We are all of us looking for a return to familiar times in this pandemic - some more than others depending on the control criteria you like to live by. This goes a long way to explain the attraction of the Travelodge story in the UK and why every call has more participants than Glastonbury. That and, to quote Mr Krabs from Spongebob, ‘for the money’.
So the waft of a rumour that Accor was considering a move on InterContinental Hotels Group was a reassuring sign in turbulent times. Although there was a twitch of caution in that this seemed like a pretty logical move and one which the sector has been flagging up for years. Accor making a logical move we could all see coming just doesn’t sit right.
One of the certainties we’ve enjoyed under Accor chairman & CEO Sébastien Bazin is a deal every few months - every month at its peak. Humanity is very adaptable and a body gets used to things, so when they’re snatched away, it’s unsettling. Shortly prior to the pandemic there was chat of a stake in Expedia and buying Rotana, but those days seem so very long ago. And, of course, Bazin himself said that the group had moved on from those heady days and now he was all about service and building the loyalty programme and other chat which no-one believed for a second.
But sitting right, like so many ducks, is IHG, with CEO Keith Barr not being encouraged to make dramatic moves of his own, able to make only the tiniest of defensive moves. Making IHG look all the more attractive has been its exposure to China, which, at the start of the pandemic, saw lots of sharp intakes of breath, but now makes it quite the golden child. Greater China accounts for 16% of the estate in terms of rooms and 32% of the pipeline, although reported revenue for the first half remained dwarfed by the Americas, with $18m in China vs $262m. But there’s promise in them there hills and certainly more than its global rivals.
And, as Credit Suisse’s Leo Carrington noted, there are economy/budget synergies to be had - Accor bailed out of the US with the sale of Motel 6 in 2012 under CEO Denis Hennequin, a move which was deeply correct at the time. Bazin joined a year later and started the move to asset light and an increased emphasis on luxury. IHG would add that missing piece.
But is it real? Both companies saw their share prices shift up 1% on the rumour, which is less than you get when there’s a good cricket result in London. Was this suspicion over its veracity? Was it too expected? An August-based lack of enthusiasm? One of Accor’s abiding issues is that the markets don’t know how to value it - in part because of its fondness for exotic deal making. Unless it shows signs of sobering up, the market will continue to peer at it through squinty eyes. Unless it considers going private.
Both companies were quick to say that they didn’t respond to market speculation - not an outright denial. Barr’s out of office was on - holidaying, or paddle boarding with Bazin? There are many reasons to leak to the press - governments like to do it to test strategies and companies are no different. They also do it to put pressure on other potential deals.
As The Young Knives sang in Here comes the rumour mill: “Here comes the bitter pill
But I don't think he'll take it”. Should this deal go ahead would Barr see this as a bitter pill, or a way to secure the future? The game at the moment is less about strategy and more about survival. When Marriott International acquired Starwood Hotels & Resorts it was about survival in the face of the OTAs. Now survival is a bit less nuanced.
One thing we can guarantee: there are big deals in the offing and Accor and IHG will be involved.The China exit that many - including some at Accor - saw for the company - is not here while the country’s government holds the purse strings, but may only be one or two plays away. Should Jin Jiang or Huazhu take on a combined Accor/IHG, then the hotel sector would really come to the world’s attention. Feel free to start the whispers now.