Accor reported a sharp improvement in its 2006 results, with like-for-like growth the strongest since 1998.
The figures further underpin its careful strategy to adjust its business structure to an asset right model that looks set to deliver steady growth.
Operating profit before tax and non-recurring items was up 28.7% to hit a record Eu727m. And net profit jumped over 50% to Eu501m.
Unlike its Anglo-Saxon rivals, Accor is committing Eu3bn of its own capital to growth over the period to 2010. It plans to add 200,000 rooms.
During 2006 22,000 rooms opened. This year 30,000 rooms are set to open and a total pipeline of 77,000 rooms exists.
The Accor plan, however, is not to own hotels. And the further up the segment scale, the less exposure to hotel property Accor wants.
This part of the plan certainly makes sense. Economy hotels in Europe achieved a return on capital employed in 2006 of 19.2%. This contrasts sharply with the 8.7% ROCE achieved by midscale and upscale hotels in Europe.
The 9.0% ROCE of US economy hotels also shows why Accor is seeking to divest its Red Roof chain in that country.
Accor also formally unveiled its new economy brand, All Seasons. This is a non-standardised offering that sits alongside Mercure.
The expansion is to be mainly franchise driven. To date, 19 franchises have been signed. Accor believes there is the potential to open 10,000 rooms in Europe, initially in France, Germany, the UK and Italy by 2010.
By the end of 2009, Accor believes it will have restructured 80% of its hotel base. By 2008, 809 hotels will have been divested since 2005 with a total cash and off-balance sheet impact in excess of Eu5bn.
The company also revealed details of the final tranche of 550 hotels to be sold-off. These comprise 140 Formule 1, 10 Suitehotel, and 400 Motel 6.
The percentage of cash flow from hotels operated under variable leases, management contracts or franchise agreements will have increased from 38% in 2004 to 70% in 2009 (excluding added in the period).
Like its rivals, Accor has ambitious plans for growth. It is ramping up its pipeline from just under 22,000 in 2006, to 32,000 in 2007, then 40,000 in 2008, then 53,000 in 2009 and finally 54,000 in 2010.
It has property company partners in most of its core territories including Fonciere des Murs in France and Belgium; Moor Park in Germany and the Netherlands; Land Securities in the UK; and EMAAR in India. A key attraction is that these partners are bringing available land to enable growth.
The total investment in growth between 2006 and 2010 is Eu2.5bn with a targeted 15% ROCE.