Goldman Sachs' role in the development of B&B HOTELS

The private equity arm of Goldman Sachs Group Inc. is exploring the possibility as part of a potential deal that could give the European budget hotel chain considerable value, sources close to the matter tell Bloomberg. Advisers from Goldman Sachs, along with Morgan Stanley, are looking for potential buyers for the company, which opened its first hotel in France in 1990.

Goldman Sachs has played an important role in accelerating the development of B&B HOTELS. Fabrice Collet, CEO of B&B HOTELS, underlined the positive impact of this collaboration. The arrival of Goldman Sachs as a shareholder has enabled B&B HOTELS to strengthen its position in the market, accelerating its development projects thanks to robust financial support and strategic expertise. In addition to providing financial support, Goldman Sachs has also been an active partner in identifying and executing well-structured external growth opportunities for B&B HOTELS. This collaboration has strengthened the company's competitive position in the European hotel market.

Goldman Sachs' investment in B&B HOTELS was motivated by the strong performance of the company and its management team, and saw potential for investment in the company's future growth, particularly given its positioning in the European budget hotel market and its resilience to crises.

Recent expansions and B&B HOTELS growth strategy

At the beginning of 2024, B&B HOTELS had 761 properties worldwide, with a total of 69,828 rooms. In Europe, this translates into 754 hotels with 68,798 rooms. In Brazil, the group has 7 hotels with a total of 1,030 rooms. In France, the Group has 395 hotels with a total of 32,094 rooms. The French offer thus represents approximately 52.38% of the total B&B HOTELS offer in Europe. 

Among the group's recent notable expansions, B&B HOTELS has marked its entry into two key markets, namely the United States and the United Kingdom. B&B HOTELS' interest in the US market was influenced by Goldman Sachs. In the US, the opening of their first hotel in Orlando, Florida, signifies not only significant expansion in the US market, but also a major step forward in their global expansion strategy. With ambitions for 400 future openings and an approach focused on economical, functional and profitable properties, B&B HOTELS is looking to replicate its European success across the Atlantic, with expansion projects planned for Miami and Jacksonville. 

Similarly, in the UK, the acquisition of their first property near London Heathrow Airport, in conjunction with the Arora Group, represents a significant step towards establishing a strong presence in the UK budget hotel sector. Through strategic partnerships and a vision focused on sustainability and affordability, B&B HOTELS aims to become a global leader in budget hotels, with an ambitious target of 3,000 hotels worldwide over the next decade.

The French group is tackling two markets that are difficult to penetrate. On the one hand, in the United Kingdom, players such as Whitbread are already extremely well-established and are in contact with the local development relays. Not to mention the impact of Brexit on legal and financial interactions. On the other side of the Atlantic, as Fabrice Collet pointed out during his speech at the Hospitality Operator Forum in 2023, the market is completely different, with a whole section of the historic motel offering that has completely deviated from its initial trajectory. This is an area of opportunity for B&B HOTELS, but also a context that requires major investment to bring this more than ageing offer up to the standards of today's budget hotels.

Introduction of the "B&me" loyalty programme

In October 2023, the Group introduced its new "B&me" loyalty programme, the result of a strategy focused on customer satisfaction and revenue growth. Designed to meet the expectations of customers and partners, the programme offers personalised benefits and experiences, while targeting a diverse customer base, including leisure travellers. It aims to retain existing customers and attract new ones with special offers to discover the brand's new hotels. With a global reach, the programme highlights the brand's growth.

Advantages of investing in budget hotels and new market trends

According to Fabrice Collet, investing in budget hotels offers a number of significant advantages. Firstly, prices in this segment have low elasticity, offering revenue stability. What's more, the management of these establishments is often simpler, which can reduce operating costs. During the Covid-19 crisis, for example, budget hotels were able to attract a diversified clientele, particularly local and corporate customers, thus maintaining a relative level of activity despite travel restrictions. Despite a brand image that is sometimes criticised, this sector has been able to innovate with offers to meet changing customer needs. Finally, the growth and development potential of the budget segment offers long-term investment opportunities, although certain challenges remain, such as pressure on profitability due to the limited room for manoeuvre on average prices, and the need to maintain competitiveness and attractiveness to investors.

Budget hotels are responding to an essential need among travellers, particularly for business trips or meetings. However, Fabrice Collet stresses the importance of maintaining a high level of quality, pointing to the positive returns on investment of around 15-20% achieved by renovating budget hotels. He also mentions the changing expectations of customers, oscillating between upmarket experiences and simple, efficient stays.

More broadly speaking, the budget hotel sector is a fast-changing market, and new trends are emerging. The new budget hotel is defined by a hybrid and innovative approach, combining traditional concepts with innovative elements to meet the changing needs of travellers. It is distinguished by a strong commitment to sustainable development, both in the construction of establishments and in business practices and customer service. Commercial strategies include an increased online presence, diversification of the restaurant offering and optimisation of operating costs. Finally, this new budget hotel is aiming for international expansion, with ambitious plans for development on a European scale and a desire to attract investors.

B&B HOTELS has structured itself over the last few years in order to remain competitive and relevant on the European and now global scene. Talent management, CSR, customer relations, design and concept are all areas in which the team has been strengthened with a number of transferees from other industries who bring a fresh perspective. Maintaining double-digit growth and remaining consistent with market expectations are just some of the issues on which the potential future partner will have to support the 30-year-old company.