According to a recent GlobalData report, global mergers and acquisitions (M&A) activity in the travel and tourism sector is expected to be worth US 155 billion dollars in 2021, representing an 84 percent increase year on year, with the lodging segment accounting for the largest share in terms of deal value and volume. The sector saw 27 billion-dollar-plus global M&A deals last year, up from 20 the previous year. This, however, contrasts sharply with the situation in India. Hotel transactions in the country did not increase significantly after the pandemic, and the sector has not yet seen a flurry of distressed transactions, as was predicted.
Deal activity in the global travel and tourism industry has increased this year, with 573 deals (including M&A, private equity, and venture financing) announced during the first half of 2022, a 3.1 percent increase over the same period in 2021.
“According to Statista, the travel and hospitality sector in India will see 12 mergers and acquisitions worth US 65 million dollars in 2021. This was a significant increase over the previous year, when only five deals were completed.”
Strong hotel demand, improved industry performance, and stable cash flows are assisting in opening the transactions market and bringing buyers back to the table as they look to capitalise on the industry’s impending growth cycle. However, as industry performance has improved, owners are torn between selling now and holding on to their assets for future appreciation.
Furthermore, borrowing for the industry has become relatively easier, even if at a higher cost, compared to Covid-times when the industry was not positively viewed as a lending category for banks. Furthermore, asset owners want to include expected future performance in the valuation. At the same time, buyers continue to discount valuation because of Covid’s impact on asset performance in recent years.
According to the most recent acquisition news from the sector, the Indian Hotels-GIC platform, which was established in 2019, is looking to acquire stressed hospitality assets and has yet to make its first acquisition. Other hospitality acquisitions are taking place across the board. Max Ventures & Industries Ltd (MaxVIL) has announced the acquisition of Accord Hotels and Resorts Pvt Ltd.
Merger and acquisition deals in the hotel sector are also expected to pick up steam in the coming year as lenders seek recourse through the National Company Law Tribunal (NCLT) as non-performing assets (NPAs) in the sector rise. Due to the rapid recovery in domestic leisure demand, interest in acquiring assets in leisure markets will surge, especially as supply remains restricted in this segment. Rather than greenfield or brownfield projects, investors are more likely to prefer operational assets or portfolios of assets to expand their footprint.