Fairview Hotels has continued its UK expansion with the acquisition of four Novotel-branded properties, taking it to 10 sites.
The company acquired the sites from Land Securities and AccorHotels, expanding on its existing relationship, and said that it planned to continue growth in the regional UK.
The deal was done off market, with the freeholds from Land Securities and the hotel businesses via AccorHotels. Neil Forbes, director of operations, Fairview Hotels, told us that the company “had other targets in mind”, adding: “Our model is to own and operate under franchise and it does appear that there is a little more opportunity at the moment, we see it as being a good time – we have other targets in mind”.
The group will continue to focus on the provincial UK, avoiding London, where prices were currently deemed too high.
Fairview has a Mercure in central London, which Forbes said had been “surging” in recent weeks, while “the provinces remained reasonably static”. “There is no doom and gloom here,” he added, “we are very optimistic”.
The acquisition adds 450 rooms to its existing portfolio, bringing the portfolio to nine hotels, totalling 960 rooms, are of which are owned and operated by Fairview Hotels under franchise agreements with AccorHotels. The new hotels include Novotel Coventry, Ipswich, Manchester West and Wolverhampton. All properties will remain under franchise agreement with AccorHotels, with fresh 15-year agreements signed. While each hotel in the portfolio is a separate entity, they all report back into Fairview Hotels.
Forbes said “We are delighted that the special relationship forged between AccorHotels and Fairview continues to grow.” The company added that acquisition presented an “ideal opportunity” for the group to continue to capitalise on the flexibility of the franchise model.
CBRE Hotels acted for Land Securities, with Anu Badola, director, CBRE Hotels, commenting: “This transaction represents a strong opportunity for Fairview Hotels who are currently the largest franchisee of Novotel hotels in the UK and is an excellent fit for their platform. We are seeing an increasing amount of interest from UK based owner operator franchisees who are seeking attractive opportunities in the UK market where there is a strong underlying base of demand and attractive returns relative to the current low interest rate environment.”
Land Securities’ relationship with AccorHotels dates back to 2004, when the former paid GBP439m for 30 hotels under the Ibis and Novotel brands with most of the hotels being based in city centres across the UK – including 10 in London. Land Securities struck the deal through its then-outsourcing wing Land Securities Trillium and agreed to spend GBP35m over four years upgrading the hotels.
Fairview Hotels became the second Accor franchisee in the UK, after Arora hotels, when it signed Letchworth Hall Hotel as a Mercure November 2008. The group added the Mercure in Bloomsbury in 2010. August 2014 saw Fairview Hotels acquire a further two hotels – Novotel Stevenage and Novotel Nottingham – direct from AccorHotels’ HotelInvest in a sale-and-franchiseback deal.
The company had previously had a healthcare arm, but exited the business in 2007. The business was founded by the Chatwani Brothers, three brothers who also own Davis & Dann Limited , which trades in pharmaceuticals, toiletries, soft drinks and beer and wine.
The family is led by Satish Chatwani who trained as an accountant but was reportedly barred from returning to Uganda by Idi Amin in 1973. He and his brothers trained as accountants, building up a practice before moving into hotels.
AccorHotels has been restructuring its own ownership vehicle, confirming that it plansned to turn HotelInvest, its ownership arm, into a subsidiary three years after its creation. The company said that the move would strengthen the company’s financial position, in addition to allowing HotelInvest to expand.
AccorHotels said that, between 2013 – when HotelInvest was created – and 2015, gross asset value increased from EUR5.5bn to EUR7bn and the profitability of the portfolio improved, with operating margin standing at 7.8% in 2015 (versus 4% in 2013). As a result, the company described HotelInvest as Europe’s leading hotel investor.
With investors including Fairview eager to expand its own AccorHotels’ portfolio, the company is able to keep the profile of its brands high, bolstering its own owned holdings.
HA Perspective [by Katherine Doggrell]: The UK regions are starting to fill up with small, privately-owned groups specialising in ownership with a side of operations, franchising from the global operators.
In the case of Fairview, the company plans to invest in the assets and then, unlike those they and its ilk are purchasing from, it is likely to hold for a decent period. Agents we have spoken to at Hotel Analysts have identified this return to the longer hold in recent months in both the regions and London, as family offices, drawn by the weak pound, strong performance, or both, are making their move, taking the place of the private equity house who, at the height of their enthusiasm, were holding hotels for around 18 months.
With owners now taking a longer interest and changing the flowers more than once during their tenure, agents may find themselves less busy, but the brands will come under increasing focus to prove that they can deliver what they say.