Boosted by Fairmont Acquisition, AccorHotels Sees Stable Third Quarter

AccorHotels, the fifth largest hotel group in the world, released its third quarter earnings for 2016 and overall, the company appeared to have a fairly stable third quarter, with sales up 1.8 percent to $1.69 billion, compared to 2 percent growth in the second quarter.

However, the company did adjust its 2016 profit estimates from $735.84 million to $790.74 million to a range of $735.84 million to $757.79 million, citing continued softness in France.

During an investors call, AccorHotels CFO Jean-Jacques Morin said the third quarter was the company’s weakest for business in France primarily because of “security concerns,” including the terrorist attack that took place in Nice on July 14. Morin said fears of terrorism “massively affected leisure travel” to France.

The French city most impacted by concerns related to terrorism this quarter was Paris, which saw its business drop by 18 percent, while other cities in the region, overall, saw business inch upward by 1 percent. Despite these challenges in the company’s home country, Morin said he believes the fourth quarter will see better numbers.

The addition of Fairmont, Raffles, and Swissotel (FRHI) properties to AccorHotels’ portfolio in July included 116 properties, or 43,195 rooms. With FRHI, AccorHotels increased its number of luxury and upscale properties by 74 percent and grew its North American presence by 34 percent. Morin noted the addition of FRHI added $159.23 million in incremental revenue.

Looking ahead to 2017, Morin said, “We have a strong, continued momentum in all regions. France will continue o be weak. Don’t expect Belgium to be better than what we are seeing right now for last two quarters.”

He added, “We just have this tough situation with all these terrorist events which have frightened people and compromised tourism in places like Belgium, France, and Turkey,” noting, however, that tourists who would have traveled to those destinations are now choosing other places to explore, including Portugal, Spain, and Poland.

“An Obligation to Be Bold”

Under AccorHotels CEO Sebastien Bazin’s leadership, the company has made a number of strategic and non-traditional investments and innovations and he hasn’t hesitated in telling fellow hoteliers they have “an obligation to be bold.” 

Rather than fight or ignore the sharing economy, AccorHotels has also embraced it.

In addition to closing its acquisition of FRHI in July, the company also bought alternative accommodations provider onefinestay in April for $168 million (). Last month, however, onefinestay co-founder and CEO Greg Marsh resigned, suggesting he may have disagreed with the direction of the company following its acquisition by Accor.

Accor has also made investments in other alternative accommodations providers that include Squarebreak and Oasis.

During the investors call to discuss third-quarter earnings, Morin answered a question regarding Airbnb’s impact on the company’s business during the third quarter, saying the overlap between their respective businesses is not that much.

“There is no data which is reliable that you can bid on to do a proper analysis, but my hunch is that Airbnb versus what we do is, over a normal amount, like 10 percent of similar business,” Morin said. “We would compete on 10 percent of the total market. On months that are not in the summer, it’s probably 5 percent. This is not scientific data.”

Last month, the company also debuted its newest brand, Jo&Joe, which will provide a more design-focused hostel experience that emphasizes co-living.

Today’s earnings call didn’t focus much on the company’s plans for its newest acquisitions and brand, but during an investor day held on Oct. 5, the company said it would focus on its online business and luxury portfolio heavily going forward.