AccorHotels swells MidEast portfolio with Fairmont deal, redundancies 'unlikely'

French hospitality group acquires FRHI for $3.2bn, winning new shareholders QIA and Kingdom Holding
AccorHotels swells MidEast portfolio with Fairmont deal, redundancies 'unlikely'
Olivier Granet, Dubai-based managing director and COO of AccorHotels Middle East.
By Sarah Townsend
Wed 13 Jul 2016 01:56 PM

AccorHotels Group has grown its Middle East portfolio to 150 hotels following its $3.2 billion acquisition of luxury operator FRHI Hotels & Resorts, the company has announced.

Accor and FRHI’s regional offices are to be merged with global decisions on the structure of the group to be taken in October, but no redundancies are expected, AccorHotel’s Middle East CEO Jean Jacques Dessors told reporters in Dubai.

The French hospitality group concluded its acquisition of US-based FRHI – the operator of upscale brands Fairmont, Raffles and Swissôtel – at a shareholders’ meeting on Tuesday.

The deal involved a share-swap with billionaire Prince Alwaleed bin Talal’s Kingdom Holding Company (KHC) and the Qatar Investment Authority (QIA) – both former FRHI shareholders – which provides for the cash payment of $840 million and the issuance of 46.7 million Accor shares.

The shares will be issued via a reserved capital increase, leaving QIA and KHC with respective stakes of 10.5 percent and 5.8 percent in AccorHotels.

QIA directors Ali Bouzarif and Aziz Aluthman Fakhroo, and KHC chairman and CEO Sarmad Zok, are to join the board of directors of AccorHotels.

The group plans to generate approximately €65 million in revenue and cost savings and/or synergies as a result of the acquisition.

AccorHotels’ portfolio in the Middle East includes 75 operational hotels with 18,000 rooms in 10 countries - Bahrain, Egypt, Jordan, Iran, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia and the UAE – and 55 under development bringing the total to 130.

Under the deal, AccorHotels will acquire all FRHI’s 20-odd Fairmont, Raffles or Swissôtel-branded hotels across the region. 

Olivier Granet, Dubai-based managing director and COO of AccorHotels Middle East, said once pipeline schemes have been completed, the company will have more than 50,000 hotel rooms in the region by 2020.

“This transaction will obviously have a significant impact in the region,” he told reporters. “It makes us the sixth biggest hospitality group in the world and within the top three within key markets in the Middle East.”

He said discussions had already begun over possible new brands the group could introduce to the region following the acquisition – though he did not disclose any details – and said the addition of new Middle East shareholders QIA and KHC presented opportunities for business development and growth.

There are 154 Fairmont, Raffles and Swissôtel-branded hotels and resorts in 34 countries across the world (40 of which are under development) and most are operated under long-term management contracts with an average term of 30 years.

AccorHotels operates a combination of luxury, budget and midscale brands including Sofitel, Pullman, Novotel, Mercure and Ibis.

There is not expected to be any consolidation of brands following the acquisition, Dessors said, adding that while the company may opt to merge some regional offices, “this does not necessarily mean staff redundancies”.

The deal represents a move by AccorHotels to ramp up activity in the luxury and upscale market – at Tuesday’s shareholder meeting FRHI’s Chris Cahill was appointed CEO of a new ‘Luxury Brands’ department at AccorHotels, responsible for increasing expertise in the management of luxury hotels.

However, this comes at a time when many GCC markets are seeking to grow their offering of budget and midmarket hotels amid regional economic uncertainty.   

Granet insisted the luxury segment continues to enjoy strong demand in the UAE in particular, and that the company “has the support of [regional] governments”.

He said: “We are working with [Dubai’s] Department of Tourism and Commerce Marketing Department of Tourism and Commerce Marketing (DTCM) and Emirates Airline to develop [mutually beneficial] incentives to attract Accor customers.

“For example, families may be offered tickets to Dubai’s [soon to be completed] theme parks as part of their stay in an Accor hotel.”

“The momentum [for luxury] is really there in Dubai and people are still coming,” he added.

For all the latest travel news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.

Subscribe to our Newsletter

Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.