07 Sep, 2017
European Hotel M&A Trends for 2017
1. «Asset Light» here to stay
The trend goes on for hotel companies to sell off their real estate to release equity and focus on their managed and franchised operations and brand expansion.
Early in 2017, Accor Hotels announced it had entered into discussions with potential investors to acquire the majority of its property subsidiary Hotel Invest, valued at €6.6bn as at 31 December 2016. This project is expected to conclude by the end of H1 2017, and could release capital for the Group to enable investment into either Hotel Service, responsible for managing and franchising hotels, or to potentially consider another mega acquisition in the sector.
Also in 2017, Hilton Worldwide Holdings Inc. completed the spin-off of both its timeshare and lodging properties businesses into two separate publically traded companies, Hilton Grand Vacations Inc. and the REIT Park Hotels & Resorts Inc. at an initial market cap of c. $2.6bn and c. $5.9bn respectively.
2. Mega hotel companies on their way
2016 saw the completion of two of the sectors largest megadeals that were announced at the end of 2015: Marriott International’s acquisition of Starwood Hotels & Resorts was completed in September 2016, creating the largest hotel company in the world with more than 5,500 hotels across 100 countries; and Accor Hotels completed its acquisition of Fairmont Raffles Hotels International in July 2016, increasing its global presence in the luxury hotel market, and creating a hotel company with 4,000 hotels across 95 countries.
3. The rise of inbound Asian capital
In December 2016, HNA Tourism Group acquired Carlson Hotels including its 51.3% stake in the Rezidor Hotel Group; in February 2017 they then submitted an offer for the outstanding shares in Rezidor.
Whilst at the time of writing, this offer has been rejected by the shareholders, this transaction points to the trend of Asian investors growing their stake in the European hotel market.
Since 2014 Europe has witnessed total inbound Asian investment of c. €2bn into major private hotel groups and c. €2.7bn in public hotel companies. This is a trend that, despite new regulations restricting outbound Chinese investment, looks set to continue.
What to expect in 2017?
European hotel investments began 2017 on a strong note with the sale of a portfolio of 19 Merlin Hotels in Spain and the Germany based A&O Hotels and Hostels; and further deals reported to be in progress including the pan-European Generator Hostels portfolio, the Italy based Boscolo Hotels, the U. K. Hilton Metropole hotels, a German 13-hotel IHG franchisee portfolio and 4 Melia hotels in Spain.
We anticipate a similar level of hotel transaction volume in 2017 following better than expected macroeconomic data emerging from the UK and Europe over the past few months and the continued investor interest in this alternative asset class.
Our suggestions: 20 Must-Read Books
Some strategies of raising capital: Bringing Your Company Public, Exploring Alternative Capital-Raising Strategies, Refinancing and Minority Equity as Partial Exit Strategies, 5 Alternatives To IPOs, How to Raise Capital For a Company in Financial Troubles, 7 Private Equity Strategies, Why Successful Business Owners Sell Out, The Six Types of Successful Acquisitions, Race to Become a Global Player, Refinancing and Minority Equity as Partial Exit Strategies, Guide To Equity Release Or «Cash-Out»