Accor outsources

Accor has revealed plans to launch a SPAC in Europe, to help nurture its non-hotel activities.  

The separately held vehicle, with potentially EUR300m of backing from external investors, will be used to support target companies innovating in food & beverage, flexible working, wellness, entertainment and events, and travel technology. Accor says these “verticals” can support the hotel business and better serve customers, by drawing in “high quality and recognizeable services and brands”.  

Accor appears to have been forced into acknowledging its plans, after news service Bloomberg broke the story in the third week of May. The idea is for the Accor Acquisition Company to be listed on the Euronext exchange in Paris. With Accor saying it expects its investment to “not be material”, it will be down to other investors to back the initiative.  

SPACs are all the rage in fundraising circles, with a good number of hospitality brands following the route to gain a market listing. Typically, and most often in the US, a SPAC is formed and funded by investors, who then look for a target company that wants to list. They acquire the target, who then effectively gains listed status, as well as a cash injection without the need to proceed along the more complex IPO route.   

Typically, US promoters of SPACs are investors who are sector and discipline agnostic, simply seeking an opportunity for a superior return for their cash. In this case, it appears that Accor will start with a clear strategic direction and desired outcome; and will not be a principal backer, but rather a provider of management expertise, and strategic direction, with other funders providing liquidity.  

Amir Nahai, Accor’s CEO of food & beverage and lifestyle brands has been named as CEO of the new company, with three other executives already selected to support him.  

Analysts at Bernstein have given the proposal their blessing, calling it a “smart move”. In a research note, they pointed out: “We would see the potential for this SPAC to, in part, consolidate some of Accor’s non-hotel assets under a new entity, simplifying Accor’s operations.” 

By putting its non-hotel businesses at arm’s length from the main business, Accor will avoid the problems it experienced in 2018, when it had to write off EUR246m in losses relating to two brands in its New Business unit, OneFineStay and John Paul. At the time, the unit was seeing rising revenues, but declaring operating losses, as it sought to nurture acquired businesses with bright ideas, but insufficient scale. And, with a focus more purely on hotel rooms, Accor shares are likely to be valued more strongly.  

But not everyone is keen on the idea. One seasoned hotel sector advisor told Hotel Analyst he fears the fashion for SPACs, which comes around every few years, often sees those involved getting burned. “They are running a big risk. It’s a big distraction for them – they should not be doing it.”  

The advisor pointed to the “asymmetric risk” which sees investors take most of it, while the SPAC sponsor shoulders very little. “Bazin should go back to Colony Capital, if he wants to make a private equity investment play.” 

A number of operational real estate businesses are in the SPAC queue, just as some commentators are warning that the latest wave of the in-fashion vehicle is on the wane. Flexible office operator WeWork is still hoping to use the route to list later this year, and recently announced first quarter losses of USD2.1bn as it cleared its books of liabilities including property restructuring costs and a payout to co-founder Adam Neumann. Also heading down the SPAC route is rental apartment provider Sonder.  

HA Perspective [by Chris Bown]: Since taking over the reins at Accor, Sebastien Bazin has given us plenty to report on. There have been the deft investments in new hotel brands, such as 25hours, where the group took an initial stake, and more recently agreed takeovers to fold into the new lifestyle division, Ennismore. And the move into co-working via Wojo in a partnership, also looks like it may have legs.  

There have been a succession of left field moves, into events, tech and other allied businesses – on which the jury is probably out. And which investors in a hotel stock such as Accor probably don’t want to see, leaching their dividend payments.  

Bazin is to be congratulated for having a go and trying to spot the next big thing in hospitality – and you’ve got to be in it, to win it. He’s probably come up with a good idea here, to park the incubator unit off site, and get others to put in the risk capital; while still being there to grab the opportunity, once one of these left field ideas looks like it’s really going to fly.  

Additional comment [by Andrew Sangster]: There were split views when Accor made this announcement. Those in favour see it as a good way for Accor to participate in the stuff going on adjacent to the hotel sector and those more sceptical view it as yet another distraction for the French giant. 

Morgan Stanley analysts had the most nuanced view in that the move is to be welcomed because it means Accor will not be using its own money again to buy non-core businesses. It’s a back-handed compliment, the equivalent of when the share price of a company rises because the CEO leaves. 

The previous acquisitions Accor made outside of its core hotel business have not aged well. The move on upmarket home rental platform Onefinestay, for instance, looked a smart idea at the time but something failed in the execution. The contrast with the success Marriott appears to be having with Homes & Villas, a business the US giant decided to grow slowly and organically, is stark. 

Morgan Stanley said Accor has spent over EUR600m on buying 13 companies in the tech and similar space which collectively lost money in 2019. The new SPAC is receiving from Accor the equivalent of less than 1% of its market cap (Morgan Stanley said the company told them Accor would hold less than a quarter of the new vehicle). 

Bernstein is more bullish about Accor but similar to Morgan Stanley the deal meets approval by “simplifying Accor’s operations while retaining necessary commercial relationships”. Feel the relief as it means Accor will not be making any more “interesting” acquisitions outside of its core hotel business. 

In November last year, Accor took full control of SBE’s hotel brands, handing back its stake in 15 owned restaurant and nightlife venues. SBE’s Sam Nazarian also increased his majority ownership of the digital kitchen concept C3. The move cost Accor about USD300m, mostly through assuming SBE debt. 

What does seem strange about these initiatives by Accor is that the most exciting bits of its business are now essentially carved out from the mainstream operations. The concept behind “augmented hospitality” is to “live, work and play”. Accor has decided its augmentation can be done through a minority holding. 

The “live” comes from catering to local communities and includes things like concierge service John Paul; “work” is co-working and includes Accor’s 50% stake in WoJo; and “play” includes upscale caterers Potel & Chabot and event organiser Paris Society. 

Also being hived off are the tech plays, labelled “business accelerators”, including D-Edge, Gekko, Resdiary and Very Chic. 

Another name for “exciting” is also “risky”. And shareholders like the fact that Accor has de-risked to become a pure-play hotelier. The JV with Ennismore has seen Accor put distance between its classic brands (like Ibis and Novotel) and the funky new lifestyle plays. But Accor has retained a majority stake which indicates it is not about to lose its grip on this vital bit of business which is 25% of its pipeline. 

Will the SPAC succeed? For Accor, that is beside the point. There may emerge a business that is the next Airbnb or it may ultimately fail. In either case, Accor hopes to benefit from the learning to provide a better service for its owners and guests. 

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