A test of trust

The ideal relationship
So, what is it that brings the owner and operator “together” in this ideal relationship?

“We need greater transparency between owners and operators and less of them versus us,” says Bhardwaj, echoing Danziger’s point.

“Owners need to be better informed with specific comparison of various hotel operators’ capabilities. While this is happening in the comparison of their ability to drive revenue through independent consultants like STR, no comparison is available regarding ability to control costs,” he says.

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For ADNEC’s Tanna, “ideally, the risks and rewards should be shared in an environment of mutual trust and communication”.

“Too often this doesn’t happen; owners are forced to take all the risks in investing and the operators reap the rewards if the asset is successful, while having no exposure if performance isn’t as expected.”

To counter this, Scully says owners need to have the confidence that the operator treats his property as an individual business — “not just as an extension of their company and their brand”.

“We particularly take note when traditional business hotel operators try their hand at resort operations where their source markets are generally only business focused.

It can take them many years and a complete change in culture before they are able to add any true value to the resort that they manage, ultimately costing owners huge sums of fees for very little value or incremental revenue,” Scully explains.

Operators that have expanded quickly and lack local knowledge also pose a risk for owners, says Scully, while Nierhaus says his biggest “gripe” about hotel operators is “the tendency to short-term tactics, particularly in a tough business cycle, based on a global company policy without taking into consideration the individual owner’s wish”.

The key to the ideal relationship, says Danziger, is the way in which such “gripes” are eliminated. This comes down to establishing a good relationship and understanding early on and ideally, having the operator on board during the development process to help advise on what they can generate a profit on.

Ultimately though, this goes back to Pisani’s original point about the importance of the “human element”.

Drawing on Wyndham’s recent signing in Doha for the first Wyndham Grand and Planet Hollywood hotels in the Middle East — which are both owned by Regency Group Holdings — Danziger says personal relationships “do matter”.

“I would rather have our great growth and expansion in this region, which is even more important in terms of relationships, with fewer people than every hotel being a new relationship.

Growing relationships and adding more with existing owners is a key strategy of ours and if you do all your deals right up to a handshake, I’m happy to do that.

“That is my style; the lawyers are part of life but deals [should be] done based on your relationships, and the trust, honour and integrity you have mutually for each other first,” Danziger concludes.