Companies / October 2016

A Landmark Hotels Acquisition

AccorHotels is the largest international hotel operator in Asia Pacific and in Indonesia. On July 12, the group announced the addition of Fairmont, Raffles and Swissôtel into its hotel networks, following a strategic deal with Fairmont Raffles Hotels International (FRHI), the Toronto-based parent of the three luxury hotel brands. By Muhammad Azhari


For Garth Simmons, the chief operating officer of AccorHotels for Malaysia, Indonesia and Singapore, the hotel chain’s landmark acquisition of three luxury hotel brands — Fairmont, Raffles and Swissôtel — is a game-changer that will cement the world-leading travel and lifestyle hotel chain’s reputation.

“For us, we say it is a really strategic acquisition,” he told GlobeAsia in a recent interview, adding that the main impact from the acquisitions will be strengthening AccorHotels’ luxury end of the market.

AccorHotels shareholders, in a special meeting at its Paris headquarters, approved the acquisition of the entire stake of FRHI via a deal in which AccorHotels paid $840 million in cash to the previous FRHI controlling shareholders — Qatar Investment Authority (QIA) and Kingdom Holding Company (KHC) of Saudi Arabia — and issued those entities a total of 46.7 million shares.

As part of the deal, QIA and KHC now own 10.5% and 5.8% of AccorHotels respectively and both investors attain the privilege to add three new representatives to the Accor board.

AccorHotels is an operator and at some properties an investor as hotel owner of more than 4,000 hotels, resorts and residences as well as more than 2,500 luxury private homes around the world. It operates in 95 countries, including Indonesia.

The acquisition of FRHI will add to AccorHotels’ network of 154 hotels and resorts — of which 40 are still under development — in 34 countries and five continents. Fairmont, Raffles and Swissôtel employ more than 45,000 staff worldwide.

“That means we have got over 450 hotels in that end of the market, luxury upscale,” said Simmons, who has been COO for AccorHotels Malaysia, Indonesia and Singapore since July 2015 and has been with the group since 2007.

The three luxury hotel brands are already listed in AccorHotels’ website. Now, the hotel chain classifies its hotel brands into four categories: luxury (Raffles, Fairmont, Sofitel); upscale (Pullman, Swissôtel, Grand Mercure, the Sebel); midscale (Novotel, Mercure, Mama Shelter, Adagio); and economy (Ibis, Ibis Styles, Ibis Budget and Formule 1).


Indonesia properties 

Singapore’s Raffles Hotel is one of the city-state’s strongest icons, having started operation a full 129 years ago. The much-younger Raffles Hotel Jakarta — sitting in the Ciputra World 1 superblock — meanwhile, according to Simmons, has already been rated “the best hotel” in Jakarta by users of travel website and app TripAdvisor.

Simmons also pointed out that the Fairmont Jakarta, near the prestigious shopping center Plaza Senayan, and the Fairmont Sanur Beach Bali that offers a scenic beach, are both perfect businesses for Accor to grow further.

“For Accor, the game-changing part is presenting our loyal guests, customers and our own teams with these wonderful new options,” Simmons — a 30-year veteran in the luxury hotel business — told GlobeAsia.

In Indonesia, AccorHotels operates around 100 hotels, the bulk of which are budget and mid-scale hotels. The hotel chain only operates these hotels in Indonesia, with ownership of the hotels usually belonging to investors, both local and global. Still, even as an operator, Simmons said the group brings “significant” investment into the country, which is seen as a market for all levels of its brands.

Upbeat on the prospect of doing more business in Indonesia, the group plans to grow the number of hotels it operates to 200 by 2020 in partnerships with selected partners. “Acquisitions like this will only help us reach that (target), giving us more brands to drive and develop,” said Simmons, who has held a variety of strategic positions in the group, including most recently as a senior vice president of its New Zealand, Pacific Islands and Japan operations.

Eastern Indonesia?

While currently the group focuses its attention on Java and Bali, Simmons said the group will not close its eyes to prospects in the eastern parts of Indonesia. “Java has the biggest population base in Indonesia, but we are also looking at really good niche areas in eastern Indonesia. We’re very excited about that,” he said.

In October last year, AccorHotels set a new milestone in Indonesia by launching its 100th hotel, the Novotel Makassar Grand Shayla City Center in South Sulawesi, marking its first sojourn into the eastern parts of Indonesia.

Simmons said AccorHotels is also eyeing Lombok, with the group set to operate a Pullman hotel currently being developed in the island. Like many players in the hospitality businesses, the hotel chain would also welcome stronger government effort to improve infrastructure in the island.

“We need the government to continue to invest to make sure that Lombok has an international-standard airport,” he said, arguing that this will encourage more people to travel and stay on the island.

A veritable rival to Bali with its picturesque beaches and prime surfing spots, Lombok nevertheless still lags behind the Island of the Gods in tourism dollars, as poor infrastructure and lack-luster resort development kept people away from the island.

Meanwhile, in terms of general business climate in the hotel industry, Simmons said the industry also felt the impact of the economic slowdown in the last few years. Growth in the industry is “very static” at the moment.

However, the hotel chain is more than confident that the country’s economy will recover sooner rather than later. “There are 250 million people living in this country and 80 million of them are middle class. And they constantly travel, both for business and for pleasure,” Simmons said. “We see a strong future ahead, that’s why we’ve invested significantly in Indonesia. We already have a very strong head office here in Jakarta, the only way is up from now on.”