Why biggest shareholder may boost stake in AccorHotels

(AccorHotels Logo)

Industry attention over the last six months has been focused on Marriott's acquisition of Starwood. And while that combined brand may be the world's biggest, others are following their lead. AccorHotels is also looking to acquire its competitors and grow its footprint in expanding markets—and may get a major boost from its biggest shareholder for its efforts. Even more importantly, the trend would reflect the increasing power Chinese companies have in Western hotel companies.
AccorHotels' growth
Last year, Accor announced that it was acquiring FRHI International, whose brands include Fairmont, Swissôtel and Raffles. (The cash-and-share deal is reportedly worth $2.9 billion.) 2015 saw 36,000 rooms and almost 230 hotels opening globally, a 20-percent increase over 2014’s numbers and a record for the company. In total, AccorHotels’ network includes 3,900 hotels and 510,000 rooms in 92 countries. Nearly half of the new hotels are franchises and 43 percent are under management agreements. The pipeline, meanwhile, includes 160,000 rooms globally—another record for the company. In the last few months alone, the company has signed deals to open more than 54,000 rooms

At the beginning of 2016, AccorHotels finalized its alliance with China’s Huazhu Group. This partnership, announced in 2014, is set to accelerate AccorHotels’ brands in Asia with the opening of 350 to 400 GrandMercure, Novotel, Mercure, ibis and ibis Styles hotels in China, Taiwan and Mongolia over the next five years.

Last week, in another move to acquire the competition, AccorHotels purchased U.K-based home rental start-up Onefinestay for an estimated $168.45 million

And this week, AccorHotels signed a management agreement with Al-Mohammadia Almotahda to open the Novotel Suites Al Khobar. The new signing will be the fourth project between AccorHotels and Al-Mohammadia Almotahda in Saudi Arabia, but represents the first in KSA’s eastern Al Khobar district. The hotel is expected to open in the first quarter of 2018.


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A bigger stake
And it seems that the company's biggest shareholder (at a 12 percent stake) has confidence in AccorHotels' future potential. Jin Jiang International (Holdings) Co., which controls China’s largest lodging company by market value, may increase its stake in AccorHotels to about 20 percent in a bid to have more influence over the hotel company's management. (AccorHotels shares jumped as much as 3.8 percent in Paris trading, the most intraday in about a month, according to reports. These additional shares would be worth $822 million at Accor’s current share price.) 

In its own right, as of the end of Q2 2015, Jin Jiang owned or managed more than 3,000 hotels, with a total of 360,000 rooms in 55 countries.

Jin Jiang's interest in boosting its control of AccorHotels is only the latest step in Chinese companies looking to acquire Western assets. In late 2014, Starwood sold Louvre Hotels to Jin Jiang for an estimated $1.5 billion. In August of 2014, Shenzhen Hazens Real Estate Group purchased the Luxe City Center Hotel and two adjacent parcels for $105 million from Beverly Hills developer Emerik Properties Corp. Sunshine then purchased the Baccarat from Starwood Capital for a record $2-million-per-room. That same year, Anbang Insurance Group Company bought New York City's Waldorf Astoria hotel for $1.95 billion.

At the same time, AccorHotels formed an alliance with China’s Huazhu Group. This partnership, finalized earlier this year, is set to accelerate AccorHotels’ brands in Asia with the opening of 350 to 400 GrandMercure, Novotel, Mercure, ibis and ibis Styles hotels in China, Taiwan and Mongolia over the next five years. (This partnership is, understandably, a strong incentive for further Chinese investment.)

The trend hasn't slowed down. Last month, Anbang agreed to acquire Strategic Hotels & Resorts for $6.5 billion from U.S. private equity firm Blackstone, and famously forced Marriott to increase its bid for Starwood by offering substantially more to acquire the company.

In total, Chinese businesses have announced $97 billion of overseas deals in the first three months of the year, Bloomberg-compiled data show. 

Sources: Bloomberg, Hotelier Middle East