In the kingdom of hotel groups, some were beginning to find their territory too limited. Fortunately, five years ago, Marriott and Starwood got the ball rolling and launched the wedding season: IHG with Regent and Six Senses, Jin Jiang with Louvre Hotels and Radisson Hotel Group, Minor Hotels with NH, Best Western with WorldHotels, Accor with Mövenpick and Fairmont…All of them celebrated new unions.
We have thus entered a phase of massive consolidation. As keen observers will have noted, the mergers have mainly inflated the upscale and luxury portfolios of the buyers. Chance favours only the prepared mind, as Pasteur pointed out in his time.
At a time when almost all hotel groups are listed, the publication of quarterly results drive stock market prices. Now that real estate has been divested, the value of the operators is directly linked to their EBITDA. The financial equation is therefore clear: the acquisition of premium and luxury brands generates higher brand royalties per room and per property. This is especially true when debt, in a context of low interest rates, finances these acquisitions.
Luxury stakeholders are also interested in the hospitality industry. LVMH is investing in the development of the Cheval Blanc brand alongside the acquisition of Belmont. Here we are talking about the experiential signature, characteristic of this segment, which leads to the breaking down of barriers between products and services: the customer must be at the heart of the brand's ecosystem. The luxury experience becomes central to their expectations. In addition to consuming a product, customers want to have an experience at every step of their journey.
Thus, we are seeing the emergence of a luxury ecosystem in which hospitality is finding its place, just as mobility will probably find its place tomorrow. Hospitality stakeholders are also expanding their ecosystem of products and services available to customers. Examples include Four Seasons creating its private jet service, Ritz-Carlton a yacht fleet and Accor expanding its entertainment offer. Brands have to arouse desire in the customer and create loyalty to their ecosystem.
This omnipresence of strong brands connecting with customers, across all possible touch points through numerous products (and no longer just manufactured goods) will continue to develop. As technology becomes more and more accessible, world-famous luxury and sports brands, will soon be able to operate where their customers don’t yet expect to see them.
If luxury brands are aimed at a smaller clientele base made up of loyal customers what about budget hotels at the other end of the scale? For these brands, it is, above all, a question of delivering service fundamentals. Some budget brands, such as B&B and Premier Inn, have demonstrated their ability to create value. B&B, for example, has posted steady EBITDA growth for many years, which makes the group attractive to LBO and private equity players.
While the market is consolidating, paradoxically the number of new entrants is growing as there is still room for growth. Tourism demand has been increasing continuously for decades and shows no signs of stopping.Today, our hospitality sector is attracting a growing number of potential investors from a wide range of sectors, including real estate companies, private equity funds, family offices and global luxury brands. What if this industry was blessed by the gods?
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