Accor acquisition gives hotel chain bigger footprint in the Middle East

The deal to buy Qatar Investment Authority’s and Kingdom Holding’s stake in FRHI for about €2.9 billion was originally announced in December.

The completion of Accor’s takeover of FRHI Holdings makes the expanded hotel chain one of the bigger players in the Middle East.

The world’s sixth largest hotel group will now include FRHI’s three luxury brands of Raffles, Fairmont and Swissotel and run 90 hotels in the Middle East with a further 60 in the pipeline.

The acquisition will also add 450 luxury and upscale hotels to Accor’s assets along with the management of many of the world’s historic hotels such as The Savoy in London, The Plaza in New York and Raffles in Singapore.

The deal to buy Qatar Investment Authority’s and Kingdom Holding’s stake in FRHI for about €2.9 billion (Dh11.81bn) was originally announced in December.

“This not only adds three prestigious luxury brands to our portfolio but strengthens our global presence,” said Jean-Jacques Dessors, the chief executive of hotel services for the Mediterranean, Middle East and Africa.

Mr Dessors said he expected the deal to result in cost reductions.

“We both have head offices in Dubai and we will be looking at whether we need two,” he said, referring to Accor and FRHI. “We expect synergies of €65 million in three years. We expect any decisions to be made in October, but we are not looking at job losses, we want to keep the talent.”

The softening economic climate of the Middle East and FRHI’s focus on luxury and upscale inventory was not seen as incongruous when across the UAE and GCC mid-market offerings were increasingly being encouraged.

“Our luxury offerings here in Dubai are doing very well,” said Olivier Granet, the managing director and chief operating officer of hotel services Middle East.

He said Dubai’s visitor numbers were growing and the theme park attractions combined with Emirates Airline’s vast network meant the UAE was still a very vibrant market. “We have the support of the government, the key stakeholders and a now luxury portfolio, which will attract a lot of our frequent visitors.”

The Accor acquisition comes after Marriott bought Starwood in the first quarter of the year for US$13.6bn, creating the world’s biggest hotel group and suggesting the hospitality industry was about to see a wave of consolidation and acquisition.

Accor, though, is thought to have bought into areas with regard to geography and where it was not strong.

“Many analysts are predicting the likelihood of more M&A activities in the near future,” said Rashid Aboobacker, the associate director at TRI Consulting, a leisure-industry consultancy in Dubai. “Although Accor owns luxury brands such as Sofitel … the operator has been more successful with its mid-market brands such as Novotel and Ibis. The addition of Fairmont and Raffles will significantly strengthen its position in the luxury segments and improve its competitive position against other major hotel management companies as well as increase its geographical coverage and customer base, particularly in North America.”

Follow The National's Business section on Twitter