Accor S.A. - Acquisitions in the Early 1990s

Acquisitions in the Early 1990s

Company Perspectives:

With 158,000 people in 140 countries, Accor is the European leader and a global operator in its two core businesses, Hotels and Services. It also operates in travel agencies, casinos, restaurants, and onboard train services.

Accor made a major move into the U.S. market when it purchased the Dallas, Texas-based budget hotel chain Motel 6 in 1990 for more than $1.3 billion. The deal made Accor the second largest hotel company in the world in terms of rooms (157,000) and represented an attempt by Pelisson and Dubrule to build an American hotel empire to match their successful European operations. Accor paid a hefty price to enter the crowded U.S. market and took on an additional $1 billion debt from the sale. The partners, however, were committed to expanding in the United States with the same cost-cutting measures that had worked so well for Formule 1, including credit card payment and limited maintenance staff.

Accor used a radio ad campaign and transatlantic marketing to lure Europeans to Motel 6. Although Accor agreed not to over-haul the management of Motel 6's parent company, Motel 6 G.P. Inc., it did sell a 60 percent stake in the budget chain to French investors. In 1991 Accor bought 53 Regal Inns and Affordable Inns from RHC Holding Corporation to make Motel 6 the preeminent budget hotel company in the world. Motel 6's success in the early 1990s was due in part to Accor's financial backing and ability to pay cash, as well as its decision to purchase company-owned properties outright rather than franchising them.

In 1990 Accor and SociétéGénérale de Belgique bought a 26.7 percent stake in Wagons-Lits, a Belgian company that dominated the European railroad sleeping car business and was the second largest hotel chain in continental Europe, owning about 300 hotels in Europe, Thailand, and Indonesia. In 1992 the European Community approved Accor's nearly $1 billion bid for a 69.5 percent controlling interest in Wagons-Lits. At the end of the year, Accor became the world leader in its industry with 2,100 hotels, 6,000 restaurants, and 1,000 travel agencies.

With the privatization of industry in Hungary, Accor entered a partnership in 1993 to buy 51 percent of the hotel company Pannonia from the Hungarian government. Pannonia owned medium-priced hotels in Hungary, Germany, and Austria and gained exclusive rights to develop under Accor in Bulgaria, Albania, Romania, Slovakia, Hungary, and the former Soviet Union and Yugoslavia, as well as to develop the Mercure chain in Austria. Accor also launched the Coralia label in 1993 to distinguish holiday hotels from business hotels. Around 30 Accor hotels in the Mediterranean and Indian Ocean regions added the Coralia label by 1994 and more were planned in the Caribbean, Central America, and Venezuela.

In the early 1990s Accor's Atria subsidiary was developing economic centers in cities and towns composed of conference centers, offices, and hotels, particularly Novotels and Mercures, in conjunction with local chambers of commerce. The company also had investments in Thalassa International spas and luxury hotels and casinos in France. Accor began a hotel-rebranding strategy in June 1993 to eliminate the Pullman Hotels International chain, acquired in 1991, while expanding its Sofitel and Mercure brands. Through renovations, the company transformed 27 Pullman hotels into Sofitels, while another 25 Pullman hotels became Mercure hotels.

Accor similarly expanded its restaurant business in the early 1990s with L'Arche cafeterias, L'Écluse winebars, Boeuf Jardinier steakhouses, Café Route highway cafés, Actair airport restaurants, Terminal train station buffets, and Meda's Grills in Spain. The company increased its partnership in France Quick and began building independent "villas" for Pizza del Arte. In 1994 Lenôtre, the bakery and catering chain Accor had developed in six countries, merged with Rosell, a chain specializing in organization, expansion, and management of catering services, for mutual advantages.

With the Dutch Wagons-Lits, Accor continued its expansion in restaurants and sleeping compartments on trains. In the car rental business, the company shared control of Europcar Interrent International with Volkswagen AG in 89 countries in Europe, Africa, and the Middle East. In March 1994 Accor agreed to merge its travel agency business with Carlson Travel Network, a subsidiary of Carlson Companies, to form a network of 4,000 agencies in 125 countries worth $10.8 billion. The new enterprise, named Carlson Wagonlit Travel, would be jointly owned (half-interest each) by Carlson and Accor. The integration of the two businesses occurred gradually over the next several years.