Is
biggercontributed
better ? by Bruce Serlen
A potential spate of big deals has started with two big transactions .
In the wake of Marriott International ’ s $ 12.2 billion agreement in November to merge with Starwood Hotels & Resorts Worldwide and AccorHotels ’ acquisition a month later of FRHI Holdings for $ 2.9 billion , speculation has been rife that the two deals are the start of a wave of consolidation that has the potential to transform the global lodging industry .
In the most extreme view , consolidation could see the world ’ s top 10 hotel companies reduced to as few as three mega-companies , some composed of up to 30 or 40 individual brands . Other analysts , executives and academics agree that further consolidation is likely in the near to mid-term but don ’ t foresee a scenario anywhere as dramatic as “ 10 into three .”
“ Consolidation provides benefits of scale , especially on marketing and distribution , network solutions and the ability to analyze data to provide a more customized guest experience . It should also contribute to improvement of profit margins at a group level and , hence , enhance shareholder returns ,” says Sarmad Zok , chairman and CEO of Kingdom Hotel Investments , Dubai . Kingdom Hotel Investments ’ parent , Kingdom Holding Co ., sold its stake in FRHI while gaining a 5.8 % interest in buyer Accor .
Certainly , the opportunity to increase profits is alluring . “ In mature markets particularly , the projected cost efficiencies from consolidating yield an accelerated path to enhanced profitability ,” says R . Mark Woodworth , senior managing director of PKF Hospitality Research , Atlanta , who can foresee “ at least a few more mergers taking place in the near to mid-term .”
Such key drivers aside , other factors are
Bill Marriott and senior Marriott executives meet Starwood staff at Starwood ’ s headquarters in Stamford , Connecticut , as the merger was announced .
fueling the “ bigger is better ” trend . And , inevitably , along with opportunity come some risk factors and other ramifications . View the situation from a wider lens . Since the Marriott-Starwood news broke , all eyes have been focused on consolidation in the hotel company space . But it ’ s been happening elsewhere . “ We ’ re beginning to see it among third-party management companies , for example , as well as among online travel agencies ,” says Daniel Lesser , president and CEO of LW Hospitality Advisors , New York .
Only asset ownership hasn ’ t seen significant consolidation , and many analysts believe that soon may be changing , particularly among lodging real estate
12 HOTELS March 2016 www . hotelsmag . com