INCREASING

CONSOLIDATION OF HOTEL
BRANDS/COMPANIES

Done by :

Srishti Parnami
Tejasvi Mehan
Shubhham Prasad
Tanishka Sharma
WHAT DO WE UNDERSTAND BY CONSOLIDATION OF
HOTEL COMPANIES/ BRANDS?

 Consolidation of Hotel chains/ Brands and

companies is a strategic technique that
companies adhere to, to gain financial profit or to
secure a more beneficial status in the market.

 Consolidation can be understood as merging or

acquisition of companies with the agreement of
both the parties, where they share a mutual
interest in increasing the business.

 In simpler terms, consolidation can also be

understood as “Merging and acquisition’’ of
companies.
OBJECTIVES OF CONSOLIDATION

 accelerate growth of the acquiring company

 enhancement of stockholders' value

 to expand capacity at less cost than constructing

new hotel properties
 to capture scale economies to save costs through the
combination of two firms within an industry
 to broaden the acquiring company's customer base
by extending products and services
 to improve credit capacity of resultant company

 to achieve the personal goals, vision, and

particular objectives of the acquiring company's
chief executive
DIFFERENT KINDS OF MERGERS IN THE
PROCESS OF CONSOLIDATION :
 1. HORIZONTAL MERGERS : is a merger usually
between two companies in the same business
sector, thus these two companies are in direct
competition and share the same product lines
and markets. In this case synergy can obtained
through many forms including such as;
increased market share, cost savings and
exploring new market opportunities.
2. VERTICAL MERGERS : is the purchase of
supplier of a business. It has as main goal
reducing overhead cost of operations and
economy of scale.
3. CONGLOMERATE: the merger is between two
irrelevant companies, there is a whole host of
different mergers. An objective may be for
example diversification of capital investment.
ADVANTAGES OF CONSOLIDATION

 The key aim of consolidation is to achieve

synergies. A synergy, according to Doyle and
Stern (2006) is “resources and capabilities that
complement and reinforce one another.’’ It can be
distinguished three types of synergies:


 1. Operational synergies: may lower the cost of

the involved business units or may enable the
company to offer unique products and services.
 Financial synergies: result in lower costs of capital.
There are three ways to achieve this: - Investing in
unrelated business to lower the systematic risk of a
company's investment portfolio -Increasing the
company's size to access to cheaper capital -
Establishing an internal capital market to allocate
capital more efficiently

 Managerial synergies are realized when the

bidder has superior planning and monitoring abilities
that benefit the targets performance.

 Another (Monopoly ) theory views mergers (in

the consolidation process) to achieve market
power. It supports that a merger is a way of
limiting competition in more than one market,
deterring potential entrants from its markets
DISADVANTAGES OF CONSOLIDATION

 Excessive gearing: many companies are too

much optimistic and by finance acquisitions, they
borrow high levels of capital. Thus, when their
benefits are not those that they were waiting,
these companies become vulnerable.
 Incoherent brand portfolios: sometimes a
company may have different brand names in
different countries, conflicting positioning
strategies and no synergies with the existing
business.
 Inadequate expertise: the acquirer can lack the
necessary knowledge to realize about the real value of
the acquisition.

 Pay too much: normally they pay too much to

acquire a business.

 Prioritizing shareholders over customers :

sometimes the companies get so focused on their
shareholders that they forget to pay attention to their
customers hence costing them loss of revenue.

 They try to substitute the lack of focus on their brand

value by acquiring another organization.
 For instance, Zara, IKEA focus on their own brand
value rather than acquiring other businesses.
KEY AREAS THAT SHOULD BE FOCUSED
ON AFTER CONSOLIDATION :

 Management innovations

 Product innovations

 Knowledge of the market

 Processes innovation
SOME FAMOUS CONSOLIDATION OF HOTEL
BRANDS :

 ACCORHOTELS ACQUIRED OVER

MOVENPICK
- By completing this acquisition, it was another
step by accorhotels to pivot away from its legacy as a
budget operator hotel.

- BLACKSTONE AND PEBBLEBROOK

COMPETE FOR THE SALE OF REIT LaSalle
- LaSalle offered its 100% shares to
Pebblebrook since its merger agreement was
more superior than that of the blackstone’s.
 CONSCLUSION

 Consolidation in the hotel brand sector will likely

continue as the pressure on hotel companies to
drive earnings growth and gain global market
share continues to intensify in the face of growing
competition and increasing threats from online
travel agents and alternative lodging companies.
A thorough and early stage consideration of the
key value drivers of a target hotel brand will
establish a strong foundation for success in
valuing, structuring and completing a hotel
brand acquisition.
 REFRENCES
 The impact of the mergers and acquisitions
on brand value in the hotel sector during
the economic crisis
-- by the HALMSTAD UNIVERSITY – for
the development of organisations, products and
quality of life.
 Mergers and acquisition performance of
hotel and lodging industry.
--- by the Economia E. Gestao

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