Accor Sees Higher Profit Despite French Weakness

August 26, 2014

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Accor forecast operating profit would rise this year as cost-cutting and restructuring efforts start to pay off and demand for hotel rooms improves in all regions outside its home market of France.

The company, whose 14 hotel brands range from budget Ibis to luxury Sofitel, predicted 2014 operating profit of between EUR€575 million and EUR€595 million (USD$759 million - USD$785 million), compared with an adjusted operating profit of EUR€521 million in 2013.

Accor is undergoing a reorganisation initiated by private equity specialist Sebastien Bazin, who took over as chief executive a year ago.

"In spite of a complex situation in France, the group is engaged on positive trends... All conditions are there to push forward and deliver on our targets," Bazin told journalists.

Accor has been hit by a variety of problems in its home market, which generates 35 percent of group sales, ranging from a rise in value added tax (VAT) to sluggish economic activity.

Business trends remained stable during the summer season with revenue per average room increasing in all regions except France, while initial indicators for August were also "encouraging". But France was expected to remain sluggish.

"We do not anticipate a significant improvement in France in the second half," Bazin said, adding the current political crisis in the country was a further hurdle.

Bazin was speaking after Accor posted a 17.6 percent rise in first-half operating profit to EUR€219 million

Bazin took the top seat at Accor a year ago. His first move has been to split the company into two divisions — HotelServices and HotelInvest — to separate its operating and franchising business from its real estate ownership activity in a bid to bolster profitability.

Accor said that HotelInvest had bought a portfolio of 13 hotels in Britain from the Tritax investment fund for EUR€89 million, which it will fund entirely through debt.

Net debt stood at EUR€259 million at end-June.