PARIS—The year 2012 will be remembered as one of massive changes at Accor.
During a single 12-month span, the Paris-based hotel owner, operator and franchisor disposed of nearly €2 billion ($2.7 billion) in assets, overhauled its suite of budget brands and opened a record-setting 38,085 rooms.
“I’m pleased to see that all these objectives have been achieved,” Denis Hennequin, chairman and CEO, said through a translator Wednesday during Accor’s investor day press conference.
The primary drivers of that change are the company’s continued commitment to an asset-light operating model and executives’ desire to grow in emerging markets, he said.
Accelerating asset light
Accor realized €1.9 billion ($2.5 billion) of adjusted net debt in asset disposals during 2012, including €796 million ($1.1 billion) from the group’s sale of North American-based budget brand Motel 6 to Blackstone.
“In 2012, Accor hotels also changed under the effective restructuring, first and foremost the disposal of Motel 6. This is a major milestone for the group that allows us to focus on markets that allow for the greatest growth potential,” Hennequin said.
“We also continued the asset-management program,” he added, which contributed the remaining €1.1 billion ($1.5 billion) of the total adjusted net debt for the year.
The group restructured 228 hotels during 2011 and 2012 under its asset-management plan, including more than 65% through sale-and-management-back or sale-and-franchise-back agreements.
The result makes for a more profitable mix of properties in line with executives’ goal of “40/40/20,” Hennequin said:
- 40% of hotels will fall under management, spurred by ambitious development of luxury and upscale properties in emerging markets;
- 40% will fall under franchise contracts, which will prove essential in Europe where Accor has a heavy preponderance of budget and midscale properties; and
- 20% owned and leased, which Accor will hold for key assets in strategy global markets.
Executives plan to restructure 800 more hotels into asset management by the end of 2016, the majority of which (83%) are in Europe, he added.
“The plan is that most of them will be converted into franchised contracts and management contracts,” CFO Sophie Stabile said through a translator.
Eyeing emerging development
Accor set an expansion record with 38,085 rooms opened during the year, with a heavy concentration in high-growth, emerging markets.
Nearly two-thirds (72%) of the rooms opened in emerging markets; 48% opened in the Asia/Pacific region alone.
Forty percent of the total openings fell within Accor’s budget Ibis “megabrand,” which during 2012 saw the company’s existing budget brand portfolio converted under a singular Ibis umbrella. All Seasons became Ibis Styles, while Etap Hotel became Ibis Budget.
“The implementation of the Ibis megabrand program is a success,” Hennequin said. More than 1,500 hotels (90% of the total Ibis portfolio) have been updated with new signage and beds.
“We already see a very strong impact of new brands on development with 15,000 rooms open only for the Ibis family for 2012. We accelerated the pace of development of 44% over 2011 with particularly strong benefits for Ibis and Ibis Styles,” he added.
Looking forward, executives will aim for 30,000 net rooms added to Accor’s portfolio every year, more than 85% of which will fit within the asset-light operating model.
The company’s portfolio as of 31 December 2012 comprised 633 hotels totaling 112,600 rooms. More than half (52%) of those are planned for the Asia/Pacific region, followed by Europe (23%), Latin America (17%) and the Middle East/Africa region (8%).
Accor’s development team is also willing to expand through key acquisitions, as was apparent though the group’s €193 million ($258 million) investment in 43 Mirvac hotels in Australia and its €217 million ($290 million) investment in 15 Posadas hotels in Latin America.
Digging into distribution
Another key focus for executives moving forward is to enhance the group’s existing distribution platform. The group made considerable headway in 2012, with highlights including:
- 50% of all rooms sold through Accor’s central reservation system—an increase of 21% from 2011;
- €2.4 billion ($3.2 billion) of total room sales though the Internet during 2012, 59% of which came through Accor’s websites; and
- an increase of 49% over 2011 in revenue generated from the company’s smartphone app.
“Changing consumer habits are radically changing the equation,” Hennequin said.
Much of that change is being driven by online travel agencies, which accounted for close to €1 billion ($1.3 billion) of accommodation revenue during 2012, he added. “We’re constantly rethinking our relations with these new players, and it’s one of the key initiatives for Accor in the future.”
Accor will invest nearly €120 million ($161 million) during the next four years to optimize its systems, enhance its brands’ visibility online and strengthen the overall distribution platform, he said.
The goal is to position Accor atop its competitive set in all aspects of performance and operations, Hennequin said.
“We want to be the benchmark, not just for our customers but as you’ll have understood for our franchisees, for our owners and of course for our staff.”