• Accor sees growth on track despite fears

Accor Hotels chairman and CEO Denis Hennequin hailed the group's first results as a 100% hotel company as "very strong and in many aspects a record" as demand accelerated in the second quarter.

The news was followed by the announcement that the company would rebrand and renovate its economy flags around Ibis from next year, at a cost to the group of Eu150m, in addition to making further sales to reduce debt.

The group described Ibis as a ‘mega-brand', with Etap renamed Ibis Budget and All Seasons renamed Ibis Styles. The cost to owners has yet to be finalised. Hennequin added that the group would welcome approaches for its Motel 6 brand, as it sought to cut capital deployed in the US, although there would be "no fire sale".

Looking forward to the full year, the group said that full-year Ebit should reach between Eu510m and Eu530m, up from Eu446m in 2010.

Hennequin said that the company had not seen "any measurable signs of slowdown in the recovery cycle at this stage", as fears continued to grow that the sector was likely to see a slowdown which could hinder the ability to build rates.

The company said that it had seen sustained demand in the main European markets and emerging countries. Occupancy rates rose "steadily" while the improvement in average room rates gradually spread across all segments.

CFO Sophie Stabile added that the trend had continued in July, with rate and occupancy contributing to revpar growth "50:50". The group saw revpar growth of 7.5% year-on-year for upscale and midscale hotels in Europe in July, with economy hotels in the region up 7.7%, as Ibis and Etap were cited as strong performers at the group. "September bookings are rather good but we remain watchful," she added.

The group opened 13,700 rooms over the half-year, with 7,100 in the second quarter. Of those, 78% were franchised or managed, with a further 10% on variable leases. Accor said it would open 35,000 new rooms this year, up from an initial target of 30,000, and 40,000 rooms per year from 2012. While the group continues to look at Europe, Hennequin said it was also keen to increase its holdings in the emerging markets, with plans to quadruple the size of its estate in China by 2015.

Stabile said that Accor would continue with its asset disposal strategy "unit by unit" and was on track to meet its target of Eu1.2bn of real estate asset disposals in 2011/12. The company has already completed half of its plan to dispose of 450 hotels between 2010 and 2013 and said that plans to reduce adjusted net debt by a further Eu1bn would involve 175 additional hotels between 2013 and 2015.

During the period 50 hotels changed ownership structure to be operated under variable leases, management or franchise contracts and an additional 15 hotels were sold, reducing adjusted net debt by Eu191m to Eu559m.  Other deals included the sale of the group's 49% stake in Lucien Barrière for Eu268m and the agreement to sell Lenôtre to Sodexo for Eu75m.

Economy hotels in the US, represented by the group's Motel 6 brand, continued to lag, reporting 4% revpar growth in July and limited ability to raise rates. Stabile said that the US operations were affected by cost inflation in terms of salaries and energy, which was part of the reason behind the flag's shift to franchising, which Hennequin added that the group hoped to accelarate. The brand opened of 22 hotels under franchise contracts, and agreed nine sale-and-franchise-back agreements and the disposal of eight hotels.

Motel 6 revenue rose by 3.7% on a like-for-like basis in the first half, but fell by 5.0% on a reported basis. Revenue was led by an improvement in occupancy rates, which the group said reached record highs during the half-year, resulting in a 0.1 point like-for-like contraction in Ebitdar margin to 27.9%. 

Accor is currently taking strength from its budget brands in the developed European market, a reliance that could give investors pause as the region's finances look increasingly shaky. If, as seems likely, global economies will see a prolonged period of stagnation, if not recession, then economy brands will come back into play as the providers of a solid, if static income.

For Accor, which is just starting to enjoy rate growth, this could mean only the briefest of glimpses at rate-setting power before a return to flat growth and the risk of rate cuts as competition with other operators for the cash-starved consumer increases.





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