TORONTO -- Fairmont
Hotels & Resorts has become the latest hotel brand to be
acquired, as the big players in hospitality seek leverage in
globalization.
The company, which
had been fending off a takeover attempt by investor Carl Icahn,
agreed to be acquired by Kingdom Hotels International, an
investment vehicle of Prince Alwaleed bin Talal of Saudi Arabia,
and Colony Capital of Los Angeles, which owns the Raffles and
Swissotel brands, for $3.9 billion in cash.
Early plans call
for the Fairmont and Raffles brands to remain separate.
The deal follows on
the heels of announcements by Hilton that Waldorf-Astoria will
become an international brand and by Starwood Capital that the
Crillon brand will be created with the famed Paris hotel as the
centerpiece.
Those, in turn,
followed such recent events as Starwoods acquisition of the Le
Meridien brand, the merger of Hilton Hotels and Hilton
International and the purchase of the Wyndham brand by Cendant
Hotels.
In all these cases,
investors and hotel executives said they saw the need for global
reach and resources in sales, marketing, reservations and
back-office operations. Fairmont has 87 hotels; Raffles operates
about 40.
Jeff Senior, senior
vice president of sales and marketing for Fairmont, said that the
company anticipates no change to Fairmont or to its relationships
with colleagues and partners.
Whereas today we
are primarily a North American brand and growing in Europe, the
Middle East and Africa, overnight we have become a global
enterprise with the addition of the Raffles brand, Senior
said.
We are going to
explore how programs and services that are highly regarded within
Fairmont might be appropriate to share with the new hotels in the
portfolio, he added.
That might include
the chains Fairmont Famous travel agent education and incentive
initiative.
That program will
become even more meaningful as we become global, he
said.
Rick Swig,
president of RSBA Associates, a consulting firm whose family ran
Fairmont for many years, said, The combining of Raffles and
Fairmont provides the potential for a stronger global brand than
either had the immediate potential of becoming. The new structure
will enable Fairmont to extend its global reach. I am not sure what
the future of individual Raffles or Swissotels will be. Both were
respected but even more limited in their reach than
Fairmont.
Sean Hennessey, CEO
of Lodging Investment Advisors in New York, said, Financial
performance for Fairmont was somewhat below investor expectations,
although they do have a strong and valuable brand with limited
distribution. The logical candidate to acquire them was another
brand that was regionally distinct and similarly under-represented.
Raffles strength outside North America and Fairmonts strength in
North America made this deal fairly compelling.
Pointing to one
possible benefit, Hennessey said, Travel agents loyal to Fairmont
may be potential sellers of Raffles properties.
Paul McManus,
president and CEO of Leading Hotels of the World, called the deal
an astute strategic move and should certainly enhance the value of
both brands.
It is unusual in
that normally with these types of transactions, one brand is
favored, McManus said.
Kingdom Hotels,
which already had a 5.4% stake in Fairmont, has investments in more
than 260 hotels in the U.S., the Middle East and Africa, some of
them managed by Fairmont, including the Savoy in London. Kingdom
also holds a 22% stake in Four Seasons.
The parties have
not revealed how much Kingdom and Colony are contributing to the
buyout of Fairmont, a company that traces its lineage to the 1880s
and a collection of hotels owned by the Canadian Pacific
Railway.
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