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Session Highlights
Time to be creative
 Industry
experts agree that management contracts need to be packaged attractively, reports
Bhavika Jhaveri
The session focussed on the owner-management affair. Giving
an investor's perspective, Taraf Etal said, "There is a myth among operators
that investors are looking for equity partners. According to me, when we see
an opportunity to develop something, operators provide us with the money. But
we always make it clear that 'I own and you operate'."
Supporting Etal's views, Sanjeev Nanda spoke about the importance of alignment
of interests between the two parties. "As long as there is alignment of
interests, there is no need to have equity. There are a lot of global private
equity funds coming into the Indian market and so there are other sources that
owners can look at and not just the operators."
| Moderator: Ashok Ummat, London-based
hotel professional
Panelists: Anthony K South,
senior vice president (Development & Asset Management), InterContinental
Hotels Group
Claas Elze, vice president (Development),
Marriott International Inc
Taraf Etal, vice president (M&A), Kingdom
Hotel Investments
Danny Farrugia, partner, Atanaskovic Hartnell
Sanjeev Nanda, MD, The Claridges Hotels Group
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When questioned about the management cost collected from developers
in times of escalating land prices, Nanda pointed out, "If you look at
global averages, there is a component of basic fees. A management agreement
brings in branding, distribution and so on and the costs vary." On the
other hand, Claas Elze said that the management costs should be more balanced
in terms of fees and performance. "We are very flexible and are looking
at number of different things; it is important for the operator to be incentivised."
Need for creativity
Touching on a sensitive topic, Anthony South spoke about the guarantee available
for developers in India, "We do as much as we possibly can to understand
the objectives of the developer-cum-owner. Some deals are more attractive than
the others the same way some operations are more attractive than the rest. The
message is clear - be more creative." He also added, "Both parties
should have an understanding of each other's objectives to avoid any kind of
conflict. It should be clear from the beginning whether it is a short-term marriage
or a long one."
When asked whether one would compromise their brand in the agreement, the answer
was clear. "We have to look at each property on a standalone basis. The
market in Delhi is strong so there are several limitations on renovations and
a lack of opportunity for global brands. It is therefore suitable for us to
run it ourselves. But in Mumbai there is scope for lot more brands. So if we
have to tap the global market, it is better to look at the global rank,"
concluded Nanda.
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