The relationship between brands and owners is always tenuous, but it’s really been put to the test during the past couple of years. During a recent panel, a handful of hotel executives weighed in on a number of brand related issues ranging from PIPs [property improvement plans] and investing in hotels to franchise contracts and working through financial difficulties following the pandemic.
The panel, entitled “Owners, Managers, Franchisors and Franchisees: The Dynamics Of Power,” took place at the recent NYU International Hospitality Industry Investment Conference.
Greg O’ Stean, chief development officer, Aimbridge Hospitality, offered the perspective of one of the largest operators in the industry as he acknowledged that “COVID changed everything.” O’Stean touted the brand’s overall support as he addressed frustrated owners who may be having trouble making payments or are considering selling their assets.
“[After COVID] the brands said ‘we’re going to work with you.’ Now it’s your turn to do your part. Obviously, there are a lot of hotels in our system that are behind, but the brands are being flexible with everyone,” he said.
Bill Fortier, SVP, development, Americas, Hilton, furthered the point.
“When COVID hit we were all in this together. There was no going back, you couldn’t change anything if you wanted to so we just worked with our owners as much as we could. There was a lot of communication, how can we help, what do we need to do? We worked through it, but now we are getting out of this and it’s coming back,” he said.
Fortier, however, maintained that flexibility from the brands can only go so far, and he suggested that may be causing some owners to sell.
“The PIPs are coming now. You might not have the cash because you’ve drained the FF&E reserves doing business during COVID. Now you’re going to have to sell some of your assets to generate some cash so you can get your portfolio up to speed. You got two years to get your PIP done now,” he said.
Fortier urged owners to act quickly. “There is another challenge out there, everybody is doing the PIPs now. It’s going to be hard to find tile, hard to find carpet, hard to find furniture. So do it sooner rather later, you’re going to be a lot better off.”
Brian Quinn, chief development officer, Sonesta, weighed in on some of the driving forces.
“Look the franchisees and the owners have been through a lot. I still think a little bit of that balance and that partnership that we had to show during the pandemic we need to continue. But we do have to get after it because consumer’s needs are changing and it’s been a couple years since a lot of the work has been done. It’s a balancing act, but it should be rooted in the consumer’s needs and wants,” he said.
According to Mark Purcell, SVP, development, Accor, “I think part of that whole strategy is being ready to strike when things continue to come back. Obviously certain markets you’re doing great anyway. But if you don’t get that hotel up to speed then you’re not going to capitalize on this uptick,” he said.
Moderator Todd Soloway, co-chair litigation/head of hotel & hospitality group and real estate litigation, Pryor Cashman, emphasized the importance of showing an ROI for owners to make such investments, particularly if their property is doing well now.
Quinn added, “I think the brand standards and PIP requirements just need to be rooted in a true consumer need and there should be ROI on them. Lastly, as the brand and the owner/operator you should set an example,” he said.
“The right answer at the end of the day is going to be the business judgement that I need to keep up with what’s going on out there and you’ve had a two-and-a-half to three-year holiday from doing that,” said Soloway.
He concluded of the lodging industry in general.
“It’s pretty remarkable coming out of COVID all the different things that are happening that are equally unpredictable as COVID itself, such as extended-stay brands being on fire, all the different business models, all-inclusives, and the regional markets being so hot.”