With the help of Middle Eastern money, AccorHotels is about to buy three of the world’s best-known hotel brands – Fairmont, Raffles and Swissôtel – along with 155 hotels and resorts.
The deal will see Qatari and Saudi Arabian interests become major shareholders in France-based AccorHotels. AccorHotels says the strategic move is set to create a worldwide leader in the luxury segment.
The transaction involves AccorHotels buying FRHI Holdings Ltd (FRHI), parent of Fairmont, Raffles, and Swissôtel.
Just a few weeks ago, another hotel mega-deal took place, when Marriott International announced it would buy Starwood Hotels & Resorts Worldwide for USD 12.2 billion to create the world’s largest hotel chain, with brands including Sheraton, Ritz Carlton and the Autograph Collection.
Such moves by hotel giants represent massive consolidation and consequent economies of scale. Some observers speculate that the big-name hotel sector may be headed the way of cruise lines, where a couple of giant corporations own most of the inventory. AccorHotels openly characterises its latest move as part of a policy of “aggressive worldwide expansion”.
In yesterday’s announcement, AccorHotels said it would acquire “an unrivalled collection of iconic hotel assets with 155 hotels and resorts, of which 40 are under development”.
In an issued statement, AccorHotels said key points of the deal included:
- Acquisition to provide AccorHotels with robust and global leadership in luxury hotels, a key segment in terms of geographic reach, growth potential and profitability, for long-term value creation.
- Fairmont’s unrivalled hotel portfolio, expertise in marketing luxury hotels and sizeable footprint in North America, provide a stronger platform to continue aggressive worldwide expansion.
- AccorHotels will pay for the acquisition by issuing 46.7 million new Accor shares and a cash payment of USD 840 million (EUR 768 million). Qatar Investment Authority and Kingdom Holding Company of Saudi Arabia are to become major shareholders, with 10.5% and 5.8% of the share capital respectively, subject to approval by an extraordinary general meeting.
- The transaction will be accretive to earnings per share from the second year with EUR 65 million in revenue and cost synergies identified in the medium term.
- AccorHotels has signed an agreement with the Qatar Investment Authority (QIA), Kingdom Holding Company (KHC) of Saudi Arabia and Oxford Properties, an Ontario Municipal Employees Retirement System (OMERS) company for the acquisition of FRHI Holdings Ltd (FRHI), parent of Fairmont, Raffles, and Swissôtel.
“This is an outstanding opportunity to add three prestigious brands – Fairmont, Raffles and Swissôtel – to our portfolio, and a great step forward for AccorHotels,” chairman and chief executive of AccorHotels, Sébastien Bazin, stated.
“It offers us robust and global leadership in luxury hotels, a key segment in terms of geographic reach, growth potential and profitability, for long term value creation. In addition, the deal allows us to strengthen our human capital with FRHI’s widely respected and talented global workforce which has a proven track record in operating and marketing luxury hotels.
“The transaction will also enable the group to consolidate its shareholder base, with the arrival of two high-profile investors that both have extensive expertise in the hospitality industry. This major acquisition demonstrates the group’s agility in a fast-changing industry and will allow us to more effectively support our guests, clients and hotel owners. Through it, we are positioning ourselves as a key player in the current industry consolidation process while maintaining substantial leeway to implement our transformation plan.”
Chief executive of Qatar Investment Authority, His Excellency Sheikh Abdulla Bin Mohammed Bin Saud Al-Thani, said: “Since making our investment, Fairmont Raffles Hotels International has become a leading luxury hotel company with an expanded international presence. This deal generates the scale needed to drive the next phase of growth in our real estate and hospitality investments. QIA has confidence in AccorHotels and looks forward to becoming a significant shareholder.”
FRHI includes three of the most prestigious global luxury hotel brands: Raffles, Fairmont and Swissôtel. It has 155 hotels and resorts (of which 40 are under development), and more than 56,000 rooms (of which approximately 13,000 are under development). Its portfolio includes such legendary properties as Raffles Singapore, The Savoy in London (pictured), Shanghai’s Fairmont Peace Hotel, The Plaza Hotel in New York, Le Royal Monceau – Raffles Paris, Fairmont San Francisco, Fairmont Banff Springs (Canada), Fairmont Le Château Frontenac in Quebec, the Fairmont Grand Del Mar in San Diego, and Swissôtel The Stamford in Singapore. FRHI has more than 45,000 employees under its brands.
FRHI’s hotels and resorts span 34 countries across five continents, with 42 properties in North America, 2 in South America, 26 in Europe, 17 in Africa/Middle East and 28 in Asia-Pacific. They are located in the world’s major tourist destinations, particularly in the United States, the leading outbound travel market. The vast majority of hotels (108) are operated under very long-term management contracts, with average remaining terms of nearly 30 years; six hotels are leased and one hotel is owned.
AccorHotels aims to generate around EUR 65 million in revenue and cost synergies thanks to the combination of brands, the maximization of hotel earnings, the increased efficiency of marketing, sales and distribution channel initiatives, and the optimisation of support costs.
AccorHotels says it will significantly improve customer data, thanks to the integration of a customer base including 3 million loyalty members, of which 75% are North Americans.
The transaction will be accretive on earnings per share from the second year, with synergies fully effective by the third year.
The agreement with Qatar Investment Authority and Kingdom Holding Company of Saudi Arabia provides for the cash payment of USD 840 million (EUR 768 million at the current exchange rate) and the issuance of 46.7 million Accor shares.
Written by Peter Needham