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AccorHotels (AC:EN), the French hotel giant, considers making acquisitions to expand its brand portfolio in South America, Patrick Mendes, South America CEO, said.

When asked if the Paris-based group was currently in talks with South American hotel brands, Mendes said he could not answer the question. Accor operates 16 hotel brands, including low-cost Ibis, midscale Mercure and upscale Sofitel.

Brazil is the group’s main market in South America and is still a country of interest, Mendes said. Argentina, Chile, Colombia, and Peru are also under the group’s radar, he added.

The French company has 289 hotels in South America, 252 of them in Brazil, 12 in Argentina, eight in Chile, seven in Colombia and five in Peru. By 2020, AccorHotels plans to have 500 hotels in the region and part of this expansion will be made through acquisitions, Mendes said.

The executive did not specify a minimum size for potential regional targets, but noted that Accor does not rule out buying small hotel chains “with three or four” units, as long as they own appealing brands in the luxury and lifestyle segments, which cater to consumers that look for a more intimate and authentic travel experience.

In Brazil, Accor is interested in resorts in traditional leisure destinations, such as the beach towns of Costa do Sauipe, in Bahia state, and Guaruja, in Sao Paulo state, and also in “urban resorts” located in large cities like Sao Paulo and Rio de Janeiro, Mendes said. Unlike traditional urban hotels, urban resorts attract people that not only want to enjoy the destination, but also are looking for a pleasing stay, with perks like clubs, restaurants, bars and health spas, he explained.

The company is also eyeing regional technology businesses that offer solutions to hotel chains and travelers, Mendes said. Potential targets are not limited to firms that can add features to the company’s booking platform Fastbooking, but also apps that can make its guests’ stay easier, he said. As an example, Mendes mentioned a solution that allows guests to open their rooms with their mobile phones.

Accor’s M&A strategy in South America, Mendes explained, is closely linked to the company’s inorganic worldwide growth plans that are founded in three pillars: diversifying the group’s brand portfolio, especially in the luxury and lifestyle segments; expanding its concierge services offering; and enhancing its technological platform to be in a better position to market itself directly to guests through the Internet.

But unlike with past acquisitions, where Accor would purchase hotels and later incorporate them into one of its hotel brands, the company’s current M&A strategy focuses on “acquiring skills and preserving the targets’ DNA,” Mendes said.

As a way to illustrate this, the executive cited the group’s 2014 purchase of a 35% stake in the French hotel chain Mama Shelter, which enabled Accor to venture into the design-oriented lifestyle brand. As part of the deal, Mama Shelter preserved its original brand name and their solid reputation helped AccorHotels gain knowledge and credibility in this niche market, he said.

On 19 January, Accor also announced it had signed a “master franchise” agreement to convert eight hotels of family-owned Colombian hotel chain German Morales e Hijos (GMH) to its Mercure brand, as reported. As part of the deal, the eight hotels will preserve part of its name and will continue to be operated by GMH.

Accor plans to fund future acquisitions primarily through the sale of a majority stake in its HotelInvest property business, which owns and operates 1,000 hotels, said Mendes. Hotelinvest's portfolio was valued at EUR 7.3bn at the end of June 2016, according to a published report.

On 16 January, the group announced it was already in talks with potential buyers for a stake in HotelInvest. Mendes said Accor plans to sell a 60% stake in the property business by June.

Proceeds from the sale would also help the company finance greenfield projects and hotel renovations worldwide, he added.

The French hotel group also considers teaming up with regional private equity firms or family offices interested in funding the build of lifestyle hotels or luxury hotel chains, Mendes added.