French hotel firm Accor has recovery firmly in its grasp and is gearing up with investments and initiatives to seize the requirements and desires of a new era of travelers, according to its two top executives.
Speaking at an analyst presentation of its full-year 2021 earnings, Accor Chairman and CEO Sébastien Bazin said that despite a setback in January due to concerns over the spread of the omicron variant of COVID-19, performance "is getting better ... quarter after quarter."
The company ended 2021 with revenue per available room down 27% compared to pre-pandemic 2019 levels.
"RevPAR at the end of the first quarter of 2022 should show improvement,” Bazin said.
He said the firm’s major goals are to continue the momentum of recovery, to attract and retain talent, to develop its network via higher fee generation per room, to further pursue the rollout of its environmental and social-governance strategy and be at the forefront of innovation and lifestyle experiences.
“Don’t stop thinking. Don’t stop acting. Be daring. You might be wrong two times out of 10, but you will be right eight times,” he said.
Accor’s results were announced on the same day Russia invaded Ukraine.
“I am putting aside that Ukraine and Russia is less than 1% of the network, because that is absolutely irrelevant. What is relevant is that we have 2,000 people in Russia, a couple of hundred in Ukraine, and we care for them. We feel for them,” Bazin said, adding that before the earnings call, he talked to many of the general managers at Accor's hotels in those two countries.
The impact the conflict will have on travel is uncertain, but Bazin noted in general that “travel desire has never been stronger than what it is today."
"People are eager to actually spend more for a better experience. Our industry is still blessed, and it will be still blessed for a number of years,” he said.
Central to Accor’s growth strategy are the 14 brands under the Ennismore umbrella, which Bazin said is now fully integrated into the Accor system and posted RevPAR for full-year 2021 that was only 8% lower than 2019 results.
Performance of that portfolio is driven significantly by the food and beverage department, he said.
“Fifty-five percent to 60% [of Ennismore’s performance] has nothing to do with the shower and the bed. … The beauty of this is that 80% of the [food and beverage] clients happen to be local people — that person who lives next door, next to it, coming by foot or by bike,” he said.
Revenue growth for Accor is also being fueled by the expansion of its portfolio to new destinations and the adoption of new "disruptive concepts," he said.
“Don’t be shy. Continue to innovate, continue to think what could be pleasing for your own guests,” he said.
Discipline
Bazin said mergers and acquisitions are not among his top 10 of priorities, noting that Accor has not been actively looking for deals over the past two or three years.
Selling has not been at the top of the agenda either, he added.
Exceptions to the company's asset-light strategy include AccorInvest, a divestment vehicle set up more than half a decade ago that Accor has a 30% stake in, and Australian brand Mantra.
Contractual obligations mean Accor cannot divest fully in AccorInvest until at least summer 2023.
“Anyway, it would be virtually impossible to sell 30% of AccorInvest today in this time of rebound," he said. "AccorInvest will probably be rebounding faster than us, because of the asset-heavy component. There will be investors for sure to take away the 30%."
As for Mantra assets, Bazin said, “I told my teams, do not sell asset-heavy lease ownership when you are in a meltdown. It would make no sense. There would be no buyer, and you cannot even put a value on it.”
Again, he said, sales activity might begin there in summer 2023 or even summer 2024.
Accor is making investments, although Jean-Jacques Morin, Accor’s CFO and deputy CEO, said they are very small in comparison with the company's overall size.
Bazin said Accor has "made several investments when it comes to ghost kitchens," noting a 13% stake in Middle East-based company Kitchen and a 15% investment in C3, a ghost-kitchen operator in America.
"These deals now are now worth between five times and 20 times what we’ve invested,” he said.
Leisure Demand, Pipeline Growth
The trend toward extended weekend hotel stays of three or four days has meant that while there have been fewer bookings, they have been longer, Bazin said. Premium bookings of secluded experiences in natural destinations have also been on the rise, he said.
Corporate bookings are also evolving, with companies more apt to plan 10 events around the world with 50 people, rather than one event with 500, he said.
“Leisure recovery will more than offset international lag by 2023,” Bazin said, noting that Accor’s home market of France will host two major events in the next two years — 2023’s Rugby World Cup and 2024’s Summer Olympics.
Other initiatives in the premium space in 2021 included the launch of soft brand Emblems Collection and the relaunch of Orient Express, which includes new La Dolce Vita trains in Italy.
“Six carriages by summer 2023, which means you have to book by summer 2022, as it will be sold out 12 months in advance,” Bazin said.
Morin said Accor's performance, though still lagging 2019, is being driven by “very strong pricing power, fueled by a recovery in demand and solid operational execution.”
He noted cost savings of 110 million euros ($122.6 million) in 2021, which exceeded previous guidance of 70 million euros. That figure is predicted to rise to 200 million euros by the end of 2022.
The French firm’s global portfolio grew by 3% in 2021, and is predicted to grow by 3.5% for full-year 2022.
Morin said the pipeline includes approximately 95,000 rooms in the Asia-Pacific region, approximately 59,000 in Europe and approximately 60,000 across the rest of the world.
In the Americas, the company has 15,000 rooms in its construction pipeline.
“Sixty percent is new build, 40% conversion,” Morin added.
Notable openings in 2021 included the 400-room Fairmont Century Plaza in Los Angeles, 221-room Mövenpick Hobart in Tasmania and 434-room 25Hours One Central in Dubai.
“We’re accelerating pipeline in Northern Europe like we have never seen before. Forty percent of all rooms [in that region] have been signed with Accor brands, which is far more than Accor market share [there],” Bazin said.
Accor posted 2021 revenue of 2.2 billion euros, a like-for-like increase of 34% over 2020 but a 42% decrease compared to 2019. Earnings before interest, taxes, depreciation and amortization came in at 22 million euros, a recovery from a loss of 391 million euros in full year 2020.
Morin said EBITDA sensitivity currently is 16.4 million euros per point of RevPAR.
As of press time, AccorHotels stock was trading at 30.11 euros a share, a decrease of 11.9% year over year. The Euronext Stock Exchange was down 6.6% over the same period.