The Chinese group has entered into a share purchase agreement to acquire all shares in Deutsche Hospitality for a base cash consideration of estimated at €719.9 million, thus acquiring a portfolio of five brands ranging from economy to luxury.
The concentration of luxury hotel players is increasingly evident. Following the strategic alliance with the Accor Group last year, Huazhu is now strengthening its market presence with the acquisition of the German hotelier Deutsche Hospitality, which owns the luxury properties of the Steigenberger Hotels and Resorts brand. But the German group also includes the economy brands MAXX by Steigenberger, Jaz in the City, IntercityHotel and Zleep Hotels. The Chinese group thus acquires a portfolio of 150 hotels in 18 countries around the world; this is a figure that the German group was planning to grow by 100 units over the next five years according to the development plan it announced in April 2019.
The acquisition of Deutsche Hospitality represents a €700 million transaction. This acquisition will enable both groups to boost their growth and global impact. The Chinese group will thus increase its presence in Europe, and "Deutsche Hospitality's brands will strengthen Huazhu's offer and its operational capabilities in the high-end European hotel market," as explained by Qi Ji, founder and Executive Chairman of the Huazhu group. The German group, meanwhile, will be able to broaden its range of brands through a strategic partnership that will strengthen its position in the European, Middle Eastern and African markets.
Qi Ji also declared:
This acquisition is an important milestone in our global growth strategy. Deutsche Hospitality is a perfect strategic fit and we expect competitive advantages for both companies.
Jenny ZHANG, CEO of Huazhu, explained:
Deutsche Hospitality and its brands will maintain their distinctive personality and individuality while benefiting from Huazhu’s leading technology, advanced innovation abilities, strong partnerships, loyalty program, effective sales and marketing support, solid global distribution network and strong presence in the fast-growing Chinese market.
I envision the merger of Deutsche Hospitality and Huazhu will create the foundation of a global hotel group that seamlessly combines European hospitality, German quality and Asian speed.
Deutsche Hospitality's Board of Directors confirmed the synergies behind this transaction, namely shared values based on being " truly passionate about offering a high-quality experience to our customers" and the presence in each of the two groups of "strong and recognized brands, which we will maintain, while further accelerating their growth."
More details will be disclosed on Huazhu's upcoming Q3 2019 earnings call scheduled on November 12, 2019.
Huazhu, the ninth largest hotel group in the world founded in 2005, represented a total of 3,907 hotels as of January 1, 2019, or 388,087 rooms (according to Hospitality ON ranking), spread across more than 350 Chinese business and leisure cities. Its brands range from economy to luxury, including Joya Hotel, Manxin Hotels & Resorts, Ji Hotel, Starway Hotel, HanTing Hotel, Elan Hotel, and Hi Inn.