Good morning from Skift. It’s Tuesday, August 29. Here’s what you need to know about the business of travel today.
25.08.2023 - 13:07 / skift.com / Sean Oneill
If you listen to the half-dozen largest, publicly held hotel groups based in the U.S. and Europe, you would think owning the hotels you run is a terrible strategy and that providing large hotels for conventions and group bookings is a bad idea. Yet Loews, a publicly held holding company, is happily pursuing both strategies in its hotel business.
Loews Hotels confirmed its contrarian approach when the parent company reported second-quarter earnings on Monday and said its hotel division more than doubled its net income to $74 million.
The publicly held holding company said owning the hotels it operates can make it more profitable in certain circumstances — and can also hedge against competition from short-term rentals.
Loews’ bigger rivals — the largest hotel groups — avoid owning or long-term leasing hotel real estate. Marriott was first to shift in the mid-1990s, but its rivals have mostly shed assets, too.
Under the asset-light model, big brands mostly run hotels through management or franchise contracts. They can avoid the need for holding lots of capital to own buildings and land.
Loews prefers to be an owner and an operator.
Over five years, Loews has made gross investments of $316 million in Loews Hotels. The brand’s room count rose by 30% to more than 16,000 rooms. In 2022, Loews Hotels generated an adjusted EBITDA of $345 million — a company record that well surpassed its pre-pandemic results.
Direct ownership was a key to Loews winning a deal to put properties at Universal Studios theme parks, the hotelier said. When you don’t own the asset, you can’t make 100% sure a property is well run. That’s why certain types of developers, such as the owners of theme parks, sports stadiums and other immersive destinations, prefer hoteliers with an owner-operator mindset.
A case in point: Universal Studios agreed 26 years ago to a joint venture with Loews to develop and co-own three hotels at the theme park with 2,600 rooms total.
“It was a very big risk when Universal wrote a very big check 26 years ago,” Jonathan Tisch, executive chairman, Loews Hotels & Company said in a recent video.
After a few more hotels open by 2025, Loews will have 11 hotels with 11,000 rooms at Universal Orlando in a co-ownership deal — a large expansion of the portfolio.
“It’s worked out incredibly well,” Tisch said.
Loews said in another investor letter that its hotels in Orlando have often outperformed their competitive set in average daily rate, occupancy rate, and revenue per available room in the past decade or so.
A surprise side effect of most major hotel groups getting out of hotel ownership is that fewer players in the market are able or willing to put up the capital to build large hotels that can cater to group
Good morning from Skift. It’s Tuesday, August 29. Here’s what you need to know about the business of travel today.
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