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Accor announces plans to restructure Europe hotels

20 Feb, 2013 By: Jena Tesse Fox
 


 

Accor, a major player in Europe's hotel scene, is planning to cut costs, expand in emerging markets and move toward franchising or managing hotels for others in a bid to boost profit margins and cope with weak trading in its main markets, Reuters is reporting.

The world's fourth-largest hotelier, behind InterContinental, Marriott and Starwood, makes over 70 percent of its sales in Europe and is more exposed to the region's ailing economy than larger rivals InterContinental Hotels Group, Marriott International and Starwood Hotels and Resorts Worldwide.

The strategy would involve the restructuring of 800 hotels—mostly in Europe—as well as the expected benefits. Along with boosting profit margins, the move to a less cash-consuming business model is expected to allow it to cut net debt by €2 billion, and boost its operating profit margin to over 15 percent by 2016, from 9.3 percent last year.

However, some analysts had hoped for more, and Accor shares were down more than 4 percent in afternoon trading.

The majority of Accor's hotels are owned or leased, generating lower profit margins and returns on invested capital than franchised hotels or those managed for other parties.

The group, which sold its U.S. Motel 6 chain in May for $1.9 billion to Blackstone Group, set a target in August to operate 80 percent of its rooms under franchise or management contracts by the end of 2016, up from 56 percent.

But there's already some good news for the company. According to Breaking Travel News, Ibis, the brand's budget chain, has become Europe’s largest hotel brand, with 1,277 hotels and 121,882 rooms across the continent. Accor’s other brand Mercure makes up the top three, with five new properties and a total of almost 57,000 rooms.

Part of the growth represents new property developments, while the bulk is a result of a major repositioning strategy by Accor to amalgamate and uniform the Ibis product with former brands Etap Hotels and All Seasons.

 

Topic : Accor, Europe Hotels
External Source : Reuters, Breaking Travel News
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