GLOBAL REPORT—Mergers and acquisitions are not top of the global hotel industry’s priorities during the COVID-19 pandemic, though weakened firms might soon regard such deals as an exit strategy.
Over the past 10 years, several high-profile deals have taken place as the hotel industry enjoyed a stellar up-cycle. Here’s a look at how those deals shaped the industry, ahead of what can be presumed will be another major transformation coming out of the current crisis.
The biggie: Marriott buys Starwood
In November 2015, Marriott International agreed to buy Starwood Hotels & Resorts for $12.2 billion and over the next nine months fought off two counter-offers from China’s Anbang Insurance.
Marriott has since folded in Starwood’s respected loyalty program, and sources said the new firm’s real legacy going forwards will be in how it expands and refines its loyalty offerings, with all its 29 bricks-and-mortar brands now sitting beneath its most important brand of all—Bonvoy. (Accor is doing likewise with platform All.)
The numbers behind the Marriott-Starwood deal still sound big five years later: 1,136,814 rooms and 5,809 hotels in a deal valued at $13.3 billion.
According to statements in its fourth-quarter 2019 earnings report, Marriott has 7,349 hotels and 1,380,921 rooms, with a pipeline of 3,050 hotels and approximately 511,000 rooms.
The leftfield buy: Minor scoops up NH Hotels
Minor International has in recent years emerged as a major Southeast Asian hotel player, but it was its October 2018 purchase of 94.1% of Spain's NH Hotels, with its primarily European portfolio, that propelled the Thai firm to the front lines.
Minor made its first foray into Europe with its €294 million ($327 million) acquisition of the 14 hotels of Portugal’s Tivoli Hotels in February 2016.
Both deals raised Minor’s global assets to approximately 550 hotels, which includes its own brands such as Anantara, Avani and Oaks as well as a portfolio of managed hotels for third-party brand firms such as Marriott International, Four Seasons Hotels & Resorts and Radisson Hotel Group.
The Anantara Villa Padierna Palace Resort near Marbella, Spain, is one of two current Anantara hotels in Europe, but following two big Covivio buys in recent years, its parent brand Minor International seeks to add more in the continent. (Photo: Minor International)
The NH Hotels deal and Minor’s move deeper into the European hotel industry also was a springboard to signing a deal with French real estate investment trust Covivio to operate eight hotels and 1,115 rooms in key European cities bought by Covivio from Milan-based investment firm Värde Partners.
The €573 million ($640 million) deal will allow Minor to bring its upscale Anantara brand into Europe outside of Iberia.
Incoming China: Jin Jiang’s two major Europe forays
China’s state-owned hotel firm Shanghai Jin Jiang International Hotels Group bought two major European hotel groups in the past decade, France’s Louvre Hotel Group and Belgium-based Radisson Hotel Group. As a result, Chinese ownership transitioned from being non-core assets of Chinese conglomerates—such as HNA Group and Anbang Insurance—to standalone hotel concerns.
With Jin Jiang’s deal to buy part of Radisson from HNA, it seems likely the hotels will fall under more aligned management, something not lost on Radisson management, who in February 2017 recommended shareholders reject a bid from HNA to own all of it.
Previously, Jin Jiang moved into Europe with its €1.2 billion ($1.49 billion) acquisition of Louvre.
As a result of that deal, Jin Jiang entered the top 10 of hotel firms in market capitalization and rooms count, the first non-Western entry, and now owns or manages more than 7,700 hotels with more than 800,000 guest rooms in 67 countries.
Unlikely bedfellows: Jin Jiang (again) and Sarovar
Jin Jiang’s January 2017 purchase via Louvre Hotels of India’s Sarovar is significant due more to geography than the amount of capital changing hands.
The $50-million buy for a 74% stake marked the first large industry M&A between the two countries with the world’s largest population, China (with 1.4 billion people) and India (with 1.3 billion).
At the time, Rushabh Shah, director in the Mumbai office of business consultancy Horwath HTL, told Hotel News Now regarding China-India relations: “There is, from Indians, a trust deficit. The relationship is not too open, so investment mostly has been indirect. We’ve seen much Chinese investment worldwide. … This Louvre-Sarovar deal is the first direct Chinese investment into Indian hotels.”
With the deal, Louvre’s 22 Golden Tulip hotels were added to Sarovar’s portfolio of 22, which since has become 23.
Transatlantic move: Accor buys FRHI Holdings
French hotel giant Accor is somewhat synonymous with the last decade of M&A activity. If something was rumored to be for sale, it was also rumored Accor was interested.
Finalized in July 2016, Accor’s $2.9 billion purchase of FRHI Holdings from the Qatar Investment Authority and Saudi Arabia’s Kingdom Holding Company included three internationally known brands—Fairmont, Raffles Hotels & Resorts and Swissôtel Hotels & Resorts—and provided a route back into the Americas.
The deal also came with trophy assets such as Raffles’ Raffles Singapore and Fairmont’s The Savoy, London, where the deal was inked. After the signatures dried, Accor CEO and President Sébastien Bazin went for a 1 a.m. cycle around Hyde Park to get rid of some of adrenalin.
New European REIT Muscle: Covivio buys Principal
Real estate investment trusts still mostly are regarded as a U.S. invention, but a few on the other side of the pond have successfully negotiated all that European Union red tape scattered over 28 very different nations.
