The internationalization of companies constitutes an important commercial strategy in the search for new markets, new projects and opportunities and with this, greater economic growth.
Along with this process, the merger and acquisition between them have become a trend, as a way to achieve greater results, face competition and increase market share. These phenomena are taking place today with greater force in the hotel sector and in any other industry.
This paper aims to analyze these phenomena and delve into the causes that cause them. For this, an analysis is made of the Marriott-Starwood operation that took place in 2015 and that of Barceló-NH, which, although it was not carried out, ratifies the current trend.
Key Words: internationalization of companies, commercial strategy, merger, acquisition, hotel sector.
Abstract
Enterprises' internationalization is a major commercial strategy in the search for new markets, new projects, new opportunities and therefore an economic growth. Alongside with this process, acquisition and merging have become very popular trends as a way of reaching for better results, facing the competition and growing the market share. Nowadays, these phenomenons, are taking place within the hospitality sector with much more strength than ever before and, than any other industry. This paper is intended to analyze these phenomenons and what are the causes for them to happen. In order to do so, the Marriott-Starwood and BarcelóNH operations will be examined.
Key words: enterprises' internationalization, commercial strategy, acquisition, merging, hospitality sector.
In today's society, a series of changes and phenomena have occurred that have as their main causes: globalization, the internationalization of companies, the abundance of products and services, and global connectivity through Information and Communication Technologies. (TICs).
According to Bayón (2014), the internationalization of companies consists of abandoning the natural geographical area in which they have emerged and developed, to start competing in new countries.
The previous concept associates internationalization with the abandonment of the geographical environment in which the company was created, however, in the opinion of this author, companies that internationalize continue to operate within their geographical environment or natural market, but by internationalizing they expand the same to other regions with the aim of obtaining greater benefits; Thus, they respond to the strategic option of expanding markets, considering these due to their geographical limits.
In this way, the internationalization of companies is a commercial strategy that can be defined as the set of activities that the company develops outside the markets that constitute its natural geographic environment. Although this strategy was originally implemented when the exhaustion or full coverage of the national market was reached or expected, at present and, taking into account the characteristics of each economic sector, internationalized companies are already emerging.
The forms of management derived from the process of business internationalization are merger, acquisition and cooperation.
The merger is the combination of two or more businesses or companies, in one, losing the businesses or companies that join or merge with the main company their independent identity, that is, only the main company maintains its name and legal personality, acquiring the rights of the parties that joined it. A merger can occur through the sale of the capital of a company, including property, materials, cash, etc., and may be the payment for these in cash or with shares of the purchasing company. The buyer may decide instead to acquire the shares of the other company, become a holding company, and thereby dissolve the now subsidiary company.
Acquisition: is the action by which one company acquires another, which may be through a sale contract, by receiving it as payment of a debt, or by any other way of acquiring property.
The cooperation includes several modalities: outsourcing or outsourcing, leasing or leasing, franchising, administration contract and Joint Ventures.
Outsourcing or outsourcing consists of the transfer to third parties of certain complementary processes that are not part of the main line of business, allowing the concentration of efforts in essential activities in order to obtain competitiveness and tangible results. It can also be defined as the subcontracting of services that seeks to streamline and economize production processes for the efficient fulfillment of the social objects of institutions, so that companies focus on what is their own.
Leasing is the rental of services to third parties, seeking to reduce costs, take advantage of the expertise of others with the consequent state-of-the-art technology.
The franchise is an agreement with the concessionaire in the foreign market, offering the right to use the manufacturing process, the brand, the patent, the trade secret and other points of value, in exchange for fees and royalties. (Kotler, 2001)
The management contract: seeks to take advantage of the strength and prestige of the hotel chain market, in addition to the know-how they have. Generally, management, marketing and technology are contracted.
Joint Ventures or joint ventures: includes an agreement between two or more parties to contribute resources to a common business.
These resources can be raw material, capital, technology, market knowledge, sales and distribution channels, personnel, financing or products. The partners of a Joint Venture, normally continue to operate their businesses or companies independently from the new joint venture or Joint Venture.
