We’re in the middle of earnings season, the period each calendar quarter in which publicly traded companies report results to shareholders. But this quarter also brings talk of mergers in the hotel business.
Hotel companies are not all that they seem. For the publicly traded hotel companies, they do not, for the most part, actually own the properties that carry their brands. Rather, properties have individual owners and pay a fee to the brand to manage the hotel for them and/or pay a franchise fee for the name. They also pay fees for access to the brands’ reservation systems. All brands have some corporate-owned hotels, but for many of them, it’s only a few.
The issue is one of scale. Having more properties under your flag allows you to get bigger corporate contracts, gain traction in your loyalty program and have more offerings for different types of customers. In general, the bigger, the better.
Starwood and Hyatt (or Intercontinental)
Starwood has been an acquisition target for as long as I can remember. It has a reliable stable of brands, including Sheraton, Westin, St. Regis and W, and generates excellent cash flow for its owners. Hyatt generates almost all of its income from its name brand and variations thereof, such as Park or Grand Hyatt. Buying Starwood would give it further penetration into the high-end brands. But the combination would still lack a well-known brand in the midscale segments. Thus, I think that Intercontinental, which also owns the Holiday Inn brand, is a more logical partner. For now, though, it seems that Hyatt has the inside track.
Accor and FRHI
Number two on the list is a possible combination of Accor and FRHI, which the Wall Street Journal broke this afternoon. Accor is not a well-known brand in the US, but it is very strong in Europe, with brands such as Sofitel on the high end and others like Novotel or Pullman to give it some variety. It is also strong in the economy brands. FRHI owns luxury hotels, such as Fairmont and Raffles, which is an area where Accor is weaker.
These kinds of rumors generally find themselves in the “where there’s smoke there’s fire” categories, so I would not be surprised to see some announcements soon.Want to subscribe? Just enter your email in the box above (and to the right) and click on the confirmation. GMailers, check your Social or Promotions boxes!
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