How Accor is bucking the asset-light trend

The French always like to do things a bit different than the rest. Like Accor. The hotel company, which operates mostly in the economy and midscale segments, is looking to acquire real estate, not shed it, like most other hotel operators have.

The latest: Accor announced that HotelInvest, the group's hotel owner and investor business, has purchased a portfolio of 13 UK hotels from Tritax for a total of €89 million (around $117 million). The move is in line with its stated strategy to consolidate the owned hotel base while strengthening its economy and midscale segments.

The portfolio, which includes 12 ibis and one ibis budget, represents 1,194 rooms located across the UK in key regional locations: Coventry, Coventry South, Birmingham Holloway Circus, Birmingham Bordesley, Leicester City, Plymouth, Sheffield City Shude, Liverpool, Manchester Princess Street, as well as London Stratford, London Thurrock and London Barking.

The properties have been operated under variable-rent leases by Accor since 2001, and since 2005 for Tritax, a real estate investor, on behalf of individual and private owners.

As The Telegraph reports, Accor's HotelInvest division is buying up hotels that are currently leased and which Accor "claims cannot be easily valued by financial markets."

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Earlier this year, Accor created two poles: HotelInvest—focusing on ownership and investment—and HotelServices, which will operate the group’s some 3,600 hotels under a fee-based system. Bazin said there were no plans to dispose of any of the group’s existing hotel brands.

On the transactions, John Ozinga, COO of HotelInvest, said: "These transactions demonstrate Accor's ability to act swiftly in implementing the strategy announced nine months ago. It's an important step forward in the significant restructuring that we are leading in HotelInvest, fully aligned with our objectives which include creating value by optimising return on capital employed, while strengthening our position as the largest owner of economy and midscale hotels in key European markets."

Prior to Bazin—who previously was Europe head of private-equity group Colony Capital, one of Accor’s biggest shareholders—Accor’s CEO Denis Hennequin embraced an asset-light approach, a strategy that many other hotel operators subscribe to, which puts a focus on developing management contracts and selling off owned real estate.

For Accor going forward, this will not be the approach, totally. Which makes sense: Bazin made a career staked on buying and selling real estate.

"When operating fundamentals are improving—as they are now—owning hotels will boost a company’s profits; in a downturn, the opposite is true," said Sean Hennessey, CEO of New York-based Lodging Advisors. "During the recent global financial crisis, asset-light was the motto of most hoteliers. But now hotel companies are amenable to owning assets, especially where it will help facilitate corporate growth strategies."

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