As the year comes to a close, 2022 could be argued as one of the most difficult years for business sectors. But for the hospitality industry, hotel owners, restauranteurs, operators, and global brands pursued new opportunities and grew their portfolios through mergers and acquisitions of other companies.
Though COVID-19 and the subsequent Delta Variant virus created significant obstacles for many, this past year served as a rebound for hospitality, as the outlook for returning demand became more clear and net operating income began to accelerate.
As a particularly strong transaction year, 2022’s first quarter of global hotel transaction volume surpassed the first three quarters of 2021. Within this time frame, these transactions totaled more than $41.4 billion in sales—up 86% year-over-year, and down only 20% to the same period in 2019.
The period of post-COVID recovery is still expected to ensue, but many industry professionals believe the global hospitality industry is well positioned to thrive in 2023—attributing much of the sector’s growth to recent mergers and acquisitions.
Marriott, Hilton, and Hyatt Hotel Portfolio Purchased Under Noble Investment Group
One of the largest contributors to M&A agreements in the hospitality industry is portfolio deals. Just in 2021’s third quarter, portfolio deals accounted for 47%—$19.4 billion—of global hotel transactions.
While some industry experts remained unsure whether this trend would continue throughout 2022, many didn’t consider uneven recovery and ownership desires to stabilize cash flow, which accelerated several large portfolio acquisitions.
In fact, one of the year’s most notable acquisitions occurred in August of this year, with Noble Investment Group announcing its acquirement of a fourteen-asset hotel portfolio, consisting of Marriott, Hilton, and Hyatt properties.
According to Noble Investment Group chief investment Officer Ben Brunt, these premium brands coincide with the company’s strategy to “invest in well-located assets in high growth markets with healthy business and leisure demand.”
But their vision doesn’t stop there. Following this transaction, the company looks to invest in physical enhancements across the hotel portfolio, as well as optimize operations of all acquired properties—a deal that’s sure to be a focal point for hospitality leaders in 2023.
Highgate’s Acquisition of Viceroy Hotels & Resorts
Aside from portfolio accruement, other global brand owners and operators sought to grow their reach through acquisitions. To close out a successful year, a strategic investment under real estate investment and hospitality management company Highgate was made to purchase Viceroy Hotels & Resorts.
Though no price for the deal has been announced, the agreement is expected to close in early 2023—certainly, something industry experts should be keeping an eye on.
This deal is set to add to Viceroy’s 11 currently operational hotels, as well as two that are still undergoing development until 2024.
Bill Walshe, CEO of Viceroy, said in a press statement, “This deal will accelerate our momentum, and solidify our position as the leading modern luxury lifestyle brand in our space.”
Additionally, Richard Russo, principal at Highgate, commented in a news release, “Highgate intends to add brand-accretive hotels to the Viceroy portfolio that will further enhance customer perception and brand awareness.”
“Further, through powering Viceroy with a proprietary relationship with Highgate’s operating company, and imparting the benefits of Highgate’s scale, we will be able to provide significant incremental value to associates, guests, owners, and partners,” Russo continues.
And though this deal might mark the end of the M&A’s for the year, Highgate’s recent acquisition is ongoing. Over the next few months, Russo hopes to announce additions to the portfolio in major urban gateway markets and select resort destinations—all of which aim to enhance the defining quality of Viceroy properties.
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With the industry still in recovery, this year has been a monumental one for hospitality execs. And although acquirers are exercising greater caution in their investment pursuits, they have not closed up shop entirely.
Despite experiencing a temporary lull in 2021, the level of merger and acquisition activity in 2022 fell in line with recent pre-pandemic averages. Further, the market for large deals not only remained strong but did so at a surprisingly rapid rate.
Many in the hospitality industry are aware of macroeconomic conditions that are likely to occur over the next year. However, while this might test the resilience of the M&A market, it doesn’t look to become a major hindrance.
The need for money and time-saving P2P solutions in place across these expanding portfolios could not be more acute. Having celebrated its 20th anniversary in 2022, BirchStreet Systems has undergone significant capitalization with investment from Serent Capital and Parthenon Capital. The scale of leadership change, along with product and delivery scaling positions BirchStreet well for growth in 2023.
As the rebound in the hospitality business throughout 2022 has contributed to several key mergers and acquisitions, the expectation for 2023 is even more buoyant M&A activity.