More hospitality mergers & acquisitions in 2019: JLL

After a bumper 2018, more hotel mergers and acquisitions are expected this year. The focus is shifting towards more private deals with smaller platforms. The top hospitality brands only account for around a third of hotel rooms around the world, making more acquisitions in 2019 likely. Tony Ryan, Managing Director of Global Mergers & Acquisitions in JLL’s Hotels & Hospitality Group says, “Most of the larger platform deals have already been done, so the big operators are now seeking out unique concepts and locations to complement existing product offerings – particularly as consumer demand changes. Those transactions will occur primarily in Europe and Asia, where there is greater opportunity for consolidation.”

On the revenue side, having a global reach enables hotel groups to provide customers with the type of accommodations they want, where they want it.

The purchasing power of a bigger operation can also mean significant cost savings, says Ryan. “Bigger players have more buying power than a standalone hotel, and so are able to pay lower commissions to distributors such as Expedia or Booking.com.”

With aggregation among the industry’s big guns more or less complete, the major global brands are turning their attention to smaller, niche players that can help them build out a full presence in every part of the accommodation market both geographically and by sector – in particular luxury, wellness, lifestyle, and entertainment.

All the major brands are seeking to enhance their luxury offering, says Ryan. “That has a halo effect on the rest of the company. Given the room rates that luxury properties achieve, it can also be highly lucrative.”

Examples include AccorHotel’s acquisition of FRHI Holdings (parent of the Fairmont, Raffles and Swissôtel brands), IHG’s purchase of Regent Hotels, and more recently, Hyatt’s acquisition of Alila Resorts through Two Roads Hospitality.

Another is LVMH’s recently-announced agreement to acquire Belmond – at a significant premium to its share price. “LVMH has an outstanding market share in luxury goods, and it wants to offer its clients luxury travel experiences,” notes Ryan.

“High-end customers are increasingly seeking transformative experiences and wellness-inspired retreats,” says Ryan. He cites Hyatt’s 2017 acquisition of Miraval and IHG’s recent acquisition of Six Senses Resorts as evidence of these companies’ ability to respond to a growing demographic of discerning travellers.

Acquisition sights have also centred on some of the more millennial-focused and urban-oriented lifestyle brands. These brands have elements of neighbourhood authenticity, entertainment and out-of-the-box F&B concepts, says Ryan. Accor’s investment into 25Hours and SBE Entertainment are prime examples.