News for the Hospitality Executive
Accor Outlines New Business Model
for its Hotels Division
October 23, On Monday, October 22 and Tuesday, October 23, 2007, Accor
is holding a two-day event for institutional investors and financial analysts
to present the new business model for its Hotels division and measure its
impact. The event is designed to share Accor’s strategic vision of its
Hotels division, and better understand the different components that constitute
“the Right Approach” that will make Accor’s Hotels business more profitable,
less cyclical and well appreciated by its clients.
Supply and demand: changes in the global marketplace
Between 2006 and 2012, the number of overnight stays in chain hotels is expected to rise by 5.7%* (*Source: Estin & Co) a year, compared with an increase of 3.7%* a year for the market as a whole. To optimize its positioning in an environment shaped by deep-seated change in hotel supply and demand in both mature and emerging markets, Accor has organized its strategy around five priorities:
To become the leader in the Economy and Midscale hotel segments and a major player in the Luxury segment around the world, Accor has redefined and expanded its brand portfolio to cover all segments-from Budget to Luxury-with an offering of standardized and non-standardized products designed to satisfy increasingly fragmented demand.
This year has seen the launch of two new brands: All Seasons in the non-standardized Economy segment and Pullman in the Upscale segment. At the same time, Sofitel is being repositioned in the Luxury segment, leveraging on its know-how and “French Touch” elegance, with the goal of meeting demand from a growing international clientele, in particular from emerging countries.
Alongside these measures to create and reposition brands, Accor is leveraging technological innovations and new product design to maintain its leadership in its traditional brands. It is launching a new Formule 1 room in France in 2007 and will roll out new room designs for the Suitehotel, Ibis, Etap Hotel brands and for Motel 6 in the United States in 2008. The Novotel and Mercure service portfolios are also being developed to enable the chains to maintain their competitive advantages.
The Right Network
Accor intends to expand its network to a total of 5,000 hotels by 2010.
The current network, which will comprise more than 4,000 hotels by year-end 2007, will be optimized through divestments, re-brandings and renovations, and revitalized with the addition of more than 1,500 hotels over the period 2007-2010.
This optimization process is expected to:
The Right Operating Performance
Reflecting the impact of the top-line initiatives, Accor hotels have outperformed the competition in revenue growth over the past two years, by 0.7 points for the French market-leading Ibis and Etap Hotel brands and by 2.5 points for Novotel and Mercure.
To optimize costs, a number of action plans have been deployed to improve operating conditions. These actions are intended in particular to drive a EUR65-million improvement in profit before tax at Group level by 2010 through more efficient purchasing management.
In France, the battle for the top line and cost-saving initiatives are expected to generate profit before tax of EUR261 million in 2007, a 28% increase over the previous year.
The Right Asset Management
Accor is pursuing the asset-right policy launched in 2005 to improve return on capital employed and reduce cash flow volatility by adapting hotel operating structures to each segment’s profitability profile. In addition to the program to modify the management structure of 350 hotels by the end of 2008, some 600 hotels could change their operating structure in 2009 and 2010. Among them are 400 Motel 6 properties in the United States, which are expected to improve their return on capital employed by four points by 2010 and to increase their EBITDAR margin by three points (excluding the impact of the hotel cycle).
Once these programs to adapt hotel operating structures have been completed at year-end 2010, 77% of the current portfolio (excluding new expansion properties) will be operated under management contracts, franchise agreements or variable-rent leases.
The Right Service Provider
The hotel management expertise developed by Accor over the past 40 years is now being offered to hotel owners through a change in corporate culture. The high value-added skills and services provided by Accor via its eight expertise platforms:
The new business model’s impact on the Group’s margins The impact of these action plans on margins could result in:
|Also See:||Accor SellsRed Roof Inn Brand (341 hotels) to Citi's Global Special Situations Group and Westbridge Hospitality Fund, L.P. for US 1.313 billion / September 2007|
|Accor’s Development in China Expected to be Equally Divided Between Luxury and Economy Branded Hotels / May 2007|