Skift Take

Just because a company isn't in the business of renting out guest rooms to travelers doesn't mean they aren't attractive in the eyes of a hotel mergers-and-acquisitions team. Future hospitality M&A is going to be more creative than in prior decades.

Series: Early Check-In

Early Check-In

Editor’s Note: Skift Senior Hospitality Editor Sean O’Neill brings readers exclusive reporting and insights into hotel deals and development, and how those trends are making an impact across the travel industry.

Learn More

Leaders at some of the world’s major hotel brands may say the era of mega-mergers like Marriott and Starwood is over. That looks to be true, but watch out for deals that take on some new twists.

Hotel executives at Marriott indicated in recent months future mergers are likely to be tuck-in deals fueling expansion to targeted parts of the world. IHG Hotels & Resorts CEO Keith Barr depicted it along the lines of filling in the rungs of a ladder of necessary brands

“First of all, you need a big checkbook to get one done,” Timothy Grisius, the global mergers and acquisitions and real estate officer at Marriott International, said this summer. “I think people are trying to keep their house in order today and make sure that they act in a financially disciplined way. There’s not a lot of need to grow even larger for a company like us. We do that organically and don’t necessarily need to buy additional brands.”

But recent dealmaking shows hotel companies are looking at mergers and acquisitions as something that doesn’t always line up with the typical consolidation playing field. MCR Hotels last week acquired Optii, a hotel housekeeping tech platform, and purchased property management platform StayNTouch last year. 

Accor’s plans for a special purpose acquisition company will target deals in sectors like food and beverage, wellness, travel technology, entertainment, events, and flexible working to complement its hotel business. 

Is there room for more consolidation in the hotel sector, either directly targeting brands within the sector or something beyond?

“Always,” JLL Hotels CEO Gilda Perez-Alvarado told Skift during the 2021 National Association of Real Estate Editors conference. 

Mega-mergers don’t have to mean something along the lines of that long-rumored Accor-IHG marriage. Transformative dealmaking can mean buying a technology platform or even a residential brand.

New M&A Vibes: There are mega-deals that could still occur if you look beyond the traditional hotel scape and into parallel business lines that cull some degree of hospitality: Residential and the future of office are frequently at the top of hotel industry conversations. 

“We were such a fragmented industry. Maybe it doesn’t seem like there’s room for consolidation if we were only paying attention to our existing ecosystem,” Perez-Alvarado added. “But when you go up at the stratospheric level, and you see what is happening in living and with technology, you see where new entrants can come in. It makes complete sense for there to be more consolidation.”

That ideology can mean looking at takeover targets from outside the typical walls of hospitality and in sectors that could complement a hotel operation.

Accor has its Wojo coworking platform while brands like Four Seasons, St. Regis, and even Standard International increasingly look to make a play in the residential sector — sometimes even without a hotel involved. Why not go further into more residential offerings beyond just high-end condos attached to a five-star hotel?

“We’ve got to be looking forward. We’ve got to be looking at technology and pay attention at what the consumer wants,” Perez-Alvarado said. “You’ve got a new consumer coming in with different forces coming into play like [environmental, social, and governance], for example. What’s happening with living and how city centers are being redeveloped and redefined post-pandemic? This is actually the greatest opportunity for us to be creative in our sector.”

Experimental Group Targets U.S. for Hotel Expansion

Commercial real estate group Brookfield made a nearly $400 million investment in European hospitality firm Experimental Group. That deal is expected to enable Experimental to open as many as 15 new hotels, mostly within the U.S., by 2024, the Financial Times reports.

Experimental Group, which owns the Hotel des Grands Boulevard and Experimental Cocktail Club in Paris, is focusing on New York and the West Coast for its American expansion as well as five UK sites. The company’s U.S. presence now is limited to La Compagnie des Vins Surnaturels Centre St., a restaurant in New York City. 

Brookfield’s backing also enables Experimental Group to buy hotels instead of its existing business strategy of leasing them. Experimental’s hotel portfolio today includes six properties in Mainland Europe as well as one in London. 

“[Before] effectively I created a lot of value for the landlord and in exchange the only right I have is to pay rent,” Experimental co-founder Pierre-Charles Cros told the Financial Times. 

Private equity dollars pouring into hospitality is becoming increasingly common, as investors want to capitalize on the upside of the recovering sector. 

Fortress Investment Group bought a majority stake in Irish hotel and serviced apartment platform PREM Group earlier this month, but no financial details were made public.

Blackstone has been among the most active in the space, scooping up Extended Stay America in a joint bid with Starwood Capital early in the pandemic and also focused on the casino resort sector with multiple deals in Las Vegas as well as contentious bids for troubled Australian company Crown Resorts. 

Brookfield is a significant backer to help fuel Experimental Group’s expansion into the U.S., but keep in mind: This is a highly competitive environment with major brands controlling a hefty share of the market.

That ices out major competition like Accor, which has a similar lifestyle hotel focus as Experimental Group and has struggled to gain much traction in the U.S.

Ennismore Makes Another Deal

Speaking of Accor’s expansion plans, Ennismore — the lifestyle hotel brand which Accor now has a two-thirds majority share — exclusively announced to Skift plans for the Hyde Paradox Hotel London City, a 110-room property planned as a renovation to what was once the Spiers & Pond Hotel. 

The London property was first built in 1874 as a hotel before getting converted to office use in the early 1900s. It’s the latest in a flurry of activity for the Ennismore joint venture, which was first announced last year and closed in recent months. The Hyde deal is getting developed by OB Capital, a joint venture between Boscalt, a member of Edmond de Rothschild Private Equity partnerships and the entrepreneur Alex Shamash.

Accor spun out all of its lifestyle brands into Ennismore, which came to the deal with brands like The Hoxton and Gleneagles. Accor CEO Sebastien Bazin sees a lot of growth potential for these types of hotels, which have more food and beverage offerings than a typical hotel and cater more to local traffic.

Accor’s lifestyle hotels only accounted for less than 2 percent of the company’s room count earlier this year and 5 percent of fee volume. But Accor CEO Sebastien Bazin estimated at Skift Global Forum earlier this year that fee figure could quickly rise to 40 percent. 

Hyde launched in 2005 as a nightclub brand in Los Angeles before expanding to hotels, beach clubs, and residential developments. The London hotel would be sixth hotel for the brand and only the second outside the U.S. following the opening of a Dubai property earlier this year.

Tags: accor, brookfield, Early Check-In, lifestyle hotels, marriott, mergers and acquisitions, Skift Pro Columns

Up Next

Loading next stories