U.S.-China Trade War Hurts Accor But It Won’t Deter Asia Expansion

The ongoing U.S. and China trade war continues to wreak havoc on the global hospitality industry.

One week after Hilton announced tensions between the nations dampened overall revenue per available room (RevPAR) growth, the Paris-based hotelier Accor conceded the conflict weighed down company earnings in China and the greater Asia-Pacific region in the first half of 2019.

RevPAR in China fell 1.3 percent, deputy CEO Jean-Jacques Morin told analysts on Accor’s earnings call Wednesday. Meanwhile, RevPAR for Asia-Pacific declined 0.2 percent. Negative results in Australia, due to political tensions, contributed to this, the company said.

Poor performance in the region will not deter Accor from expanding in the region, it said. Much like its competitors, the hotel chain has identified China and the Asia-Pacific market as a key growth opportunity, as it looks to take advantage of a rise in Chinese travel. Of Accor’s pipeline of 202,000 rooms, or 1,153 hotels, 50 percent of those accommodations will be constructed in Asia.

“Australia is at the cusp now, with the election behind us. The question mark is the rest of China,” said Morin. “Our assumption is China will stabilize and slightly improve. RevPAR for Asia-Pacific is now marginally improving.”

Loyalty Update

Also on Accor’s agenda, is upgrading its loyalty program. The company announced plans to invest $255 million into a new offering dubbed Accor Live Limitless (ALL) in February.

Morin told analysts on the call that the company has spent only $10 million of those funds through the first half of the year, with a significant portion of that capital being spent on marketing materials to showcase the company’s brands across multiple digital channels.

Since the announcement, Accor has additionally been aggressive about finding partners for ALL. The loyalty program will serve as Paris Saint-Germain’s official kit sponsor for the upcoming football season beginning in August. Accor and Air France-KLM also teamed up on a joint loyalty venture last month.

“This can work very well,” Morin said about the KLM France deal. “You will see us do more of this in the future to make our loyalty program stickier.”

Earnings Results

Accor’s revenue grew to 1.9 billion euros ($2.1 billion) in the first half of 2019, a 28 percent increase over the same period last year. Net profits for the company also came in at 141 million euros, it said.

As for RevPAR, Accor disclosed a 2.9 percent increase overall, led by sharp growth in its home market of Europe and South America at 4.4 percent and 13.8 percent, respectively. Each region benefited from sporting events, such as the Women’s World Cup and the Copa América tournament in Brazil.

Accor finished the quarter with 4,900 hotels and 717,000 rooms available in 110 countries.