“There is no slow-up in local investors investing,” Solomons said. “There is more political uncertainty than we are used to, but if you have long-debt debts and planning, then you can sort yourself out in the short term.”

　　The worst of the recession is over; chains are divesting ownership in bricks and mortar and concentrating mostly on operations; and the savvy, global travelers are beginning to see why going the way of the online travel agency is not the obvious route to getting more value, two CEOs said during this week’s 25th European Hotel Investment Conference hosted by Deloitte.

　　Frits van Paasschen, president and CEO of Starwood Hotels & Resorts Worldwide, and Richard Solomons, CEO of InterContinental Hotels Group, occupied the stage in high spirits. The two spoke during a panel titled “A sprinkling of gold dust: The view from the top,” moderated by Nick van Marken, Deloitte’s global head of advisory, travel, hospitality and leisure.

　　“I see this optimism in the conversations with owners and investors. People want to travel at the moment. We are a long-term business, and optimism also comes in the number of deals we’ve been signing this year as opposed to last. We’re up,” Solomons said.

　　Van Paasschen heartily agreed with this sentiment.

　　“Our plans are with local investors, who vote with their own capital and are the best informed as to their own markets,” he said. “Our business is also up this year. Our best measurements are our record occupancy in North America. And in Europe, occupancy is up close to 70%. In China, occupancy is up year on year. That said, you can certainly find reasons to worry.”

　　Potential danger

　　The panel saw concern in the United States’ on-going saga over debt repayment, as well as housing policy in the United Kingdom in the run-up to a general election and worldwide political instability.

　　Owners appear to be leading the charge, but flexible chains and brands also are ready and willing to find new market niches and to use their own capital where necessary. Ultimately, though, the chains are largely happy to become more unwieldy in terms of the assets they hold.

　　“There is no slow-up in local investors investing,” Solomons said. “There is more political uncertainty than we are used to, but if you have long-debt debts and planning, then you can sort yourself out in the short term.”

　　A quick glance at the two companies’ portfolios also leads to a healthy regard for what the future has in store. According to recent calculations, from data shown at the conference, IHG has market capital of £5.4 billion ($8.7 billion), a pipeline of 179,000 keys and a focus (74% of pipeline) on the midscale market. Starwood Hotels’ numbers for the same criteria is $15 billion, 100,000 keys and a focus on upper upscale and higher (67%).

　　Both companies have growth in China, where brands are sought. Both also are looking at Africa, but in a lesser degree.

　　“Africa is an economic ride up and down, and it is not just concerned with raw materials but also the rise in technology and demographics,” van Paasschen said. “Technology has led to democracy and entrepreneurial spirit. Every country is its own novel, with its own wrinkles, but, again, it is about the long term. The market is positive in Africa.”

　　Solomons said it is difficult to conduct business in Africa.

　　“They say that India is not for the fainthearted, but in Africa you have to choose the right partners,” he said. “In proportion, it is not our main focus—rather the growth in the Middle East, India and China.”

　　Capital considerations

　　No one is surprised when global-chain executives announce they wish to become more asset light. Van Paasschen and Solomons shared that sentiment.

　　“We are more willing to use our balance sheet than the market has asked us to do it, and we have the capacity to spend our own money if we want to do that. But in most markets, we have found willing local investors,” van Paasschen said.

　　Van Paasschen said IHG, in discussions with its investors, has made it clear that it wanted 80% or more of its earnings to derive from management and franchise fees, a marked increase from eight to 10 years ago when that figure was 25%. He also said it had been made clear to the investment market that all assets potentially are for sale.

　　“Selectively, we might invest to grow, but to use our own capital to invest in our own brands might say that these brands are not healthy to investors. We are comfortable with the hotels we own, but no property is sacrosanct,” Van Paasschen added.

　　Solomons said IHG had recently spent its own capital in the U.S. on new brands, but with 1,000 hotels in the pipeline, it could not fund all of it.

　　“The way the capital markets work, then the right is for it to be private money invested and for hotel companies to be asset light,” he said.

　　“We probably will not own any of the hotels we own now in five years’ time, but we will possibly own new ones and new brands,” Solomons said.

　　Owner relationships

　　This increasingly prevalent model of being asset light and working with owners and third-party management companies inevitably leads to a conversation as to how these new relationships develop in time.

　　Solomons said 85% of IHG’s income comes from driving revenue, which is what owners want.

　　“Fundamentally, we are a brand company, which means you have to have owners believe in this model. Our goal is to make the brands and operations better, and many of our deals are done with owners who already own,” he said.

　　“More our income is driven by franchise fees, the better we have to be at being good partners,” van Paasschen said. “Our attention has turned to creating value for owners, making our global systems and platforms better and have better local relationship in real-estate investment. To be best over all the markets we operate in would be almost impossible without the partnership of local owners. We are in a position to create more incremental income for owners than we ever were.”

　　“Capital market, brand and consumer trends all point to this new type of relationship increasing. Growing brands and launching brands in gaps in the market is a lot to keep us busy with,” Solomons said.

　　Van Paasschen agreed, adding that with the exception of Sheraton Hotels & Resorts, Starwood Hotels does not have a brand with true global scale.

　　“If we find a brand that we might wish to buy, we’d ask if it would fit in with the brands that exist already in our portfolio,” he said.