Accor revenue up, but guidance narrowed on Asia tension
 
Accor revenue up, but guidance narrowed on Asia tension
21 OCTOBER 2019 7:36 AM

Accor saw steady if not spectacular performance results in third quarter but slightly narrowed its guidance for the full year, mostly due to continuing political and economic turmoil in China and Hong Kong.

PARIS—French hotel firm Accor slightly narrowed its 2019 guidance for earnings before interest, tax, depreciation and amortization following hotel performance declines in some of its Asia/Pacific markets in the third quarter.

Accor’s prior full-year EBIDTA guidance was between €820 million ($915 million) and €850 million ($948 million), but on Thursday, executives lowered the high end of the range to €840 million ($937 million).

In an earnings call outlining Accor’s third-quarter 2019 results, CFO and deputy CEO Jean-Jacques Morin told analysts that the firm’s asset-light model and strong pipeline filled by “powerful brand” equity was largely offsetting challenges, especially in the Asia/Pacific region with trade tariffs between the U.S. and China and ongoing protests in Hong Kong.

“Asia/Pacific is a challenge,” Morin said. “Our system continues to grow steadily. … Our performance was fueled by strong equity.”

Accor’s global RevPAR only increased 0.7% year over year in the third quarter, and political and economic tension in the Asia/Pacific region resulted in a 1.1% RevPAR decline. Revenue per available room in Hong Kong dropped 32% year over year, Morin said.

He added Australia still has not improved, and with China being the country’s largest trading partner, pressure will continue. But Morin said Accor still beat out its competitors in the market.

The disposal of Accor’s Polish assets via its Orbis SA division is well on its way to completion, which, Morin added, will allow more cash to be deployed and returned to shareholders.

Morin said marketing and discussions with investors in regards to Accor’s recent acquisitions of the Mantra and Mövenpick brands have continued, with the notion real estate sales would soon be made.“Becoming an asset-light operator is key for us,” Morin said.

He also noted that currency exchange rates have helped the firm’s overall numbers.

In the earnings release, Accor’s CEO and chairman Sébastien Bazin said the firm’s “third-quarter performance was solid.” Reported Q3 revenue increased year over year by 10.9% (+4.1% like for like) to €1.05 billion ($1.2 billion).

With the exception of the Asia/Pacific region, most of Accor’s other geographical regions and markets displayed RevPAR increases.

Its home market, France, continues to bounce back, posting a 2.3% RevPAR increase, although that was much slower growth from Q3 2018 when RevPAR rose 8.3%. Germany is down (RevPAR -4.6%) due to 2019, unlike 2020, not having a robust events calendar, the release said.

London continues to grow RevPAR (+1.6%) for the company, although the United Kingdom provinces posted a 0.9% decrease. Spain showed an increase of 9% in RevPAR, an improvement the company attributes to the finalization of renovations at two Barcelona properties, the Fairmont and Pullman. But Morin mentioned renewed political tension in Spain following the sentences announced this month for political leaders involved in calls for Catalonia’s independence in 2017.

The Americas, Middle East and Africa also showed RevPAR increases. Morin said that in the MEA region “occupancy rates continued to increase thanks to an appropriate pricing policy.”

One boon is South America, where RevPAR rose 13.8%, Morin said, fueled by good trading in Brazil where “(average daily rate is) able to be pushed due to low supply.”

Accor’s network size continues to grow, Morin said, with the firm opening 60 hotels in the quarter with approximately 8,500 rooms. Its pipeline as of the end of Q3 consists of 1,181 hotels with approximately 205,000 rooms.

“We are on track to reach 5,000 hotels by the end of the year, a net growth of 5% for the network, and there will be some significant openings in (the fourth quarter),” Morin said.

Accor’s new business division showed revenue up 3.9% in like-for-like terms.

Bazin’s take
Interviewed by Bloomberg TV on the same day as the Q3 results were published Thursday, Bazin acknowledged pressures in Greater China.

“(It is) pretty devastating. … Hong Kong for us over the last two quarters is down 40, China is down 6%,” Bazin told Bloomberg, adding that other Southeast Asian markets were up and the company was sufficiently diversified to weather the storm.

“Be patient, as people remember when you were there in the bad times,” Bazin said. “(Greater China) may be difficult in the next couple of years, but that does not matter. It is in the downturn where you make the best decisions.”

Bazin said potentially Germany is the biggest headwind, as it is export-driven, but he added it had no debt and as the major European economy for quite some while, it should never be written off.

But Bazin was upbeat about both global travel and Accor’s part in it.

“Whatever you don’t control, don’t stress over it … in the hotel industry, every quarter I have a bad environment in one place and a good environment someplace else. It was very bad in Brazil a couple of years ago, and it is very good in Brazil today,” he said.

“As complex as the world is, as messy as it is, we’ve never seen so many international travelers, (1.5 billion) today, a couple of billion in five years, so don’t you worry about it, they don’t go to countries, they don’t go to countries because of geopolitical environment, but they do elsewhere,” he added.

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