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Hotel groups may regret selling off property

Hotels that have sold off assets may find themselves in trouble in the medium to long term, a leading banker warned at last week’s International Hotel Investment Forum.

Struan Robertson, managing director of Morgan Stanley, said: “Being too asset-light may not be good for hotel groups in the long term. Just keeping core assets may not be enough.”

He added that in five years’ time, the merits of asset disposals would be questioned as company growth and changes in brand format became more difficult to implement, while smaller market capitalisation left listed companies more vulnerable to take-overs.

The strategy would be subject to the “law of unintended consequences”, Robertson warned, laying the blame at the feet of investment bankers, industry analysts and hotel management boards.

Michael Hirst, consultant at property agents CB Richard Ellis Hotels, said: “It was the market that originally forced hoteliers to sell their assets because of low returns and now they’re the ones casting doubt on the strategy.”

But he added that becoming asset light had two important benefits. “It allows managers to do what they do best, and frees up capital for new property investments that will generate better long-term returns.”

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