AccorHotels has invested an initial EUR16m as part of a strategic partnership with 43-strong Banyan Tree Holdings.
The company told us it would not “buy for the sake of buying” but that the deal represented a good investment and a further brand to offer loyalty members and developers.
Under a long-term partnership, both parties intend to collaborate to develop and manage Banyan Tree-branded hotels around the world. Banyan Tree will also have access to AccorHotels’ global reservations and sales network, as well as its loyalty programme Le Club AccorHotels.
This investment will be made through a mandatory convertible debenture that at conversion will give AccorHotels an approximately 5% stake in Banyan Tree. AccorHotels has an option to purchase an additional approximately 5% stake.
The company’s global chief development officer, Gaurav Bhushan, told Hotel Analyst: “Luxury, lifestyle, and leisure are key areas of growth to complement our portfolio, and that’s the strategy we continue to follow. The main driver for this deal is that we strongly like the brand and that it is a great niche with a great potential. It is really a good fit.
“The deal has two parts: first, the investment side since we’re investing in a company that has good growth potential and second, the development rights and the distribution and loyalty component. Banyan Tree will have access to our powerful and international reservations network and loyalty program, while AccorHotels will develop and manage hotels under the Banyan Tree brand. All these components are what give full sense to this partnership.
“Besides the investment and development side, loyalty and distribution are indeed strategic factors involved in this new deal. To have a strong brand and network like Banyan Tree available to our luxury customers is a great value add for our loyal customers.”
Customers will be able to book Banyan Tree hotels on the AccorHotels platform and also be able to book our hotels on the Banyan Tree platform.
Bhushan said that AccorHotels “won’t interfere in their management. Key AccorHotels’ executives will represent our interests, but only our CEO Sébastien Bazin will have a seat on their board of directors. We are happy to work closely with the management of Banyan Tree in a true partnership, this is why we have no intention to take over. Our intention is not to go beyond a 10% investment stake simply because in our agreement, we have secured the right to develop, operate, manage, and distribute Banyan Tree branded hotels all over the world. That is our main goal and we can do it without acquiring Banyan Tree.”
He added that, because AccorHotels has “the infrastructure to do it, our ambition is to take the development of Banyan Tree to a new level. We know that there is great potential for its brands in Europe, the Middle East, Central America, the Caribbean as well as Mexico.
Bhushan said: “Our collaboration with Banyan Tree is a great opportunity to complement our business proposition to owners with iconic brands, while always better servicing our guests. Banyan Tree has created key leading positions across Asia with luxury resorts, one of the fastest growing segments in the industry. We will bring scale to the network through our ability to develop and manage hotels under their brands globally, hence strengthening our leadership in the luxury hotel space.
“This partnership follows a number of other deals we made this year in the luxury market. We became a world leader in the luxury Serviced Homes market by acquiring Onefinestay, we completed the purchase of Fairmont Raffles, we also bought the leading concierge and loyalty provider John Paul, and very recently, we also invested in boutique brand 25hours Hotels.
“This idea is not to buy for the sake of buying, it has to make sense and to be accretive; but we are convinced that there is still room to add high value content with complementary luxury brands and services on our distribution and loyalty platforms. This initiative is designed to enrich the content of our digital ecosystem and reinforce our position as a hospitality industry pioneer and trailblazer.
“It does not mean that we’ve lost the ability to create by ourselves and it is demonstrated by the fact we have launched a new brand – Jo&Joe- that blends the best of private-rental, hostel and hotel formats and that totally reinvent the hospitality experience in terms of design approach, catering, service and customer journey.”
HA Perspective [by Katherine Doggrell]: As Bhushan told us, this is not buying for the sake of buying. Instead this is a way to add scale without having to spend the billions which Marriott spent on Starwood Hotels & Resorts. Having picked up – and launched – brands one-by-one there are no questions over cannibalisation, even if it does not enjoy an instant scale hit. The seeds have been planted.
Luxury has also been a focus for the group of late, fleshing out the stable after the purchase of Fairmont and looking to the higher profits from the higher end. The company cut its teeth on large-scale economy, now we watch as it works the other end – largely with the help of bought-in management.
For Banyan Tree, the advantages are obvious. The company’s executive chairman, Ho Kwon Ping, said: “This agreement is not only transformational for Banyan Tree, but is also an innovation for the global hospitality industry. With the current consolidation of mega hotel companies, smaller but also global players – many family-controlled – are also seeking strategic alliances with the global giants.
“Our strategic alliance with AccorHotels allows us to remain an independent company, enabling us to continue securing hotel management agreements on our own and yet accelerating Banyan Tree’s speed and scope of expansion but with AccorHotels helping us to grow our brands around the world.”
We can expect to see many more deals like this as consolidation continues into 2017.
Additional comment [by Andrew Sangster]: As ever, Accor is doing things differently. There are now effectively four truly global majors – Marriott, Hilton, IHG and Accor. And of these, only one – Accor – has the bulk of its presence outside of North America.
Perhaps it is this that informs Accor’s approach. While in North America it can look like you have a good grip on supply. You can make claims to have meaningful market share and pricing power. In Europe, this is not possible.
The far more fragmented landscape of Europe has encouraged Accor to think differently and imaginatively, at least under the leadership of Sebastien Bazin. There is a recognition of the limitations of the brand company and an understanding of the need to connect more meaningfully with guests / consumers than has been done in the past. Banyan Tree is another small step towards this goal.