Hotel owners and operators: lessons from 2019–2020

By 2019 the international hotel groups had never been larger. After its US$13.3 billion acquisition of Starwood, Marriott International became the world’s largest hotel company by rooms and opened its 7,000th property in April 2019. Scale brings distribution power and vast loyalty programmes, but it also raises a question every hotel owner cares about: as operators grow, is each individual hotel still a priority?

Two disputes in Thailand

In July 2019 Minor International sued Marriott International over the performance of JW Marriott Phuket Resort & Spa, which Minor International owns outright and Marriott International manages. According to Minor International, the hotel’s gross operating profit fell by 20 per cent in the first half of 2019, and its initial claim was 570.6 million baht, around US$18.7 million. The figure mattered less than the argument. Minor International said changes to Marriott International’s loyalty programme had cut revenue, and that Marriott International, after its consolidation, managed 11 hotels in Phuket that were competing with one another. Marriott International rejected the claims. In September 2019 a Thai court allowed the case to proceed. On 15 June 2023 a Thai court dismissed the claim; Marriott International said the court had found no wrongdoing, while Minor International called the ruling a decision on technical grounds and said it would appeal.

At the same time in Bangkok, the Phataraprasit shareholders, holding 50 per cent of The Peninsula Bangkok, sought to end the management agreement with The Hongkong and Shanghai Hotels (HSH). HSH held the other half through a subsidiary and ran the 370-room hotel. On 10 September 2019 the Thonburi Civil Court ruled that the HSH subsidiary should not have voted on the termination at the joint venture’s shareholder meeting of 26 January 2019. HSH appealed, maintaining that the management agreement remained binding. In September 2020 the two sides found a way out: HSH announced an agreement to acquire the remaining 50 per cent for US$70 million in cash, transferring its 50 per cent interest in the Thai Country Club and adjoining land to the Phataraprasit family, to end the disputes.

When the operator reorganises

Owners are affected not only by results but by how operators organise themselves. In 2017 InterContinental Hotels Group (IHG) folded Asia into a single vast region covering Europe, the Middle East, Asia and Africa, run from London. In late 2019 it went further, making its regional managing directors responsible for new development. Some Asian owners feared that executives meant to focus on the performance of existing hotels would now have to put pipeline growth first.

Distribution: control over wholesale

Not every change worked against owners. Under the multi-year agreement Marriott International signed with Expedia Group in April 2019, from 15 October 2019 Expedia Group became the exclusive global distributor of Marriott International’s wholesale rates, availability and content to a network of travel providers. Here, an operator’s scale was used to bring control to a distribution channel that bears directly on owners’ costs.

Deals, new brands and home rentals

In February 2019 IHG bought Six Senses from Pegasus Capital Advisors for US$300 million, taking on the management of 16 hotels and resorts and 37 spas, with a target at the time of around 60 hotels within ten years. In August 2020, with international travel at a standstill, Le Figaro reported that Accor had considered approaching IHG about a merger, a sign of how groups looked to scale to cut costs.

In the ultra-luxury segment, Aman Group announced a second brand, Janu, in March 2020: around 120 rooms per hotel, a livelier atmosphere and rates about 30 per cent below Aman hotels. Meanwhile the line between hotels and rented homes was blurring. Marriott International launched Homes & Villas with some 2,000 homes in more than 100 destinations in April 2019, while in Vietnam homes let through Airbnb grew quickly between 2015 and 2018.

Rubix Navigation’s view

Every merger, restructuring or brand launch can change where a hotel sits in an operator’s portfolio. For hotel owners in Vietnam, the lessons of this period still hold: a management agreement should set out clear performance tests, any area of protection against competing hotels, termination conditions together with the operator’s cure period, and how distribution and loyalty costs are shared. Rubix Navigation examines these questions in more depth in its three white papers on the value international hotel companies bring to hotel owners and the impact of their mergers and acquisitions.