By Lina Saigol
Shares in France’s Accor and U.K. rival InterContinental Hotels Group rose on Friday, after reports the two companies had explored a merger that would create the world’s biggest hotel group with a combined value of $17 billion.
French newspaper Le Figaro said Accor /zigman2/quotes/203800565/delayed FR:AC -0.67% had not made a formal approach to IHG /zigman2/quotes/202865596/delayed UK:IHG +0.16% which owns brands including Holiday Inn, Crowne Plaza, and Regent Hotels.
Accor, the world’s fifth-largest hotel chain by rooms, owns a portfolio of brands, including Ibis and Mövenpick, as well as high-end chains such as Raffles and Sofitel.
The French group was downgraded to junk status by ratings agency S&P Global earlier this week, as the hospitality sector has been hit hardby the coronavirus crisis. Earlier in August, Accor said it would cut 1,000 jobs worldwide in a bid to save €200 million in costs by 2022, as the coronavirus pandemic saw its revenues fall by more than half.
Shares in Accor, which have fallen by 43% so far this year, rose 3.21% in early morning European trading. IHG’s stock, which is down 23% in the year to date, was up 2.06%.
Le Figaro’s report said Accor’s management board was in favor of a deal , but the group’s chairman and chief executive Sébastien Bazin was more cautious about pursuing talks. The paper said Bazin has set up an internal task force to look at a potential merger,
Bank of America analysts said a potential combination would have some geographical merits, scale and costs benefits. Accor has market leading positions in Europe and many emerging markets, while IHG has strong positions in North America and is the leading international operator in Greater China.
“Accor currently operates 748k rooms (as of June 2020) and IHG 883k rooms. A combination between both companies would create an industry giant with 1.6 million rooms in the system,” the BofA analysts said in a research note.
The impact of prolonged travel restrictions could wipe out $5,543 billion in the sector’s contribution to global gross domestic product, according to research published in June by the World Travel & Tourism Council (WTTC).
“Under our worst-case scenario, prolonged travel restrictions could put more than 197 million jobs under threat and cause a loss of more than $5.5 trillion to global Travel & Tourism GDP,” the WTCC said.