Skift Take
Accor does not wish to own real estate, however it does want to throttle ahead with growth in the way of life hotel sector– where many of the staying independent operators own their real estate. A SPAC can help Accor balance this kind of dispute in future acquisitions.
Cameron Sperance
Accor is the most recent business to dive into the unique purpose acquisition business, or SPAC, merger market.
But the truth that the Paris-based hotel company behind brands like Novotel and Raffles would want to remain in the motorist’s seat of this kind of offer has analysts forecasting this all come down to keeping realty holdings off Accor’s balance sheet.
“When public companies like Accor are trying to find a SPAC, they most likely want to make an acquisition that doesn’t exactly fit with their present company design,” said Nicolas Graf, associate dean at New York University’s Jonathan M. Tisch Center of Hospitality.
Accor’s SPAC listing, named the Accor Acquisition Co., would target companies in the way of life and leisure sectors along with flexible working and travel innovation, the business confirmed Thursday morning after this story first published. AAC plans to raise as much as $366 million under such a deal while Accor’s investment in the SPAC “will not be material,” according to the company’s announcement.
The prospective SPAC’s focus remains in keeping with the business’s ongoing growth with way of life hotels, which Accor when specified as residential or commercial properties that make as much as half their income from food and drink outlets. Accor drew out its lifestyle brands like SLS and Mondrian into a separate entity last year with Ennismore, owner of brands like the Hoxton and Gleneagles.
Accor invested years selling off its property assets to concentrate on management and licensing arrangements. However the company’s targeted development in the way of life hotel sector may mean a return to home ownership depending upon brand names it desires for the Ennismore division. A SPAC would help stabilize the desire for development and absence of hunger for more realty holdings, comparable to a tracking stock that parent companies sometimes utilize to separate the financials of a division away from the primary company.
SPACs are basically shell business that backers produce to merge with another business and go public on the stock market in a much quicker style than a traditional bank-led initial public offering, or IPO. They have grown in appeal considering that last year, when more money was raised for SPAC IPOs than all previous years integrated.
Wynn Resorts recently announced plans to take its online gaming platform public via SPAC at a $3.2 billion valuation. Sonder’s SPAC prepares worths the short-term rental business at $2.2 billion while Rosewood Hotel Group’s SPAC might raise about $400 million for the Hong Kong-based hotel company.
“SPACs have historically been effective at getting investors to buy into companies at an inflated evaluation,” said Michael Ohlrogge, a professor at New York University’s School of Law. “It’s not unexpected to me why anyone would be interested in the capability to sell off assets at an inflated appraisal. If you’re a struggling, then that could be much more enticing than normal.”
A Lift to Way Of Life Hotels
Accor declined to comment for this story, however its SPAC strategies could be a method to give a significant financial lift to its push into lifestyle hotels.
The business’s CEO Sebastien Bazin declared on a February investor call these hotels create more than 70 percent of their earnings from being “social and local centers” with “foodie material” and culture.
All hotel business struggled through the pandemic, but Accor tackled more headwinds due to its greater exposure to Europe and its more extended travel constraints compared to the U.S. and China. Nevertheless, the business continued to promote way of life hotels as a major growth chauffeur even while publishing a $2.4 billion loss in 2015.
The lifestyle hotel sector accounted for just 2 percent of the top quality hotel supply on the planet and 10 percent of the whole industry’s advancement pipeline, Bazin stated in February. At Accor, way of life hotels represent a quarter of the predicted franchise costs to be produced from the business’s 212,000-room development pipeline.
An Asset-Light U-Turn
Going back into realty ownership would be a departure for Accor, which in 2019 finished an asset-light effort to rid itself of most of its real estate holdings.
“If [they do list a SPAC], it’s going to be more of a property SPAC play than about the brand names,” stated Steve Carvell, a teacher at Cornell University’s School of Hotel Administration.”
A lot of major hotel companies practice the asset-light model, as it restricts exposure to the unpredictable real estate market and financial obligation associated with property ownership. Rather, these business concentrate on their strengths of hotel management and licensing.
It’s unlikely Accor wishes to go back to owning real estate.
“We are asset-light and have no strategy to return to asset-heavy,” Bazin stated in 2015 at the start of the pandemic.
But that mentality might be at chances with more lifestyle hotel expansion. A number of the smaller, regional way of life brands that Accor might want to bring into its Ennismore division are asset-heavy, those interviewed for this story said while decreasing to discuss on-record what brands those might be.
Creating a SPAC would be a method to park real estate assets in a separate company before turning over the branding contracts to Accor.
“I would think they’re most likely looking at a group of hotels that owns the real estate,” Graf said. “They would get that through the SPAC and obtain back [to Accor] the management agreements.”
[UPDATE]:Following publication, Accor verified strategies to sponsor a SPAC. This story has actually been updated.