Accor-Ennismore deal a sign of things to come in hotel sector

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The lobby of Brooklyn's Hoxton Williamsburg hotel, which is one of nine Hoxton properties worldwide.
The lobby of Brooklyn's Hoxton Williamsburg hotel, which is one of nine Hoxton properties worldwide.

French hospitality giant Accor's recently announced partnership with Ennismore can be seen as agility in the face of adversity. Or an early example of Covid-inspired mergers-and-acquisition activity. Or an indication of a bullish view of the potential for growth in the boutique and lifestyle sector. Or all three.

In late November, the group forged a joint venture with Ennismore, parent company of the Hoxton boutique hotel chain and Scotland's Gleneagles resort. Central to the partnership is the launch of a standalone lifestyle hospitality platform that will bring the Hoxton and Gleneagles properties and Hoxton's Working From coworking offshoot under the same umbrella as Accor's Delano, SLS, Mondrian, SO/, Hyde, Mama Shelter, 25hours, 21c Museum Hotels, Tribe and Jo&Joe brands.

The division, set to operate under the name Ennismore, will be majority-owned by Accor, with Ennismore founder and CEO Sharan Pasricha holding a "substantial minority position." Pasricha will serve as co-CEO of the combined entity, alongside Gaurav Bhushan, Accor's chief development officer.

Lifestyle hotels "will recover faster from the pandemic," Pasricha predicted. "Accor's ambitions around creating an autonomous entity focused entirely on lifestyle, the fastest growing segment of the hotel business, aligned with [ours]. We're well-positioned to complement each other's strengths."

Key among Accor's strengths is its sizable global development team, which Pasricha said will play a key role in fueling the new platform's expansion. 

Currently, the lifestyle entity's dozen hotel brands operate 72 properties worldwide, with another 110 properties in the pipeline.

That pipeline includes a Hoxton opening in Rome this spring as well as eight properties flagged under the eclectic Mama Shelter brand. The 25hours flag is similarly set to scale up with six openings, while Tribe -- a midscale lifestyle concept launched by Accor in early 2019 -- has "huge growth potential," said Pasricha, with 31 hotels in its pipeline.

Accor's SBE portfolio, which includes the Delano, SLS, Mondrian and Hyde flags, is also in expansion mode. (As part of its plans to launch the lifestyle spinoff, Accor has upped its stake in SBE from 50% to 100%. Accor has concurrently bought out partners in the Mama Shelter and 25hours brands, as well.)

SBE remains on track to open nine properties under the Mondrian brand by 2022, including the Mondrian Gold Coast in Australia and the Mondrian Shoreditch in London and locations in the Dominican Republic, Germany, the Maldives, Puerto Rico, Thailand and Vietnam.

Several SLS additions are also in the works, with the SLS Cancun in Mexico and the SLS Dubai both set to debut early next year, while the Delano brand is getting an outpost on Sardinia in 2023.

"We're in the business of creating a unique destination, not just for the traveler, but also the local," said Michele Caniato, SBE's chief brand officer. "Usually, restaurants are seen as an amenity for the hotel guests. For us, we're creating restaurants, mixology [venues] and spas that the locals will want to come back to, while also serving our hotels. That's how SBE has built its success."

According to Caniato, SBE's local focus has helped the portfolio weather the pandemic. For example, SBE's reopened Miami properties, including the SLS Brickell, SLS LUX Brickell, SLS South Beach and the Hyde Midtown Miami, have been buoyed by relatively solid staycation business in recent months. 

Ennismore's brands have similarly shown resiliency, which Pasricha believes is a testament to the staying power of lifestyle concepts. 

"When we came out of the first lockdown in the summer months, [we] outperformed our comp set by a large margin," said Pasricha. "Once restrictions lift, vaccines are circulated and people's confidence starts to come back, we know people will be looking for hotels and experiences that help make up for lost time and feel like something worth looking forward to."

Meanwhile, for analysts, the joint venture between Accor and Ennismore marks a bellwether for post-pandemic deal-making to come, especially given the cost savings such partnerships could generate. Accor has estimated that the standalone lifestyle entity will generate "significant cost synergies" of approximately $17.8 million per year.

"Companies are definitely going to be asking themselves, do we cash in or do we endure the slog of recovery?" said Robert Cole, Phocuswright's senior research analyst for lodging and leisure travel. 

Bjorn Hanson, a hospitality consultant and adjunct professor at New York University's Tisch Center for Hospitality, Tourism and Sports Management, expects to see post-pandemic M&A announcements ramp up sometime near the end of 2021.

"What we've gone through has weakened some companies' balance sheets," Hanson said. "There's strength in numbers, and big companies do tend to have that 'too big to fail' advantage that smaller companies don't." 

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