Competition, cheap debt, push M&A to record level

Global mergers and acquisitions grew to a record total in 2014, fueled by low borrowing costs and rampant competition. Data collected by Bloomberg show that acquisitions of hotels, travel-services companies and tour operators in 2014 totaled $64.4 billion—more than twice the value in any of the previous six years.

In 2014, there were a reported 596 announced deals. These included Anbang Insurance Group Co.’s October purchase of the Waldorf Astoria in Manhattan and Blackstone Group's March acquisition of the Cosmopolitan in Las Vegas.

And while 2014 was a record year, 2015 dealmaking could be as good or better. The reasoning? Bloomberg cites the "increasing clout of online travel agencies and other Web-based services threatening the earnings of hotels and tour operators, pushing them to become bigger and go digital."

The same is being said in Davos, Switzerland, during the World Economic Forum. As Reuters writes, "low borrowing costs, currency shifts and the hunt for both cost savings and growth opportunities will drive a steady flow of merger and acquisition deals this year despite geopolitical tensions."


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Chief executives, bankers and investors in Davos say they expect U.S. companies to take advantage of a rising dollar and robust growth at home to strengthen their position in global markets.

"In tourism, there are great opportunities because it is a growing market, but it is also very competitive, and competition is growing,"Angelo Rossini, a tourism analyst at Euromonitor International, told Bloomberg. "This is a period of very fast changes for the industry due to the arrival of online and mobile travel."

Last year was the busiest by number of deals and total value since 2007, the year that Blackstone acquired Hilton Worldwide for $26 billion.

In addition, OTAs are eating into hotel company profits by ripping high commissions and enervating room rates. They are also "poaching" customers from tour operators.

Cheaper debt—here in the U.S. and abroad—has also provided the impetus for companies to expand. In fact, U.S. companies are forecast to cross the Atlantic to raise funds in euros at the fastest pace in at least eight years in 2015 as borrowing costs in Europe fall below dollar rates by the most in a decade.

According to Bloomberg, Bank of America Merrill Lynch was the most active financial adviser for such deals, with a market share of 9.9 percent, followed by Lazard Ltd. at 9.2 percent. And the spree may continue. Bloomberg, for example, cites France's Accor, which plans to spend 225 million euros through 2018 to improve its digital presence.


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The investment firm wants both the hotel and the nearby residential land.

The total value of tourism and leisure industry merger and acquisition deals was down from June, but still up nearly 40 percent from July 2018.

Christoph Eichbaum has joined the investment management hospitality team headed by Andreas Löcher.