UPDATE 1-Hotel group Accor held back by problems in home market

Thu Apr 17, 2014 1:57pm EDT

* Difficulties in France expected to continue in Q2

* Q1 sales 1.135 bln euros, up 2.1 pct on like-for-like basis

* Robust demand in other markets (Adds details, CFO comment)

By Dominique Vidalon

PARIS, April 17 (Reuters) - Europe's largest hotel group Accor said on Thursday that difficulties in its core French market that held back first-quarter revenue growth would remain in the second quarter.

The world's fourth-largest hotel group behind InterContinental, Marriott and Starwood is undergoing a reorganisation instigated by new CEO Sebastien Bazin, but has been beset by a variety of problems in its home market, which generates 35 percent of group sales.

France's value added tax (VAT) rate rose to 10 percent from 7 percent at the start of the year, increasing Accor's room prices, while poor weather also discouraged short-stay leisure guests, it said

The group, however, said that it would benefit from a solid trading environment in its other markets.

"First-quarter trends remain generally robust, with rising demand in almost every country, signs of recovery in Southern Europe and firm hotel pricing power, with the exception of France, Spain and Italy," it said.

Revenue in the first three months of the year reached 1.135 billion euros ($1.57 billion), a 2.1 percent rise on a like-for-like basis, which excludes currency fluctuations, acquisitions and divestitures.

This marked a slowdown from like-for-like growth of 3.4 percent in the fourth quarter of 2013.

On a reported basis, revenue declined 5.5 percent because of weaker currencies in emerging markets, notably in Brazil.

Chief Financial Officer Sophe Stabile told a conference call that France would continue to feel the negative VAT effect in the second quarter, while there would also be an unfavourable holiday calendar in April and May.

There would also be no Le Bourget airshow near Paris in June, which is traditionally a boost for a group that draws 70 percent of its clients from the business world.

Accor said it opened 4,449 new rooms during the quarter, 50 percent of which were in emerging markets.

Shares in Accor have gained about 3 percent this year, outperforming a 2.5 percent rise in the CAC-40 index of French blue-chip companies.

Accor shares trade at 20 times forward earnings, in line with InterContinental but below 25.92 times for Starwood and 22.35 times for Marriott. ($1 = 0.7228 Euros)

(Editing by Maya Nikolaeva and David Goodman)