New types of owners are bringing new kinds of business

W London – Leicester Square
W London – Leicester Square. (Marriott International)

Insight Comment
There’s no shortage of money available for investment in hotels. Just as significant is that the cash is coming from more different kinds of investor. The consequence is likely to be that managers of capital will be less likely to sit on the sidelines and more likely to sell up sooner than traditional institutional investors.

New types of investor, notably private equity funds, are bringing fundamental change to relationships between the owners and managers of hotels, delegates at the Annual Hospitality Conference (AHC) heard.

The new owners are much more interested in how a property is run than the archetypal traditional institution happy to buy an asset and hold it for the rental income for lengthy periods of time.

“New forms of capital are coming in.” As well as private equity players, Adela said family offices and local authorities are increasingly active,” Adela Cristea, vice president and head of business development in the UK and Ireland for Radisson Hotel Group, said.

As was discussed on the panel entitled ‘Development Strategies for the Post-Pandemic World,’ the influx is reshaping the nature of business dealings between owners and managers. New types of owners are more inclined to intervene.

“At the end of the day we have to do what is right for the landlord,” Lionel Benjamin, co-founder of AGO Hotels, said.

Newer types of investor may have a finite time horizon for divestment, which could create more disruption for managers and operators. Management contracts are unlikely to last as long. Twenty-five year contracts, said Lionel, were on the way out. 

In short, owners are becoming much more interested in everything from the broad strategy and the day-to-day operations. One of the key reasons, delegates heard, is that the new kind of owners have different ambitions. 

Cristea has worked in hotel development and hotel consulting across EMEA for the past 20 years. She told the AHC that commercial property investors were being attracted to hotel properties in spite of the disastrous drop in revenues in the last couple of years. The reason, she said, is because the prospects are both promising and sustainable – unlike office and retail spaces.

The attractiveness of office space is being affected by pandemic-led popularity of working from home. High street retailers, meanwhile, are facing tougher and tougher competition from online rivals such as Amazon.

New kinds of investors are also bringing fresh eyes to the different parts of the hotel market. 

Tim Walton, who runs the development of Marriott’s brands across Western Europe, added to the theme about varying investor tastes by talking about how the market was segmented. 

In the UK, where London properties are often highly prized, he observed that opportunities outside London were being keenly targeted. Before Marriott, Walton worked in development with Le Meridien Hotels & Resorts and in consultancy with BDO.

Sam of Sonder made the point that owner-manager relationships are bound to be different if the deals are struck in different ways.

Barrell is director of real estate development at Sonder, a hospitality company which says it couples “beautiful design with seamlessly connected technology.” Sonder operates in more than 30 cities in eight countries and on three continents.