The pandemic has driven greater flexibility in the relationships between hotel brands and owners, according to a webinar hosted by Watson, Farley & Williams last week.

The post-pandemic relationship between the two was expected to become more transparent, as hotels moved into mainstream and investors became more educated about the intricacies of the sector.

Felicity Jones, global real estate sector head & partner in the corporate & M&A group, Watson, Farley & Williams, said: "We still need to have a better fundamental balance that recognises the brand value but balances the risk of all stakeholders. I would like to see more certainty for the owners coming out of this.

"I am hoping that change will come as there are more experienced - and larger - owners in the market who will fully understand operations and, together with funders, will drive change.

"Experienced owners have expectations. More experienced owners will have better deals and more power. But there should be more transparency on costs. In any other business, owners would expect transparency on all costs at the beginning."

Jones called for contracts where there were more opportunities for the brands to stand by their performance profiles, with enforceable termination rights and solid levels of comfort.

Robert Swade, managing director, Maze Hospitality, agreed, commenting: "I think there are more owners that are more educated and sophisticated than we perhaps give them credit for. Education is something that is very accessible.

"All brands, whether global or emerging, should be more flexible. Those brands that are prepared to adopt a flexible and adaptable approach will emerge from this much more successful that those that stick to the 'by the book' approach. Owners will expect brands to operate in partnership with them and take a much more collaborative approach."

Lionel Benjamin, co-founder AGO Hotels, which added 10 hotels from the Travelodge estate in the UK on a hybrid lease model, said: "The big challenge to us has been the education. The brands and owners aren't sitting opposite each other, it's a round table - we're all sitting around the same table. Those landlords like the idea of risk and reward. This isn't just about Travelodge, it's about the future of the industry, can we work hand in hand and coexist together to provide a service to the guest."

The panel discussed the growth in conversion brands during the pandemic, with several of the large, global operators adding to their stables. The hope was that they would give owners the chance to enjoy the distribution benefits of a global group, but without the need to adhere to strict brand standards.

Jones said: "In theory they offer more flexibility but it varies from brand to brand. I have been quite disappointed to see a 'collection' agreement that is very similar to a standard agreement. It seemed to be a proliferation of a proliferation.

"I think the theory and intent is good but again it needs to recognise a greater flexibility beyond just design standards."

Greater equality was the hope of the panel, with the agreement that it need not be a zero-sum game; greater flexibility from the brands need not mean a drop in their valuations.

Benjamin said: "The brands have suffered, there is no question. They are burning a lot of cash to keep businesses open. Brands are going to want to secure their income streams, so come to the table with flexibility. Believe in your brand. Finding the solution to enticing the landlord. Everyone will win when we are all sitting around the table and there is skin in the game."

He suggested that brands could offer a product with "one fee, no additions, no extras. The brand that comes out of the mêlée of brands and says 'this will be our fee'. There will always be an alternative to brands so we have to be innovators and find solutions that work for everyone."

There were doubts about such innovation from Jones and Swade, but acknowledgement that those who innovated were the ones likely to come out of the pandemic the stronger.

The webinar was the first in a three-part series hosted by Watson, Farley & Williams. The next will take place on Wednesday 10th March 2021 and be moderated by Katherine Doggrell, Co-Founder of NewDog PR. Please email [email protected] to register.

Register to attend the webinar here

Watson Farley & Williams

Watson Farley & Williams is a leading international law firm with offices in Athens, Bangkok, Dubai, Düsseldorf, Frankfurt, Hamburg, Hanoi, Hong Kong, London, Madrid, Milan, Munich, New York, Paris, Rome and Singapore. We provide legal services of the highest quality through a combination of technical excellence and industry knowledge in the sectors we know best, principally, Transport comprising Aviation, Maritime and Rail, Energy comprising Oil & Gas, Power, Natural Resources and Renewables, and Real Estate. Our lawyers apply their specialist skills and experience to provide effective commercially focused advice across a broad range of corporate, finance, dispute resolution, tax, employment and regulatory matters.

Katherine Doggrell
Co-Founder of NewDog PR
Watson, Farley & Williams