The crisis had direct consequences on the financing of a new hotel supply. Loans are much more restrictive. People increasingly want to split the risk. New ideas are leading to fledgling projects, such as “mixed use” or combo projects where many different brands are implicated. Europe is clearly having a hard time creating a new supply.
Didier Boidin, Vice President Western Europe, Russia, and Ukraine, IHG"Things change depending on where in Europe you’re talking about. What is valid in northern Europe is not necessarily true in southern Europe. However, there are more opportunities for chains like us, particularly in terms of conversion. Many hotels consider that it is complicated to survive a crisis untouched. By the way, we have also launched a new brand focused on conversion in the United State: Even. The crisis is also an opportunity to focus on hotels already open and improve profitability. The sky is not blue but there are rays of sunshine. New openings will lead us to become more creative. For example, in Lyon, the city wanted a jumbo 500-room hotel. No group wanted to take the risk alone, and we reached an agreement with Accor to supply 250 rooms each with two complementary brands."Gaël Le Lay, Director of Hotel Investment, Axa Real Estate"The creation of a new establishment is a complex process between the weight of the project, its execution and management. Today, the challenge is to find a player at each stage that is willing to take his share of risk. Much of our work today is to analyze the risks and decide whether to go or not. Joint projects are particularly interesting: in Marseille, we added a portion of accommodation to a hotel project. We also support "combo" projects when several brands share operational risks. An increasing number of investors have now become more professional. Hotel development has developed its own experts."Frank Marrenbach, CEO, Oetker Collection"I’m quite happy that it’s not so easy anymore to finance any kind of hotel project, which might sound strange to you, but I remember that a few years ago hoteliers had the wildest ideas of what should be done. I’m happy that we now have a more realistic view on projects and there is a more solid way of financing because at the end of the day, we are equity strong. It is more comfortable when competition left and right has a more realistic view on their projects. There are two sides to a coin, and this I reckon is the positive side and the moment.Furthermore, Europe is a mature market, at least the majority of Europe, and the big growth scenarios are outside of Europe, but that doesn’t mean that you won’t find a nice project in Europe. One can build, take over, and convert… and one should develop outside of Europe as well. For us the choice of partner is critical, so the views of the project have to be compatible."Ulla Schneider, Vice President, Warwick Hotels International"Location is key in Western Europe. We own and operate most of our hotels so we are very prudent investors. When you look at something, you have to look at it in the long-term. Does it make sense and is the location right?. We just signed management contracts in Jordan and Lebanon. There will always be markets for small groups like Warwick. We are looking for long-term management contracts. We are looking for management contracts in the Middle East, Africa and South America. That is the difference with the economy sector: On one side we have people who finance, on the other we have people who operate. I personally believe that development will be stagnant in Europe, but increase in other countries, such as South Africa, the African continent in general, and South America..."Philippe Bijaoui, Vice President Business Development, Carlson Rezidor Hotel Group"Today, financial packages for new hotels are more complicated. We are increasingly using mixed-use locations that are part-hotel, part-residence, and part-lodging and shops. This is a practice that will become widespread in new projects. The development to asset-light naturally presents greater risks because the owner often changes along the way. When it is planned beforehand, it is not necessarily a problem. Location in Europe is very important. What is true in France is not in the rest of the country. The same is true between northern and southern Europe, where there are no new openings, so we need more resort to conversion, like our new Radisson hotel in Athens. Paradoxes do exist, as in a difficult market like France, where we will release three new projects in Nantes, Lille and Corsica. It’s been a long time that something like that has happened."Valéry Grego, Partner, Perseus Capital Partner"The crisis has changed the criteria for financing. Beforehand, banks were the only ones financing and today they require a contribution from one’s own equity. In France, without a prior commitment from Oseo, investment banks are nowhere to be found. Approvals are becoming fewer. The geographical distribution is no longer only between northern and southern Europe. Within a country, priority is given to projects in major cities. There is a natural bonus for capital cities and major cities that have a balanced customer mix between business and leisure. We cannot raise equity financing in secondary cities." Laurent Bonnefous, Chief Development Officer, B&B Hotels