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Hotel groups won't offer loans to help property owners

19 March 2009 by
Hotel groups won't offer loans to help property owners

The major hotel operators are "in denial" about the repercussions of the global financial crisis and must change their business models to adapt, industry experts have warned.

During a discussion at the International Hotel Investment Forum (IHIF) in Berlin last week, a panel of chief executives from InterContinental Hotels Group (IHG), Hilton, Starwood, Accor and Marriott - which all predominantly operate on a management contract basis - said they did not intend to "share the pain" of the recession with the owners of their hotels.

The chief executives said they would not loan money to the owners or alter management contracts, despite the recession hitting hotel revenues across the board. In a separate interview, IHG chief executive Andy Cosslett said the owners were in "a competitive world of their own" and suggested that many had overstretched themselves.

Jochen Schafer-Suren, head of hotels and leisure property fund management at investment firm Invesco, said these comments showed that the chief executives were "still in denial" about the financial crisis and warned that the major chains would have to invest more.

"The asset-light model is really a hotel-business light model which is not sustainable," he said. "If hotel chains want access to capital now or going forward they will have to make investments or take risks in the hotel business."

Former Hilton chief executive Michael Hirst, now consultant to property agent CBRE Hotels, said the operators ran the risk of creating tensions with their owners.

"While many hotel investors are seeing their returns decimated, hotel management fees and recharges are not always proportionately matching this decline in owners' returns," he told Caterer.

"This could put the necessary supportive partnership between hotel owners and their management companies under considerable threat at this critical time."

Want to read more? Go to www.caterersearch.com/hotelnews

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By Gemma Sharkey

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