The reasons why companies decide to internationalize can be divided into internal and external. According to (Guerras y Navas, 2007) quoted in (Bayón, 2014).
Among the internal reasons are:
- Costs reduction; cost savings can sometimes occur, as internationalization can offer advantages such as access to cheaper raw materials and labor, as well as tax benefits in countries that decide to internationalize. Search for new resources; the destination country may offer interesting factors for the company that it cannot access in its country of origin, such as natural resources or a specialized work factor. Have an efficient minimum size; because on certain occasions it is difficult to achieve an optimal sales size only using the national market. Exploitation of resources and capacities; this refers to when companies have resources and capacities that are not fully utilized,therefore, internationalization offers the opportunity to use these resources and capacities in the different countries in which you want to operate.
On the other hand, external reasons include:
- Industry life cycle. This happens when the current market reaches its maturity phase, and it is complicated to continue having a growth rate, therefore entering new markets, which are still in the early stages of the process, constitutes an important solution. External demand. Sometimes it may be advisable to go abroad if there is a great potential demand that can be exploited. Consumer guidelines; This refers to the fact of being able to know first-hand the customs and behaviors of the consumer in order to be able to offer products and services that really satisfy their needs and expectations. Globalization of the industry. The existence of increasingly global markets is the main reason for the internationalization of companies.Other reasons such as gaining prestige in the domestic market, being able to compete in a sector where other firms obtain economies of scale worldwide and facing stiff competition in the domestic market or as a reaction to the attack of an international competitor that threatens their position, also they play a significant role in the decision to internationalize.
The main advantages of this process, according to ABC (2014) cited in Bayón (2014) for companies that internationalize, are:
- They become larger than those that do not carry out this strategy. They obtain higher productivity rates and a higher volume of business. They can better face times of economic crisis. They take advantage of opportunities for emerging countries to grow and develop in those markets.
The international nature of the tourism industry has fostered this process in the sector, also supported by being a pioneer in the use of the Internet, electronic commerce and ICTs in general (Rastrollo, 2002; Martin Rojo, 2001; Kahle, 2002).
The internationalization processes exert a considerable influence on the hotel industry, being these one of the precursors of the development of competitive advantages that allow the differentiation in the market of the different brands that intervene in the sector.
The hotel sector is an inseparable part of the tourist activity, being one of its central axes. The increase in complexity and competition in the environment, as well as the dynamic and changing nature of the industry, forces hotel chains to adapt to new circumstances and, together with it, to adopt pertinent strategies for their growth and survival in the long-term market. (Martorell, 2002)
Among the main strategies carried out in the hotel sector in recent years, to face new needs, are acquisitions and mergers, which have accelerated globally, as a way of ensuring the expansion process. National and international; the separation of ownership and management, allowing for more dynamic growth, excellence in management and optimization of resources, mainly those based on knowledge (Martorell, 2002; Ramón Rodríguez, 2002; Proserpio, 2007).
A study carried out by Dunning & Mc Queen (1982) shows that internationalized hotel chains usually operate with better quality standards than local chains, because they are bigger, more diversified and experienced and manage to penetrate new markets more easily. This is because these chains already have a more developed structure and, in turn, built a set of intangible resources and logistical aspects that can be made available to new units that are incorporated into them. Despite the criticisms related to the fact that in the cases of Joint Ventures, mergers and acquisitions the paradigm is not valid, Dunning himself reviews it and adapts it to the existing consequences on him in certain alliances.The author assigns a more dynamic character to the paradigm within the framework of the determinants of international production (Ramón Rodríguez, 2002).
The author, for his part, considers it important to specify, within intangible resources, the business know-how related to Marketing or Commercialization from his strategic scope. Although, globalization processes have identified transversal segments, that is, whose characteristics are not related to areas or countries; Internationalization requires avoiding commercial risks, with the consequent economic losses, on the one hand, the knowledge of consumers in new markets and, on the other, the ability to modify the product according to their tastes and preferences.
