Accor’s Financial Recovery Is Elusive Due to European Exposure

Accor, with a catastrophic $2.4 billion annual loss, was the financially worst-performing major hotel company last year. The first quarter of this year didn’t give much of a break to the Paris-based owner of brands like Sofitel, Fairmont, and Ibis.

While companies based in the European Union are only required to report profits or losses on a semi-annual basis, Accor gave a first quarter performance update Wednesday. Accor’s roughly $435 million total revenue was down 48 percent while rooms revenue — the hotel industry’s key performance metric — was down 64 percent from the first quarter of 2019.

“The results are the results, but there is no surprise,” said Jean-Jacques Morin, deputy CEO at Accor.

The company’s exposure to Europe — significantly higher than competitors like Marriott and Hilton — is the leading factor in the drag on revenue. Hotel operators in the U.S. report strong pick-ups in bookings and reservations for spring and summer travel due to accelerated vaccine distribution. But many European operators are still dealing with lockdowns in cities like London and Paris amid the spread of new variants of the virus and, in the EU, less access to vaccines.

While the U.S. outpaces the EU in terms of vaccine distribution, Accor’s revenue per room was down about 76 percent in North America and the Caribbean. Many of Accor’s hotels in the U.S. are in urban areas or target convention and business travelers, sectors that have yet to revive relative to leisure-oriented business.

Accor’s revenue per room dropped roughly 87 percent in both the UK and Germany. Revenue per room in France was down nearly 61 percent, but a third lockdown implemented earlier this month will likely drive that number up for the second quarter.

Despite the devastating performance, Accor leaders remain just as bullish on summer months as some of their American counterparts.

The French lockdown is expected to lift in mid-May, and UK restrictions are slated to ease around the same time. Vaccine distribution, furthest ahead in markets like Israel, is also anticipated to accelerate in the next few months across the EU. That, combined with a higher savings rate — French households added as much as $146 billion in excess savings during the pandemic — should be enough to usher in a booming summer of travel.

“There are macro-elements that tell you demand will be there,” Morin said.

Accor isn’t just relying on summer optimism to get it through the crisis, however. The company’s $235 million cost-savings plan announced last summer is nearly complete, Morin added. That shed 1,000 corporate jobs, shifted focus away from the Parisian headquarters, and removed two regional headquarters in Europe and Asia.

The company also has about $4.3 billion of cash on hand.

“The second quarter won’t be a miracle, but you should see all the effects of what we’ve been describing in terms of the [cost-savings plan] and then vaccine distribution accelerating,” Morin said. “This is obviously the way forward.”