Historically, value creation in hospitality was split between real estate capital gains, the appreciation or creation of goodwill, and operational management results. Then, job specialization, coming from the U.S. and the outsourcing of property ownership, encouraged the emergence of players focused on asset acquisition on one hand, third-party management on the other, and finally, distribution.
A rational ecosystem for the time took shape between REITs, SIICs, equity funds, and operators or third-party managers. Each had its mission. Value was neatly distributed through sales or contracts in the realm of "Asset Light."
Today, this division of roles is being questioned. Each actor eyes the added value generated by their partner, wondering if it would be better housed within their own accounts.
Investors, after all, have responsibilities to their shareholders, family offices, or institutions, to the savers subscribing to their investment vehicles, and to the banks providing financing. They must generate the best possible return on investment to satisfy all partners across the investment cycle.
Interest in the hotel asset class is largely fueled by its multiple sources of added value. Now, investors are no longer content with property ownership; they’re eagerly looking to acquire goodwill and increasingly to control operations, countering pragmatic brand managers.
It’s a return swing from the last century, with the reformation of groups that are both owners and managers. Some even create their own employer brand, or, where needed, a commercial brand.
As long as this new strategy accumulates sources of added value, it’s justified, or at least understandable. The ROI and IRR are all the better for it, contributing to a fair reward for the risks taken.
Is there a risk or a limit to this reorganization of relationships among hospitality actors? Time will tell, but we’re already seeing skills transfer through staff recruitment and tensions between yesterday’s partners, now finding themselves in the same roles. After excelling in one specialty, can one really excel in all areas? Will the new models effectively meet the challenges involved in transforming every stage of value creation?
If there’s one takeaway, it’s that the hospitality world will continue to evolve - clearly faster than other real estate asset classes -, prompting greater creativity in operational methods to maximize profitability.
Adolescence is not an end in itself but a step toward continuously building maturity. In an economic context shaken by geopolitical, social, and financial tensions, the major players in hospitality remain surprisingly confident in the future. Despite warnings, indicators remain favorable; the commercial accommodation market is active, travel remains strong, and major events continue to attract crowds. This drive to capture a larger share of added value is more understandable in a climate where it’s becoming scarce in other sectors.
Vanguélis Panayotis
CEO MKG Consulting & Hospitality ON / MRICS