Quote:
Originally Posted by Jdawgboy
I have a question that hopefully someone here can answer. Since this is slated to be a Fairmont, do they not invest in the construction? It seems odd that Manchester would have difficulty with costs or partners for such a prestigious brand. Do they just commit that once the building is built they will run the hotel or is there more to it than that?
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The project's developers have kept details fairly secret. I don't think they are planning to operate the hotel on their own. Probably the developers entered into a management contract with Fairmont in which the hotel is developed to meet Fairmont standards, and Fairmont will operate the hotel (and pay a hefty annual rent to do so) for a number of years with options to renew the lease. This is the way most hotel projects get done. The developer takes the management contract, which might provide them with a percentage of operating profits in addition to the annual lease payments, to lenders or potential partners who decide to invest based on the strength of the operating agreement and other variables. I guess some hotel companies may participate in financing or ownership of a property, but most usually do not. The Marriott properties in Austin are all owned by other companies. White Lodging has been the main developer of Marriott properties in the Austin area, and they actually operated some of these hotels under franchise agreements with Marriott. Examples of re-branding under new operating contracts abound. You may recall that the current Sheraton was until recently a Marriott. The Hilton Garden Inn was a Sheraton. The contracts run out and frequently a hotel changes branding at that time.
With regards to whether this project gets built, I suspect that the agreement with Fairmont is solid and attractive. The ultimate decision to build probably hinges on the variables, the most important one being a determination as to whether the Austin market can absorb a project of this size at the present time.
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