Shares in Accor have fallen 40 per cent since before the pandemic — about twice as much as IHG stock
With international travel decimated by Covid-19, it’s a dark time for hoteliers. So it’s hardly surprising that Accor SA might be interested in a merger with London-listed InterContinental Hotels Group Plc, owner of the Crowne Plaza
and Holiday Inn brands.
France’s Le Figaro newspaper reported that Accor’s CEO, Sebastien Bazin, considered an approach for the rival company before deciding the timing wasn’t quite right. But if a deal could be agreed, there would be an opportunity to strip out costs to help the chains navigate the current crisis.
IHG operates a so-called “asset-light” business model, where it doesn’t own much property — preferring instead to franchise its brands and offer hotel-management services to the owners. Its French rival has moved in this direction too, which limits the savings you’d get if you were combining two big property portfolios.
Nevertheless, there are other costs that could be cut in areas such as centralised bookings, property management and the procurement of goods used by hotels. IHG and Accor are respectively the world’s fourth- and fifth-biggest hotel operators, and there would also be geographical advantages to bringing them together. The two companies
are especially concentrated in the mid-market, through chains such as Accor’s Ibis and Novotel brands. These cater more to domestic travellers, so they’re better placed to recover more quickly from the pandemic.
The problem is that the very circumstances that make a deal desirable also render it difficult to construct. Shares in Accor have fallen 40 per cent since before the pandemic — about twice as much as IHG stock. So Accor has suffered much more, leaving it as the smaller party. That makes it harder for Bazin to initiate talks from a position of strength. Based on their market values, a nil-premium merger would give IHG shareholders 57 per cent of the combined company and Accor’s 43 per cent.