Accor Q3: ‘marked improvement,’ solid liquidity

Accor Pullman Paris Tour Eiffel
In Europe, Accor's third-quarter Management & Franchise revenue fell 69.6 percent like-for-like, pointing to a 56.7 percent overall fall in RevPAR across all segments. Photo credit: Accor

Accor’s performance during the third quarter point to a marked recovery of business during the summer season, according the company’s quarterly results.

“The worst of the crisis is now behind us, but our main markets are still substantially affected by the measures rolled out to combat the health crisis,” said Sébastien Bazin, chairman and chief executive officer of Accor. “Only China reports solid performances and should swiftly recover its activity level precrisis.”

Bazin said that against this still uncertain context, discipline, adaptability and cost control are critical.

“We keep transforming our organizations to make the group even more efficient, more agile, and focused on the most profitable and promising markets and segments,” he said. “We are also deploying additional sources of revenue, in our hotels and in our loyalty program.

These efforts will help us benefit faster from recovery and pursue our ambitious development of the group."

By the Numbers

Group revenue in the third quarter of 2020 came in at €329 million, down by 68.7 percent as reported and by 63.7 percent like-for-like due to the effects of the health crisis.

Revenue per available room fell 62.8 percent during the third quarter of 2020, a significant sequential improvement in the wake of a difficult second quarter (RevPAR down by 88.2 percent), according to Accor. This improvement reflects a recovery in business in all regions, and most especially in Europe during the summer season. However, the downturn in leisure customers, in addition to the introduction of new restrictions after the end of August, pushed the recovery down in September.

Accor opened 57 hotels during the third quarter of the year, or 7,800 rooms, in line with those of the first quarter (58 hotels and 8,000 rooms). By the end of September 2020, the group was operating 750,135 rooms (5,121 hotels), with a pipeline of 208,000 rooms (1,192 hotels) running at 75 percent in emerging markets.

By the end of September 2020, 90 percent of Accor’s hotels were open for business, or over 4,600 units.

Group Revenue

Group revenue in the third quarter of 2020 came in at €329 million, down 63.7 percent at constant scope of consolidation and exchange rates (LFL) and by 68.7 percent as reported data with respect to Q3 2019.

Reported data showed the following details:

  • Changes in the scope of consolidation (acquisitions and disposals) had an adverse effect of €36 million, mostly caused by the disposal of Mövenpick hotel leases.
  • Currency effects had an adverse impact of €16 million, mostly related to the U.S. dollar (-4.5 percent) and the Brazilian real (-29.7 percent).

HotelServices Revenue

HotelServices, which combines fees for Management & Franchise (M&F) and services for owners, generated €224 million revenue, down by 69.0 percent like-for-like. This points to the deterioration of RevPAR due to the impact of the COVID-19 epidemic and health restrictions taken by governments worldwide.

Revenue of fees from Management & Franchise stood at €72 million, down 72.4 percent like-for-like, with a considerable fall in fees based on hotels' operating margins (incentive fees) in management contracts.

The group's RevPAR dropped an overall 62.8 percent during the third quarter.

In Europe, Management & Franchise revenue fell by 69.6 percent LFL, pointing to a 56.7 percent overall fall in RevPAR across all segments.

  • In France, RevPAR was down 44.6 percent like-for-like in the third quarter, a net improvement after a second quarter, which lost 88.6 percent. This performance was the outcome of a recovery in leisure customers in provinces during the summer season (RevPAR down 27.6 percent), while Greater Paris (RevPAR down 72.2 percent) was affected by the absence of international customers.
  • In the United Kingdom, RevPAR fell 79.8 percent. Although less impacted, trends between London (-91.8 percent) and provinces (-67.2 percent) were comparable to the French figures. This reflects flows of national tourists in a country where border-crossing is still subject to severe restrictions.
  • In Germany, RevPAR was down 60.9 percent. Despite end of lockdown measures taken earlier than other European countries, RevPAR is still affected by a huge reduction in business customers, particularly from abroad.
  • In Spain, RevPAR fell 77.2 percent in the third quarter.

Asia-Pacific Management & Franchise revenue was down 70.8 percent like-for-like, affected by RevPAR falling 58.8 percent.

  • In China, the third quarter (RevPAR fell 29.4 percent) confirms the recovery of business observed in the second quarter of the year. This improvement continues month after month (September's RevPAR was down by 16.8 percent), and the "golden week" vacation after the national holiday season (first week in October) confirms the potential of domestic tourism.
  • In Australia, RevPAR fell 62.7 percent in the third quarter. Business is restricted to domestic customers and hotel quarantines decreed by the government because the country's borders are still closed.

In Africa & Middle East, Management & Franchise revenue fell 73.9 percent on the basis of a 69.9 percent RevPAR reduction due to border closures.

In North America, Central America & Caribbean, Management & Franchise revenue was down 80 percent, in line with an 83.4 percent fall in RevPAR during the third quarter. Plunging fees based on hotels' operating margins (incentive fees) were partially offset by a relatively sound performance by other revenues from Management & Franchise contracts.

Finally, in South America, Management & Franchise revenue fell 87.2 percent on the basis of an 80.6 percent reduction in RevPAR, although this is gradually improving.

Revenue from services to owners, which includes sales, marketing, distribution and loyalty divisions, shared services and reimbursed of hotel staff costs, stood at €153 million, against €488 million at the end of September 2019.

Hotel Assets & Other Revenue

Hotel Assets & Other Revenue, standing at €76 million with a decrease 57.1 percent like-for-like, were impacted by the RevPAR decrease in Australia and Brazil. The "Strata" business in Australia benefitted from domestic leisure tourism in the country. In terms of reported data, the 72.3 percent fall was increased by the disposal of the Mövenpick hotel lease portfolio in early March 2020.

As of Sept. 30, 2020, hotel assets accounted for 163 hotels and 29,441 rooms.

Revenue from New Businesses

By the end of September 2020, New Businesses (concierge services, luxury home rentals, private sales of hotel stays and digital services for hotel owners) had revenue dropping to €23 million, or down by 43.6 percent like-for-like.

FY 2020 EBITDA Guidance

Accor usually announces an annual earnings before interest, taxes, depreciation and amortization guidance when it presents the half-yearly results and revenue for the third quarter. The present ever-changing environment and developments in the COVID-19 crisis do not afford sufficient visibility for a reasonable target range to be provided, according to the company.

In this context, the group is benefiting from its solid liquidity position, over €4 billion euros at the end of September, and despite limited visibility it is confirming 2020 operational sensitivity indicators as follows:

  • An EBITDA sensitivity per point of RevPAR under €20 million,
  • Monthly cash burn under €80 million