In early December, with the industry still reeling from the news of the Marriott/Starwood acquisition, the team at AccorHotels in France dropped another bombshell.
The Paris-based hotelier announced plans to acquire Toronto-based FRHI Hotels & Resorts for an estimated US$2.9 billion, bringing a portfolio of 155 luxury properties under the Fairmont, Raffles and Swissôtel brands (40 of which are currently under development) into Accor’s stable.
The news certainly came at the right time. J.P. Morgan’s 2016 M&A Global Outlook cited a “supportive deal environment” in 2015, characterized by US$5 trillion in global mergers and acquisitions activity, and predicts 2016 will see an even greater number of deals. “This is certainly an exciting next chapter for our brands as FRHI’s unrivalled collection of iconic hotel assets, extensive experience in the luxury market and sizeable North American footprint combined with AccorHotels’ global operating platform, innovative digital strategies, diverse stable of brands and international exposure will only lead to new levels of success,” stated a release from FRHI Hotels & Resorts.
In a statement, AccorHotel’s Chairman and CEO, Sébastien Bazin boasted the acquisition demonstrates the group’s agility in a fast-changing industry. “Through it, we are positioning ourselves as a key player in the current industry consolidation process while maintaining substantial leeway to implement our transformation plan,” he says.
“The Fairmont/Accor fit is a good one because it brings in management contracts and a luxury product they didn’t have before. That makes it different than the Marriott/Starwood acquisition — two large companies with comparable product and brand distributions coming together,” says Brian Stanford, senior managing director at CBRE Hotels.
Accor’s brands span the market, with 11 mid-scale/budget concepts and one luxury brand, Sofitel Legend. Its presence in the North American market, however, is scarce, with only eight units in Canada and fewer than 10 in the U.S. “I’m sure Accor is happy to get the portfolio in Canada, but they also get brands they can now take in a much stronger way into Europe, where they’re big, and then into emerging markets such as China or India,” says Carrie Russell, managing director, Consulting & Valuation at HVS in Vancouver. “They’re bringing into their system a product and a segment that they weren’t a major player in before,” adds Stanford. “As you look at the ability to elevate Accor globally, that’s a very positive thing.” The transaction will also usher three million FRHI loyalty members — 75 per cent of which are from North America — into Accor’s loyalty program.
The deal also fits well within Accor’s new brand strategy, which includes entering new playing fields. During the past couple of years, several company-wide innovations have helped transform Accor, including a gender-equality plan that seeks to employ at least 35 per cent female GMs by next year. It’s also investing in various types of sustainable energies and was an official partner of the 21st United Nations Climate Conference in Paris this past December.
Until the transaction (subject to the regulatory approvals of the antitrust authorities) closes mid-year, it’s business as usual. But that doesn’t mean industry consolidation is over yet. “I don’t think we’re done seeing companies consolidate,” sums up Russell.