Overdue consolidation may attract serious investment

THE phrase "You ain't seen nothing yet" seems to be cropping up in everybody's' conversation. What are they talking about? Activity in the hospitality sector of the London Stock Market, that's what (see News Analysis, page 16).

Ladbroke's takeover of the Stakis hotel group, the rumour of potential bidders eyeing up Swallow Hotels' parent Vaux, even the merging of the Best Western and Consort hotel consortia - among city analysts it all causes a flutter that has been missing in this industry for too long.

"Consolidation," they are saying. "It's been a long time coming, but it had to happen sooner rather than later. And this is merely the beginning." Ian Burke, chief executive of Thistle Hotels, is reported to have said: "We will see more of it in 1999."

This raises two questions. Why is it happening? And who's next? Staff working for affected companies and operators of smaller and independent hotel groups might also ask: will this change my life?

The answers are, as always, complex and not always definitive.

According to analyst Paul Slattery of Dresdner Kleinwort Benson, this level of activity is nothing new, but shareholders are growing weary of the City's continual undervaluation of hospitality shares. They want action. At the same time, because of the long-time discounting of shares, it has become apparent to canny chief executives with purchasing power that a number of potential bargains are out there on the market.

So who's on the acquisition dance floor? Vaux is available, probably. Whitbread is on the lookout for ways to expand, and might be eyeing up Greenalls (see page 14). Ladbroke's deal with Stakis is seen as a forerunner to a remerger of the world-wide Hilton operation and the US-based Hilton Hotels Corporation; and there's a rumour that Granada is considering offloading its television rental operation in order to raise capital for a big spend in hospitality. The dancers are looking for suitable partners, and consummation, or consolidation, is certainly behind their actions.

But what will it mean to people working in the industry? At the top of merged companies, directors may go; at the bottom, not much will change. As the big chains get bigger, however, the medium to small chains will have to sharpen their niche appeal - or make themselves attractive enough for a takeover.

And there is one other consequence of all this market activity that can't be ignored. At last, after years of neglect, venture capitalists might be encouraged to view the industry seriously and get involved in hospitality. Until now acquisitions have been made only by companies selling assets first. Now some serious outside investment may be at hand - and that would be no bad thing. n

FORBES MUTCH

Editor

Caterer & Hotelkeeper