An investigation of Australian and New Zealand hotel ownership

Abstract

The results of a study seeking to advance a typology of hotel owners as well as examining the composition of hotel owners in Australia and New Zealand are reported. Interview observations resulted in the six hotel ownership categories, discernible from prior commentaries, being broadened to nine hotel owner types. Considerable insights with respect to differentials in the investment time horizon and capital expenditure strategy applied by different owner types were gleaned from the interview data. From a questionnaire survey phase it was found that high net worth private investors and hotel management companies each own approximately a quarter of large 3-5 star Australian and New Zealand hotels.Several distinct hotel operational characteristics are also apparent across the hotel owner types. These include the observation that developer, high net worth investor and strata-title owned hotels tend to be smaller in terms of revenue generated and also these owner types tend to own less hotels. Also, general managers tend to hold their position for shorter periods in hotels owned by hotel management companies and high net worth private investors tend to own older hotels.

The Impact of Renovation Capital Expenditure on Hotel Property Performance

“…It is important to recognize that hotel owners do not have the same investment time horizon, opportunities, funds or investment goals. Turner and Guilding (2014) highlighted that hotel owners’ investment time horizons range from short-sighted (5 years or less) to long-term (10 or more years). Owners with a short investment time horizon, categorized as being “opportunity funds” (e.g., Morgan Stanley), are typically characterized by a strategy of “buy low and sell high.” Capital investment decisions for this class of owners are more tactical than strategic (Davis & deRoos, 2004).…”

“…do whatever they do, get out in a three to five-year period, take the profit and go. These guys are not interested in maintaining the long-term integrity of the hotel.” (Turner & Guilding, 2014, p. 79)…”

“…It is surprising that few owners have short investment time horizons. It seems likely that opportunity funds, by virtue of being in the banking sector, either: (a) can more easily procure funding required to “throw a lot of money at it” (Turner & Guilding, 2014, p. 79), or (b) simply assume greater risk consistent with the expectations of their shareholders.…”

Precursors to the financial and strategic orientation of hotel property capital budgeting

“…A large proportion of owners of publicly traded hotel companies are institutional in nature (Turner & Guilding, 2014), a factor that might reasonably be expected to promote a culture of more formalised and financially oriented capital budgeting decision making.…”

“…This is particularly the case when it is recognised that it is the owner that generally funds most hotel capital expenditure. Furthermore, different types of hotel owner do often vary considerably in terms of their size and this size can therefore have a significant impact on the capital budgeting strategies that they adopt (see Turner & Guilding, 2014). Little empirical academic research was found, however, that had attempted to measure the size of a hotel owner.…”