Banyan Tree strikes strategic partnership with AccorHotels

Singapore - RESORT operator Banyan Tree Holdings has inked a strategic partnership with hotel group AccorHotels that comes at a time of consolidation within the industry.

Banyan Tree said on Thursday that both parties have entered into a heads of agreement for their long-term partnershiip. AccorHotels will invest an initial S$24 million in a mandatory convertible debenture that on conversion will give it an approximately 5 per cent stake in Banyan Tree. AccorHotels, which has a portfolio of hotels that include Singapore's Raffles Hotel, has an option to purchase another stake of about 5 per cent.

Shares in Banyan Tree surged four cents, or 10.1 per cent, to S$0.435 on Thursday on the news.

The partners noted not just the need for scale in the hospitality industry, but also pointed to the growth within the luxury resort segment in Asia that Banyan Tree has tapped into.

Both parties intend to collaborate to develop and manage Banyan Tree branded hotels around the world. Banyan Tree will also have access to AccorHotels' global reservations and sales network, as well as its loyalty programme, Le Club AccorHotels.

For each co-developed hotel and branded residence, Banyan Tree and Accor will share the management and other fees received through Accor. The collaboration shall be for an initial term of 10 years.

Ho Kwon Ping, executive chairman of Banyan Tree, said: "With the current consolidation of mega hotel companies, smaller but also global players - many family-controlled - are also seeking strategic alliances with the global giants. Our strategic alliance with AccorHotels allows us to remain an independent company, enabling us to continue securing hotel management agreements on our own and yet accelerating Banyan Tree's speed and scope of expansion but with AccorHotels helping us to grow our brands around the world.

"We believe this agreement will propel our brands rapidly to global reach and range and strengthen our ability to embrace change and innovation in the hospitality industry with a strong global partner."

The initial debenture investment would pay a coupon rate of 3.5 per cent per annum, payable quarterly. The conversion period is four-and-a-half years from the time the debenture is issued.

Accor will nominate one director to the board of directors of Banyan Tree. It has indicated to Banyan Tree that its first nominee to the board will be Sebastien Bazin, the CEO and chairman of Accor group.

Mr Bazin said: "Banyan Tree Holdings has created key leading positions across Asia with luxury resorts, one of the fastest growing segments in the industry. We will bring scale to the network through our ability to develop and manage hotels under the Banyan Tree brands globally, hence strengthening our leadership in the luxury hotel space."

Banyan, citing the weak global economy and uncertainties over Brexit, last month posted a third-quarter net loss of S$10.8 million as revenue fell 23 per cent.

This article was first published on Dec 9, 2016.
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