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HAF "Suddenly, the will to build no longer existed"

Henry Simpson, Senior Director Of Development France, Belgium, French-speaking Switzerland and Turkey at IHG Hotels & Resorts, discusses the changes between the different partners involved in hotel projects at the Hospitality Asset Forum.

I'm here to talk to you about the relationships between us as operators and our partners, whether it's for construction or investment, because Covid has had an impact on these relationships. Before Covid, we were in a neoliberal space where we developed new hotels in a certain comfort. A situation that is particularly valued by us, the big international brands, because in new properties we can deploy all our brand standards.

If we look at this ecosystem, there were the developers and promoters on one side and the investors and politicians on the other, covid has profoundly changed this situation. Builders and developers live in the long term with a visibility to develop a product over 3 to 10 years. These actors are therefore used to seeing the long term and going through crises.

On the other hand, financial players have a more short-term vision and are much more alert to risks. Covid, which brought our activity to an immediate halt, had an extremely strong impact on decision-making and risk-taking upstream and much less on the construction sites that had begun. Thus, a few weeks after the lockdowns, the worksites resumed their course with protocols to follow. On the other hand, there was a real halt in decision-making and funding, which caused real problems for all of us. 

We have seen many of our financial partners disappear, and there have also been many political changes with the municipal elections. The changes were quite violent at that time in France and many building permits were on hold.

We operators found ourselves stuck in this situation. We were living on construction and on established partnerships by being perceived as suppliers of customers for hotels. Suddenly, the will to build no longer existed. All the big groups have this desire to grow and we are in a growth war because the franchise needs to grow to maintain its market share. So we had to put in place all the means to ensure that this growth would continue. So, from pure franchisors taking care of the distribution part, we became deal makers. We started to take a detailed interest in our deals by looking for different financiers and partners. We saw a lot of private liquidity come in. We also saw promoters who wanted to invest in the hotel industry as well as family offices. With our pan-European and global vision, we went looking for other investors in Europe and for whom, seen from abroad, France is an extremely stable space. As a large group, IHG is assimilated to the institutional sector. We have therefore capitalised on this image to accompany our owners to meetings with town halls or financiers.

This relationship has changed completely over the last two years, and we are now fully-fledged partners. During the crisis, we provided operational and financial support.

The year 2022 has been extraordinary in terms of performance, it has been the greatest reward for this belief in the hotel industry. Two years ago, we did not think we would have such a good year. We all know that the context is fragile and we don't know how the future will unfold. In the new relationships that we have today with our owners, we have become much stronger partners, at IHG in France we have gone from 20 to 50 people at the French corporate headquarters with a doubling of the number of hotels in 3 years. We also have the role of providing human support. Today, a franchisee comes to look for a franchisor not only for his fees but also for the added value that he will bring.

After the Covid and the two scary summers we have just gone through, we are finally addressing the subject of the environment. The promoters had already grasped this issue, they have been proposing solutions that work for years. However, they were systematically refused for immediate financial reasons, but today, in construction meetings, we are finally starting to talk about the energy bill of hotels in the future. The crisis has made this environmental awareness possible. Everyone who was sensitive to the subject can finally express themselves on these subjects in their own role and in their company. Today we must start to build these new hotels with a new deal.

If 2022 was a very good year in terms of performance, it was also the year of a major crisis in terms of human resources. This is an issue that is clearly not resolved today and one in which everyone must play their part. We have a role to play for employees in creating a sense of belonging to the brand by giving meaning. In the manufacture of the hotel object, we must take into account this need to give meaning. We also have to think about the life of the employee in this object that is the hotel. We must therefore have this perspective in supporting the owner.

The work of requirement, entrepreneurship and support has been largely modified between franchisors and franchisees, we have become full partners in all aspects of the life of a hotel.

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