The hotel industry, it seems, has taken yet another cue from the airlines: Bigger is better. Economies of scale. Diminished competition. Pricing power. The business case for consolidation is well known.
And as with consolidation among the airlines, the hotel-merger trend doesn’t bode well for consumers.
Last month, it was Marriott’s $12.2 billion purchase of Starwood, to create a combined network of more than 5,500 hotels in more than 100 countries.
This week, it’s AccorHotels’ $2.9 billion acquisition of Toronto-based FRHI Holdings, parent company of the Fairmont, Raffles, and Swissotel brands. Accor is Europe’s largest hotel operator, with around 3,800 hotels under a variety of brands, including Sofitel, Ibis, and Novotel. FRHI’s portfolio comprises a comparatively modest 100 hotels. But many FRHI properties are in the luxury or upscale segments, where Accor is relatively underrepresented. And therein lies the move’s rationale. According to Accor:
The acquisition of these three global brands will strategically enhance AccorHotels’ brand portfolio, and will provide AccorHotels with a better-balanced business profile. The integration of Raffles, Fairmont and Swissotel will broaden the Group’s geographic footprint in the luxury segment, and enable it to optimize its luxury and upscale brands in order to adapt its offering to the expectations of an increasingly demanding clientele. With nearly 500 luxury and upscale properties, AccorHotels will become one of the key global players in this segment and will be able to offer the most profitable management contracts and the best growth potential in many markets.
Probably the most pressing issue for travelers when the deal closes, sometime in 2016, will be the integration of the two companies’ loyalty programs. While no details have been released, it’s reasonable to expect that Le Club AccorHotels members will benefit somewhat from the addition of FRHI properties as earning and redemption options. The same can be said for members of the Fairmont President’s Club, although the reaction among President’s Club members so far has been overwhelmingly negative. As one dispirited poster on FlyerTalk put it, “Absolutely terrible news. I can’t think of a worse fit for Fairmont. Our beloved FPC program will be shredded to the Accor points program, and my stays will go from 50/year to 0.”
The bigger story, of course, is consolidation, and what that portends for travelers. What’s worrisome isn’t this particular acquisition; it’s the trend. Bloomberg reports that global lodging deals, including the Accor and Marriott tie-ups, totaled $46 billion so far this year, a substantial increase over 2014’s $37 billion, which was a record.
Following the wave of airline mergers, more than 80 percent of U.S. domestic air traffic is controlled by just four carriers. The result: record profits for the airlines and class-action lawsuits charging those same airlines with collusive pricing. A similar scenario looks set to play out in the hotel industry.
Reader Reality Check
Have you seen any benefits from travel-industry consolidation?
This article originally appeared on FrequentFlier.com.