Navigating a Hotel Merger
September 3, 2019 | Last Updated on: July 20, 2022
September 3, 2019 | Last Updated on: July 20, 2022
Merging businesses is not an easy process. You will need to apply for acquisition loans, do your due diligence, ensure that the other hotel is even a good fit, and then finally facilitate the merge. The process is muddled in legal, financial, and staffing challenges.
That being said, a successful merger can be hugely beneficial for everyone involved. You can offer your customers more options in terms of where they stay. You can merge both of your loyalty programs. You can increase revenue by joining your resources, and improve your marketing efforts by combining both communities of customers.
A hotel merger should be amicable all around, but for this to happen, you need to prioritize finding the right fit. If you want to gut the other hotel completely, you would be better off buying one that is up for sale, rather than dealing with the issues of a merger.
Merging hotels is a great way to expand your business beyond just another location. It means taking all their strategic points and putting them to work for you. Take the Marriott and Starwood merger: Their combined force makes them the largest hotel chain in the world. Customers of Marriott and Starwood are able to choose from over 5,500 hotels around the world and benefit from a combined loyalty program.
As for the two companies in question, they each get financial benefits, including a buyout and a percentage of stock. The business model brings forward the power of Starwood’s loyalty program with Marriott’s award-winning business model.
Though it is unlikely you will have the assets necessary to buy out the second-largest hotel chain in the world, you can start your own chain by merging with another hotel. Acting as “sisters,” you can improve the service and value available to your customers.
When you are looking to start a company acquisition process, you will want to ensure that your ducks are in a row, as they say. In short, you need to prepare.
Having liquid assets is critical when it comes to company acquisitions. You need to have enough to pay for the buyout as well as for the services of the professionals who will facilitate the acquisition. You will not be doing this on your own. Ensure that you have enough to cover the whole cost.
Before you settle on a hotel merger, you first need to decide on what your goals are. Knowing these goals will help you when choosing which hotel to merge with. If their goals do not align with yours, it’s best to look elsewhere.
You will need to hire a lawyer or a team of lawyers to work through the deal. The only exception is if you are a large enough company that you have your own in-house attorney or attorneys, and they feel confident in handling this merger on their own.
If you work and operate in the same area as the hotel you are looking to acquire, then you are probably already in line with the law. If you are looking for a new hotel acquisition elsewhere, then you will need to check with the local authorities to see if anything is stopping you.
Once you have prepared, it is time to find the ideal merger candidate.
When vetting candidates you need to pay particular attention to logistics. If the organizational or operational challenges are too great, it will cost a lot to merge with this hotel, meaning it might not be the best investment opportunity for your company.
The difference between buying a new hotel location and creating a merger is that both of your companies come together to create a better company, as opposed to you just opening another location. The merger should then be beneficial to both of your brands.
Always do your due diligence to test how strategic the acquisition is. See if your goals align with theirs, or if you are in any way at risk for a bad deal. You want to ensure that the deal is good for your brand, your bottom line, and your customers.
To successfully navigate a merger, you will want to meet these goals:
A transition team can make the process go smoothly and limit resistance from within. Though upper management might be thrilled to merge with you, their staff might not be.
This is especially important if you are merging with a hotel business in a different location than you. Even if you operate in the same country, but in different states, there could be vital cultural differences you simply don’t understand. Keep key members on so that marketing and customer service can remain optimized.
As stated before, staff might be nervous or outright hostile during a merger. If you keep communications open and provide information about job security, then they will be more amicable.
If staff from either hotel bring up objections or challenges, listen, and try to resolve them.
Sometimes you will need to replace staff. When you do, make sure it is for objective reasons, and that you provide them with those reasons. Being replaced because you are a bad employee is a different story than being replaced because the company taking over thinks it can do a better job.
The acquisition of business isn’t an easy process, which is why you want to ensure that the hotel you merge with is the perfect fit for both your goals and for your customers.
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