Originally Posted by Canarsie
If I am not mistaken, brands such as Starwood and Hilton have been reducing actual ownership of real estate in favor of simply operating and maintaining the properties. Host Marriott buys the properties to actually own them for investment purposes.
I suppose this not only helps raise cash for the hotel chains, but also helps keep the cash liquid instead of having it tied up in real estate and capital improvements to properties.
I am not sure it is that rosy as there ain't no free lunch!
Host Marriotts of this world cherry pick and buy only the most profitable ones. Which means the remaining not so lucrative ones will be stuck with Starwood or will need to be independently owned. In either of these situations, the available investments into such marginal properties cannot be subsidized (even temporarily) by more lucrative ones as might happen if the same entity owned it. So the more profitable ones get better and the marginal ones get worse. How does Starwood intend to maintain brand consistency across such division?
Is Starwood investing the cash raised from these sales into improving properties it owns (I cannot see that happening if it is increasingly divesting itself of ownership)? May be it will get into the business of improving marginal properties with investment and selling it other Host Marriotts and that might be good for customers. But that does not seem to be a long-term business model.
The biggest problem for the consumer will be that Host Marriott owned properties may not compete aggressively with each other even if they are differently branded. For example, it makes no sense for Host Marriott to sign up to investing in offering a great new service or feature at its Hilton property that the Hilton brand is trying to promote to compete with Starwood brand if Host Marriott owns a Westin brand at a nearby location that will suffer from it.
What am I missing in this changing landscape of concentration of ownership across multiple brands?