ANZ and the Pacific is experiencing high levels of Hotel Management Agreements (HMAs). Watson Farley & Williams Head of Hotels and Hospitality Asia Pacific, Robert Williams, highlights key trends in HMA activity locally.

New HMA activity is as busy as ever in ANZ and the Pacific – fuelled by both brands that are new to our market (think Ace, Standard, Selina, 25 hours, Treehouse, Kimpton, Garden Inn) but also by conversion opportunities as those early 2000s agreements expire and sale transactions throw up vacant possession.  Every operator has to have a conversion brand.

All types of operators are participating in this — the big globals, niche US and Asian brands, as well as local ANZ platforms like Lancemore and Event, across limited service, lifestyle right through to luxury. 

No question it is an exciting time, particularly as the new build product that is coming will take the hotel stock in ANZ up a notch, even if some markets do feel the drag of new supply for a little while.

HMAs remain the dominant form of operator/brand engagement in the ANZ market, and whilst there has been a great deal of commentary around white label platforms, we are just not seeing — at least not yet — that segment get traction in any volume. Leases are still on the table for some deals, with some operators, but that is now a very limited opportunity — and with force majeure inevitably now suspending rent obligations, leases are less attractive anyway.

We are seeing the following trends:

  • local developers are dominating the scene, and operators are finding local presence and relationships are more important than ever
  • many developers are continuing to value large, branded operators
  • interference from converging brands within the same system is a growing concern for many in Sydney and Melbourne
  • upfront development concerns around feasibility and financing are getting prioritised, often at some cost to the long-term deal — not a new phenomenon
  • boutique operators who can demonstrate a focus on the bottom line and senior management engagement are getting cut through, particularly on regional opportunities
  • larger operators are more rigid on their loyalty, shared services, procurement etc. — drafting all fertile ground for agitation later in the asset’s lifecycle
  • financial support is rare — in most cases, guarantees are now standasides, with claw backs
  • key money is on offer — though in our view is a fairly blunt tool.

Of course, we are fielding calls from owners on terminating HMAs. Any relationship that was in trouble going into COVID is likely to be more stressed now, and with a buoyant transaction market, vacant possession is attractive. We work for both operators and owners so get both perspectives.  My experience is that it will be a rare set of circumstances that sees an operator walk away from an HMA. But it does happen.

For more, check out the April issue of HM, published next week.