Originally Posted by
CanadaDH
Easier to walk away, sure, but I don't think the shareholders of Accor are planning to just shut down the business and walk away. People will start to travel again.
Let's say you own a 400 room hotel with an ADR or $150 and 80% average occupancy. By my math, this puts the property's gross revenues at just shy of $1.5 million per month. Slash away 100k of this for the management fee, and you're at 1.4 million.
If occupancy drops to 10%, you're looking at a bit less than 200k in gross revenues, and a trivial management fee.
Let's further assume that your total costs, including debt service, are 800k per month at 80% occupancy and 650k at 10% occupancy.
This means that you're losing 450k while the management company is at zero. I'd rather be at zero with minimal exposure than pissing away 450k per month.
As a shareholder, I would prefer to be an owner of a hotel that includes the real estate.
Some chains (e.g. Shangri-La and Wanda) try to own as high a percentage of their properties as possible, others invest in properties on an opportunistic basis (e.g. Hilton, Marriott, Hyatt), and the rest are 100% asset light. I'm not sure which model is best, but all 3 have strengths and weaknesses.