AccorHotels to divest stake in assets with new platform
 
AccorHotels to divest stake in assets with new platform
22 FEBRUARY 2017 10:29 AM

AccorHotels executives said the time is ripe to divest its HotelInvest ownership platform as the company enjoys record-strong earnings performance, and there is a plan in place to attract outside investors while retaining some ownership stakes. 

PARIS—AccorHotels laid out what is essentially another reinvention of its business at a time where the company has been eager to pioneer change.

Sébastien Bazin, AccorHotels’ chairman and CEO, shared details of the company’s new ownership platform project, once called Booster but now referred to as Accor Invest, at an analyst conference announcing the company’s full-year 2016 results.

The goal of the project, which Bazin said could launch this summer, is to move 430 of the 1,100 assets held in the company’s HotelInvest portfolio, allowing AccorHotels to divest at least a portion of their ownership in those hotels.

“It will bring in some €4 billion ($4.23 billion) in revenue, but once (Accor Invest and HotelInvest) become two separate groups … the reinstated assets will have the effect of increasing asset values and EBITDA,” Bazin said.

Bazin said the plan for Accor Invest is to create a separate platform outside of AccorHotels for some of the company’s currently owned assets. AccorHotels will remain majority shareholder in the platform, but the goal is to attract institutional and other investors, to raise approximately €4 billion ($4.2 billion) in revenue through asset sales.

No mention was made of where any new capital would be placed.

Bazin said the name given to the new entity, Accor Invest, was carefully chosen and reflects AccorHotels’ commitment to the platform.

“We will remain the biggest shareholder for a very long time, I expect,” he said.

The assets of the project will be held in a Luxembourg-based holding company and consist of approximately €6.6 billion ($6.9 billion) of owned hotels, but it will not include wholly owned hotels in its existing, listed Orbis platform, Bazin said.

Bazin said this project is the result of many months’ worth of effort.

“We’ve been working over the last 15 months on legal, accounting and fiscal aspects, to make it watertight and transparent. Nothing is to the detriment on anyone else. We said we would take on €2 billion ($2.1 billion) in new debt, and another €1.5 billion ($1.6 billion) in an additional facility that comprises three components, €500m ($525.9 million) to accelerate capital expenditure, €500 million for the acquisition of further leased assets and another €500m to develop and build greenfield projects,” Bazin said.

Bazin said the value of the properties remaining in HotelInvest is likely to rise dramatically by the end of its first phase.

“By 2021, I hope around €10 billion ($10.5 billion),” Bazin said.

“There is no risk-taking we cannot control,” he said. “Accor will retain 30% to 33%. That is my gut feeling of how much shares we will retain. My investors want Accor to have skin in the game.”

Bazin said Accor Invest would not be controlled by AccorHotels but it would remain very close to it as the largest shareholder.

Bazin was forthright as to what it would cost investors to join the entity.

“The minimum entry ticket is €200 million ($210.4 million),” Bazin said.

He would not go into much detail on that point for competitive reasons.

“In the next few weeks, the situation will become a little more tense, so I will say as little as possible today so as not to weaken the group’s hand. I can say more when I have the money,” Bazin said.

2016 performance
Bazin shared highlights from the company’s 2016 performance, and said the group is moving ahead with confidence.

Full-year 2016 numbers showed record earnings before interest and taxes of €696 million ($732.1 million), a 12.4% increase from 2015, despite French contribution to that number again falling, to, Bazin said, between 22% to 23% of the total.

“No one likes to see France there,” Bazin said, who added the EBIT number was above guidance, also a record margin and that, despite challenges, France, Germany and the United Kingdom contributed more than 50% of it.

Jean-Jacques Morin, AccorHotels’ CFO, said the EBIT record margin reflected sound operating resilience and the group’s digital efforts.

Bazin said the goal was to double earnings before interest, tax, depreciation and amortization over the next five years.

An announced dividend, to be voted on 5 May, will amount to €1.05 per share ($1.10) and a total of €299 million ($314.3 million) handed back to shareholders.

Yet more change
When Bazin took charge of AccorHotels in August 2013, it did not take him long to split the firm into two components, HotelServices and HotelInvest.

The latter division resulted in AccorHotels becoming one of the only major hotel companies to be, if not asset-heavy, at least asset-balanced, while todays changed moved it into a more asset-flexibile position.

Bazin outlined other changes as well:

He said the three verticals of the “new look” company would be its hotel business, its initiatives in the overall travel space, such as private rental activity, and plans to increase the scope of what he called community services.

In terms of community involvement, Bazin said AccorHotels needed to take a leaf from Facebook’s book.

“Facebook has interaction with its clients six or seven times a day. I have that pleasure three to five times a year, so how can I increase that? I am open 24/7 and have 240,000 people, so what can I do to improve the lives of citizens and the increased numbers of travelers?” Bazin said.

He said initiatives could be around F&B, dry cleaning, leaving luggage, recovering or dropping off rental cars, holding keys, and other services.

“That revenue that can grow 20% to 30% a year, while on my properties that is 4%, 5%,” Bazin said.

Segment expansion
Bazin and Morin underlined the fact that AccorHotels is now present in several segments and areas it was not 12 months ago.

“Luxury … lifestyle, boutique hotels, which appeal to the young, and also some not so young, nonconformists, those off the beaten track,” Bazin said.

“We need to diversify out of hotels, not that we do not like hotels, we love hotels, but our customers and colleagues want something different, so this is why in private rentals we’re within 12 months (of becoming) the world leader,” he said.

The CEO added AccorHotels had also become a leader in the luxury segment.

“We’ve been asked legitimately if Accor had the culture to do luxury. Well, we have not lost a single contract (from the FRHI Holdings buy) and within barely seven months we have signed 20 new contracts, more than they had signed in the last two years,” Bazin said.

Morin said the 2016 full-year EBIT margin contributed from the FRHI buy equalled 15.5% of the total.

Other wins announced were the 910 hotels in its signed pipeline, a record according to Bazin, and the approximately 70 million H-World loyalty members from its joint venture and buy into Chinese firm Huazhu, which would take AccorHotels’ overall loyalty membership to 106 million.

“No one will be taking over market share from Accor in Europe. … Where we have great rollout ability is Asia-Pacific….Myanmar, Vietnam, India, that’s where we’re going. It’s a good time to invest in Brazil, even if we do not know if it will take two, three, four years to show. It can be difficult to know when to invest, but we have, in Colombia, in Chile, for example,” Bazin added.

Sharing the company’s overall performance numbers, Morin said revenue on a like-to-like basis increased 2.2% to €5.6 billion ($5.9 billion) and better and faster integration of recent acquisitions would see €45 million ($47.3 million) in synergies in 2017 and €55 million ($57.8 million) and €65 million ($68.3 million) in 2018 and 2019, respectively.

Morin also said revenue per available room increased overall by 1.1%.

No mention was made, either during the presentation or Q&A, of yesterday’s announcement that former French president Nicolas Sarkozy had joined AccorHotels’ board as head of international strategy, or that Colony Capital, from whence Bazin came and that has invested in AccorHotels since 2005, last week sold its 4.9% stake in the hotel firm.

As of press time, AccorHotels’ stock was up 9% year to date on the Euronext Stock Exchange. The Hotel Stock Index is up 17.6% over the same period.

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