Accor’s New Strategy to Include Sale of 450 Hotels

Embarking on a new strategy as a pure hotel company, French lodging giant Accor said it is now focused on developing its brand portfolio for guests, its business as an operator and a provider of hotel services, the value of its assets through sales of hotel properties, and an ambitious plan built mainly around management contracts and franchise agreements, not wholly owned hotels. As part of that plan, Accor will sell 450 or its 1,600 hotels, though most of these will be operated under management contracts.

Ahead of the demerger to be submitted to shareholders for approval at the extraordinary shareholders meeting on June 29, 2010, Accor organized an investor day on May 19, 2010, to present its new business model and strategic vision to the financial community. The company said its vision is based on being the world’s leading hotel operator, by emphasizing customer and employee satisfaction, and developing the brands and leveraging the expertise acquired over more than 40 years in business.

Of a total of 493,000 rooms, Accor today operates a network of 384,000 rooms in hotels that are owned, leased or operated under management contracts. The company said it is now intent on becoming the leading franchiser in Europe, by converting existing hotels and developing new projects. It also wants to become one of the world’s top three hospitality groups by stepping up the pace of expansion by opening 35,000 to 40,000 new rooms a year beyond 2012, in Europe and in countries with high growth potential.

To achieve these targets, Accor said will leverage three main sources of value creation under its corporate mission project: Operational excellence and cost efficiency, the Asset Right strategy, and an ambitious development plan based primarily on the asset-light model After sharply contracting in 2009, Accor said the hospitality market showed clear signs of improvement during the first quarter of 2010 in most countries, particularly in Europe. Looking beyond the positive outlook linked to the cyclical upturn, expanding demand in both developed and emerging markets should drive long-term growth.

Accor’s brand portfolio also is being aligned to respond to increasingly segmented market. In this respect, the company has decided to reposition Suitehotel within the Novotel brand. The new Suite Novotel brand, to be launched this summer, will leverage the strategic fit between the merged brands and will benefit from the power of the Novotel brand already present in 60 countries.

The shift in business model towards asset-light ownership structures will allow a budget of €200 million a year from 2012 (Accor’s share of the investments), plus €50 million for hotel repositioning expenditure. By 2012, the Group expects to open 35,000 to 40,000 rooms a year, with hotels operated under management contracts or franchise agreements accounting for over 80 percent of new rooms.

One fifth of the investment budget will be used for the development of hotels operated under management contracts. Eighty percent of targeted investments in owned and fixed leases hotels will concern the Economy segments in Europe, for the most part Ibis and Etap units. By the end of 2015, the expansion plan is expected to drive the opening of more than 1,800 hotels, or around 220,000 rooms, with a strong focus on Europe and Asia.