Arthur de Haast, Global Chief Executive Officer
With fundamentals in many of the world’s mature lodging markets still bouncing along the bottom, brands and investors continue to look abroad for growth to their portfolios.
Much has been said about the development opportunities that the BRIC economies offer and this is still very much true today. Globally, the most significant hot spots for hotel development are China and India, and also Brazil. The Middle East has seen an explosion in new hotel openings in a number of cities but Saudi Arabia still offers considerable potential for growth. Investors are also looking to North Africa. Hotel markets in Egypt and Morocco are doing well. Furthermore, several natural resource-rich countries in Africa are starting to selectively pop up on investors’ radar. Indochina also presents development opportunities, though not on the same scale as in China, India and Brazil.
As I discussed with my fellow panelists during today’s workshop “International Hotel Development: Translating Domestic to Global”, the development of hotels outside of mature lodging markets is accompanied by a host of challenges. There are virtually no experienced third-party hotel operators in these emerging markets, which is a challenge for franchisees. Many developers do not have previous experience with hotel assets and have a limited understanding of management agreement terms and how they work. In agreements for hotels outside of the U.S., it is often more difficult to negotiate how risk is shared in the event of operating shortfalls. In many emerging markets, mixed-use hotel developments are the norm, which brings further complexities.
Being flexible in terms of certain brand standards and offering more flexibility in management agreements is crucial for increasing brands’ development pipelines. Offering termination without cause, subject to fair compensation to the operator, may represent one of the ways to get more deals done.
- Arthur
