AccorHotels is buying a 30 percent in the German boutique hotel chain 25hours Hotels for a total cost of $39 million, or 35 million euros. Reports say this move marks an increased effort by AccorHotels to step up its expansion in the global boutique hotel market, a fast-growing niche that aims to shun the repetitive styles of many major brands.
A news report by Reuters indicates that 25hours Hotels will continue to be run by its co-founder and chief executive . 25hours currently consists of 7 boutique hotels spread throughout the German cities of Hamburg, Frankfurt, Berlin, Zurich, and Vienna. At the time of the transaction, 25hours has major expansion plans with five more hotels to open in a list of cities that includes Zurich, Munich, Cologne, Dusseldorf, and Paris, all within the next two years. The chain is slated to take its international imprint further soon by also moving into Melbourne, Miami, and Milan.
AccorHotels leadership has painted the deal as a great way for them to partner with an established brand as they move into the increasingly popular boutique hotel market.
“Through this partnership, AccorHotels is investing further in one of the fastest growing segments in the industry and enriching its offer to achieve scale in this segment,” said AccorHotels Chief Executive Sebastien Bazin in a statement.
In recent years, demographics in the international travel industry have shifted. Millennials, a generational group that includes tech-savvy people born after 1980, have now begun to wield increasing buying power in international travel. Millennials, unlike previous generations, tend to prefer the small, stylish upmarket boutique hotels to their counterparts owned by large hotel chains. The leaders of major global hotel operators of AccorHotel’s rivals, including Marriott, Hilton, and InterContinental, have all said they are shifting their efforts to target millennials, the group that industry experts say will be the largest demographic of hotel consumers by the year 2020.
Accor’s Bazin has long voiced warnings that traditional hotel operators should be wary of threats to business by Airbnb, which offers guests the option to rent apartments and houses from other users, rather than stay in hotels, often at cheaper prices. In October, Airbnb announced that the number of users of its services in Paris—long Airbnb’s top market—had increased through the summer even though foreign visitors to that city had decreased due to escalated security fears.
AccorHotels has already taken steps to appeal to millennials and other patrons of boutique hotels by creating its existing Mama Shelter boutique hotel brand. In September, AccorHotels also laucned its Jo&Joe youth hotels brand. This year has not been without setbacks for AccorHotels, which cut back its upper end 2016 profit targets in October because it’s properties in France and Belgium were suffering due to concern about security that has stemmed from militant attacks in those European countries.