Rumours of a potential merger between accommodation giants Accor and InterContinental Hotels Group continue to circulate this weekend. In France, Le Figaro reports the Covid-19 pandemic has created space for both companies to consider the deal, though the Financial Times in the UK considers any move less likely. The tie-up has, however, been mooted in various quarters since the start of the year, before coronavirus promoted a shutdown of global travel. Though no approach has yet been made, any takeover would create the largest hotel company in the world.
Marriott International currently holds the top spot in the market, having snapped up Starwood Hotels & Resorts for $13 billion in 2016. The new combined group would have 1.6 million rooms — around 200,000 more than Marriott, split roughly equally between Europe, the Americas, and Asia. There do appear to be grounds for optimism for a potential merger, though. Based in France, Accor currently offers around 5,000 hotels in 110 countries, with 60 per cent of its portfolio in Asia.
While it has a strong presence in the budget sector, with the Ibis brand, the company grew into the luxury space with the acquisition of FRHI Hotels & Resorts in 2016. This added upmarket brands Fairmont, Raffles, and Swissôtel to the stable. Conversely, InterContinental Hotels Group is much more focused on North America, home to 60 per cent of its portfolio.
Holiday Inn and Holiday Inn Express make up most of its estate, but the company has also been expanding in the luxury segment, having paid $300 million to take over Six Senses last year. The company also offers strong growth prospects thanks to its early-mover advantage in Greater China, which accounts for 15 per cent of rooms and 30 per cent of its pipeline.InterContinental currently has nearly 6,000 hotels globally, offering some 883,000 rooms.
Cost-cutting is another justification, with analysts estimating synergies of between €100 and €150 million – equivalent to about seven per cent of the predicted operating earnings for 2022 of any enlarged company. Both Accor and InterContinental Hotels Group have seen revenues dip this year, as Covid-19 saw hotels close around the world, but both suggest the worst of the pandemic is now in the past. Accor currently had a market capitalization of €6.2 billion, slightly less than the £7.3 billion (€8 billion) value of the British company.
This is likely to make any deal a merger of equals, rather than a hostile takeover. However, if Accor went alone, the group would need the backing of its main shareholders, state-owned Jin Jiang International of China and the Qatar Investment Authority. Both could underwrite the share issue needed to fund any bid.
