Asset-light hotel companies resume paying dividends as travel rebounds

More hotel chains adopted the asset-light strategies even before the pandemic. For example, Marriott had transitioned from a real estate firm into an asset-light hotel management company decades ago. In 2017, Hyatt began selling off its $1.5 billion real estate in a three-year plan (Kwok, 2017).

Asset-recycling vs. asset-light strategy

Hyatt adopted a more traditional asset-recycling strategy before 2017 when the company owned and managed many Hyatt Hotels in the market. The company’s growth was tied to the real estate market. Hyatt would buy properties when the price was low and sell them when the price was high.

Under the asset-light strategy, Hyatt would hold onto large cash flows instead of assets. Hyatt could invest the additional cash flows from the sales of its assets in technology, customer loyalty, and product development, the essential areas to grow today’s lodging business. Additionally, large cash flows would also allow Hyatt to acquire other hotel companies to quickly expand its portfolio of hotel brands.

Why do more hotel chains want an asset-light strategy?

Marriott and Hilton are two other hotel chains adopting the asset-light strategy earlier. Marriott’s hotel management firm has experienced phenomenal growth since Marriott Corporation split its business into two separate publicly-traded companies, one focusing on real estate and the other on hotel management.

How are those asset-light hotels doing in post-pandemic?

Many companies stopped paying dividends since the pandemic hit the global economy. Hotel companies are not an exception. Now that the world is gradually opening for post-pandemic travel, asset-light hotel chains are going to resume paying dividends to their shareholders. Marriott International and Hilton Worldwide Holding announced in May that they would start paying quarterly dividends again (Strauss, 2022). Both companies’ earnings beat expectations in the first quarter of 2022.

Are asset-light hotels more resilient to crises in general? If so, for what reasons?

Note: This article is first published in the Hospitality News Magazine. The picture was downloaded from Shariaportfolio.com.

Comments

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