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Accor to rebalance away from Europe, seeks acquisitions
November 6, 2012 / 3:21 PM / in 5 years

Accor to rebalance away from Europe, seeks acquisitions

JEDDAH, Saudi Arabia (Reuters) - Accor, Europe’s largest hotel group, is seeking to add around 5,000 rooms annually through acquisitions worldwide as it shifts focus away from weaker markets in Europe, its chief executive has told Reuters.

A view of the Novotel hotel, in Mohamed V Avenue, in Tunisia April 3, 2012. REUTERS/Zoubeir Souissi

Chairman and Chief Executive Denis Hennequin said he had effectively unlimited capital available along with 1.7 billion euros in credit and would for example take any opportunities that arise to expand its midscale and upscale brands in the United States.

He said Accor saw demand growing in the Asia-Pacific area and planned to shift its focus toward that region in the next three years as it rebalances away from Europe, adding a total of around 40,000 rooms annually including organic growth.

“When you look at the demand worldwide you see there is a bit of a slowdown in southern Europe. Italy, Spain and Portugal are suffering,” Hennequin told Reuters in an interview.

“In Asia-Pacific it is still double-digit growth as well as in Latin America. Here in the Middle East it is quite strong ... Africa is rebounding.”

The French group, which runs more than 4,400 hotels ranging from the luxury Sofitel to the budget Ibis chains, currently generates about 70 percent of its income in its home continent.

“I‘m opening 110,000 rooms, 70 percent of which are outside of Europe, because I want to find another balance, which is 50 percent of our profits from Europe and 50 percent outside of Europe by 2016,” he said.

Of the 110,000 rooms to be added, around 50 percent will be in the Asia-Pacific region, 20 percent will be in emerging markets including the Middle East and Africa, and 30 percent in Europe, Hennequin said.

The firm is seeking acquisition opportunities worldwide and aiming for acquisitions that give a return of at least 15 percent in “reasonable size” hotels. “We have no limitation on capital and have a 1.7 billion (euro) line of credit that we haven’t used,” Hennequin said.

“There are acquisitions that can be made all around the world ... I am not limiting myself to one part of the world or one region...Our ambition is worldwide.”

Accor plans to open around 40,000 rooms each year, of which around 5,000 will be made through acquisitions and the rest through organic growth. “This year we are not done with the year but I will open more than 35,000,” Hennequin said.

The company is the world’s fourth largest hotel group, behind the InterContinental (IHG.L), Mariott MAR.N and Starwood HOT.N chains.

Accor sold its discount Motel 6 chain in the United States for $1.9 billion in May, and is looking at growth opportunities in mid-scale and upscale brands in the United States.

“If there are opportunities to grow with our mid-scale brands, or upscale brands like Pullman, or MGallery or Sofitel, I will take those opportunities,” Hennequin said.

Accor said in October its third-quarter revenue growth slowed to 1.3 percent versus 3.1 percent in the second quarter, after business conditions in southern Europe worsened.

Hennequin reaffirmed the company’s previous forecast for 2012 earnings before interest and tax EBIT.L in a range of 510-530 million euros, “the expectation for the year being at least in line with the previous year.” (Reporting by Asma Alsharif; Editing by Andrew Torchia and Patrick Graham)

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