Accor May Use SPAC to Own Real Estate While Still Trumpeting Asset-Light Strategy

Accor is the latest company to dive into the special purpose acquisition company, or SPAC, merger market.

But the fact that the Paris-based hotel company behind brands like Novotel and Raffles would want to be in the driver’s seat of this kind of deal has analysts predicting this all boils down to keeping real estate holdings off Accor’s balance sheet.

“When public companies like Accor are looking for a SPAC, they probably want to make an acquisition that doesn’t exactly fit with their current business model,” said Nicolas Graf, associate dean at New York University’s Jonathan M. Tisch Center of Hospitality.

Accor’s SPAC listing, named the Accor Acquisition Co., would target companies in the lifestyle and leisure sectors as well as flexible working and travel technology, the company confirmed Thursday morning after this story first published. AAC plans to raise as much as $366 million under such a deal while Accor’s investment in the SPAC “will not be material,” according to the company’s announcement.

The potential SPAC’s focus is in keeping with the company’s ongoing expansion with lifestyle hotels, which Accor once defined as properties that make as much as half their revenue from food and beverage outlets. Accor spun out its lifestyle brands like SLS and Mondrian into a separate entity last year with Ennismore, owner of brands like the Hoxton and Gleneagles.

Accor spent years selling off its real estate assets to focus on management and licensing agreements. But the company’s targeted growth in the lifestyle hotel sector may mean a return to property ownership depending on brands it wants for the Ennismore division. A SPAC would help balance the desire for growth and lack of appetite for more real estate holdings, similar to a tracking stock that parent companies sometimes use to separate the financials of a division away from the main business.

SPACs are essentially shell companies that backers create to merge with another company and go public on the stock market in a much quicker fashion than a traditional bank-led initial public offering, or IPO. They have grown in popularity since last year, when more money was raised for SPAC IPOs than all previous years combined.

Wynn Resorts recently announced plans to take its online gaming platform public via SPAC at a $3.2 billion valuation. Sonder’s SPAC plans values the short-term rental company at $2.2 billion while Rosewood Hotel Group’s SPAC could raise about $400 million for the Hong Kong-based hotel company.

“SPACs have historically been effective at getting investors to buy into companies at an inflated valuation,” said Michael Ohlrogge, a professor at New York University’s School of Law. “It’s not surprising to me why anyone would be interested in the ability to sell off assets at an inflated valuation. If you’re a struggling, then that could be even more appealing than normal.”

A Lift to Lifestyle Hotels

Accor declined to comment for this story, but its SPAC plans could be a way to give a major financial lift to its push into lifestyle hotels.

The company’s CEO Sebastien Bazin claimed on a February investor call these hotels generate more than 70 percent of their revenues from being “social and local hubs” with “foodie content” and culture.

All hotel companies struggled through the pandemic, but Accor tackled more headwinds due to its greater exposure to Europe and its more prolonged travel restrictions compared to the U.S. and China. However, the company continued to tout lifestyle hotels as a major growth driver even while posting a $2.4 billion loss last year.

The lifestyle hotel sector accounted for only 2 percent of the branded hotel supply in the world and 10 percent of the entire industry’s development pipeline, Bazin said in February. At Accor, lifestyle hotels represent a quarter of the projected franchise fees to be generated from the company’s 212,000-room development pipeline.

An Asset-Light U-Turn

Stepping back into real estate ownership would be a departure for Accor, which in 2019 completed an asset-light initiative to rid itself of most of its real estate holdings.

“If [they do list a SPAC], it’s going to be more of a real estate SPAC play than about the brands,” said Steve Carvell, a professor at Cornell University’s School of Hotel Administration.”

Most major hotel companies practice the asset-light model, as it limits exposure to the volatile real estate market and debt associated with property ownership. Instead, these companies focus on their strengths of hotel management and licensing.

It’s unlikely Accor wants to go back to owning real estate.

“We are asset-light and have no plan to go back to asset-heavy,” Bazin said last year at the beginning of the pandemic.

But that mentality might be at odds with further lifestyle hotel expansion. Many of the smaller, regional lifestyle brands that Accor might want to bring into its Ennismore division are asset-heavy, those interviewed for this story said while declining to mention on-record what brands those might be.

Creating a SPAC would be a way to park real estate assets in a separate company before handing over the branding agreements to Accor.

“I would think they’re probably looking at a group of hotels that owns the real estate,” Graf said. “They would acquire that via the SPAC and acquire back [to Accor] the management contracts.”

[UPDATE]: Following publication, Accor confirmed plans to sponsor a SPAC. This story has been updated.