Major Hotel Mergers an Antidote to Airbnb?
The Wall Street Journal recently published an article exploring the possible motivation behind the recent merger activity in the hotel industry. The three mergers mentioned were Commune Hotels & Resort and Destination Hotels (creating the largest independent operator of boutique hotels), Accor SA acquiring FRHI Holdings, Ltd., and Marriott International buying Starwood Hotels & Resorts (creating the world’s largest hotel company). The author of the article pointed to several reasons for such mergers… 1) A broader reach helping these companies to regain ground lost to Airbnb, Inc., which will account for 5.4% of total U.S. room supply in 2016. 2) Regaining ground lost in revenue to online travel agents (Expedia Inc., Priceline Group Inc., etc…) These booking channels charge fees of about 12% to 25% of room revenue. Brands that have larger room inventory have the most favorable terms with these companies. 3) Bigger hotel operators have better brand recognition, larger loyalty programs and bigger marketing budgets. 4) The slowing of the hotel business cycle which makes it more difficult for companies to grow organically so they are looking to grow through acquisitions. 5) A way for companies to plug holes in a brand portfolio.
Read the whole article here: http://www.wsj.com/article_email/hotels-ramp-up-deal-making-as-an-antidote-to-airbnb-1453503524-lMyQjAxMTE2NDIyMzMyOTM4Wj