Europe assets: AccorHotels’ and Hyatt’s 2017 strategies
 
Europe assets: AccorHotels’ and Hyatt’s 2017 strategies
04 APRIL 2017 8:03 AM

AccorHotels and Hyatt Hotels Corporation have Europe as a top priority in 2017. An AccorHotels executive gave an update on the company’s AccorInvest division while a Hyatt official highlighted Hyatt Place as the front-runner to lead the company’s Europe development.

Editor’s note: This is the second of a two-part series on major hotel brand development in Europe. Four of the world’s largest hotel companies—Hilton, InterContinental Hotels Group, AccorHotels and Hyatt Hotels Corporation—have big plans for the continent. This article covers AccorHotels and Hyatt. To read Monday’s story on Hilton and IHG, click here.

REPORT FROM EUROPE—AccorHotels and Hyatt Hotels Corporation are focused on widening their footprints in Europe, but in 2017 both global hotel companies have different strategies to reach that goal.

AccorHotels has revised its asset strategy as the French company continues to invest in other aspects of the hospitality industry. Hyatt, like competitors Hilton and InterContinental Hotels Group, will rely on its select-service portfolio and notably its Hyatt Place brand to grow its presence in Europe.

Executives from both AccorHotels and Hyatt gave an update on their plans for Europe in the coming year.

AccorHotels’ new asset strategy
AccorHotels started 2016 with yet another display of 180-degree acrobatics. After three years since reversing its asset-light structure, the company has returned to the strategy, albeit with some remaining control.

During a February conference call to discuss AccorHotels’ full-year 2016 results, CEO Sébastien Bazin announced a decision to move all of the company’s owned HotelInvest assets into a new holding company, AccorInvest, which will be based in Luxembourg.

Bazin also said AccorHotels would likely keep about a third of the stock in the new vehicle.

“Accor will retain 30% to 33%,” he said. “That is my gut feeling of how much shares we will retain. My investors want Accor to have skin in the game.”

Does this now make HotelInvest a more fragile entity?

John Ozinga, COO of HotelInvest, said that is far from the case. All of its owned assets were shifted—with the exception of its portfolio of Orbis properties—in Eastern Europe.

“The first step for AccorInvest will be about the assets and the people, while the second step will be when we open it up to capital, to attract investors interested in a seven-to-10-year horizon,” Ozinga said. “The beauty of the move is that once (HotelInvest and AccorInvest) have gone their separate ways, AccorHotels will be able to use its balance sheet to increase capital expenditure, share value and profits, all of which now are hampered by our debt profile.”

AccorHotels will now seek leveraged debt and equity for AccorInvest, with the holding company not directly owning any assets. Ozinga said ownership will exist in individual, single-country investment teams.

“It makes a lot of sense,” Ozinga said, “as it enhances traffic flow and value.”

HotelInvest will continue to add to AccorInvest’s portfolio, Ozinga added.

“In the next three years we plan on increasing its gross asset value to €10 billion ($10.7 billion). Today it is €6.6 billion ($7 billion),” he said.

What Hyatt Place can offer Europe
Hyatt Hotels Corporation’s momentum is growing in Europe thanks to its select-service portfolio, namely via its Hyatt Place brand, according to Peter Norman, SVP of acquisitions and development. The company maintains ownership of between 13% and 16% of its global portfolio, Norman said.

Hyatt has moved into franchising in Europe, especially with hotel management companies, and while Norman said he could not pinpoint where Hyatt would be in five years in terms of its franchise footprint in the continent, he added while “it would not necessarily be slow, we’re also not forcing the pace.”

“Hyatt grew up in full-service, upscale, luxury, but Hyatt Place grew out of AmeriSuites,” Norman said, speaking of the North American chain Hyatt bought in 2004.

What excites Norman about Hyatt’s European goals is the brand recognition of Hyatt that he said has grown quickly and organically.

“Our unprompted brand awareness in Europe is high,” he said. “We’re already part of the domestic demand. We look to be in exciting neighborhoods and have no problem being next to an Ace or Hoxton hotel.”

Norman described Hyatt as “quick to market and inventive in deals.”

“Our business model depends on the deal structure, which has to relate to the individual investor,” Norman said. “In the United Kingdom, we are seeing a lot of private equity.”

The success of Hyatt’s policy derives from the amount of time being spent on research and due diligence, Norman said.

“No site is ever chosen without the return on investment numbers being right,” he said. “This comes down right through from the macro to the micro. That might mean fewer deals, but it works in the long term.”

Hyatt’s research has shown the Hyatt Centric brand can have a more efficient footprint in urban sites, Norman said, while its extended-stay Hyatt House product chooses its destinations carefully and thus will not enter as many European markets.

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