• Accor, Park Plaza, see recovery maintained

Accor and Park Plaza Hotels both launched their results with the news that the signs of recovery seen in the second half of 2010 had continued into the New Year.

Both groups have benefitted from a rise in demand from both corporate and leisure travellers, with Park Plaza and Accor seeing growth at the upper and midscale positions in the market and the latter also reporting recovery in its economy hotels.

For Park Plaza, Boris Ivesha, president and CEO, said that, after having seen a number of projects in the form of acquisitions and property developments come to fruition during the year, including the opening of the flagship Park Plaza Westminster Bridge London, it was "focused on improving overall performance across our business, advancing confirmed development projects and actively exploring new opportunities".

Total reported revenue increased by 74.1% to Eu139.8m and Ebitda grew by 132.1% to Eu37.6m as the group started to benefit from its development pipeline, with 1,579 new rooms added to its portfolio during the year.

The company also spent much of the year strengthening its position, with the refinancing of three of its London hotels and then acquisition of the joint venture interests in, and shareholder loans related to those sites. It also acquired a 342-room conference hotel near Amsterdam Schiphol Airport and the freehold and head lease interests of Park Plaza Leeds and Park Plaza Nottingham.

At Accor the group said that it expected to see revpar increases continue to favour occupancy, with 70% of growth, and rates accounting for 30%. CFO Sophie Stabile told a conference call: "We didn't want to switch too soon to an increase in price because of the macro economic environment and geo-political events". She said that the company planned to maintain that stance for 2011. She added that the group was continuing to increase its market share everywhere in Europe, particularly in France.

In Europe she said that rates were "positive roughly everywhere" except in Spain, where the group was more exposed to the resort market, and in Italy.

In the group's US economy hotels, represented by its Motel 6 brand, Stabile said that rates were starting to stabilise, commenting "since the beginning of January, we've seen positive signs" after occupancy rates started to rise last July. Revenue from the US economy segment increased by 4.1%, as occupancy rates improved and average prices rose for the first time since the second quarter of 2008. Stabile said that, in terms of revpar, the brand continued to outperform the market.

At last month's International Hotel Investment Forum in Berlin the group's chairman and CEO Denis Hennequin responded to speculation that it was planning to sell the under-performing brand by saying: "It's a very strong brand, but it's true that the model is broken. It needs to be less exposed to cycles and it would work perfectly if it was 90% franchised." Motel 6 opened 13 hotels under franchise agreements during the quarter, lifting the total to over 1,100 units.

Recovery in the economy segment was driven in the main by occupancy, with, in the UK, rate falling back by 3% while occupancy increased by 6.1%. Stabile said: "Because of the macro-economic environment we are cautious about raising prices. In the UK and particularly in the provinces there is additional pricing pressure from the competition."

While Park Plaza was building its property holdings, Accor confirmed its ongoing move to an asset-light structure through disposals. Stabile said: "We still plan to achieve Eu1.2bn over next year and are on track. We are seeing a very dynamic real estate market at the moment."

She added the group had seen a record number of openings in the first quarter, first quarter with 6,600 rooms (50 hotels), of which 76% were under management contracts and franchise agreements (and 93% in all asset-light ownership structures) and 44% were in Europe and 29% in Asia.

The group confirmed its objective of opening 30,000 new rooms in 2011, with more detail on the net impact to the total estate expected at the first-half results.

 

HA Perspective: The good news from both of these companies was that the recovery is clearly underway. The less good news is that it remains slow and gradual.

There is also a clear divergence in strategy, with the global major Accor focusing on its fee income business and Park Plaza, the much smaller company which franchises its main brands, pursuing the traditional real estate development model.

Both strategies can work but only due to their different sizes. Pursuing a fee income strategy when you are as small as Park Plaza makes little sense given the brand giants you would be lining up against. And likewise, Accor would be restricting growth opportunities were it to deploy its capital in a limited number of real estate opportunities when it can pursue many more via an asset light approach.

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