PARIS—Anyone who has heard Accor Hospitality chairman and CEO Gilles Pélisson speak during the past few months knows the company is geared up for an “asset right” strategy.
Accor’s vision is to become the leading European hotel franchisor and one of the three leading hotel groups in the world, according to the company’s Investor Day presentation, which was given 19 May. Pélisson was unavailable for comment at press time.
Through 2012, the company will focus on deleveraging and cash flow generation. During 2013 and beyond, the focus will be on growth through asset-light development and consolidation of corporate leadership.
Accor had 814 hotels under ownership structure at year-end 2009. During the deleveraging phase of 2010-2013, Accor expects to dispose of 450 hotels for cash proceeds of €1.6 billion (US$1.97 billion) for an adjusted net debt impact of €2 billion (US$2.5 billion). In April, the company had secured more than half of the 2010 program with a €450-million (US$552.6 million) target.
"In 2011-2012 Accor should be debt free and still have a lot of properties on the books, which is a good place to be," said Olivier Poirot, CEO of Accor NA, who also served briefly as Accor's CFO prior to the demerger.
- Watch video, “Olivier Poirot, Accor NA” from the 2010 NYU International Hospitality Industry Investment Conference.
Accor expects to invest about €200 million (US$ 245.6 million) in development with 35,000 to 40,000 new room openings per year, with a focus on management and franchising. The Etap and Ibis brands will be the focus in Europe, the presentation said.
Accor’s 2015 expectations:
- 20 percent of its portfolio owned or fixed-leased, with the remainder in franchising, management or variable lease agreements;
- 58 percent of guestrooms in the economy and budget segments;
- 700,000 rooms worldwide; and
- 48 percent of its rooms in Europe; 20 percent of its rooms in Asia/Pacific; and 19 percent in North America.
Asset-light model
Accor plans to operate primarily through franchise and management, but expects “a distinct approach for each segment and country.”
| Sofitel | Management |
| Pullman | Management, franchise |
| Novotel, Mercure | Variable leases, management, franchise, JV |
| Ibis, Etap, HotelF1, Hotel Formule1 | Selective investment |
| All seasons, Motel 6 | Variable leases, franchise, management |
Source: Accor The company plans to accelerate franchise development in mature European countries by capitalizing on its recognition and a new European franchise department. It also will use management contracts in fast-growing countries within the regions of Asia and Latin America. Selective investments in joint ventures with local partners will be used in India, the Middle East and Northern Africa.
Not mentioned in the official strategy, the new MGallery brand, Accor’s upscale collection, which has 30 hotels. The target is a maximum of 100 hotels. Development will be exclusively through management and franchise in Europe and Asia, according to an Accor spokesperson.
The Suite Hotel brand will be combined under the Novotel flag as Suite Novotel properties, according to the presentation. The suites have a new “frame” which is easier to adapt to existing buildings and thus will be easier to franchise, the Accor spokesperson said.
Poirot said the company prefers the combination of operating models to open its development options worldwide. In particular, the variable leases, which means the lease is a function of the hotel's revenue, allow Accor to package as much as €500 million of assets at a time and sell the lease back to developers.
Without ownership components, Poirot said Accor believes it would lose control of its brands and therefore dilute brand strength.
Growth markets
Asia/Pacific is the “main common battlefield” between Accor and the big U.S. players, according to the Investor Day presentation. Indeed, the company plans to add 350 hotels comprising 66,000 rooms with a corporate investment of approximately €300 million (US$368.4 million) by 2015. Within this region, Accor sees the greatest potential for its branded hotels in India, China and Indonesia.
Accor also aims to be the No. 1 player in Brazil. It currently has 22,500 rooms there.
Russsia/CIS and Morocco round out the company’s larger emerging market targets.
Life after paid services
Accor Hospitality shares are expected to trade at €27 to €30 (US$33.17 to US$36.85) when the companies are separately listed 2 July in Paris, according to three analysts’ estimates in a Bloomberg Businessweek story.
The hotels business will be valued at about nine times estimated earnings before interest taxes, depreciation and amortization for this year, according to Bloomberg’s survey of five analysts, which is lower than the average.
While Accor views its operating model as a unique benefit, the analysts' ratings show some hesitance, Poirot admitted.
"You're right--in the market there has been some reluctance to that formula," he said. "Some investors do prefer that we were a pure player, focused on management and franchising. But there are a number of investors out there that do support the formula. And the strategy will become much more clear when the deleverage is complete in 2013."
The now separate voucher unit, Edenred, was given a higher than average rating by the analysts.