BERLIN—Development executives, who added about 200 hotels to the big brands in 2009, discussed current growth strategies and developer relationships  this week at the International Hotel Investment Forum.

Opportunities

• There won’t be a lot of new builds for the next few years, although there are a number of hotels under construction right now, said Christian Karaoglanian, chief development officer, Accor.

  There won’t be a lot of new builds for the next few years, although there are a number of hotels under construction right now, said Christian Karaoglanian, chief development officer, Accor. “Accor sees room for budget brands … There’s still a market to develop outside of France, in (Brazil, Russia, India and China), of course, but Africa, Middle East, there’s still enough opportunity to grow. Accor plans to open 32,000 to 40,000 rooms every year.”
• It’s been three years since Jumeirah embarked on a global expansion. The company has projects under construction in Frankfurt and Morocco, said Paul Macpherson, chief development officer, Jumeirah Group.  “We’re seeing more activity now than a year ago and the year before that. … We’re having serious meetings with numerous developers.”
• Carlton C. Ervin said Marriott has a strong cash position. “We’re finding ways to enable growth,” said the chief development officer of Europe for Marriott International. “We look at (mergers and acquisitions). It’s more likely to be smaller chains that fill gaps rather than a redesign of the portfolio.”
• “It’s buoyant compared to a year ago,” said Simon Turner, president, global development, Starwood Hotels & Resorts Worldwide. In terms of where Starwood spends capital, acquiring smaller chains or properties is third on the list after support systems and asset improvement and testing. “There’s a list of hotel chains out there that we say we could fit this brand into this, three could go here, four could go there. We watch those, but we keep plugging away.” Turner said shareholder expectations can’t be ignored: “Our shareholders want us to be asset-light, asset-right; they want us to be a branded consumer-goods company. We’re going to look to use our balance sheet to help people to help us grow. For the right opportunity, … we’re going to be open-minded to get our brands to the right owners.”
• Rezidor has not been a company that dictates standards for contracts and brands, said Puneet Chhatwal, senior VP and chief development officer, The Rezidor Hotel Group. “We’ve tried to adapt our approach. We’re dipping into our bucket, and we have tried to provide sliver equity.” Rezidor is trying to move away from leases. “It’s an outdated model for hotels companies, but it will not go away in next three to five years.”
• Hilton sees tremendous growth opportunity in Europe and Africa. “We have a pot of capital, but it’s more about moving with the market and working with the developers,” said Patrick Fitzgibbon, senior VP development for Europe and Africa, Hilton Worldwide. “We’re taking opportunities that we know exist. I was astonished with the number of hotels being built in Europe without a brand. We went after those, and we’ve been able to get some of them.”
• In the past few years, the lending that was taking place and loan-to-value ratios that were funded were unrealistic, according to Chhatwal.  “This is the first time that I see we actually might get a higher percentage of branded assets in because of fear.  … This will fuel a little franchise growth.”

Lending

• “It’s buoyant compared to a year ago,” said Simon Turner of Starwood Hotels & Resorts Worldwide, as Rezidor's Puneet Chhatwal looks on.

  Hilton has a huge role to manage relationships with banks now, Fitzgibbon said. The company took banks on a tour of new product to make them comfortable. 
• “2009 was a year of going sideways,” Turner said.  “2010 will be a year of rebuilding. … Yes, banks are beginning to lend but LTVs are lower, spreads are wider … covenants are more challenging.”
• Karaoglanian said he is seeing deals get done, and the appetite of banks is growing. “The sweetened deal is there … non-disturbance agreements are near-and-dear to the people on this stage.”
• “The all-important debt coverage ratio is making sense with deals now,” Macpherson said.  “The equation is in a frame far better than it was before. I don’t think we should go there again. You do some simple math—when the next downturn hits in seven or eight years, will it be able to service debt with a decent cushion?”