AccorHotels’ 5% buy of Banyan Tree caps busy 2016
AccorHotels’ 5% buy of Banyan Tree caps busy 2016
22 DECEMBER 2016 9:47 AM

AccorHotels certainly has not kept quiet capital-wise in 2016. Its most recent deal, a 5% stake in Singapore’s Banyan Tree brand, once again targeted the global lifestyle arena.

GLOBAL REPORT—AccorHotels has opened its wallet throughout 2016, most recently to buy a 5% stake in Singapore-based luxury brand Banyan Tree Hotels & Resorts.

The 8 December deal, with a cost of 24 million Singapore dollars ($16.6 million), continues the French company’s goal of being a major global player in the lifestyle hotels arena.

The deal has a pair of distinct advantages, according to Gaurav Bhushan, global chief development officer of AccorHotels.

“The deal essentially is two parts,” he said. “One is on the investment side, with the 5% stake potentially going up to 10%. The other part, which is the main driver, is a collaboration agreement on core development, management and loyalty.”

Bhushan said AccorHotels has secured management and development rights to all Banyan Tree properties around the world.

“We like the brand. It has a distinct niche,” he said. “There is global appeal for an ultra-luxe Asian luxury brand with strong spa component. Banyan Tree augments our portfolio, as it is a push into lifestyle as much as it is a push into luxury.”

AccorHotels will manage all Banyan Tree hotels that the two companies develop in conjunction, although Banyan Tree also can develop hotels on its own.

Banyan Tree executives said they are equally excited about the arrangement.

“This agreement is not only transformational for Banyan Tree, but is also an innovation for the global hospitality industry,” said Ho Kwon Ping, executive chairman of Banyan Tree. “With the current consolidation of mega hotel companies, smaller but also global players, many family-controlled, are also seeking strategic alliances with the global giants. Our strategic alliance with AccorHotels allows us to remain an independent company, enabling us to continue securing hotel management agreements on our own and yet accelerating Banyan Tree’s speed and scope of expansion, but with AccorHotels helping us to grow our brands around the world.”

Currently Banyan Tree has 22 properties in Asia—in China, Indonesia, The Maldives, The Seychelles, South Korea, Thailand and Vietnam. Eleven of those are in China; five are in Thailand. The brand also has one hotel in Morocco and two in Mexico.

Now Banyan Tree expects to see swift global expansion.

“We believe this agreement will propel our brands rapidly to global reach and range, and strengthen our ability to embrace change and innovation,” Ho said. “Banyan Tree’s global footprint today is strong in Asia, parts of the Indian Ocean, and with a growing presence in Central America. We will continue to manage some of these regions exclusively. AccorHotels has a strong presence in Europe, Africa, Middle East, North and South America, areas where we can grow our brands.”

He added that no portfolio goals have been set yet.

“AccorHotels has approximately 150 business development executives around the world, who will all contribute to securing contracts for co-developed hotels,” Ho said.

The companies will partner on distribution and loyalty across the entire Banyan Tree portfolio, said Bhushan, who added that the small stake demonstrated AccorHotels’ commitment to the relationship.

“It is a good investment, and we were happy at that level,” he said.

Bhushan said it is too early to state numbers in terms of Banyan Tree portfolio expansion, but he mentioned North Africa, Mexico, some limited exposure in Europe (limited) and Cuba as possible arenas.

“The issue for Banyan Tree is that … being smaller, they do have the operational structure,” Bhushan said. “It will be three months before the full paperwork is done, but we do know the brand. Its positioning remains absolutely unchanged, but the product has to be tweaked depending on the market. But (Banyan Tree is) doing that already.”

Leveraging lifestyle
The deal continues AccorHotels’ goal of being a major player, and it also allows Banyan Tree to gain access to additional markets.

“At Accor, we have talked about new levers, and we see three areas of growth—luxury, lifestyle and leisure resorts,” Bhushan said. “And what you will see is that we will continue to make moves into these areas. There’s a lot of growth from emerging markets.”

Jorge De La Torre Koch, CEO and managing partner of Phuket, Thailand-based hotel consultancy LHM Asia, said he believes Banyan Tree will gain invaluable international expansion in Europe and the Americas. At the same time, he said, the company will be able to keep its way of doing things and promote its brand across the luxury spectrum, backed by AccorHotels’ own mix of upscale, upper-upscale and luxury brands.

This deal can open doors to expansion for investors in other countries, in the Caribbean, Africa, South America and even the U.S., De La Torre Koch said.

“It helps Banyan Tree to be more well-known in the international view, as Americans are not familiar with the brand, which has only properties in Mexico,” he said.

Due to currency exchange rates favoring travel to Europe, De La Torre Koch added, this deal might also allow Banyan Tree and other Asian firms to move Chinese and Asian travelers back to Europe, where their spending has trailed off somewhat in recent years.

Bhushan said he is convinced the future of hotels is in lifestyle.

“Lifestyle is about differentiated experiential products, and that will continue to grow,” he said. “We will see if it makes sense for us, in terms of growing that, and any purchases have to be complementary and equated. They should not be cannibalizing each other. We’re very mindful of that.

“We’re looking at the industry in a whole different way, with a new era of different business models of growth and development, such as what we did with (our 10.8% buy of) Huazhu, (30% buy of) 25hours Hotels and (35% buy of) Mama Shelter,” he said.

Bhushan said there are other ways of driving growth.

“We’re not just about the traditional buying of a hotel or brand 100%, or adding a brand,” he said.

Banyan Tree’s Ho said AccorHotels will bring “real strategic value to our company. … Both companies share similar views of the future of the hotel business and the role of independent family-owned companies in providing unique offerings.”

Middle-class Asian travelers are increasingly looking for unique, authentic experiences, he said.

AccorHotel’s 2016 spend
In addition to the 25hours Hotels and Huazhu deals, AccorHotels also completed in 2016:

  • A $2.9-billion purchase of FRHI Holdings Limited, which gave it brands Fairmont, Raffles and Swissötel;
  • a $150-million purchase of high-end concierge service firm John Paul;
  • a $168.2-million purchase of luxury extended-stay brand Onefinestay;
  • a 30% stake in short-term rental platform Oasis Collections for an undisclosed sum; and
  • a 49% share of upscale-resort-hotel digital platform Squarebreak, also for an undisclosed sum.

AccorHotels also has been a seller in 2016, including a €504-million ($524 million) portfolio of properties that it will continue managing—and also continue to own a 30% share—to Grape Hospitality.

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