French Hotel Giant Targets U.S. With New Lifestyle Operator
Accor to combine boutique brands with London-based Ennismore, eyeing growth in design and dining-focused properties as pandemic continues to crimp industry
European hotel giant Accor SA is betting big on lifestyle hotels, agreeing to merge its boutique properties with a U.K. company to create what it says will be the world’s largest operator of lifestyle hotels.
Accor said it has agreed to form a new venture in an all-share transaction with Ennismore, a London-based hotel operator, that will include more than 70 properties. It will feature a dozen lifestyle brands, including Mama Shelter, SLS and the 21c brands that operate hotels in the U.S.
Under the proposed deal, the combined company would have about another 180 hotels either in the pipeline or in advanced discussions with hotel owners, Accor said. That size and scope could give the new division—which will operate under the Ennismore name but would be majority-owned by Accor—enhanced global clout in this popular lodging segment.
“Lifestyle is the fastest-growing hotel segment on the planet,” said Accor Chief Executive Sebastian Bazin. “Guests want it, and hotel owners want it.”
While the lifestyle label is sometimes ambiguous, it usually refers to hotels that emphasize design and feature an active bar and restaurant scene. Mr. Bazin said he defines a lifestyle hotel as one that derives at least 40% of its revenue from food and beverage and other entertainment services.
Lifestyle properties, which have also been called boutique hotels, took off in the 1980s when nightclub impresarios Ian Schrager and Steve Rubell founded Morgans Hotel Group Co. That pioneering brand featured popular spots like the Royalton hotel in Manhattan and the Delano hotel in Miami Beach. Morgans’s brands have since changed hands and will be part of the new Accor lifestyle unit.
Over time, larger hotel companies like Marriott International Inc. and Hilton Worldwide Holdings Inc. entered the segment by creating their own lifestyle brands. InterContinental Hotels Group PLC acquired Kimpton Hotels & Restaurants in 2015, putting another of the original boutique operators inside the portfolio of a global hotel company.
The lifestyle segment has suffered along with most other hotels that tend to cluster in or near large cities, where both business travel and tourism have dwindled during the pandemic. With much of Europe reimposing lockdown orders in recent weeks, the environment has been tough.
The current Ennismore properties have been struggling with occupancy levels between 30% and 50%, and the hotels have cut room rates by 20% to 30%, said Sharan Pasricha, founder of the original Ennismore who will be a co-CEO of the merged company.
Gaurav Bhushan, who runs Accor’s lifestyle business and will be the new unit’s other chief executive, said he expects activity at the properties to ramp up next year even if travel remains subdued. That is because the hotels draw heavily from their own neighborhoods as a place to eat or drink, he said.
With more than 750,000 rooms world-wide, Accor is Europe’s biggest hotel operator and one of the world’s largest. Still, the Paris-based company has struggled to gain traction in the U.S. market. Only about 5% of its rooms are in North and Central America.
But those regions’ hotels account for 14% of Accor’s earnings before interest, taxes, depreciation and amortization, or Ebitda, and the company is eager to expand further in the U.S. through the Ennismore brand.
“We have a strong pipeline in the U.S., and it’s going to be a big focus for us,” Mr. Bhushan said.