Half its planned asset sales to cut debt completed
(PARIS) Accor Hospitality, the hotels business of France's Accor SA, said that over half its 2010 plan to dispose assets to reduce debt had been completed by the end of last month and that it was stepping up hotel expansion in Europe and Asia.
The company, which is being split from Accor's prepaid services unit, said yesterday that recovery in its key revenue per average room (RevPar) gauge in the first quarter continued into April and the first half of this month.
With 4,100 hotels in 90 countries and 145,000 employees, Accor is the fourth-largest hotel group in the world behind the InterContinental, Marriott, Hilton and Starwood chains. It wants to grab the No 3 spot by 2015.
Accor SA plans to separate its hotels - ranging from luxury brand Sofitel to budget Ibis and Motel 6 - from its services business, which provides food and childcare vouchers.
The split is aimed at helping the operationally geared hotels business shed real estate and assets to boost cash and expand, and give the cash-rich, defensive prepaid business a freer hand to invest and grow. The group plans to continue managing the hotels that it sells.
Accor Hospitality expects disposals for this year to have a 450 million euro (S$772 million) impact, of which more than 50 per cent had been secured by the end of last month.
Chief executive Gilles Pelisson told investors yesterday that the planned split would accelerate its shift towards a more asset-light business model that would boost Return on Capital Employed (ROCE) and cash flows.
By 2012, Accor Hospitality plans to open 35,000 to 40,000 new rooms a year, with hotels operated under management contracts or franchise agreements making for over 80 per cent of revenue against 60 per cent last year.
Accor said that by the end of 2015, it planned to open more than 1,800 hotels, with a strong focus on Europe and Asia.
The services unit, which is due to list on July 2 in Paris if shareholders approve the one-for-one share split at a meeting on June 29, held its own investor day on Tuesday.
Accor SA has said that it would allocate 1.2 billion euros of its 1.6 billion debt to hotels and 400 million to prepaid services.
The hotels business, which wants an investment grade rating, thus needs to accelerate asset sales to wipe out debt.
Yesterday, the unit kept all its debt reduction goals.
'Our asset sales are going well,' Mr Pelisson told BFM radio, adding that it was becoming easier for potential buyers to secure financing.
The 2010-2013 asset disposal plan is expected to increase cash by 1.6 billion euros and reduce adjusted net debt by two billion.
Beyond 2013, more property portfolio restructuring is on the cards, which would cut debt by around 200 million to 300 million euros a year, the company said. - Reuters
Source: Business Times, 20 May 2010