Two executives close to the biggest deals of 2015 and 2016—Marriott’s acquisition of Starwood and AccorHotels’ FRHI Holdings buy—gave some background on the deals and what each company plans to do next.
LONDON—The hotel industry saw two megadeals that were announced in 2015 close in 2016. What factored in to these transactions behind the scenes, and where do the buyers go from here?
Two top executives gave more color to AccorHotels’ $2.9-billion purchase of FRHI Holdings and Marriott International’s $13.3-billion buy of Starwood Hotels & Resorts Worldwide during a panel titled “M&A: Riding the crest of a wave?” at Deloitte’s 28th European Hotel Investment Conference held 9 November.
Nick van Marken, Deloitte’s global head of hospitality, asked executives from Marriott and AccorHotels to name the key moments and game-changers in their respective deals. Carlton Ervin, Marriott’s chief development officer for Europe, said the acquisition was guided by the company’s continued confidence in the strength of the Starwood buy and Chairman Bill Marriott’s “voice of pragmatism throughout the process.”
Gaurav Bhushan, AccorHotels’ global chief development officer, said the watershed moment in the FRHI deal was when the key commercial terms of the acquisition were agreed upon by both sides. Once officials from both companies shook hands, he said, the celebrations ensued.
Bhushan confirmed AccorHotels’ executives stayed up to 2 a.m. in the lobby of The Savoy in London and took photos outside while standing on The Strand, while CEO Sébastien Bazin rode his bicycle through the London streets after the deal was signed.
“Yes, I think that’s true,” Bhushan said of Bazin’s nighttime ride.
The aftermath of each deal, Bhushan and Ervin said, came after a great deal of work and many meetings. Chance encounters also played their part.
AccorHotels’ FRHI acquisiton was “as much about Kingdom Holdings and the Qataris buying into Accor as it was about Accor buying FRHI. … They did not want to cash out, and they had choice (of buyers),” Bhushan said. “There is a lot of international competition bidding for brands of this quality. They do not come around very often, (but AccorHotels) had equal focus on getting the right deal.”
Bhushan underlined the importance of the FRHI deal to AccorHotels, which gave the French company both a luxury product it did not have before and a larger footprint in the Americas.
Ervin mentioned that former Starwood CEO Adam Aron and Marriot President and CEO Arne Sorenson met at an industry event, and three weeks later the deal was done.
Then in March 2016, when China-based Anbang Insurance Group made two counteroffers to try to woo Starwood away from Marriott, Ervin said Marriott doubled down on its commitment to get the deal done.
“Our conviction that we had made the right decision grew and allowed us to increase the capital. … There was more internal debate after Anbang’s second bid,” Ervin said. “The first (Marriott) bid was all stock. … For the second, we raised ($3.6 billion) over a weekend.”
Ervin added Marriott executives never lost sight of what was best for the company—or for Starwood.
“The press said (Marriott’s acquisition of Starwood) was a good deal for Marriott, which bemused us, as a good deal for Marriott was also a good deal for Starwood,” he said. “The press was really concentrating on that line, which prepared us for a counteroffer.”
Forward onto integration
AccorHotels shareholders approved the FRHI acquisition on 12 July, while Marriott closed the Starwood deal on 23 September. With the acquisitions completed, both Ervin and Bhushan said the focus of their companies will transition to successful integration of their new assets.
Ervin said the way Marriott looks at future acquisitions might change, as the company will place more emphasis on reaching its customer base.
Bhushan said the “cultural aspects of integration are going well. Toronto (FRHI’s HQ) is now Accor’s North American office. It is about leveraging the right people.”
AccorHotels, though, has been busy spending more money. On 7 November, it purchased 30% of 25Hours Hotels, a German firm Bhushan described as “edgy, entrepreneurial, eclectic and ambitious.”
“We have a strategy of getting into areas we want to be stronger in—luxury, lifestyle, the resort segment,” Bhushan said. “Lifestyle is 1% of the industry but 10% of its pipeline.”