In such a bad environment, where travelling and tourism are down more than 20% vs. 2008 (and last year was a bad one too), Accor continues toplan for expansion. It has recently announced plans to expand further its business. Accor, Europe’s largest hotelier, plans to set aside 100 million euros ($132.8 million) a year to buy hotels put up for sale as a result of the global downturn, the group’s chief financial officer said on Sunday.
Indeed, the expansion seems to be on. On April 16, in its quarterly results announcement released in Paris, Accor mentioned that:
“In the midst of an unprecedented recession,
Strong performance in Prepaid Services, with an 8.3% increase.
Worsening business conditions in Hotels, with an 8.7% decline despite resistance in Economy Hotels in France (down 3.2%).
New cost-saving initiatives:
– A €175 million annual reduction in renovation capital expenditure in 2009 and 2010, compared with 2008.
– A larger cost-saving plan, in addition to the already announced €100 million program.”
Despite worsening economical conditions in the hotels area (a 8,7% decline in a like-to-like comparison to last year), Accor showed also a growth on the prepaid services division, its second larges source of revenue (5.7%). The decline in the Q1 hotels is said to be the same in Q2, whilst the CFO of the company mentioned that Accor still has some room to decrease further. Our doitinvest.com financial statements analysis for Accor shows that the receivables are a mere 8.8% of their turnover, whilst the financing of the business is quite solid, culminating with the bonds issuance (600 million Euros) made by Accor in Q1 in pretty good market conditions. This makes it very capable of further investing, allowing Accor to buy cheap hotel assets in this downturn economy with the purpose to take advantage of it when the business and private travel spending will pick up.
The United States remained in a “bad” position, although there were signs of a stabilization. “The (U.S.) market is down around 12 percent for economy hotels, 15 percent for mid-scale and between 20 and 25 percent for upscale hotels in terms of negative revPAR (revenue per available room). It’s not worsening, it’s stabilization,” said the CFO of the company. Accor is prepared to open around 30,000 rooms this year, with more than 40 percent in Asia Pacific, Sthe CFO Stern said. Accor has about 25 Ibis hotels in China and plans to open 20 more in 2009. “The pace of development for China for Ibis will be around 10 new units per year in the next years,” said Stern.
Accor makes therefore a good example of another company which was caught by the recession with some reserves to grow. How much will it do it in the incoming years, remains to be seen.