Expect a deluge of hotel transactions this year

Skift take

As the second anniversary of the pandemic approaches, hotel companies will be eager to buy and sell around the premise that the travel industry is settling into a new normal.

Cameron Sperance

Hotel mergers and acquisitions may have been lighter than some might have imagined following a downturn like the pandemic, but that is almost certain to change this year.

Even with the Omicron variant ramping up towards the end of 2021, there is a general feeling that the worst of the pandemic is behind the hospitality industry. Executives focused on sustainable sources of income such as leisure travel and business travel for small and medium-sized businesses. This has caused all the major companies to return to profitability by the end of the year.

Lenders are likely to be less flexible with loan terms, and central governments are unlikely to further implement the kind of stimulus seen in the past 21 months. That alone could drive an extraordinary level of transactions, as homeowners have to be content with current demand levels to make ends meet. Analysts felt that the stimuli and flexibility of lenders was largely holding back the volume of transactions at the start of the pandemic.

Major transactions in the hospitality industry in the nearly two years since the World Health Organization declared the coronavirus a pandemic have focused mostly on big-priced properties or small brands. Las Vegas has hosted several big sales, such as the $ 6.25 billion Venetian and Sands Expo Center sale or Blackstone’s $ 5.6 billion deal to sell the Cosmopolitan.

Now is the time to recalibrate what a hotel business wants to look like on the other side of the crisis.

Companies like Accor have already made it clear that they plan to respond more and more to more local traffic. Thus, the Parisian hotel company has joined forces with Ennismore on an autonomous lifestyle hotel entity. Expect more hotel companies to play for these types of hotel brands that offer more bars and restaurants to attract residents of the surrounding city.

Hyatt’s 2018 acquisition of Two Roads Hospitality, which included brands like Thompson Hotels, was also in this vein. The fact that companies like Wyndham and IHG Hotels & Resorts have each launched a boutique brand for their respective brand portfolios indicates just about everyone in the hospitality industry wants the type of properties that Accor and Hyatt are looking for.

Don’t rule out getting more into the all-inclusive resort space, either organically or through outright acquisition. Marriott and Hilton are both strengthening their presence in the all-inclusive resort industry, while Hyatt’s $ 2.7 billion acquisition of Apple Leisure Group strengthens its existing all-inclusive resort portfolio.

Size matters: Cool, trendy brands may play a bigger role for big hotel companies in an age of more and more leisure travel. But many publicly traded global hotel chains also need to show their shareholders that they are growing steadily.

Smaller players like Sonesta International Hotels Corp. have shown that not all hotel companies are just a duck sitting around waiting to be taken over by Marriott International, Hilton, Hyatt, IHG or Accor. The company’s $ 90 million acquisition of Red Lion Hotels’ parent company, RLH Corp., made it one of the largest hotel companies in the United States in a matter of months.

The big brands were not left out in the M&A activity of the last year. Hyatt significantly strengthens its European presence with the acquisition of Apple Leisure Group.

There will likely be more deals this year to help a small business build its presence in the highly competitive US market. Marriott, Hilton and IHG accounted for nearly 70% of all hotel rooms under construction in the United States at the end of the third quarter of last year.

But a potential sale of Blackstone’s Motel 6 could provide a big boost to a company looking to break into the U.S. market at a time when big brands have a big chunk of the development pie. The investment group plans to market the economy brand of roadside hotels to potential buyers early on, Bloomberg reported late last month.

A potential deal could fetch more than $ 1 billion. Blackstone bought Motel 6 from Accor in 2012 as part of a nearly $ 2 billion acquisition, which also included the hotel’s real estate. The investment group has since strived to move the brand to an industry-standard, lightweight, lightweight franchise model.

All eyes on the complexes: Investors this year are likely to target more convention hotels and other properties geared towards group gatherings, particularly in the Sun Belt and on the east and west coasts – dubbed the “Smile States” in circles. real estate.

“We developed a thesis a few years ago to target convention hotels and large corporations,” said Sean Hehrir, director and managing partner of Trinity Investments, in an interview with Skift. “What Covid has really taught us and the management teams on the ground is that these are group hotels, but they are also phenomenal leisure hotels.”

Trinity Investments recently made two major acquisitions in Southern California with W Hollywood and Omni San Diego. The company already has a resort in Orlando consisting of a 582-room Ritz-Carlton and a 998-room JW Marriott, as well as properties in Arizona and Hawaii.

These recent deals came after an extraordinarily busy year in Las Vegas, where properties like the Mirage, the Venetian and the Cosmopolitan were all ready to sell.

As leisure travel appears to once again have a grip on reservation systems in the new year, look for more investors who are getting into resort ownership, especially as longtime owners like MGM Resorts are looking to seek new sources of income that do not involve real estate ownership. .

Accor loses presence on Huazhu board of directors

A seat on the board of directors appears to be a consequence of Accor’s declining stake in Chinese hotel company Huazhu.

Accor CEO Sebastien Bazin resigned “with immediate effect” from Huazhu’s board at the end of last month, according to a filing with the US Securities and Exchange Commission. Gaurav Bhushan, CEO of Accor’s lifestyle and entertainment division and co-CEO of lifestyle brand Ennismore, lost his title of deputy director in connection with Bazin’s departure.

Accor acquired a 10.8% stake in Huazhu in 2016, but that figure has since fallen to 3.3%.

The Paris-based hotel company declined to give details of Bazin’s exit from the Huazhu board.

But there has been speculation in the industry. Huazhu’s decision to acquire Deutsche Hospitality in 2019 – becoming a competitor in Accor’s European backyard – set in motion the sour relations between the French and Chinese partners.

Huazhu was expected to significantly expand the Steigenberger and IntercityHotel brands after the acquisition closes in early 2020, but the pandemic appears to have stunted expected growth.

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