AccorHotels spends $105M to acquire Chile's Atton Hoteles

It hasn’t even been a month since AccorHotels confirmed that it would be buying Switzerland's Mövenpick Hotels & Resorts for an estimated $582 million, but the French hotel company isn’t done with its global M&A push. Casting its eyes on South America, AccorHotels has signed an agreement with the shareholders of Chile's Atton Hoteles to acquire the company.

According to the agreement, AccorHotels will acquire 100 percent of the management company that operates 11 Atton hotels across Chile, Peru, Colombia and Florida. The company has another three hotels under development. In order to capitalize on Atton’s existing brand equity, most of these properties will be co-branded with AccorHotels brands, before being fully rebranded to Pullman, Novotel, MGallery and Mercure properties in the midterm.

AccorHotels will also acquire 20 percent of the property company that owns these assets, the remaining 80 percent being bought by Chilean group Algeciras. AccorHotels will also have an option to sell its 20 percent in that property company to Algeciras after five years.

Total cash consideration for AccorHotels will be $105 million, or approximately €89 million at current exchange rate, including €67 million for the operating company and €22 million for the 20-percent stake in the real estate arm. The transaction will have an accretive impact on group earnings from the first year.

Seeking Value, Signing Deals

The acquisition follows a string of deals that AccorHotels has made to grow its scale, taking on some of the world's biggest companies like Marriott and Hilton. In February, AccorHotels sold off 55 percent of its real estate business to a group of sovereign and institutional investors for €4.4 billion to further its growth in emerging economies.

Some of its acquisitions have been in core traditional hospitality (for example, the $840-million FRHI Hotels and Resorts deal in 2016) and in tangential businesses like its April acquisition of Glasgow-based ResDiary, a restaurant reservation and table management platform. Also last month, AccorHotels announced plans to buy a 50-percent stake in South Africa-based Mantis Group, a collection of privately owned, managed and branded properties, adding 28 hotels to its portfolio and strengthening its presence in Africa.

That was just in April. In March, the company received approval from Australia's Foreign Investment Review Board for the $930-million acquisition of Mantra Group, which could be finalized before June. AccorHotels announced its bid for Mantra last October, seeking to capitalize on skyrocketing tourism across the country.

The same principles apply to the other deals. AccorHotels is seeking out lucrative markets and striking deals while the irons are hot. STR calculated that in 2017, occupancy in African hotels grew 5.6 percent to 58 percent as ADR rose 7.4 percent to $104.15 and RevPAR reached $60.43 after a 13.4-percent increase. This makes the Mantis deal all the more appealing.

Latin America's Appeal

Latin America has also seen a boost in inbound travel—a strong impetus for AccorHotels to make a deal with a local company. According to STR, hotels in the Central and South America region reported positive Q1 2018 performance results, with occupancy growing 4.5 percent to 57.6 year-over-year, ADR up 7.9 percent to $108.70 and RevPAR rising 12.8 percent to $62.60. And the positive numbers are poised to continue. According to ForwardKeys, South American countries are 12 percent up year-over-year for inbound travel for the first half of 2018—and those travelers will need somewhere to sleep.

But the numbers are not evenly distributed over the region—and Chile, where Atton Hoteles has five of its 11 hotels, reported declines in occupancy, ADR and RevPAR for the first quarter of the year, which STR credits primarily to supply growth. AccorHotels reportedly is eager to boost its presence in fast-growing markets like Chile and Peru, but if these destinations are already saturated, this move could backfire. The company already has 335 hotels open and operating across Latin America, with another 166 under development.

The transaction is subject to regulatory approvals. It should be completed during the second half of 2018.