Smaller Hotels Merge Globally
<B>Smaller Hotels Merge Globally</B>
By Bruce Serlen
Continuing the consolidation trend that gradually is reshaping the global hotel business, three transactions were announced last month affecting small to midsize hotel companies in the United States and Europe. Raffles Holdings acquired Swissôtel Hotels & Resorts from SAirGroup, Bass PLC acquired the Posthouse chain from the Compass Group and Hilton Group PLC announced that its Hilton International unit was absorbing Scandic Hotels.
Particularly for travel buyers whose hotel programs include properties in international destinations, this latest wave of consolidation means fewer suppliers with which to deal. While this may streamline buyers' programs, fewer suppliers also tends to mean less negotiating leverage.
SAirGroup put Swissôtels on the block earlier this year in an attempt to recoup losses sustained from its airline operation. Raffles Holdings, which is based in Singapore, acquired either outright ownership or management contracts on the 23 Swissôtels worldwide. Included are properties in such high-demand markets as New York, Chicago, Washington, D.C., London, Frankfurt and Beijing. The deal was valued at $242 million. Raffles, which already has a portfolio of 39 properties around the world, said it intends to operate the acquired properties under the Swissôtel flag.
With an eye to frequent business travelers who place a high premium on consistency of experience across a chain, Swissôtel's existing management said it didn't expect service levels to vary. "We intend for the integration to be seamless to our guests, whose service requirements and preferences remain our central focus," said Andreas Meinhold, Swissôtel president and CEO.
After its acquisition of the 79 midprice Posthouse Hotels, most of which are highway locations in the United Kingdom, Bass said it intends to convert them to its Holiday Inn brand. Bass Hotels & Resorts chairman and CEO Thomas Oliver earlier this year told BTN that one of Bass' key priorities was to expand the Holiday Inn franchise around the world--the Posthouse acquisition is a step in realizing that strategy. "Our objective in building the brand is to stress the value it represents and the tremendous coverage we've been able to achieve," Oliver said (BTN, Jan. 15). The deal was valued at $1.16 billion.
Likewise, the acquisition of Scandic Hotels by Hilton International, which operates Hilton-brand hotels outside the U.S. market, is intended to give the company greater global reach. Scandic's 154 hotels, which are mostly in Scandinavia, will give 220-property Hilton International a major presence in markets where it presently has little penetration.
"In such a region as Europe, there are probably 15 to 20 major cities where, if you're missing more than one or two, you can't offer the corporate customer sufficient coverage that they'll choose you," David Michels, CEO of Hilton Group PLC, told BTN last year (BTN, Oct. 30, 2000). The Scandic deal, which was valued at $884 million, is intended to fill in some of those holes.