AccorHotels’ ambitious strategy to buy up companies across the travel space has suffered a setback after it wrote off $288 million (€246 million) from two of its marquee investments, Onefinestay and John Paul.
The company had previously hinted that all was not well in its New Businesses unit, but has waited until now to reveal the scale of the problem.
Accor said its expansion plans for home-rentals platform Onefinestay and concierge service John Paul relied on finding “synergies and scaling plans” with its hotels business and these had “not been delivered as planned.”
Although the company has now booked a substantial impairment charge — indicating the companies are worth much less than Accor thought—Accor said that “both serviced private homes and concierge services offer strong potential in the group’s ecosystem.”
Overall, the New Businesses division, which is home to many of Accor’s non-hotel assets, reported revenue growth of 7.1 percent on a like-for-like basis and 61.5 percent as reported, with revenue amounting to $82 million (€70 million) in the first six month of 2018, versus $50 million (€43 million) in first-half of 2017. The increase in reported revenue is mainly down to the company’s continuing acquisition strategy.
Revenue growth however, has failed to improve profitability in the division with losses before interest and taxes increasing 24 percent to $25 million (€21 million).
Air France-KLM Deal Off
Accor has chosen not to pursue a potential investment in Air France-KLM Group.
News of the surprise potential move broke in June, to much bemusement in the travel industry and it appears the company has realised buying a share in a struggling airline group might not be the best use of funds.
“While the group believes that closer partnerships between hotels and airlines have great potential in the creation of value, it also believes that the requisite conditions for the acquisition of a minority stake are not yet met and will therefore not be pursuing this particular avenue,” Accor said.
Accor reported revenue growth of 7 percent to $1.7 billion (€1.5 billion) in the first half of its financial year. However, largely because of the above impairment charge it made a loss from continuing operations of $77 million (€66 million), compared with a profit of $224 million (€191 million) in the prior year.
The company’s overall net profit was dramatically improved by the inclusion of discontinued operations. That figure stood at $2.6 billion (€2.2 billion) with the sale of its property unit AccorInvest earlier this year inflating the figure.
Accor said it has received an offer from Colony NorthStar to buy a further 7 percent of AccorInvest for $293 million (€250 million).