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Growth in Accor’s sights, but CEO not visible
August 28 2013

Continued savings, online booking services and expenditure-consolidation will drive future buoyancy, Accor executives said, despite providing little comment on Sébastien Bazin, its new CEO.

Highlights
  • Small profit for 2012-2013, in contrast to substantial loss in 2011-2012.
  • New CEO available for comment later in year, not now.
  • Managed and franchised hotels result in EBIT margin of 53%.
     

PARIS—Cost management, continued expansion in emerging markets, further investment in online booking services and an effective asset and finance department to contribute savings were the key points emerging from Accor’s 28 August 2013 interim results conference call.

But what was not said generated noise—namely the 27 August announcement of the company’s new chairman and chief executive officer, Sébastien Bazin.

Executives dodged numerous questions from analysts regarding Bazin. The most solid news came from Global CFO Sophie Stabile, who hosted the conference call. She said “all strategic plans were still in place,” and Bazin was not available on the call but would be available for comment by the end of the year.

Analyst Ian Rennardson from Jefferies asked whether it was suitable for Accor to provide more comment on the new CEO, given Bazin’s likely role in driving the strategic direction of the company. But Stabile still declined.

Fellow analyst Tangi Le Liboux of Aurel BGC said he believed Stabile was too brief concerning her comments on operating profit outlook for 2013. Other analysts suggested they thought Bazin’s tenure would see Accor continue to move toward an asset-light model aimed to cut debt and boost profit margins.

In Accor’s latest posted numbers, managed and franchised hotels resulted in earnings before interest and taxes figures of €175 million ($234 million), an increase of €8 million ($10.7 million) year-on-year and an EBIT margin of 53%. Owned and leased hotels in Accor’s portfolio posted an EBIT margin of 3.1%.

Overall, Paris-based Accor showed net profits of €34 million ($45 million) for the first half of the year—a marked improvement on the loss of €532 million ($711 million) for the first half of 2012—which Stabile attributed to the group’s sale of its Motel 6 holdings.

An analyst from Morgan Stanley asked if the company was on target for its 2013 hotel debt restructuring target of 200 properties, considering only 24 have been completed during the first half. Stabile downplayed the issue, saying the 24 hotels—13 of which are leased hotels, 11 owned—would help reduce adjusted net debt by €184 million ($246 million) to an adjusted net debt of €248 million ($331 million).

Continued European economic woes, Stabile added, were mostly responsible for a 6.4% decline in operating profit, although she expected this summer’s healthy sales to continue through the rest of the year. Overall operating profit for 2013 is expected to be between €510 million and €530 million ($682 million to $708 million). Operating profit in 2012 was nearly the same, at €526 million ($703 million).

Revenue for the first half of 2013 rose 1.8% to €2.7 billion ($3.6 billion). Europe is responsible for more than 70% of Accor revenue, Stabile said, adding that the company is “more exposed to its ailing economy than larger rivals (InterContinental Hotels Group), (Marriott International) and (Starwood Hotels & Resorts Worldwide).”

Accor’s targets up to 2016 have not altered with the CEO transition, she added, although she did not mention Bazin by name.

Emerging markets
Cutting costs and pushing forward expansion in emerging markets are key elements for 2013 and 2014, Stabile said. 

Africa, Latin America and Asia/Pacific remained central to this expansion, she added, despite Australia’s mining region, with 10 mostly economy hotels posting a decline due to a dip in Chinese business in the area. Revenue per available room in Asia/Pacific was up 8.9%, while it increased in Latin America by 5.9%.

Stabile said executives were confident in Accor’s business position, with expenditure-consolidation plans—including strategic initiatives in distribution and loyalty programs in line with its digital plan, the continued rolling out of its new asset and investments department and its €100-million ($134-million) savings plan—increasingly adding to positive future results in the third and fourth quarter.

Expansion plans have not been altered by the arrival of Bazin, Stabile said. Accor had “117,700 rooms in the pipeline as of 30 June 2013, of which 84% (are) under management and franchise contracts, 50% in the Asia/Pacific region and 47% in the Ibis family.”

In a June conference call, Stabile said during the first half of the year that Accor opened 77 hotels (9,940 rooms), 80% of which were franchised or managed and that the “58% of the company’s portfolio of 4,200-plus hotels (fit) into its asset-light strategy.”

More on Bazin
In a press release issued Tuesday marking his arrival, Bazin was quoted as saying he wanted to “find the boldness, dynamism and desire which (Accor) has always been led by.”

He arrived from Colony Capital, Accor’s largest shareholder, where his experience includes investment banking, high-end hotel development—including the buyout of the Fairmont and Raffles chains—and acquisitions in hotel groups such as Lucien Barrière Group, La Générale des Eaux, Club Méditerranée and Accor.

On 23 April, former chairman and CEO Denis Hennequin ended his tenure with the company, voicing reservations regarding Accor’s ongoing strategy. On the same day, Bazin was named to the Accor board as vice chairman. Yann Caillère, Bazin’s predecessor and former president and chief operating officer, became interim CEO.

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