With two deals in the past decade, Covivio is one of them. First was its €858 million ($944 million) acquisition of 14 hotels from Starwood Capital Group, 10 of which were branded under SCG’s Principal Hotels brand, a brand that quickly had established itself in the United Kingdom and was just as quick to disappear.
As part of the deal, Covivio, which at the time was named Foncière des Régions, reached an agreement with InterContinental Hotels & Resorts to bring in the latter’s Kimpton Hotels & Restaurants brand into Europe.
Its second deal, in January of this year, was to acquire eight hotels from Värde Partners and further cement its place in the European hotel landscape.
Fashion play: Louis Vuitton bags Belmond
Belmond, formerly Orient-Express Hotels, often had been mentioned as a potential M&A target, but few predicted the identity of its purchaser, French fashion and retail house LVMH Moët Hennessy Louis Vuitton, which splashed out a cool $2.6 billion for it.
This was not the first move by a fashion concern into hotels and brands, the two sectors sharing a lot of DNA. Versace and Bvlgari S.p.A, of which LMVH is its major shareholder, are two cases, but the Belmond move was by far the largest in terms of price, hotel count and global span.
Belmond’s hotels, spread across the globe and including the Belmond Hotel Monasterio in Cusco, Peru, now are part of super-brand LVMH Moët Hennessy Louis Vuitton. (Photo: Belmond)
Retail analysts expressed some excitement at the thought of LMVH and Bvlgari brands featuring into Belmond’s trains, safari camps, restaurants and 34 hotels, though no hotels have been added to the portfolio since the deal closed in April 2019
Bringing in the boutique: IHG buys Kimpton
IHG executives asked at hotel industry conventions why the British brand was not buying anything have often pointed to its $430 million deal in December 2014 to add Kimpton Hotels & Restaurants to its portfolio, which they say kick-started this past decade of M&A activity.
Kimpton had long been the boutique darling of the U.S., but a common view was that it would be difficult to scale it globally, until IHG proved it wrong in a deal that signaled the end of the Great Recession.
The brand’s latest push in Europe has come via IHG’s deal with French REIT, as it becomes better known outside the Americas. The plan is to position the brand’s European hotels at a slightly higher level than those original hotels.
Newbie capital: Fattal partners on Jurys, Grange
A very notable influx of foreign capital in the last couple of year has derived from Israel, a country in which analysts said there was nowhere else for Israeli capital to be parked, hence it beginning to look to neighboring Europe.
Fattal Hotels was the biggest player, with two sizable deals. The first was in partnership with Swedish hotel brand Pandox AB that saw it scoop up Ireland’s Jurys Inn Hotels for £800 million ($1.1 billion) from U.S. public equity firm Lone Star.
That December 2017 deal was a little complex, with Fattal owning the operations, Pandox most of the real estate, and including one additional hotel under the Hilton umbrella, but the Israeli firm’s appetite was obvious and sparked another Pandox partnership, the £115 million ($151.3 million) purchase of Manchester’s famed Midland Hotel from Q Hotels in October 2018.
Following those two deals was the April 2019 deal by Fattal—this time minus Pandox—to operate four former London assets of Grange Hotels bought by Queensgate Investments the previous month that likely will see—as might assets of the Jurys Inn deal—the rise of Fattal’s Leonardo and Nyx brands.
The very latest: Lone Star buys Japan’s Unizo
Just as with Jin Jiang’s buy of Sarovar (see above “Unlikely bedfellows”), the sale of Japanese hotel firm Unizo Holdings to U.S. private-equity firm Lone Star for $1.9 billion raised eyebrows. Analysts usually fall behind the comment that Japanese shareholders normally support existing, Japanese management and that sales to international capital especially are rare.
This deal did not arrive out of the blue, Lone Star’s arrival with its agreed-to deal of 6,000 Japanese yen ($55.77) per share following approximately nine months of heated battle. First up was a hostile-takeover bid by Japanese travel agency HIS, which then saw counter offers from the likes of Fortress Investment Group and Blackstone.
The price accepted saw the hotel firm, which has 27 hotels across three brands—Hotel Unizo, Unizo Inn and Unizo Inn Express—all in Japan, sell for almost double of HIS’s initial offer. The holding company at Unizo, named Chitocea Investment Co., is part-owned by Unizo employees.
Chinese flexibility: HK CTS buys third-party Kew Green
In August 2015, Chinese capital showed it did not just want trophy assets, notable portfolios or leisure hotels into which it could plug-and-play travelers who would buy their whole vacation journey via the same Chinese conglomerates’ online platforms.
Kew Green Hotels sold its 44 assets and 5,179 rooms to HK CTS for £400 million ($517.6 million), and entered hotel management in China.
Chinese capital invested in European white-label management with HK CTS’ acquisition of Kew Green Hotels, which opened hotels in China including the Kew Green Hotel Wanchai Hong Kong. (Photo: Kew Green Hotels)
The parent company in China was deemed farsighted in seeing the development and rise of white-label hotel companies in Europe, which got their start in the continent in the U.K. Deals with Chinese partners nearly always have been about sharing Western experience and Chinese capital and geographical knowledge to both Chinese and Western guests, and this deal was emblematic of that.
According to its website, Kew Green now has more than 70 hotels in the U.K., as well as that handful in China.