Factors influencing the ownership and management structure decision making in hotel investments

Abstract

Hotel properties constitute a relatively small percentage out of the commercial property investment sector in New Zealand due to two main factors. One is the significant amount of capital required for the development of such properties while the second factor is the direct relationship between the developer and the specialized tourism industry. The ownership and management structures of such property investment activities are crucial as they determine the risk and financial performance associated with such investments in the long term. The purpose of the research is to assess the hotel development process in terms of ownership and management structures by identifying the common ownership and management structures and factors influencing on the decision making of such structures.

The research reports on the findings of a multi-method methodology approach. Firstly, a survey participated in by major hotel developers within New Zealand has been conducted to assess the common ownership and management structures and the factors influencing the decision making of such structures. Mainly multi-criteria and some open questions have been used to assess the weight attached to each structure. Secondly, in-depth open-ended interviews have been conducted in order to fully clarify and support the data obtained from the survey results.

The research develops the contention that the most commonly used ownership structure in the New Zealand hotel investment market is the Strata Title, while the contractual relationship with the hotel operator is the most commonly used management structure. Furthermore, the study argues that financial factors have a significantly higher influence on the decision making of the ownership and management structures compared with non-financial factors that cannot directly be measured in dollar terms.