Scandic acquires Rica, expands Norway base
 
Scandic acquires Rica, expands Norway base
12 FEBRUARY 2014 9:33 AM

Sweden’s Scandic Hotels has bought Norway’s Rica Hotels in a deal that increases the former’s Norwegian footprint from 19 properties to 84.


SCANDINAVIA—Stockholm-based Scandic Hotels extended its footprint in neighboring Norway by buying peer Rica Hotels, based in Billingstad, Norway, in a deal that Svein Arild Steen-Mevold, Scandic’s VP in the country, described as “the very best day of my professional life.”
 
Before the deal, Rica had 72 properties—65 in Norway, seven in Sweden—while Scandic had 151 properties, including 19 in Norway. The jewel in Rica’s crown is the Grand Hotel Oslo, which is part of the deal but will maintain its name, according to Steen-Mevold.
 
Scandic did not disclose the acquisition price. 
 
All other Rica hotels will adopt the Scandic name following regulatory approval to the deal, which by law must be given or not within the next 75 days. Steen-Mevold said there were no large obstacles preventing the deal, and from the minute Scandic gets approval it will start the full rebranding process, which should be finalized by 2015.
 
In a news release, Frank Fiskers, president and CEO of Scandic, said, “With the acquisition of Rica, we will rise to a new level in the Nordic hotel sector. We will strengthen our portfolio with 72 highly regarded Rica hotels in attractive locations, and our guests will soon be able to choose from 223 hotels throughout the Nordic region.”
 
The same release said former Rica Hotels’ owners, the Rivelsrud family, will continue its involvement through Rica Eiendom Holding, which owns 20 hotels in the Rica portfolio that now will operate with Scandic as leaseholder.
 
Scandinavian footprint
Max Barclay, managing director of international business at Swedish commercial property advisory company Newsec and head of the Urban Land Institute Sweden, said the timing was ripe for such a deal. 
 
“The Scandinavian hospitality sector is having a good time right now, especially in Sweden and Norway, and that means that from Scandic’s perspective it needs to continue its growth. One way of doing that is to grow hotel by hotel, another way by acquiring competitors,” he said.
 
“Scandic are a very strong brand in Scandinavia, perhaps the strongest, with good economies of scale. There is logic in the acquisition, and I understand where they are coming from. Scandic have a Scandinavian focus to its growth, and this deal has an edge to it and gives them a stronger footprint in Norway,” Barclay added.
 
Steen-Mevold said he regarded “Scandic as being the No. 1 hotel chain in Sweden and Denmark, but only No. 5 in Norway. With this one deal, overnight we are now No. 1 there, too.”
 
Future growth
According to Steen-Mevold, Scandic’s leading strategy is to have a “fortified Nordic (footprint), to be extremely strong in our home base,” but he did not rule out the possibility of expanding outside the company’s traditional boundaries and beyond the handful of properties it has in Poland, Belgium, Germany and The Netherlands.
 
“The expansion possibilities in Scandinavia are more limited now than they were three days ago. Growth in Scandinavia is still very important to us, and while we will not be as aggressive in other parts of Europe, we are open to good properties. When we have digested this transaction, which will take a little time, then we will look outside the Nordics,” Steen-Mevold said.
 
“In 2007 and 2008, even the greatest fool could be a successful hotelier in the Nordics. The area was enjoying annual (revenue-per-available-room growth) of 20% to 25%, but today things are more normal. Home markets have shown significant growth, and corporate business is returning, but we are also awaiting full recovery in the rest of Europe that could help support us—even from Germany,” he said.
 
For now, Scandic executives are enjoying the Rica deal.
 
“In my professional life, yesterday was the best day ever. Strategically, now we have across Sweden and Norway the perfect map,” Steen-Mevold said. “It is almost as though since 1963 when Scandic was created and 1975 when Rica was, we have been building up to this one day.” 
 

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