minutes before I was going to sign the check for $45 million, asking me if I was totally sure.
“But I knew the deal made absolute sense,” he added.