Skift Take

Voilà. The European hotel giant hasn't yet seen inflation erode the recovery in travel demand. Meanwhile, its reorganization effort continues to smell like a preparation for a split within perhaps a couple of years.

Accor, the Paris-based operator of about 5,300 hotels globally, said on Thursday as hotel stays surpassed pre-pandemic levels for the first time in the second quarter across all regions and brands. The internationally exposed company has seen a recovery despite the absence of Chinese and Japanese outbound travelers.

“We’ve been missing those Chinese travelers ever since,” said Sébastien Bazin, chairman and CEO of Accor, during a call with investors. “But the enormous amount of American tourism [in Europe] is certainly an indication of our industry still being blessed with two things happening, the rebound of international travelers and a very, very strong domestic leisure market.”

The group, which runs chains such as 25hours, Pullman, and Ibis, made a net profit of about $32 million (€32 million) on revenue of $1.77 billion (€1.73 billion) for the first six months of the year.

In the second quarter, Accor’s prices moved above 2019 levels in many key markets. In London, the group’s hotel prices were up 14 percent. In Paris, rates were up 11 percent. In Sydney, up 7 percent.

Strong pricing helped the company in the quarter lift its worldwide revenue per available room, a key industry metric, by 1 percent above the level it had notched in April through June of 2019. Compare that result to a 3 percent improvement over 2019 reported by Hilton on Wednesday.

“The hotels sector is getting support in particular from the excess savings built up by Western European and US consumers during the pandemic,” wrote Sabrina Blanc, a Societe Generale equity analyst, in a report. “Our main concern remains the ability of companies to pass on inflation to end customers.”

Inflation hasn’t yet weakened travel demand, Accor executives said.

“We already have the benefit of having the month of July almost behind us, in which we we have a very solid performance, which was even better than June,” Bazin said. “No worry at this stage in terms of activity, pace, geography, and that is all across the brands.”

The third quarter typically has business travel accounting for “probably 60 percent” of Accor’s business, Bazin said, and he has been questioning how demand will be this year. But he noted that major events, such as Germany’s Oktoberfest, the Paris Automotive Show, and the World Cup in Doha, are confirmed.

Accor said its marketing efforts to avoid losing travel bookings to third parties, such as online travel agencies, had worked in the first half. Direct bookings so far this year have been at the same percentage of the mix as in 2019. Direct bookings help the company and its partners avoid paying more in commissions to distribution middlemen.

Hotel development is continuing to hum along, with a target of “plus or minus 3.5 percent net room growth” for this year.

“I was yesterday with the head of development, and she told me that I guess we had an extraordinary number for July,” Bazin said. “So it’s really there only a question of rebound and countries opening.”

In the meantime, the company needs to become more asset-light by selling the remaining 7 percent of its network that it directly owns. It also continues to focus on increasing fees per room as an (undisclosed) metric rather than driving gross volumes, Bazin said.

No Company Split Immediately Foreseen, But…

When Accor announced this month it was reorganizing, splitting its leadership into two units, speculation formed that it may be preparing itself to break up.

One of the two business units would be an “economy, midscale, and premium” division for 4,816 hotels representing brands such as ibis, Novotel, Mercure, Swissôtel, Mövenpick, and Pullman.

“It’s 90 percent of our hotels,” Bazin said. “It is 85 percent of the fees, but it’s only two-thirds of the cash flow.”

The other division would be for “luxury and lifestyle.” It would get four brand collections that together have 488 hotels: Raffles & Orient Express, Fairmont, Sofitel & MGallery, and Ennismore.

“It’s probably very much equivalent to a third of the EBITDA [earnings before interest, taxes, depreciation, and amortization],” Bazin said.

Accor’s executives said there was no immediate plan for a split or major asset sale.

“In terms of eventual split, it is not today in the thinking,” Bazin said. “What is in this thinking is getting better, being clearer, being more efficient, and having probably an easier relationship with the owners. Because the owners [of the luxury properties] are in many cases absolutely different [than with the budget and mid-scale properties], with different ambitions, expectations, and way different numbers in terms of investment and dollars at risk.”

Having said that, Bazin still managed to imply that one benefit of the re-organization — besides a promised gain in efficiency plus more upskilling of the company’s luxury workforce — is that it would give the group more options for a possible split in the future.

Bazin said that “what we will do, for at least 24 months,” is to have common shared services, such as distribution software and information technology be provided as a service by the group to the units and controlled essentially at the headquarters level.

“If one day a split should could might happen, which is not something we’re thinking about today, we would have prepared the company to have that optionality in the tally,” Bazin said.


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Tags: accor, earnings, hotel earnings

Photo credit: A junior suite at the Moevenpick Hotel Basel. Source: Accor.

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