06 May, 2020 Surge in M&A activity likely for hotel industry post-COVID-19Posted in Travel & Tourism
Many smaller hotel companies will have no choice but to combine with their larger counterparts in order to survive post-COVID-19, creating a more consolidated industry in the process, says GlobalData, a leading data and analytics company.
Ralph Hollister, Travel & Tourism Analyst at GlobalData, offers his view:
“The number of announced mergers and acquisitions (M&A) deals globally decreased from 2,349 in February 2020 to 1,984 in March 2020, while deal value decreased from US$151.2bn to US$129.9bn. This global trend is replicated in the tourism sector and more specifically in the hotel industry. However, M&A activity is likely to increase as smaller providers are backed into a corner.
“COVID-19 and its seismic impact on hotel revenues and occupancy rates are almost certain to present investment opportunities for major players as the pandemic progresses and most definitely when it is over.
“Major companies will be in a fierce battle for whatever revenue is available as demand slowly but surely returns. Smaller hotel companies will have no choice but to listen to offers from their larger competitors, as cash reserves deplete at a staggering rate.
“In the short-term, travelers will initially stick to what they know best, they will likely become more sensitive towards factors such as hygiene and will want familiarity. Bigger brands will be more likely to convince consumers that they can offer this over independent hotels.
“One of the biggest problems that arises in a substantial economic downturn is that major players usually end up benefiting, whilst smaller players with less market share and cash are either consumed or become bankrupt.”