• Accor CEO’s debut lacks surprises

With Gabriele Burgio's replacement still unpacking his desk, Accor's new CEO Denis Hennequin was eager to prove to his shareholders that he was ready to hit the ground running at his first results presentation.

After predecessor Gilles Pélisson's departure over "strategic divergences" Hennequin showed that his strategy was in line with the rest of the board as he revealed an acceleration of the company's expansion and asset sales.

"Our objective will be to accelerate the execution of our strategy," he told analysts, with franchising key to the group's expansion. He added: "We want to turn Accor into a global leader in franchises, notably in Europe". The group's growth plan calls for the addition of 101,000 rooms by 2014, 42% of which will be in Asia-Pacific and 32% in Europe, 75% of which will be management contracts and franchises.

The second part of the group's strategy will see a speeding up of its asset disposals, which is helping it pay down debt. Accor has already completed almost one third of the Eu2bn asset disposal plan in place for 2010 to 2013 and has increased its target for sales to Eu1.2bn by the end of 2012, up from Eu800m previously.

The latest hotel to be identified for sale is the 480-room Hotel Novotel north of Times Square in New York, with one of the sale conditions being for the buyer to keep Accor on at the site under a management contract.

Accor, which owns the Sofitel Luxury Hotels and Motel 6 brands, among others, aims to sell the Novotel, at 226 W. 52nd St., as part of its strategy to shed real estate and instead focus on managing and branding hotels. A buyer of the Times Square property will be required to keep Accor as the hotel's long-term manager, an Accor spokeswoman said.

At the full-year results, the group said that net debt had fallen Eu234m to Eu730m, compared to Eu964m at its interims. In a note, Morgan Stanley said that the figure was beneath its estimates of Eu902m. The figure is expected to fall to close to zero by the end of the year. The group ended the year with total debt/Ebitda of 2.1 times, compared to 3.9 times at the end of 2009.

Guillaume Rascoussier, an analyst at Oddo & Cie, said in a note: "Hennequin's experience is exactly what Accor needs to turn the group into a cash cow. He is better positioned than his predecessor to manage Accor's move from leased to franchise hotels. The biggest change needs to be made inside the company, which isn't experienced in promoting and attracting franchisees."

However, there had been expectations of the group returning cash as a result of the sale of the company's Lucien Barriere sale, with Rascoussier describing this as "short-term disappointment".

Operationally, the group has seen its position strengthen, with hotels revenue up by 7.4% like-for-like, to Eu5.69bn, helped by sustained growth that gained momentum in the second half in Europe. The results also reflected improvements in the emerging markets of Asia and Latin America.

FD Sophie Stabile said that the company expected the hotel sector recovery to continue this year, driven in the main from rising occupancy and with some improvement expected in room rates. She added that, in regions where the turnaround had been slower, such as Italy, Spain, the Middle East and Africa, trading would likely remain "difficult".

In the upscale and midscale segment, revenue increased 10.1%, and the growth was 11.1% in economy hotels, excluding the US, where Motel 6's revenue rose 3.8% led by an increase in revpar. The company said that average room rates were improving in upscale and midscale hotels and "gradually stabilising" at economy level, with "strong growth" in emerging markets.

Despite Motel 6 continuing to underperform, Hennequin refused to be drawn on whether the group would sell the brand, and, although he acknowledged that the company faced criticism for its extensive brand stable, he commented that it was too soon to consider selling any of its flags. He added that the group would look mostly to organic growth, but would not rule out acquisitions.

In announcing the group's strategy under his captaincy, Hennequin, who has also recently presided over changes to the executive committee – described by him as leaner and more efficient – used words such as "accelerate" and "dynamic" to emphasis the contrast in urgency with his predecessor.


HA Perspective: How much of an impact Hennequin will have on Accor remains to be seen. He is at least making the right noises from the point of view of the shareholders behind the ejection of Pelisson.

However, the strategy does not represent a sea-change for Accor. While, at the presentation he seemed to have a strong grasp of the group and its business, observers are looking to see if he can make the changes to the group's mindset at ground level.

The challenge is not so much about changing the approach of the troops in the front line – in this case the hotel developers out there selling franchises – but whether there is a realistic opportunity to achieve the objectives being set.

Changing the structure and attitude of the workforce is clearly something within Hennequin's control. And given his track record, it would be unwise to bet against him succeeding.

But creating a suddenly dynamic demand for franchising within Europe is another matter entirely. Other major hoteliers believe it can be done – IHG and Hilton are among the most aggressive.

If it does happen, then the industry is about to undergo one of its most radical periods of transformation.

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