• Accor ups target despite cautious outlook

Denis Hennequin, Accor’s replacement for Gilles Pelisson, was able to celebrate moving into the CEO and chairman role last week by increasing the group’s full year Ebit forecast by Eu20m to around Eu440m.

Accor has seen countries including France, Germany and the UK cement their recovery, and the company has made a rapid start to the New Year, selling its stake in Groupe Lucien Barrière and adding 10 hotels to its Mercure brand in the UK. However, observers appear uninspired by the lack of strategic drama at the top. 

Hennequin, who is due to lead the group’s full-year presentation in February, was replaced by CFO Sophie Stabile at the conference call for group’s fourth-quarter update. She said that the first quarter had started with "good" bookings, although "less visibility than last year". She commented: "In 2011, we will be in a mixed situation, with a hotel cycle recovery and a risk in the macro-economic environment particularly for European countries."

Despite the increased Ebit forecast, the company’s shares fell to an eight-month low, part of which could be attributed to profit taking – Accor’s shares have risen 47% since the company span off from Edenred in July. However, full-year sales were slightly below analysts’ hopes, according to a survey by Bloomberg, and 3.5%, or Eu183m, of the 9.8% revenue increase (to Eu5.70bn) was attributed to currency factors, including the weak Euro.

Accor’s shares have in part ridden the increase in general hotel sector fundamentals and, in turn, as comparisons become tougher going into this year as the recovery moves to stabilise, it will start to see growth rates slow.

For Accor specifically, analysts are looking for rapid expansion, with as little capital deployed as possible, combined with a reduction in debt through asset sales. In a research note Morgan Stanley expressed disappointment that the group had not cut its debt further since its interims when it reported it at "around Eu1bn", according to Stabile, in October.

The fourth-quarter update showed that expansion sped up towards the end of the year, as the company opened 84 hotels, out of the full-year total of 214 hotels. For the quarter these openings added Eu15m, or 1.1% to revenue, which was up a total of 11.8% on the year to Eu1.45bn. The need for further growth was underlined by the 2.6% negative impact of the group’s asset-right strategy, which reduced revenue by Eu34m. Stabile said the group was planning to open between 210 and 240 hotels this year.

She added that previous growth in occupancy was now translating into rate increases for the company, with the exception of Spain and Italy. The increase was led by Germany and the UK. In the latter economy hotels saw revpar up by 11%, further encouraging Accor’s plans to make expansion into the sector a key strategy.

Across the estate, room rates were up by 4% in the midscale and upscale segments and flat in economy. The emerging markets reported double-digit like-for-like revenue growth, being "especially robust" in the fourth quarter, with increases of 10.7% in Latin America and 13.5% in the Asia-Pacific region.

Signs of recovery were seen in the group’s beleaguered Motel 6 brand, currently undergoing refurbishment, with occupancy up by 4.5% in the fourth quarter and rates close to flat, with a 0.1% decline. Like-for-like revenue growth stood at 0.7% with a strong 7.2% increase in the fourth quarter, building on the 4.9% rise in the third quarter. Accor said that the brand had opened 58 hotels during the year under franchise contracts, of which 23 were in the fourth quarter.

Analyst’s eyes are now on Hennequin next month, in the hope that he will put other people’s money where Accor’s mouth is and continue to speed up the group’s franchise ambitions.


HA Perspective: It is ridiculously early to expect change at Accor already. By any reasonable measure, a new CEO needs months, arguably at least 12, before implementing radical change. After all, Accor is hardly a stricken ship.

But stock market investors are not typically reasonable and Hennequin will have to throw them something before the year is out. In particular, Colony and Eurazeo need to be kept onside.

Simply carrying on with Pelisson’s previous programme will not be enough. That is not why Pelisson was thrown overboard in favour of Hennequin. A radical new course needs to be charted.

Simply speeding up the Pelisson programme is not a realistic prospect. Hennequin’s task is to find something radical enough to keep his investors content but sensible enough to ensure his ship remains seaworthy. It is going to be some voyage.

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