The following table shows the most important hotel chains in the world in terms of number of hotels and number of rooms in 2016. In this way, a comparison can be made of their production volume, as well as their market share. once they merge.
Table 1: World's main hotel chains by number of rooms and hotels in 2016.
| Global position | Hotel chains | country | Number of hotels | Number of rooms |
| one | Marriott International | U.S | 5952 | 1164668 |
| two | Hilton Worldwide | U.S | 4875 | 796440 |
| 3 | IHG | UK | 5174 | 767135 |
| 4 | Wyndham Hotel Group | U.S | 8035 | 697607 |
| 5 | Shanghai Jin Jiang International Hote Group Co. | China | 5977 | 602350 |
| 6 | Accor Hotels | France | 4144 | 583161 |
| 7 | Choice Hotels International Inc. | U.S | 6514 | 516122 |
| 8 | BTG Homeinns Hotels Group | China | 3402 | 373560 |
| 9 | China Lodging Group | China | 3269 | 331347 |
| 10 | Best Western International | U.S | 3677 | 293059 |
| eleven | HNA Hospitality Group | China | 1385 | 228948 |
| 12 | Hyatt Hotels Corp. | U.S | 657 | 177118 |
| 13 | GreenTree Inns Hotel Management Group | China | 2100 | 173053 |
| 14 | G6 Hospitality | U.S | 1395 | 125017 |
| fifteen | Magnuson Hotels | U.S | 1274 | 103306 |
| 16 | Meliá Hotels International | Spain | 376 | 96355 |
| 17 | Westmont Hospitality Group | U.S | 787 | 91564 |
| 18 | La Quinta Inns and Suites | U.S | 888 | 87283 |
| 19 | Interstate Hotels & Resorts | U.S | 425 | 76247 |
| twenty | Vienna Hotels Group | China | 464 | 73534 |
| twenty-one | RLHC (Red Lion Hotels Corporation) | U.S | 1137 | 72657 |
| 22 | Qingdao Sunmel Group Co. | China | 1313 | 72408 |
| 2. 3 | Dossen International Group | China | 795 | 70865 |
| 24 | Aimbridge Hospitality | U.S | 500 | 70000 |
| 25 | Whitbread | UK | 752 | 69645 |
| 26 | Extended Stay Hotels | U.S | 629 | 69000 |
| 27 | New Century Hotels and Resorts | China | 232 | 60014 |
| 28 | NH Hotel Group | Spain | 379 | 58472 |
| 29 | APA Group | Japan | 361 | 56734 |
| 30 | Toyoko Inn Co. | Japan | 255 | 50510 |
Source: Hosteltur (2016)
As can be seen, Marriott, after the purchase of Starwood, is positioned at number one in the world ranking taking into account the number of hotels and rooms. With the implementation of this strategy, the US hotel group added a total of 5,952 hotels and 1,164,668 rooms worldwide in 2016.
As mentioned above, one of the trends that is most evident in hospitality is the acquisition and merger between large corporations. Proof of this was the case of the Marriott-Starwood operation:
The purchase of Starwood Hotels by Marriott, thus creating the largest hotel group in the world, caused a stir in the sector. Experts agree in pointing out, with due caution, that as a result of this fact, new merger operations will begin to be carried out, confirming the often-announced trend of consolidation within the hotel industry.
These operations correspond to the fact that other hotel groups, especially the most prominent competitors, will try to match the colossal size of the organization formed by Marriott International and Starwood Hotels & Resorts Worldwide.
Some authors allude to the fact that for several years they have been talking about the consolidation of the main brands in the sector, which is why the boards of directors are insisting on the need to carry out mergers to be more cost-efficient.
The entity's international reach resulting from this merger will allow it to develop customer-focused technologies, which would be difficult to finance for other firms.
