How to handle mergers in your hotel business
Merging hotel businesses can be a great idea, but it does bring some additional challenges. Whether you’re acquiring another hotel or merging with an existing brand, your merger needs to be approached with careful planning and consideration.
If you’re trying to navigate your hotel merger, keep reading our short guide.
Navigating UK merger control and regulatory requirements
One of the first things you should be aware of is that mergers in the UK hospitality sector may be subject to the new Digital Markets, Competition and Consumers Act 2024 (DMCCA). Under these new regulations, certain mergers are subject to mandatory notification to the Competition and Markets Authority (CMA).
While you can always submit for review voluntarily, you might want to consult with specialist hospitality lawyers to see if it’s needed or not. Failing to comply with merger control rules can result in significant penalties or fines, so it’s best to seek advice as soon as possible.
Operational, financial, and ESG considerations
Due diligence is critical when managing your hotel merger, especially with regard to your operational, financial, and ESG departments. Before finalising the merger, assess whether there are any outstanding maintenance or health & safety issues, as these could affect guest experience and the overall valuation of the business.
You also want to ensure that the financial aspects have been thoroughly reviewed, as assets, liabilities, and revenue streams will play a core part in ensuring long-term financial stability. We also suggest that you conduct site inspections and review brand alignment, since this can reveal opportunities for improvement.
Cultural integration and stakeholder communications
Perhaps one of the most challenging aspects of any merger is the integration of culture. Every hotel operates differently, and to ensure that services align across sites, there may need to be some significant changes.
To ensure as seamless a transition as possible, you can set up a ‘joint task force’. This team would include members from both sites, and by facilitating the exchange of information and operational techniques, should allow for a smooth guest experience.
Post-merger structure, management agreements, and legal considerations
After the merger, it may be essential to review and renegotiate existing hotel management agreements, including lease terms, franchise contracts, and staff contracts, to reflect the new ownership structure.
Your legal considerations should not be overlooked, as contracts will likely need to be adjusted to align with the new operational goals. By thoroughly reviewing the legal structure, you can ensure your newly merged hotel entity operates efficiently.