Accor draws groups seeking size

Sofitel Washington DC Lafayette Square
The Sofitel Washington DC Lafayette Square is part of Accor's U.S. portfolio. Photo credit: Accor

Sébastien Bazin, chairman and CEO, Accor, said during this week's results conference call that the company it had “never seen so many enquiries” from small and medium-sized groups, commenting: “it won’t be one-by-one; it will be groups of hotels of 10,000 rooms and above.”

While sharing the company's first-half results, Bazin announced a €200 million cost-saving plan, including “simplification and realignment of operating structures in different regions and automation of tasks for repetitive processes.”

Bazin referenced the recent news that the company is teaming up with the U.K.-based Travelodge Owners Action Group to launch Ago Hotels, which it describes as a “landlord-friendly” platform. Ago Hotels offers a hybrid lease model under the Ibis Budget flag, with Accor potentially investing £32m in rebranding, distribution and IT.

Bazin said: “Travelodge would have never happened without this crisis being there. Travelodge is a very fine brand and it’s a question of structuring an inability to pay rent. There is probably a way where we can be inventive, innovative and audacious, providing the Ibis Budget brand. I have no idea whether we will have 20 or 500 hotels.

“There are other stories like this of people looking for the size of Accor’s strength.”

Looking at the cost savings, Bazin said: “We knew that we had to adapt the asset-light model to full asset-light company. It was time to do it. We mapped 7,000 different tasks across the regions, selecting what were activities we don’t get paid for and where there is not enough margin.” Bazin said that the group was looking at a leaner management structure, frugality, “real estate—using less square meters all around the planet. Automation—less human interaction.”

He added: “We need to finish the job and go full asset-light, we will have a stronger Accor and greater profitability. If anything, COVID is an accelerator. We are in a world where there is no margin for error. The team is aware what is going on, all the technology is shared and people will be made accountable.”

Bazin said that he hoped to compensate for the drop in corporate business by offering hotel rooms as an alternative to working from home or working in an office. He added: “You can travel 10 minutes to the neighborhood hotels of Accor, do it on a subscription and why not? I am convinced that you can have 5 percent to 10 percent of room count transformed into offices.”

As of August 3, 81 percent of the group’s hotels were open. On the same date, the company said that occupancy in China was 60 percent, 56 percent in France, 39 percent in Germany 39 percent and 35 percent in the U.K. And, Bazin said, it was “increasing with every passing week.” He added: “In Europe, 60 percent of all the bookings today have been made with less than five days’ notice. Exactly double that of last year.”

The anticipated drop in traveler numbers, by 1 billion people, according to the United Nations World Travel Organization, meant, Bazin said, that the sector would see the “same number of travelers as 1985, so we have to accept that we are going back 30 years”.

He added that Airbnb was “one of our biggest competitors—they are looking for someone else’s home to feel safe.”

By the Numbers

Accor had already launched a €60 million general and administrative annual cost savings program that was 60 percent achieved by the end of June 2020. The company said that it had then undertaken a review to shift from its new asset-light business model to an asset-light company.

Revenue per available room was down 59.3 percent in first-half 2020. Consolidated earnings before interest, taxes, depreciation and amortization was negative €227 million in the first half of 2020, down 153.7 percent like-for-like and down 160.5 percent on a reported basis compared with first-half 2019. Sensitivity of EBITDA to RevPAR changes amounted to less than €20 million for each percentage point decline in RevPAR.

The group’s monthly cash burn came to €80 million on average over the first half of 2020. Combined with two undrawn renewable credit facilities, totaling of €1.76 billion to the existing cash and cash equivalent, Accor had more than €4 billion in liquidity.

The company said that it was seeing signs of recovery, first in Asia-Pacific where RevPAR had been down 77.4 percent in the second quarter, before gradually spreading to other regions, particularly Europe, where RevPAR had been down 90.6 percent.

During the first half, Accor opened 86 hotels, and the end of June had a pipeline of 206,000 rooms, of which 75 percent was in emerging markets.

The group said that it would not be providing full-year EBITDA guidance.

Bazin concluded: “You learn from the crisis, you can try to anticipate how guests change their behavior and then you can build the future structure of Accor. The first two and a half months you are in the water, then the next two and half months you are safe on your paddle board. We are safe on the board, we can see what is happening around us and we can choose whether we can surf.”

This article originally appeared on Hospitality Insights.