Accor ‘agile’ after sales

Accor Greet

Accor said that it had seen a “strong acceleration of the decline in the activity across Europe” as a result of the COVID-19 outbreak, but was confident it could “tackle the situation”.

The comments were made as the company reported that it had completed both the sale of an 85.8% stake in Orbis and the sale of Mövenpick hotels’ lease portfolio.

Orbis was sold for €1.06bn to AccorInvest, with the Mövenpick deal having a €430m positive impact on net debt. The group said that the sales meant that it was more “agile”.

The company said that since the publication of its 2019 results on 20 February travel and leisure markets had declined “very significantly”, owing to the expansion of COVID-19 into new geographical areas. This in turn resulted in “the deployment of exceptional measures” to limit travel as well as public and private events.

Through the end of February, the group recorded a 4.5% decline in its revpar on the same period in 2019 like-for-like. Revpar in February was down by 10.2%. Over the first two months of the year, this net decline in activity due to COVID-19 has had a €20m impact on EBITDA. Since the last week of February, the group had seen a strong acceleration of the decline in the activity across Europe, particularly in Italy, France and Germany.

Accor said that it had implemented material savings measures to mitigate the downturn in activity and benefitted “from a robust financial position”.

Sébastien Bazin, chairman & CEO, said: “I have no doubt, capitalising on our extraordinary, talented and experienced team members, our strong brand powerhouse and our global market leadership positions, we will weather the storm possibly stronger than ever”.

Answering questions on the coronavirus outbreak, at the company’s results last month, Bazin said: “Greater China is 3% of revenue and the number of rooms is more than 10%. Asia Pacific accounts for 33% of revenue.

“Eighty per cent of our people are not working at the hotels. From the start of the outbreak to this morning has cost €5m in revenues. My bet is to look at the past. Look at what the authorities have said. They are doing a hell of a job in handling something which was totally unseen. They will inject as much money as they can [to restart the economy]. I don’t know how long COVID-19 is going to last but we will all work to get back what has been lost in the last few weeks.”

There was no specific update with the latest comment, other than to say the “rapidly changing environment limits our ability to fully assess the financial impact”.

Bazin said at the results presentation that he could see room to grow in Europe and confirmed that the group would return cash to shareholders as part of efforts to convince the markets of its value, as well as mooting the idea that it could sell its remaining stake in AccorInvest earlier than anticipated, as long as there was a plan for the proceeds.

Bazin said that the company would continue “to have cash, we have capacity to open one hotel a day in 2020. Accor is truly optimistic on our capacity to weather many storms”.

When asked whether the group would sell its remaining stake in AccorInvest, Bazin said: “We have a five-year lock up to 2023. It’s going to be a matter of two things: do we get the green light from the other partners to relieve us from the three years of lock up - we haven’t asked them. We need to have an idea of what to do with the proceeds. The last thing we need is more cash on the balance sheet.”


Insight: There is not much delight to take from the COVID-19 outbreak and indeed, with deaths rising by the day, nor should there be. But for those of us observing Accor the hope, just the twinkling of a hope, is that it will kick the group back into the glorious frenzy of deal-doing that it developed a reputation for.

In times like these we all need a diversion and times could not be better for a return to the Accor of recent past. The company is in need of a plan to see off its agitating shareholders who want to split it up and flog off the luxury division. To be fair, it has a plan and that plan is returning screeds of cash to those same shareholders. This is not the favoured plan of this observer because it is quite dull and well, it didn’t work at Whitbread.

What would be much more fun is if it merged with Marriott International - of course - but that may be too much fun altogether, although when the black swan’s wings flap, we can expect to see all sorts of deals and the vultures are certainly gathering.

While all that is great for bird watchers, let’s look to the more likely. Accor is now sitting on a lot of cash and not all of it is earmarked for those grasping shareholders. We continue to hear talk of a sale to Rotana and even a move deeper into distribution. Things just got interesting again at Accor. Polish those binoculars.