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Accor to be split into two units in strategic revamp to boost results
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Accor’s new chief will divide the hotel group into two in a strategic revamp, promising this would improve its performance but frustrating expectations of further cash-generating disposals.
Shares in the company, which had spiked to a two-and-a-half-year high ahead of the statement, dropped more than 5 percent to their lowest in more than a month.
Three months after becoming the group’s chief executive, former private equity boss Sebastien Bazin said he was splitting Accor into a fee-oriented hotel operator and franchisor, HotelServices, and a hotel owner and investor, HotelInvest.
The new strategy means Accor, Europe’s largest hotel group by revenue, will make no further disposals of owned hotels unless they are underperforming.
“Sorry to disappoint you, that’s behind us ... If we had sold our assets, this would have hampered our growth,” Bazin told analysts.
Under former CEO Denis Hennequin, the company had been selling real estate and using the proceeds to grow in emerging markets to offset European weakness. Bazin had been expected to quicken that strategy, as well as cutting costs.
Bazin did not provide any targets under his plan but said those set under a three-year revamp initiated a year ago by Hennequin were no longer valid. “We are banking on returns well above the previous plan,” he said.
One Paris-based trader said the announcement had been taken negatively.
“A likely substantial reduction in owned/leased hotel disposals, compared with the previous plan, is at first sight disappointing for cash returns ultimately,” the trader said.
Bazin confirmed Accor’s operating profit target of between 510 million euros (US$691.6 million) and 530 million euros this year, compared with 526 million euros last year.
“I want Accor to become the world’s best-performing and best-value hotel group,” he said
Bazin, previously Europe head of Colony Capital, one of Accor’s top shareholders, had been unhappy with the pace of change under Hennequin and as CEO he is under pressure to prove he can improve the group’s performance.
Accor, which competes with InterContinental, Marriott and Starwood, has lagged the profit margins of some of its peers as a large part of its hotels are owned or leased, generating lower profitability and returns on invested capital than franchised hotels or those under management contracts.
Accor’s operating margin was 9.3 percent last year, whereas InterContinental, which owns under 1 percent of its hotel portfolio, had a margin of 33 percent.
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