The turbulent times for the hotel industry have been illustrated well in the past couple of weeks at Accor, which has been subject to speculation that it is both a target and acquirer.
The would-be buyer was the inevitable private equity firm, this time KKR, while the potential target was touted as Whitbread, a suggestion flatly denied by Accor.
Accor had been the world’s largest hotel company by enterprise value until Blackstone’s bid for Hilton which dramatically lifted the latter’s valuation given the 40% premium offered.
It remains a substantial holder of hotel property – about half of its portfolio is either owned or on a fixed lease – although it has sold down Eu2.4bn since 2005 and has a further Eu2.8bn likely to go over the next couple of years. Unlike the other members of the big five (Marriott, Hilton, Starwood and InterContinental) its main exposure is to European markets rather than North America. The fact that Europe significantly lags North America in terms of the business cycle means there is more left of the current upswing.
The 10.28% holding by Colony Capital, along with its two seats on the board, makes an approach by a rival private equity firm unlikely. Colony’s stake increased thanks to its exercising of a convertible bond earlier this month.
Meanwhile, Whitbread, having thrown-off persistent speculation about a bid by Starwood Capital, still remains the subject of takeover gossip. Part of the reason is the attractive nature of its asset-backing – it owns almost all of the properties in Premier Inn. But also, Whitbread is now focused on Premier Inn, a business that has consistently delivered double digit returns over the last few years.
It is a strange irony that management’s success in shedding weaker businesses and bringing more focus has done little to slacken takeover talk.