Growth plans offset European headwinds for AccorHotels
 
Growth plans offset European headwinds for AccorHotels
28 JULY 2016 8:58 AM

France and Brazil continue to trouble performance, but improvements in other markets and a restructuring of existing assets have AccorHotels executives confident in the future.

PARIS—In five years’ time, 30% of AccorHotels’ revenue will come from directions that it does not come from today.

That was the claim from CFO Jean-Jacques Morin during AccorHotels’ 28 July conference call outlining its half-year 2016 earnings. He said success was derived from “ambitious strategies regarding digital and new businesses.”

The majority of the French hotel firm’s pipeline in coming years would be outside of its traditional European core, Morin said.

Jean-Jacques Morin, AccorHotels

Morin said AccorHotels felt bullish despite signs of negativity in its first-half 2016 earnings numbers.

Executives believed several recent developments are key to the firm’s future.

Fresh from $150 million deal to buy luxury concierge-services firm John Paul announced 27 July and the 12 July closing of its $2.9-billion deal for FRHI Holdings, Morin and fellow executives predicted the firm’s full-year earnings before interest and tax would rise to between €670 million ($743.1 million) and €720 million ($798.6 million).

That would mean growth of between 0.7% and 8.27% from 2015’s full-year EBIT tally of €665 million ($737.6 million), with chairman and CEO Sébastien Bazin underlining in the news release that the driver of these good numbers was “considerably improved performance, driven by restructuring” of its ownership division HotelInvest.

On 12 July, AccorHotels made that division a subsidiary, thus opening it up to outside capital to help bolster expansion, with the goal being to “ultimately enable third-party investors to hold the majority of HotelInvest’s capital.”

A steady ship in choppy waters
Bazin said the predictions boded well for the firm, as challenges—continued sluggish performance in France and Brazil, terrorism threats and the United Kingdom’s decision to leave the European Union—still existed.

Like-for-like revenue for the first half of 2016 increased by 2% to approximately €2.6 billion ($2.9 billion), while like-for-like EBIT for the same period fell 4% to €239 million ($265.1 million).

In the first six months of 2016, the hotel firm recorded a record number of 19,366 rooms opening, 90% of which were under franchise or management agreements.

Other key wins for the first half of the year included the buy of luxury serviced-homes provider Onefinestay in April.

Of the two markets that have regularly worried AccorHotels’ executives in the last several reporting periods, France saw revenue decline by 2.6% and revenue per available room fall by 2.2%, with Paris’ RevPAR falling 12%. Brazil saw revenue drop by 5.5%. Executives are also concerned about performance in Belgium, which has also been affected by terrorism.

A silver lining to those results were that the Euro 2016 soccer championships held in June and July helped RevPAR across France rise in the period by 6%. Revenue in the Americas region got a lift from favorable performance in countries like Canada (up 9.7%), Mexico (up 20.6%) and Argentina (up 57.2%).

Morin said French results “did not meet our original expectations … (but) transformation in such countries as Germany and Spain more than offset the declines in France and Belgium.”

Morin said overall he was happy with the results.

“All has been achieved in a complex environment,” Morin said.

Disposals in the first half of 2016, the figures showed, reduced revenue by €143 million ($158.6 million) and growth by 5.2%, while the restructuring of 120 assets, 81 of which were leased, 39 of which were owned, had the “effect of reducing adjusted net debt by €233 million ($258.4 million),” he said.

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