Accor looks to leverage record revenue to boost loyalty
Accor looks to leverage record revenue to boost loyalty
21 FEBRUARY 2019 10:00 AM

If 2018 was the year AccorHotels—now simply called Accor—invested in brands via M&A, 2019 might be remembered as the year it spends some of its HotelInvest cash on catching up with its competitors in loyalty, markets itself globally and develops partnerships.

PARIS—In 2019, AccorHotels will strengthen its portfolio, beef up its loyalty programs, invest, market a simplified name in Accor and grow its partnerships, according to executives.

During Accor’s full-year 2018 earnings call with analysts, executives outlined a deal for its loyalty program to sponsor the team shirt of French soccer club Paris Saint-Germain, a move that puts the French hotel firm on a potential collision course with the world’s largest hotel company. No price tag was announced.

“We will have fun with this on social media. I hope Arne will not mind,” CEO Sébastien Bazin said on the earnings call, referring to Arne Sorenson, CEO of Marriott International, which on 20 February announced its loyalty program is partnering with United Kingdom soccer giant Manchester United.

In highlighting the company’s 2018 performance, Bazin pointed to record revenue of €3.6 billion ($4.1 billion), a 16.9% increase over 2017. The numbers “are exceptional, super-good,” helped by increased demand and a tight rein on costs, and “2018 was a turning point for the company,” he said.

He said he expects the company’s board of directors will approve more cash being returned to shareholders at the upcoming 30 April annual general meeting.

Bazin also unveiled the company’s new name, as well as a new logo. But he noted that in terms of strategy, nothing has changed since 27 November, when Accor last held its Capital Market Day with investors.

“Even though it was my decision three and a half years ago to add (the word) ‘hotels’ to our core name, well, we’re actually making the exact reverse decision,” Bazin said, adding that the “enormous emphasis” remains that Accor is a hotel group.

“Or maybe I should say Accor was a hotel group,” Bazin said. “And now we are dropping ‘hotels’ because we are doing so much more than hotels.”

The CEO said this is not an indication that hotels will cease to be the firm’s core interest any time in the next 50 years.

“We have strong potential for development in our core markets. … We are the biggest hotel operator on the planet,” Bazin said, adding this is in terms of the management of hotels, not the franchising of them. The company ended 2018 with a portfolio of 4,780 hotels and 703,806 rooms.

Bazin said Accor met or exceeded its key performance indicators and guidance, which gives him confidence the company will reach the goals in its 2019 forecast. That includes a 2022 target of €1.2 billion ($1.36 billion)* in earnings before interest, tax, depreciation and amortization.

“We are designing our future … just a true will that Accor is moving into a new dimension,” Bazin said.

Much time will be spent on loyalty and partnerships, Accor executives said. Chief Digital Officer Maud Bailly said Accor’s loyalty members are responsible for 85% of direct web revenue but that they have asked for “simplicity and immediacy.”

Bailly said an additional €225 million ($255.4 million) will be invested in loyalty, partnerships and brand marketing, while Bazin unveiled yet another new name, saying the firm’s loyalty program now will be called “All.”

Bazin said Accor’s current loyalty and partnership efforts are dismal when compared with competitors.

“Marriott is spending $4.4 billion, Hilton, $2.2 billion, (InterContinental Hotels Group), $1.5 billion, while Accor? $700 million. We have to catch up. It is time to wake up, time to show muscle, time to dare,” Bazin said. “(Our loyalty) has to be fixed. We need to transform. … You have to put your brand out, or you will get punished. We are very bad in revenues and partnerships.”

Chief Brand Officer Steven Taylor said the strategy is to have an “overarching and very strong and engaging loyalty program to then sustain all (our) individual brands, as you cannot obviously afford to invest in 33 brands to the level that perhaps you want.”

Bedding down buys
Accor was very active in mergers and acquisitions in 2018 as the company spent €2 billion ($2.3 billion).

The company used cash from the February 2018 sale of a stake in its ownership division HotelInvest toward M&A, and spent €850 million ($965 million) in share buybacks and the continued transformation of the company, Bazin said.

In 2018, Accor purchased Mövenpick Hotels & Resorts for $566 million on 30 April, acquired 100% of management and 20% of real estate of Chilean group Atton Hoteles for more than $100 million on 14 May, and on 29 June the company purchased 50% of New York City-based SBE Entertainment Group, the parent company of SBE Hotel Group.

Accor’s 2018 earnings have buoyed its executives to concentrate on these loyalty, partnership and brand endeavors.

Jean-Jacques Morin, deputy CEO of finance, communications and strategy, reported the company saw a 5% increase in net organic system growth year over year, with 198,000 rooms in its pipeline, and €712 million ($808.1 million) in EBITDA, which he added is in line with guidance.

Morin said the firm’s cash conversion for the year was 83%, after earlier guidance stated the figure would be closer to 70%, and systemwide, like-for-like revenue per available room rose 5.6%.

That number was “predominantly driven by France, where RevPAR grew by 6.9% over the year, lifted by strong gains in Paris of 12.2%,” according to the earnings press release.

Every region worldwide saw revenue increases by almost or more than 10%, with only the Middle East and Africa region seeing a decrease (-1.1%). North and Central America posted a 17.1% increase while the Caribbean and South America reported a 13.8% increase.

“Returning free cash flow is €529 million ($600.4 million), and our dividend policy will be 50% of this number,” Morin said.

Accor added approximately 100,000 rooms in the year, 56,000 of which were via acquisitions.

As of press time, AccorHotels stock was trading at €38.47 ($43.66) a share, up 5.6% year to date. The Baird/STR Hotel Stock Index is up/down 13.9% for the same period.

*Correction, 22 February 2019: This story has been updated to correct Accor's projected EBITDA in 2022.

No Comments

Comments that include blatant advertisements or links to products or company websites will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff.