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September 26, 2016

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AccorHotels widens global reach with FRHI deal

By Cherry Cao | September 26, 2016, Monday | Print Edition

ON July 12, AccorHotels Group shareholders approved the US$2.7 billion acquisition of Fairmont Raffles Hotels International (FRHI), the Toronto-based parent of the Fairmont, Raffles and Swissôtel luxury brands.

The deal involves US$840 million in cash and 46.7 million AccorHotels shares.

The acquisition cements the Paris-based hospitality giant’s profile as a world leader in the luxury accommodation market and expands its footprint in North America, according to Sébastien Bazin, chairman and chief executive officer of AccorHotels.

AccorHotels is predicting 65 million euros (US$72.6 million) in revenue and cost-saving synergies from the combination of hotel brands.

AccorHotels has been in the hotel business in China for more than three decades. Shanghai Daily sat down with Michel Molliet, chief operating officer for China, to discuss the impact of the acquisition.

Q: How will the acquisition of FRHI and its three hotel brands affect your China business?

A: Our global portfolio is increasing with the addition of some iconic and beautiful hotels, including, for example, The Savoy in London, The Raffles Singapore, Fairmont San Francisco, The Plaza in New York and Fairmont Peace Shanghai. In support of the acquisition, the group has created a separate management entity to lead the integration process and will be responsible for the strategy and global operations of AccorHotels Luxury and Upscale Brands. The brands portfolio will include Raffles, Fairmont, Sofitel Legend, So Sofitel, Sofitel, MGallery by Sofitel, Pullman and Swissôtel — each with a strong positioning and not overlapping with each other.

In China, we have 185 operating hotels across 13 different brands, covering luxury to economy including the addition of 10 FRHI hotels. We are merging the two corporate offices into one and will provide an even better support team for our presence in China. We will also combine the loyalty programs of the two companies in the course of next year.

Q: How will your China business benefit from this acquisition?

A: The acquisition has created a much stronger company and made it a leader in the global luxury hotel market. AccorHotels will benefit from FRHI’s luxury, marketing and guest experience knowhow, while AccorHotels is contributing its digital knowledge, strong distribution network and loyalty programs.

In China, we recently formed a strategic alliance with Huazhu Hotels Group to become AccorHotels’ exclusive master franchisee in China for the economy and midscale segments, as well as the upscale Grand Mercure brand.

In tandem with the FRHI acquisition and increased luxury portfolio, this strengthens and diversifies AccorHotels’ presence in China, covering the full spectrum of segments from luxury, upscale, midscale to economy.

Q: Will this acquisition affect your future development plans in China, where the pace of new luxury hotels has been slowing?

A: The development trend in China in the past 10 years was strong in the luxury segment, however the pace is slowing. There is still a strong focus on luxury and Upscale. No question about it. Today we see more development opportunities coming in the midscale and upscale segments, while economy segment is still growing very fast. Owners and real estate partners will continue to benefit from our experienced development teams and the addition of the powerful brands such as Raffles, Fairmont and Swissôtel will create new development opportunities. By the end of 2017, we are planning to open four Sofitels, four Pullmans, one Fairmont and two Swissôtels in China.

Q: Any key challenges you are encountering?

A: The challenge at the moment is the integration process. You have two different companies and two different cultures. There are expectations of increased efficiencies and increased synergies. Shareholders expect us to create a strong entity, additional revenues and savings. At the end of the day, we want to create a stronger and more diverse organization.

Mice


 

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