Groundbreaking alliance between Accor and Huazhu (China Lodging) creates a hotel giant in China
Accor and Huazhu Hotels Group today sealed an extensive and long-term alliance to create the most prominent and diversified hotel company in China, with more than 2,000 hotels and the strongest pipeline in the country.
This major alliance will rapidly accelerate both groups’ expansion in what is today one of the largest and fastest-growing domestic travel markets and the world’s largest outbound travel market. The objective of the alliance is to bring together the best of the two respective groups, combining Accor’s internationally recognized brands and powerful global distribution network with the extensive coverage, local reputation and strong development capability of Huazhu Hotels Group in China. Huazhu plans to open 350 to 400 new hotels under the Accor brands in the next five years.
“This major step is key to our digital transformation as the agreement will link the power of both groups’ reservation and loyalty platforms, providing an expanded distribution capability,” said Sebastien Bazin. “This agreement will provide travelers and loyal members more access and more choice of hotels."
“China is today the largest outbound tourism market in the world; in that context, creating one of the largest hotel groups in China will lead to growth globally as those travelers come to recognize Accor and Huazhu’s brands and expand their travel internationally,” said Sebastien Bazin. “This agreement will also help us better anticipate customers’ expectations and strengthen our leadership in the Chinese market over the long term.”
With the opening of a new ibis Styles in Sao Paulo last August, Accor has just reached the figure of 200 hotels in the country reinforcing its position as the market leader.
Present in 84 cities and offering 33.000 accommodations, Brazil is Accor’s third world market. In 2014, two new brands have been successfully implemented in the country: Adagio Aparthotels and ibis Styles in the budget category.
Additionally, the Group keeps up with a strong and secured expansion plan to nearly double the size of its operations in the three years to come. By 2018, over 150 new hotels will be inaugurated, representing a 75% increase in the amount of rooms.
After major cities, Accor’s ambition is to increase its penetration in secondary and tertiary cities that are currently experiencing a moment of economic growth in particular in the South-East. Through hotel franchise model, the Group will mainly develop budget hotels with local partners.
Globally, Accor is leading the Latin America hotel sector and will cement its presence with over 20% of its total pipeline secured in the region.
13 new properties in the UK
Accor announces that HotelInvest, the Group’s hotel owner and investor business, has purchased a portfolio of 13 hotels from Tritax for a total consideration of €89 million (£71 million) in line with its stated strategy to consolidate the owned hotel base whilst strengthening its economy and midscale segments.
The portfolio, which includes 12 ibis and 1 ibis budget, represents 1,194 rooms located across the UK in key regional locations.
The properties have been operated under variable-rent leases by Accor since 2001, and since 2005 for Tritax, a real estate investor, on behalf of individual and private owners.
The acquisition will be financed at 100% through debt. It will be immediately accretive to Accor’s EBIT and will also reduce off balance sheet debt by c.€39m (£33m) attached to minimum lease commitments. It will also increase the contribution of owned hotels to HotelInvest’s Net Operating Income* by around 0.5 point, in line with the target of raising this figure from 54% in 2013 to more than 75% over the medium term.
This acquisition for HotelInvest, follows an active period for the team in the UK who have also sold and franchised back two properties, Novotel Stevenage and Novotel Nottingham, to Fairview Hotels. Fairview will be investing significantly in both the properties to ensure the consistency and quality of the Novotel Brand is maintained.
John Ozinga, COO of HotelInvest said: “These transactions demonstrate Accor’s ability to act swiftly in implementing the strategy announced nine months ago. It’s an important step forward in the significant restructuring that we are leading in HotelInvest, fully aligned with our objectives which include creating value by optimising return on capital employed, while strengthening our position as the largest owner of economy and midscale hotels in key European markets.”
Purchase of 97 hotels in Europe
In May, Accor announced that its HotelInvest business agreed to purchase two real-estate portfolios representing 86 and 11 hotels respectively (12,838 rooms) for a total consideration of about €900 million.
“These transactions send a strong signal of our capability to rapidly implement the strategy of restructuring the HotelInvest portfolio,” said Sébastien Bazin, Chairman and Chief Executive Officer of Accor. “They are fully aligned with our selective asset acquisition criteria: hotels located in key European cities and delivering excellent operating performance in our most profitable market segments”.
The first portfolio, representing 86 hotels and 11,286 rooms across Germany (67 hotels) and the Netherlands (19 hotels) has been operated by Accor since 2007 under variable-rent leases and the following brands: ibis (29 hotels), ibis budget (31 hotels), Mercure (17 hotels) and Novotel (9 hotels). The total consideration for this acquisition is €722 million. The sellers are two funds, Moor Park Fund I and II, advised by Moor Park Capital Partners, a pan-European real estate private equity investment advisory business.
Besides, Accor has entered into exclusive negotiations with Axa Real Estate for a second portfolio representing 11 hotels and 1,592 rooms in Switzerland. This portfolio has been operated by Accor since 2008 under variable-rent leases and the following brands: ibis (5 hotels), ibis budget (2 hotels), Novotel (3 hotels) and MGallery (1 hotel).
Both acquisitions will be accretive to Accor’s EBIT in 2014. Based on pro forma 2013 figures, the relative contribution of owned hotels to HotelInvest’s net operating income* will increase by around fourteen points to 68%. One of the key objectives for HotelInvest, the leading hotel investor in Europe, is to raise this proportion to more than 75% over the medium term.
Completion of the acquisitions is subject to the usual conditions for this type of transaction, as well as to regulatory approval.
* EBITDA less maintenance capex