AccorHotels Eyes Higher Profit Despite Brexit, Europe Attacks

AccorHotels has predicted its operating profit would rise further this year as the hotel group benefits from its restructuring and gets a boost from the acquisition of luxury hotel group FRHI.

First-half operating profit fell 4 percent like-for-like to EUR€239 million as weak trading in France following Islamist attacks in Paris and slumping profits in recession-hit Brazil weighed.

First-half revenue grew 2 percent, reflecting solid activity elsewhere in Europe, notably in Britain and Germany, as well as in recovering southern Europe.

AccorHotels, undergoing an overhaul begun by chief executive Sebastien Bazin in 2013, forecast a 2016 operating profit of between EUR€670 million (USD$736.20 million) and EUR€720 million, compared with EUR€665 million in 2015.

The group was cautious about France, its largest market accounting for 30 percent of revenue and EBIT, where profit fell 4.2 percent in the first half and Revenue per Available Room (RevPar) in Paris alone fell 14 percent.

Commenting on the impact of the Bastille Day attack in Nice, Morin said that at this stage AccorHotels' Nice business was down 10 percent. The group had however not yet seen an impact of the attack on bookings in the rest of France.

Economy Minister Emmanuel Macron said last week that tourism in the Nice area had already seen bookings drop by 20-30 percent after the attack.

The world's fifth-largest hotel group however expressed caution about the impact of Britain's vote to leave the European Union and attacks in France and Germany and said the situation in Turkey was "still difficult to measure".

Britain is the group's third-largest market after France and Germany, accounting for around 15 percent of its sales and EBIT.

Britain's vote to leave the EU has caused the value of the pound to fall by about 10 percent, making it more expensive for Britons to travel abroad, and prompted consumer uncertainty.

Morin said the pound’s fall could cost AccorHotels EUR€10 million -EUR€15 million in second-half profit but with more Britons staying in their country it could also sustain Accor's business in the UK, where it has 220 hotels.

CEO Bazin, a private equity specialist who took over in August 2013, has split Accor into two divisions, HotelServices and HotelInvest, separating its hotel services business from its property activities in a move to boost profitability.

Last week Bazin announced a plan to turn HotelInvest into a subsidiary, paving the way to selling the majority of its capital to institutional investors to raise cash for the group's further expansion.

As part of the restructuring Bazin has also expanded the group's business in China and increased its exposure to the luxury sector with the USD$2.7 billion acquisition of FRHI, owner of London's Savoy and New York's Plaza hotels.

AccorHotels has also been strengthening its digital expertise with a flurry of small deals to fight the rising challenge of companies such as Airbnb and online travel agents Expedia and Booking.com.