With this operation, Marriott sought to gain weight and size against alternative competitors; considerably increase the number of rooms that it brought together in its management and, from a geographical point of view, penetrate other markets; Because while Marriott has a greater presence in the United States (77%), Starwood's offer is more diversified by region and country (45% in the United States, 55% distributed among 100), where, in many of them, Marriot was not present or had a very small presence. Furthermore, this operation allowed Marriott to incorporate well-known brands into its portfolio, which complement its own. Among those brands are:
Luxury: W HOTELS WORLDWIDE, THE LUXURY COLLECTION HOTELS & RESORTS, ST. REGIS.
Upper upscale: Sheraton, WESTIN HOTELS & RESORTS, Le MERIDIEN. Upscale: FOUR POINTS BY SHERATON, ALOFT, ELEMENT.
It is evident that the process of internationalization that is currently taking place in the tourism industry is tending towards the development of consolidations through mergers and acquisitions because the product of the large hotel corporations has reached a certain stage in their life cycle in which they are It is pertinent to adopt this type of strategy to relaunch or reactivate them and thus take them to other countries where there was no presence of it and it is pertinent for them to further extend their sales frameworks so that their offer does not remain stagnant. In addition, this process also takes place because, as in the case of the Marriott-Starwood alliance, which are one of the most prestigious hotel brands worldwide, and which now represent the largest union within the hotel industry, they develop cost advantages or economies of scale.,since they have all the know-how proven worldwide and are accepted and highly recognized by the national and international market. The example also shows the great weight that the location of the companies has to capture a greater market share, since with the acquisition or merger these corporations no longer have subsidiaries only in the United States, but also throughout the world.
Currently, there are corporate operations in various stages involving hotels. A clear example of this was the recent proposal by the Barceló group to the Spanish hotel chain NH to merge at the end of 2017.
Table 1 shows how NH is among the top 30 hotel chains in the world and the second in Spain after Meliá. According to data from Hosteltur (2017) NH has a total of 379 hotels, of which 133 are in Spanish territory, while Barceló has 229 hotels, of which 58 are in Spain.
With the merger between these two Spanish hotel companies they would add a total of 109,162 rooms, surpassing the Spanish giant Meliá with only 80,305 rooms. (Hosteltur, 2017)
For the merger, the Barceló group proposed to NH the sum of 2,480 million euros, at a price of 7.08 euros per share, which represents a 27% premium over the average price of the last three months prior to October 30, back then 5.56 euros. However, Barceló made clear his interest in controlling 60% of the company resulting from the merger between the two.
On January 10, 2018, NH rejected Barceló's offer. For this, the hotel group is based on the facts that Barceló's valuation of the company at 2,480 million is insufficient, in addition to the exchange ratio that would give Barceló 60% of the capital of the new company. Likewise, the offer did not take into account the new growth projects planned by the NH group, as well as the growth in its economic results.
The Mallorcan hotel group Barceló hoped, with this operation, to face competition both in Spain and abroad, as well as diversify its product; because while it has a greater deployment in Sol y Playa destinations and is mainly oriented towards a vacation segment, NH has a greater presence in the main cities with a product that is mainly focused on culture. It was expected that the NH group would reject the offer made by Barceló, being the first of these better positioned and diversified, both nationally and globally.
Despite this event, NH claims to be open to new proposals that actually take into account its real value and growth potential. This statement leaves the doors of a future negotiation with other Spanish hotel chains ajar.
This would be an important opportunity for chains like Meliá, who plays an important role in the hospitality sector and leads the Spanish market. In this way, it could add to its management an approximate of 155,031 rooms in 755 hotels. It will only wait.
The previous elements demonstrate the constant efforts made by large corporations to develop competitive advantages that allow them to maintain their position in the market.
Internationalization is one of the expansion alternatives of the company when it takes into account non-national scenarios for the development of its markets, the international strategy is an integral part of the general competitive strategy. In addition, business internationalization processes are one of the strongest ways to develop competitive advantages. This, in turn, brings benefits, fundamentally economic-financial, for those companies that decide to undertake this strategic process that sometimes becomes almost obligatory for large companies and organizations that dominate the world in its various branches.
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