It’s clear the market is saying that Accor is achieving a transformational breakthrough of sorts by acquiring scale in North America and high-end product segments. And otherwise, in general that M&A is risky and less preferable to relatively stable, long term organic growth. The market is willing to support hotel chain valuations for those who consistently invest in organic growth and R&D. On the contrary, the management teams that spend the bulk of their time making acquisitions, integrating them and dealing with owner relations issues and managing unforeseen problems, offset much of their perceived gains. Their abstract arguments about loyalty database growth, cost synergies and overnight shelf space are often offset by management turnover, inheriting undeveloped brands and weak management and franchise contracts.
Bottom-line is the data suggests hotel management is better off focusing on developing a strong distribution platform, focusing on customer service and internal innovation to address Airbnb and other disruptions versus M&A. Back to “Good to Great”, building a flywheel is a winning strategy and M&A can be a distraction and is more likely than not, to fail. In general, unless consolidation is transformational and strategic, it does not create relative value for shareholders. Management teams should step back from the herd mentality. It’s time to consider the alternatives and chart a sustainable growth strategy that builds an enduring organizational capability.