Big hotel chains and unbranded-hotel owners find they need each other

Big hotel chains and unbranded-hotel owners find they need each otherNEW YORK - Independent hotel operators and giant global chains are increasingly linking up in franchise agreements as high-interest rates have slammed the hospitality industry, slowing down new hotel construction.

"In a climate where the debt markets for new construction are somewhat constricted, the importance of conversions is elevated," Marriott’s CEO Anthony Capuano said on an earnings call earlier this year. "Access to hotel financing, especially in South America, is currently limited since many hotels faced difficulties in meeting their debts during the pandemic," said Fernanda L'Hopital, South America director of consulting and valuation at hospitality consulting firm HVS.

Brand-affiliated hotels have a lower cash-flow risk than independent hotels, according to a 2022 Cornell University study based on 4,000 hotels over 20 years. "Some people have had 13 years of extremely low-cost money, said Barbrook. "They're coming off fixed rate loans into this much-higher rate environment. Many of our clients wish they could simply extend the facilities that they already have."

"Every couple 100 or 1,000 more rooms matter because there's a franchise fee associated with it," said Jan Freitag, director of U.S. hospitality at analytics firm CoStar.

Source: Loan Digest (loandigest.net)

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