Asset-light shifts to asset-right | Hotel Management 25/05/2017 18:13

Transactions

Asset-light shifts to asset-right

by Andrew Sheivachman | Apr 23, 2012 6:55pm

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U.S. hotel companies look to increase ownership stakes through targeted deals

National ReportFor years hotel brands embraced an asset-light ownership model to shore up Popular Content
balance sheets during an uncertain economy. Lately major franchise companies have made key
asset purchasestriggered in part by Hyatt Hotels Corp.s 2011 investments to reinforce its How Greece became a stando
select-service portfolio. destinationand why invest

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Asset-light shifts to asset-right | Hotel Management 25/05/2017 18:13

Is the time now for brands to switch from asset-light to asset-right, as new opportunities are taking notice
emerge in a strengthening economy? May 23, 2017

Many [hotel companies] are starting to look at targeted acquisitions, whereas everyone was Regional New Zealand hotel
focused on an asset-light model [before], said Michael Glennie, president and COO of keep pace as demand for ass
Fairmont Raes Hotels International. Fairmont recently acquired the Fairmont Sonoma remains strong
Mission Inn & Spa, an almost contradictory move from a company that rarely owns its managed May 24, 2017
properties. Fairmont has managed the property since 2002 and held a 20-percent ownership
Belmond acquires Anguilla's
stake. The property entered foreclosure last year.
Juluca for $84.6M
It may make sense for [hotel companies] to own more real estate, whether its a strategic asset May 22, 2017
in a strategic city or an asset for which the only way to control it is through an acquisition as a
China's Shanghai United set
100-percent owner or as a joint-venture partner with signicant equity, Glennie said.
acquire IHG property in Sydn
Looking at the industry at large, tight lending will be less of an issue for hotels in gateway May 22, 2017
markets. Its going to be opportunistic, with people weighing the value of an asset case-by-
El Paso's Camino Real Hotel t
case, said Mark Fraioli, SVP at Jones Lang LaSalle Hotels. It will [come down to] three or four
join Marriott's Autograph
brands competing for the same assets.
Collection
Fraioli said franchise companies have dierent strategies when it comes to increasing May 23, 2017
acquisitions.

He cited Marriott Internationals $165-million acquisition of the iconic Manhattan Clock Tower About the Author
building and said the hotel in the works will have a signicant benet to their brand image.
Andrew Sheivachman
He said Hyatts approach is more of a power move into the select-service segment. Theyre $
using a balance sheet to further enhance their select-service presence; they spent about $200
million to get into the Hyatt Place brand through the acquisition of AmeriSuites, he said.
Those acquisitions are deant, strong moves for the company.

Even brand companies that have been historically hands-o when it comes to ownership are
dipping their toes in the water.
Wyndham Hotel Group opened the Wyndham Grand Orlando Resort Bonnet Creek last year, its
rst owned property.

In this case, Wyndham Hotel Group President and CEO Eric Danziger said ownership is not a
new trend for Wyndham, but more of an opportunity. We were happy to complete the deal
[for Bonnet Creek] but I dont know how long well own it because someone will want to buy it,
he said. Then we can use that capital. Its not a strategic shift to be in the ownership business.

Glennie said Fairmonts goal with the Sonoma purchase is part of the companys larger
acquisition strategy in the U.S., which focuses on increasing a propertys protability and selling
the hotel o with a long-term management agreement tacked on.

Were already in conversations with other potential buyers, he said.

No matter how many or few assets brand companies seek to acquire, equity requirements
remain high for transactions, meaning that brands and buyers with strong balance sheets will
seek to enter new markets and drive up prices in the process.

The dierence is that historically you make acquisitions with a small sliver equity piece, and
thats becoming increasingly dicult for assets where everybodys competing, Glennie said.

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