Accor’s 50% SBE buy brings it US lifestyle know-how
Accor’s 50% SBE buy brings it US lifestyle know-how
29 JUNE 2018 10:10 AM

AccorHotels’ latest acquisition, a 50% stake of U.S.-based SBE Entertainment Group, will see the French giant underline its Americas’ luxury lifestyle portfolio and gain vital knowledge and experience in both that market and segment.

GLOBAL REPORT—French hotel group AccorHotels has agreed to purchase a large stake of yet another hotel company—this time committing a total of $319 million for a 50% stake in Los Angeles-based SBE Entertainment Group. The deal will strengthen AccorHotels’ presence in the upper tiers of the U.S. lifestyle segment via subsidiary SBE Hotel Group.

The purchase, according to an announcement from AccorHotels, includes the acquisition of the “50% of SBE’s common equity held in part by Cain International,” valued at $125 million. The remainder of the overall price is an agreement by AccorHotels to invest $194 million in a “new preferred debt instrument that will be used to redeem all existing preferred units, also held in part by Cain International,” a real estate investment firm based in London.

According to SBE’s website, the firm has 23 opened hotels, mostly in the U.S. but also in London, Istanbul, Doha and The Bahamas, and a further nine in its pipeline, which includes properties in Argentina, Colombia, the United Arab Emirates, Mexico and Turkey.

Soazig Drais, associate director of consultancy and valuation in the Paris office of Christie & Co., said the logic behind AccorHotels’ latest move is very simple.

“For me, it is their strategy of multiplying brands and strengthening development opportunities,” Drais said. “They have reached a point where there are so many AccorHotels assets on the market, they have to look elsewhere for development.”

Drais also saw the move from an experience and management viewpoint.

“They also have invested in the luxury knowledge they do not have, and of course they have a lot of cash to invest, and they have to use it,” Drais said.

Philippe Doizelet, general manager of the Paris office of Horwarth HTL, said the deal gives AccorHotels a new level of experience in the U.S. lifestyle hotel market.

“They are trying to buy some knowledge in the U.S. for hotels with a flair, whereas (its purchased) brands there, such as Fairmont, are rather traditional. Classic furnishing,” he said. “Certainly, Accor wants to diversify and challenge what already has been achieved in that sector.”

Luxury and knowledge
Following SBE’s December 2016 acquisition of Morgans Hotel Group, that company now has a direct hotel connection to Ian Schrager, widely accepted as the inventor the boutique hotel, Doizelet said.

“How will (AccorHotels) capitalize on that knowledge? Will SBE continue to be their own master?” Doizelet said. “Everyone wants to be the innovative guy. (AccorHotels is) following the trend.”

Founder, Chairman and CEO of SBE Sam Nazarian will own the other 50% of the company. SBE’s hotel brands include SLS Hotels; Hyde Hotels, Resorts & Residences; Hudson; The Redbury Hotels; The Raleigh Miami Beach; TownHouse Hotel Miami Beach; Mondrian and Delano. SBE Entertainment also owns and manages seven restaurant brands, including Tres by José Andrés, and five nightclub brands.

AccorHotels has been very active in 2018, following the February sale of 55% of its HotelInvest portfolio for €4.4 billion ($5.1 billion).

On 14 May, AccorHotels agreed to a $105-million buy of 100% of management and 20% of real estate of Chilean group Atton Hoteles, which has 11 hotels in operation, including one in Miami, and three in its pipeline. On 30 April, AccorHotels bought Swiss hotel group Mövenpick Hotels & Resorts for 560 million Swiss francs ($564 million).

Christie & Co.’s Drais said the only manner in which the SBE deal might be a little unusual is that AccorHotels bought 50% of SBE, not a lesser stake, such as it has with 25hours Hotels, for example.

“I think it is a strategy for (AccorHotels) to learn about a new activity and have control of it. They will benefit from received information,” Drais said.

From different ends
Doizelet noted that AccorHotels’ genes are not in the high end of the hotels spectrum.

“Most of the U.S. majors, the Hiltons, the Marriotts, they started with an upscale brand that is their core brand that is the name of their group and that they then replicate with brands at different grades,” he said, “and on top of that they develop with partnership such as with Ritz-Carlton, then develop products in the extended stay, economy and midrange categories to get the full spectrum.

“Accor did not do that. They launched with the first Novotel, a synonym of “New Hotel” and it worked out tremendously at the speed of light. … Now it is more legitimate in the Americas with Fairmont, in Asia with Raffles, but while acclaimed they need more modern flair.”

Doizelet also referred to the MGallery by Sofitel brand and speculated as to whether some SBE assets might be headed for a rebrand.

“Maybe the project is to rebrand those properties to MGallery,” he said. “Would that be a risk? I do not know. I am not party to the confidence, but globally, (AccorHotels’) luxury hotels are being positioned to face the competition and to be aggressive.”

Cain International, SBE Hotel Group and AccorHotels had not returned calls by publication.

The parties involved in the transaction expect it to be completed by 31 July.

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