Raffles, Fairmont and Swissotel sold to Accor – what will change?

French hotel group Accor, owner of Sofitel, Novel, Mercure, Ibis and various other brands, was confirmed last night as buyer of FRHI.

These means that Accor will be gaining control of the Fairmont, Raffles and Swissotel brands, including such iconic hotels as The Savoy in London, The Plaza in New York and Raffles in Singapore.

FRHI was owned by the state investment funds of Qatar and Saudi Arabia.  As Accor is paying partly in shares, the two countries will now be 10% and 5% shareholders respectively in Accor.

FRHI is smaller than you might think, with just 115 properties currently open and a further 40 projects under development.  The largest grouping is in Canada, the original base of Fairmont.

The transaction will not run into any regulatory issues and, strategically, it is a decent fit.  Accor only has Sofitel at the luxury end of the market.  I would imagine that the Raffles and Fairmont brands will remain, although I am not sure that Swissotel has enough brand equity to be worth saving.

What happens to the loyalty programmes?

I would put down any cups of coffee you may be holding before reading on, because sniggering can cause spillage.  The press release states:

Le Club AccorHotels and the loyalty programs of the Fairmont, Raffles and Swissôtel brands are among the most generous and innovative in the global hospitality sector. Our brands and locations are highly complementary and we want to make the most of these two programs to offer you ever more exclusive services and privileges.

To be fair, I know very little about Fairmont President’s Club.  I didn’t even know that Swissotel had a loyalty scheme (Swissotel Circle) until I just looked it up.

The Accor programme works well in its own way.  It is basically a cashback scheme, as the points you earn can only (with a tiny number of exceptions) be redeemed for money-off vouchers for future Accor stays or turned into airline miles.

Because it has fixed value redemptions, you cannot arbitrage it when you redeem.  (A normal loyalty programme lets you get extra value by redeeming on peak days by paying the standard price.)  To some extent, Accor has got around this by trying to arbitrage earning.  It has run some very generous promotions recently, such as offering 10,000 points for just three stays.

Good news for American Express Platinum cardholders

If you have American Express Platinum, you receive Platinum status in the Accor programme for as long as you keep the card.  This offers decent benefits including guaranteed lounge access at Sofitel (presumably the three new luxury chains will be included) and upgrades.

Once integrated, you will another 155 hotels – and good quality ones at that – where you can use your status.

As with Marriott / Starwood acquisition, it will take a while for anything to happen.  The transaction will not complete until mid-2016.  I would then expect it to take at least another year before the hotels are integrated into the Accor system for the purposes of earning and redeeming points.

My view

FRHI was so small as a chain – in fact, it was really three chains with little overlap – that it didn’t provide much competition.  Very little is lost by the acquisition.  Adding these properties into Accor is, for me, beneficial as I will have far more high quality hotels where I can use my Le Club AccorHotels Platinum status.

If we are really lucky, FRHI may employ someone who knows how to code a decent website and we could be saved from the chaos that is accor.com.

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