The changed circumstances of many Middle East based hotel investors has led them to review their attitude to management companies.
This month's Arabian Hotel Investment Conference saw several statements from speakers and delegates seeking more "skin in the game" from the brand owners and operators. It is not a hope likely to be realised.
Gerald Lawless, executive chairman of Jumeirah, a subsidiary of the troubled Dubai Holding, said that banks were slow to lend and mixed-use developments were "very difficult" to obtain finance for. "Owners are now talking to operators about putting in loans or sliver equity," he said.
Just before the event, Jumeirah put out a press release headlined: "Jumeirah Group sees sales soar, reaffirms growth strategy and names new brand". But the release was more notable for the lack of detail than its new content.
Impressive occupancy figures were listed for Jumeirah's beach front properties, which include the Jumeirah Beach Hotel and the Madinat Jumeirah, of 92.5% in April and an average of 89% in February and March. Not given, however, were any details on rate and Jumeirah's representatives remained tight-lipped about this.
The target of having 60 hotels signed by 2012 was reaffirmed and Jumeirah said it was confident of having 30 hotels open by 2013. Also announced was the "contemporary lifestyle" brand VENU.
Jones Lang LaSalle Hotel's head of the region, Jalil Mekouar, said that in Middle East and North Africa about 60% of hotel projects were either delayed or cancelled. Investors were now more risk averse and sophisticated.
Joe Sita, president of IFA Hotel Investments, said debt finance cost at least 15% and what was available was mostly foreign. He did not believe the Middle East should swing away from luxury but he described himself as "bullish" about the opportunities for branded budget hotels.
HA Perspective: Groucho Marx famously said: "I don't care to belong to a club that accepts people like me as members." The situation with brand owners and operators putting in sliver equity or significant guarantees is similar. The only offers of significant guarantees or equity are likely to come from brands an owner should not want.
This is particularly the case in Dubai and other emerging markets. As Roger Blackall, a former Kingdom Hotel Investments executive and now head of hotels and hospitality at Premier Group in Bahrain, said, security of title remains an ongoing issue in the region.
It is hard to conceive of a brand company wanting to expose themselves to that sort of risk, especially if they are a listed entity. Sarmad Zok, CEO of Kingdom Hotel Investments, said that owning hotels was very complex and best held in private hands. Asset light listed operators do not want to entangle themselves in effective ownership positions.
Kirk Kinsell, president EMEA at IHG, made the further point that operators have already made an investment in emerging markets by bringing in trained staff and training locals. The risk the operator took was in this investment.
The cash crunch in Dubai has sent owners seeking other options to continue to grow. Dragging in operators to the ownership side of the business should not be one of them.