Skift Take
Another day, another rumor that Accor and IHG will combine forces. But even a successful merger is unlikely to send the hotel industry into a wave of consolidation due to so many other distressed deals expected during the pandemic recovery.
Long-rumored hotel merger partners Accor and IHG are once again garnering headlines about a potential tie-up that would result in the world’s largest hotel company.
The timing for such a deal, which would be the biggest in hotels since Marriott acquired Starwood in 2016, seems doubtful right now, say analysts. But it's interesting to ponder the marriage of these two giants of hospitality, and how it may change, or more than likely, not change the overall hotel industry.
Even as a pandemic shakes the industry to its core, the fundamentals may not be right for such a mega-merger. While limited profitability in the airline industry diminished the number of major airlines around the world over the last 20 years, that same merger gung-ho spirit is unlikely to extend to hotels anytime soon.
“The thing with the airline industry is profitability got quite low, and it needed to merge and consolidate,” said Richard Clarke, senior analyst at Bernstein. “I don't think we’re there in the hotel industry. It’s still possible for a good, small, single hotel to be profitable.”
Clarke favors organic growth over a costly merger in the current environment, as it costs a parent hotel company fairly little money to get existing hotels to take on a brand flag or, in better economic times, build out a new-construction pipeline.
Hilton is the fastest-growing of the four major hotel companies — which also includes Marriott, IHG, and Accor — today and hasn’t executed a merger or acquisition in more than 20 years, according to a Bernstein report. The company has also only funded less than 0.5 percent of its $50 billion development pipeline.
Focusing on a costly merger could distract a combined Accor and IHG from organic gro
