• Accor raises guidance, but remains cautious

Accor has raised its full-year Ebit guidance by Eu30m to up to Eu420m, after seeing growth accelerate in the third quarter.

The group has seen rates in the upscale and midscale segments in the main European markets of the UK, Germany and France improve by 2.5% while occupancy rates continued to rise, up 5.9%. The group's upscale brands, Sofitel and Pullman, led the march. However, concerns over future visibility continued to give the group pause.

CEO Gilles Pélisson told a conference call: "Continuing the pattern established in the first two quarters, the upscale and midscale segment outperformed the economy segment excluding the US, which had demonstrated greater resilience during the recession."

France, the group's biggest market, saw a 3.6% increase in rates for its upscale and midscale hotels the first increase since the start of the year. The upscale segment saw occupancy rates up 7.9 points and average room rates up 4.5%.

Pélisson said: "We have rather good visibility over the fourth quarter, with most European countries on good trend," however, added that he was "cautious" about next year, because of austerity measures in Europe and the length of time still being taken by clients to make reservations, with individuals booking an average of eight to 10 days ahead and meetings and conventions between 40 and 45 days.

The group's US economy hotels, a weak spot for the company, saw growth, with revenue up 4.9% mainly attributable to improved occupancy rates. In an economic environment still weakened by the recession, the group said that Motel 6 had gained additional market share and reported revpar up 5.3%, the first increase since the fourth quarter of 2007.

In the economy segment as a whole, revenue was up 8.2% in the third quarter. Revenue growth was led primarily by improved occupancy rates to nearly 75% in Europe. Average prices stabilised particularly in France and in the United Kingdom, or rose, notably in Germany. Overall the segment saw a 0.5% rate fall for the quarter.

Echoing results seen throughout the sector, third-quarter revenue growth was also led by strong advances in emerging markets, with gains of 21.7% in Latin America (versus 17.7% in the first half) and 17.9% in the Asia-Pacific region (versus 13.5% in the first half). 

Despite the results, Pélisson said that he remained uncertain over the quality of the economic climate in the US, commenting: "To be honest, I don't have any strong sign of a strong recovery in the US."

The group is to continue to pursue its asset-right strategy, despite the impact on revenue. For the third quarter the opening of 37 hotels added Eu21m to revenue, with a 1.5% positive impact. In all, the group plans to open 200 new hotels in 2010.

During the period the group announced the sale and variable leaseback of 48 hotels in France, Belgium and Germany for Eu367m.  The cash impact of the deal will amount to Eu282m, allowing Accor to reduce its adjusted net debt by the same amount in 2010. In addition, around Eu3m a year will be added to operating profit before tax.

In the third quarter the asset-right strategy was calculated to have had a 3.4% negative impact, reducing third-quarter revenue by Eu47m. The group did, however, benefit from a 4.3% positive currency effect, which increased revenue by Eu58m.

As part of its ongoing debt-reduction plan, which sees it plan to cut adjusted net debt by Eu2bn by 2013, the group had been planning to sell its 49% stake in the casino operator Groupe Lucien Barriere. However, the IPO, which would have raised around Eu298m for Accor, was cancelled due to a lack of investor interest. Accor confirmed its intention to divest this non-strategic asset at a later date.

Following the withdrawal of the offer, Accor's credit ratings were reviewed by Fitch and Standard & Poor's. Fitch affirmed its BBB- rating and changed the outlook from stable to negative, while Standard & Poor's affirmed its BBB- rating and placed Accor on CreditWatch negative.


HA Perspective: The cancelled IPO of Lucien Barriere is a blot on an otherwise good year for Accor. But Accor remains intent on divesting its holding in this and other non-core businesses. And in any case the better than expected recovery is bolstering its credit rating.

But if this recovery falters – as many forecast given the fiscal squeeze being imposed by many governments in Europe – Accor will face a more torrid time. Whether this will force a rethink on strategy depends on how badly the recovery weakens.

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