The Strategist

Accor Hotels to Buy Hotel Operators Fairmont, Raffles and Swissotel

12/10/2015 - 14:20

One of the largest hotel operators in the world, the French Accor Hotels Group, announced purchase of the three premium hotel brands - Fairmont, Raffles and Swissotel – worth in total $ 2.9 billion. Experts point out that now hotel chains tend to consolidate as competition from alternative players such as service Airbnb is growing rapidly.

Europe's largest hotel chain, French Accor Hotels announced a significant expansion of its business in the US and in the premium segment. The company announced purchase of FRHI Holdings from a Qatari investment fund (Qatar Investment Authority - QIA), a Saudi investment fund and Oxford Properties Group. FRHI Holdings Company owns three famous hotel brands - Fairmont, Raffles and Swissotel. In total, these brands operate 155 hotels in 34 countries, of which 40 are currently under construction. The most famous hotels are Raffles Hotel Singapore, Hotel Savoy in London, Fairmont Peace Hotel in Shanghai, Plaza Hotel in New York City. The biggest hotel locations are North America (42), Asia (28), Europe (26). The transaction will be effected through payment of $ 840 million and additional issue of Accor shares, which will make $ 2.9 billion in total. As a result of the transaction, QIA (10.5%) and the Saudi state investment fund (5.8%) will become the largest shareholders of the combined company. According to CEO of Accor Sebastien Bazin, the transaction will enable Accor to become "one of the key global players in the luxury segment", bringing the number of hotels to nearly 500.

Experts point out that the recent consolidation of hotel chains has increased markedly - a month ago, hotel chain Marriott International announced purchase of its rival Starwood Hotels & Resorts Worldwide. The deal amounted to $ 12.2 billion. The growing competition between the leading players in the market is being additionally exacerbated by increasing popularity of alternative players such as Airbnb. They either take away customers from traditional hotels or give fall to prices for the whole market. According to Merrill Lynch’s report, proportion of bookings on Airbnb will be only 1.2% by the end of 2016. It is expected to rise by already 4.3% by 2020. Even greater pressure is put on the prices. The traditional players cannot help but cut them in order to successfully compete with the alternative players. "Our preliminary estimates suggest that the new players are already a force to be reckoned with. And then, their influence will only grow ", - said analysts at Merrill Lynch.