As both Huazhu Group and Deutsche Hospitality were looking to accelerate the growth of their footprint, executives from both companies say the pending deal affords them the opportunity they were looking for.
GLOBAL REPORT—The pending acquisition of Deutsche Hospitality by Huazhu Group is a deal that helps both companies achieve their goals, according to executives from both companies.
Shanghai-based Huazhu announced earlier this week it had entered into a share-purchase agreement with Frankfurt-based Deutsche Hospitality through its wholly owned subsidiary China Lodging Holding Singapore. Huazhu offered to acquire all shares for a base cash equivalent of €700 million ($771.8 million). Pending regulatory approval, the deal is expected to close early in 2020.
In an email interview, Deutsche Hospitality CEO Thomas Willms said his company has charted an ambitious growth strategy, announcing this year a plan to reach 250 hotels by 2024.
“The acquisition by Huazhu will enhance Deutsche Hospitality’s ability to achieve this target by strengthening its competitive position in Europe, the Middle East and the African market and now also in Asia,” he said.
Deutsche Hospitality operates 118 hotels with another 36 under development in 19 countries. Huazhu Group has more than 5,000 hotels in more than 400 cities, recently expanding outside of China into Japan and Singapore.
Acquiring Deutsche Hospitality accelerates Huazhu’s expansion strategy and will drive revenue growth in the upscale and luxury segments in Asia, including China, while also expanding Huazhu’s international footprint, Huazhu Executive Vice-Chairlady Jenny Zhang said via email.
“Both Huazhu and Deutsche Hospitality have strong and recognized brands, which will maintain, while further accelerating their growth,” she said. “Deutsche Hospitality brands complement those of Huazhu, and the merged portfolio will be able to offer a wider range of brand choice to travelers, owners and franchisees.”
After the deal closes, Deutsche Hospitality will retain its DNA, and the two companies’ future “will represent the combined strength of European hospitality, German quality and Asian speed,” she said.
Zhang said that while it’s too early to provide more details at this stage, Huazhu appreciates the synergies Deutsche Hospitality’s brands will bring to the combined portfolio. Deutsche Hospitality has a plan to reach 250 hotels by 2024, and Huazhu will support and help accelerate that, she said. Citing her company’s exclusive arrangement with Accor, she added her company has grown Ibis and Mercure’s presence in China from 100 hotels into 300 within four years.
“We know the China market well, and we have a very good record of growing our partners in China,” she said.
Both Deutsche Hospitality and its guests will benefit from Huazhu’s ownership of the German hotel company and the synergies that will follow, Willms said.
“The continued growth of Deutsche Hospitality requires an international distribution network and a strong global loyalty program and access to innovative technology,” he said. “These are the essentials that Huazhu brings to the partnership as well as a clear vision to strengthen the brands of Deutsche Hospitality in Europe, Asia and other parts of the world.”
Leadership changes at Huazhu
Following the announcement of Huazhu’s pending acquisition of Deutsche Hospitality, the Shanghai-based company has made changes to its executive leadership to support the company’s accelerated growth strategy, according to a company news release.
Huazhu’s founder and executive chairman, Ji Qi, has been reappointed to serve as CEO and will “devote his full time to lead Huazhu forward.” Zhang, who has served as CEO since her promotion from CFO in May 2015, will serve as executive vice-chairlady.
“This change will allow Jenny to have more time to drive our international expansion, while assisting (Ji Qi) in critical strategic and operational decisions for Huazhu Group,” the release states. “This change will also allow Jenny to spend more time coaching our Huazhu executives and our promising young talents to facilitate their growth for future Huazhu leadership roles.”