LONDON, U.K. — Data-and-analytics company GlobalData predicts many smaller hotel companies will have no choice but to combine with their larger counterparts in order to survive post-COVID-19, creating a more consolidated industry.
“The number of announced mergers and acquisitions (M&A) deals globally decreased from 2,349 in February 2020 to 1,984 in March 2020, while deal value decreased from US$151.2 billion to US$129.9 billion,” says Ralph Hollister, Travel & Tourism analyst at GlobalData. “This global trend is replicated in the tourism sector and, more specifically, in the hotel industry. However, M&A activity is likely to increase as smaller providers are backed into a corner.”
Hollister notes COVID-19’s impact on hotel revenues and occupancy rates will undoubtedly create investment opportunities when the health crisis is over. “Major companies will be in a fierce battle for whatever revenue is available as demand slowly but surely returns,” he explains. “Smaller hotel companies will have no choice but to listen to offers from their larger competitors, as cash reserves deplete at a staggering rate.”
“In the short-term, travellers will initially stick to what they know best, they’ll likely become more sensitive towards factors such as hygiene and will want familiarity,” Hollister adds. “Bigger brands will be more likely to convince consumers that they can offer this over independent hotels.”