AccorHotels used its capital market day to described its “numerous acquisitions” as behind it, as it focused on its strategy to “unleash the group’s full potential”.
The comments came the day after the company announced an offer for the 47.31% of Orbis which it did not already own.
The group said that it was aiming to increase its rate of opening from one hotel every 33 hours last year to one hotel every 24 hours in the midterm. It was looking to increase growth in its fees by 1.7 times over the same period.
AccorHotels said that had “a clear path” from EUR626m in Ebitda in 2017 to EUR1.2bn in 2022.
In a presentation to investors, Sebastien Bazin, chairman & CEO, AccorHotels, described the various players in the sector as “intertwined across the hospitality value chain”, pointing to the rising role of Airbnb as a distributor, the global hotel companies moving into the private rental market and moves by Expedia and Trivago to manage in-stay experiences and restaurant booking.
Bazin described AccorHotels as the “most diversified” in the hotel sector, with 33 brands, with rooms split 41% in the economy segment, 34% midscale and 25% luxury and upscale. In terms of geographical diversity, 49% were in Europe, 30% Asia Pacific, 9% MEA, 8% South America and 5% North America and Canada.
The CEO said that the company had the leading position in Europe, with 30% brand penetration and 45% of rooms in the top five chains. It also described its position as leading in Asia Pacific (excluding China), MEA and South America, having expanded its network by 40% between September 2015 and September 2018. These regions, Bazin said, were also those with the most potential.
Bazin said that the company would look to accelerate its growth in China, while also “selectively” expanding in North America. He also identified the “opportunity” in lifestyle, F&B and events.
In China, the company has set the target of growing its Chinese traveller roomnights outside the country by 3.5 times by 2020, against its 2017 levels.
The company indicated that it had not abandoned acquisitions entirely, with Guarav Bhushan, global CDO, describing the company’s expansion strategy as combining both organic growth and “strategic M&A as a key lever”. His key objectives were to increase the pace of organic openings while increasing the fee per room through the higher fee yielding segments of luxury, leisure and lifestyle. Between 2015 and 2018 the company had increased its pipeline by 15%, with a 75% increase in luxury rooms.
AccorHotels said that it now had the “most comprehensive brand portfolio in lifestyle in the industry” and held 2% of supply, with 10% of pipeline.
Chris Cahill, deputy CEO responsible for hotel operations, illustrated the shifting focus towards luxury as well as towards management, with the Sofitel brand accounting for less than 3% of the number of hotels, but 8.4% of fee income. Between 2017 and 2018 the company went from 41% of its rooms under management contract to 61%, with franchised remaining at 33%, squeezing ownership back from 26% to 6%.
Bazin said: “AccorHotels has gone through a major transformation over the last few years. This was evidenced by numerous acquisitions of brands and new ancillary business activities, the strengthening of our digital platforms, and the shift to an asset-light model with the sale of a majority stake in AccorInvest.”
“These major steps behind us, we are now focused on executing on our strategy to unleash the group’s full potential. Our targets are ambitious yet achievable. AccorHotels is more agile, more profitable, and more global, with a well-balanced brand portfolio. These assets are unique in the industry. Combined with a rigorous management, this will enable the group’s to create sustainable value for our shareholders, our clients and our employees. ”
At Orbis, the offer for 21.8 million shares was priced at 87 zlotys per share, putting the bid at just over USD500m. AccorHotels plans to delist Orbis if successful.
Bazin told analysts at the capital markets day that the deal was the “continued rollout of the asset-light strategy, replicating the value creation at AccorHotels through the monetisation of assets”
Bazin said: “As its largest shareholder since 2000, AccorHotels has fully supported Orbis’ growth in Poland, then across Central Europe since 2014, where Orbis has become today a formidable leader. The proposed transaction will enable AccorHotels to accelerate its development in the region. In addition, it will enable AccorHotels to further implement its active asset management policy.”
The group said that the deal would allow it to consolidate its leadership in Central Europe and improve optionality on Orbis’ asset portfolio management, including replication of the active asset management strategy implemented by AccorHotels for several years.
HA Perspective [by Katherine Doggrell]: And so it is with terrible sadness that we note AccorHotels’ plan not to buy everything in sight and keep us hacks constantly entertained. Say it ain’t so. There is hope. As Bhushan pointed out, there is still room for “strategic” deals and a little strategy can go a long way.
Bazin made much of the group’s primary challenge being digital technology, the need to quickly prove to customers that AccorHoels could offer them the best hotel at the best price wherever they went. He ruefully told L’Echo that the hotel sector should have bought platforms like Booking.com, Expedia or Tripadvisor when they were not so expensive.
The current digital strategy was aligned, as with the other operators, around loyalty, with an appreciation that the company also needed strong partners, such as Huazhu. The group was investing in using the knowledge it had on the guest to improve personalised service, something Bazin appreciated the group had not focused sufficiently on in the past.
By looking to its luxury brands for growth, the company is looking to a segment where loyalty is more easily gained as the opportunity for exceptional service is more readily available. It is the economy and midscale – both markets it needs to build on in China – where going that extra mile is harder to achieve without stressing the bottom line.
Additional comment [by Andrew Sangster]: Accor is the smallest of the four biggest global majors (in room number order the others are Marriott, Hilton and IHG) and it has struck out on a distinctive course.
Firstly, it is far more focused on management than the other three. While the big US players can be seen as hospitality brand companies, Accor is much more of a hospitality services company. This is an important distinction in markets which are fragmented – pretty much everywhere outside of North America.
Secondly, it has been prepared to fail in its rush to buy things and try things: Accor Marketplace was a complete flop, and Onefinestay has been written down. The failure has been embraced, and it has been far more prepared to try new things than its rivals.
It is now signalling, however, that this push into new niches is over and the focus is going to be its core hotel business going forward.
Thirdly, Accor is a true global player. While it does dominate its home market of France, it has proportionally far greater exposure outside of its domestic markets than the other three global majors (and we’re treating IHG as a US player for these purposes). This ought to give it an edge in the higher growth emerging markets.
The final point about Accor is its relationship with Jin Jiang which is the single biggest shareholder at 12.3%. The Qatar Investment Authority has 10.1% and Kingdom Holding has 5.7% (as a result of the Fairmont Raffles deal).
Now that Jin Jiang is the world’s second or third largest hotelier following its takeover of Radisson, a combination with Accor would be a compelling proposition. Could Accor move from being predator to prey? Probably not.
A takeover of Accor is likely to attract the attention of the French authorities and CEO Bazin is well connected politically as the presence of former French President Nicolas Sarkozy on Accor’s board demonstrates.
More likely is a further deepening of Accor’s China ties. The relationship with Huazhu, the former China Lodging, is more friendly than that of Jin Jiang and may result in a deeper union.