Once they were arch-rivals. Privately, Swissotel called the other one “that ice-cream hotel chain”, while Movenpick Hotels & Resorts, older and bigger, found Swissotel beneath itself to even call it anything.
When AccorHotels’ CHF560 million (US$562 million) acquisition of Movenpick is completed in the second half of the year, the rivals will become sisters and the sale will mark the end of Swiss-born international hotel companies, of which there were only the two (not counting representation firms such as Swiss Quality Hotels International). Many sentimental Swiss hoteliers will rue the day. They won’t be the only ones. Several Asian owners in fact care about it right now.
These owners picked Movenpick precisely because it wasn’t as big as the Accor’s or Marriott’s of the world. They had “close relationships” with the Movenpick team who could be easily reached to resolve issues immediately. A few have two or three Accor hotels located near their own hotel – to think that they had picked Movenpick specifically to compete against those Accor properties. Others thought of Movenpick becoming just a brand in the “fruit salad” of Accor and wondered why on earth Accor needed two Swiss fruits, or more fruits for that matter, given its upscale and upper upscale layers already bear brands such as Sofitel, Pullman and Grand Mercure.
Bill Heinecke, chairman and CEO of Thailand-based The Minor Group, which owns and operates hotels under its brands and third-party brands, thinks their concerns are understandable. “I cannot imagine that the owners would be in support of this acquisition and integration. Of course there may be benefits to owners such as economies of scale, but there are also many downsides. Owners become very small fish in a very big pond. There can be little or no personalisation and it is hard to see how Accor would cater to the individual needs of owners and support them in their efforts to compete with new sister brands in the same market,” he said.
As it is, Accor’s brands distinction is “a big mess”, said a source. “Many Sofitel hotels are definitely not luxury and some Novotels are better than some Sofitels. Single brand management is definitely more focused and targeted – think Four Seasons (Hotels & Resorts) or Mandarin Oriental (Hotel Group). We have seen the unfortunate demise of Le Meridien brand once it was bought by Starwood (Hotels & Resorts); it became a dying brand, from an excellent single brand company with a French touch.
“The question is whether Accor will actively develop the Movenpick brand as it will have a lot of brands to be selected for upcoming hotel projects,” said the source.
Said another source: “Honestly, I don’t see why Accor would have any interest in the Movenpick brand. They already have plenty of brands and I don’t think Movenpick has any particular USP that Accor doesn’t have from (its) other brands. I think it’s mainly buying presence in certain markets where Accor could use the lift and Movenpick is there, i.e. Middle East (and) may be certain spots in Europe.”
A company insider told TTG Asia while it’s true that smaller companies like Movenpick would benefit from a larger chain’s distribution, clustering, procurement, HR strategies, customer retention, loyalty programmes, cash for key money to secure a trophy hotel in a key destination and so on, the source believed the sale was triggered by Kingdom Holding, which holds 33.3 per cent in Movenpick, not Swiss-based Movenpick Holding.
Wall Street Journal had reported that the Saudi Arabia government demanded at least US$6 billion from Kingdom’s chairman, Prince Alwaleed bin Talal, in the recent so-called government crackdown on rich officials and businessmen. The Journal also reported while the prince remains chairman of Kingdom, investment decisions at Kingdom are now subject to government approval.
Kingdom owns a 5.7 per cent stake in Accor, which is flushed with cash, having sold its majority stake in AccorInvest.
“Nobody knows the facts but there was a deal. Therefore, it made sense for him to transfer his 33.3 per cent stake in Movenpick as he wants out already earlier as it is a minority stake,” speculated the source.
The source added there were two due diligences done in the past on Movenpick, the last two years ago around the time FRHI (comprising Fairmont, Swissotel and Raffles) was sold to Accor, but the sale of Movenpick did not materialise then.
“There was always talk of merging Swissotel and Movenpick in the past but it never materialised. The two companies would have complemented each other quite well looking at the geographical spread of hotels. For example, Swissotel is ‘a nobody’ in the Middle East, whereas Movenpick operates over 30 hotels with 20 additional properties in the pipeline. As a result, it would work well as they complement each other moving forward.”
WILL TWO BECOME ONE?
Whether or not Accor will eventually merge Movenpick and Swissotel into one remains to be seen.
Jesper Palmqvist, area director Asia Pacific of STR, said it’s hard to tell. “As seen in M&A activity in the past few years, we’ve seen both complementary acquisitions, but the big groups have also not been adversed to bringing brands into the fold that technically would compete in terms of chain scale or overall brand and customer perspective.
“These two historic European brands could certainly both compete and complement each other, when you look at locations and pipeline for both brands. The scale of this being two competing brands in the same family is also smaller than that of Marriott after the Starwood acquisition.”
Added Robert Hecker, managing director, Pacific Asia Horwath HTL: ‘Accor is currently saying they are keeping the brand, so those owners who picked Movenpick will still have the brand, although Accor may later try to convince them to switch to other Accor brands.”
What’s certain is it is the end of Swiss international hotel chains. There is SwissBel, founded by the late Peter Gautschi who worked for The Peninsula Group for 30 years, and is run successfully by a New Zealander, Gavin Faull. However it operates out of Hong Kong, is not considered a Swiss company, does not operate hotels in Switzerland, focuses mainly on Asia-Pacific and the Middle East – and may also end up in a fruit salad one day.
“The sad part is that the soul of Movenpick will totally disappear and be eaten up by the Accor machine,” said the insider. “Sad to see the end of an amazing company, the disappearance of Movenpick’s soul, DNA and company culture. Mainly corporate and area people will have to worry about integrating into Accor and whether their job is still secured. The most exposed people are the corporate and area teams as they are often the first ones to be released in case of a takeover as the management is always looking for synergies and shareholder value by reducing overhead costs. Marriott’s target was US$350 million a year.”
Palmqvist sees a silver lining: “Brands get created all the time, so perhaps this is an opening for a new Swiss entrepreneur.”
Likewise, waiting in the wings to swoop in on any disenchanted Asian owner are other smaller hotel groups, Minor, which is also growing in the Middle East, makes no bones about it.
Heinecke said: “Similar to the acquisitions that we have seen over the last few years, I feel that the Movenpick takeover offers an opportunity to Minor Hotels, and indeed all small and medium sized hotel groups, as we remain nimble and dynamic in the face of oversized giants. We still have the ability to react quickly to market changes and customer expectations. We are not weighed down with layers of bureaucracy and rigid guidelines, instead we have the ability to rapidly evolve the customer journey in real time. I truly believe that small and mid-sized hotel companies are more in tune with guests, staff and owners and can react quickly to their needs. We all know the story of David and Goliath – times have changed but the story remains relevant.”
As is the saying: never ever treat a rival badly. They could end up a sister one day.