AccorHotels narrows full-year EBITDA guidance
 
AccorHotels narrows full-year EBITDA guidance
18 OCTOBER 2016 2:23 PM

AccorHotels has seen some shocks to the system, notably in France and Belgium, but its executives say Q3 numbers show the group is performing well and is well positioned to take advantage of any rising tides. 

PARIS—AccorHotels officials are lowering their full-year earnings expectations even though, they say, the hotel giant experienced a relatively strong third quarter.

According to CFO Jean-Jacques Morin, AccorHotels delivered sound performance in its third-quarter 2016 trading, but nevertheless narrowed full-year earnings before interest, tax, depreciation and amortization to between €670 million ($735.6 million) and €690 million ($757.6 million).

During a conference call with analysts, Morin said terrorist incidents in Europe depressed numbers in some markets, but the French company is enjoying strong momentum globally.

“Some markets will be weak in 2017. I do not expect Belgium to be strong,” Morin said.

He noted that uncertainty in the United Kingdom is another challenge the company faces.

“In the U.K., (revenue per available room) is up 1.6%, and occupancy remains at an extremely high level, above 85%, with London above 90%. Brexit had a limited net effect, and the weak exchange rate helped staycations, although business travel was hampered by the uncertainty,” Morin said.

Morin said he expects much of the same for the fourth quarter of 2016, with some regions strong and London mildly negative, but at the same high occupancy.

“It is a tough situation with these terrorist events that have frightened people, but on the positive side, there are lots of people traveling,” Morin said.

Morin shared some insights into the company’s growth and restructuring following the $2.9 billion purchase of FRHI Holdings Limited, which closed on 12 July. That deal gave AccorHotels control of the Fairmont, Raffles and Swissötel brands.

FRHI revenues comprised 7% of the revenue of HotelInvest, AccorHotels’ ownership division. “Integrating FRHI into our system has been good. No one has come back to us and said we do not want to work with HotelInvest, and FRHI is a very important complement,” he said.

System growth, Morin said, was boosted by that huge deal. The Q3 news release states the quarter showed record development, with the opening of 51,391 rooms, of which 116 hotels and 43,195 rooms relate to the integration of the FRHI group.

New EBITDA guidance
When asked about the company narrowing its full-year EBITDA guidance, Morin said the reduced number represented a 1% drop, which he said “is not a bad number … a €15 million drop, mostly from France.”

He reiterated the Jekyll and Hyde nature of some of AccorHotels’ portfolio but stressed the group is in a good place.

“In Germany, I do not think RevPAR growth next year will be as strong due to that market’s biannual trade show calendar … but I do not think it will be negative,” he said.

There are some bright spots in Germany. “Occupancy was above 75% in Munich, so we were able to hold rate,” he said, adding he is bullish on the prospects for several other countries.

“Brazil will rebound, and we are very well positioned there. Inflation should get under control,” Morin said, and “Spain and Portugal benefitted from a strong summer and posted double-digit RevPAR growth.”

For the quarter, the entire group saw a 1.8% increase in revenue to €1.5 billion ($1.7 billion) at constant scope of consolidation and exchange rates, and a 3% increase in revenue as reported, Morin said.

“It will come as not surprising that France showed its weakest quarter so far in 2016, with -5.8% RevPAR, and all other (metrics) being down,” he said.

Q4 looks better in France, he said, with some big trade shows coming up.

“It will take more time (in France) before we feel comfortable with occupancy,” he added.

Asked whether any depression in Q3 numbers or full-year EBITDA figures was due to Airbnb, Morin said he did not believe so.

“We’ve been as candid as we can (about Airbnb). Performance this year has been because of security concerns, and while I have no data, my hunch is that we compete (with Airbnb) over 10% of business, outside summer, 5%,” Morin said.

Changes
AccorHotels has been busy lately, expanding its coverage, offerings and revenue streams, but it also lost its deputy CEO, Vivek Badrinath, this month. His departure was first announced in August.

Badrinath took up the post of regional CEO, Africa, Middle East and Asia-Pacific, at communications company Vodafone, although he remains on AccorHotels’ board. Before he began at AccorHotels in January 2014, Badrinath had an executive position at peer communications firm Orange.

Recent AccorHotels’ acquisitions in addition to FRHI include high-end concierge service firm John Paul for $150 million in July; luxury extended-stay brand Onefinestay, which operates at the same price category as John Paul, for €148 million ($162.5 million) in April; a 30% stake in short-term rental platform Oasis Collections for an undisclosed sum in February, and a 49% share of upscale resort hotel digital platform Squarebreak, also for an undisclosed sum.

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