Skift Take
It may not have seen the biggest revenue of significant hotel companies last year, however Accor’s swing from a multibillion-dollar loss to a multimillion-dollar profit over the span of 12 months is a significant win for a company with significant exposure to Europe and other locations more based on worldwide travel.
Cameron Sperance
Among the most financially damaged hotel companies from the pandemic made a sharp U-turn to profitability last year.
Accor reported Thursday early morning a roughly $95 million earnings for all of 2021. While the profitability figure may be less than what was seen by most of Accor’s U.S.-based rivals, it is a seismic enhancement over the Paris-based hotel business’s more than $2 billion loss seen in 2020.
Business leaders kept in mind the monetary turnaround began last April which they hope to capitalize on the recovery underway by continuing to broaden their concentrate on higher-performing high-end and way of life hotels catering to more regional traffic. CEO Sebastien Bazin made it clear the chain isn’t lingering for a full healing of business travel, forecasting at least a quarter of that company is gone forever.
He noted some systemic changes that are happening.
” [There is] an enormous change in habits from visitors at Accor … We need to get much better at regional stays,” Bazin stated during an investor call Tuesday. “There is a clear need for everybody to embark with the regional populations and [guests] we have domestically.”
Accor’s greatest vulnerability for much of the pandemic has been its considerable exposure to Europe and other areas more dependent on worldwide travel, which was mainly curtailed as part of international pandemic mitigation method.
Bazin and other Accor leaders early in the pandemic were quick to no in on lifestyle hotels, or those that make at least half their income from food and beverage outlets or other amenities beyond guest spaces. The most significant push into this sector stemmed from Accor’s link-up with Ennismore, owner of brands like Gleneagles and The Hoxton. The deal, leading to Accor having a two-thirds stake, included spinning off brand names like SLS and Delano under the new way of life collaboration.
While Ennismore presently operates 94 hotels across 14 brands, Bazin stated it might swell to “most likely over a couple hundred in the next three years.”
There is more financial incentive for Accor to keep pumping resources into its way of life hotel portfolio. While Accor’s tradition brands like Sofitel and Novotel may rely more on worldwide company traffic, way of life hotels cater more to domestic and regional traffic– two need sectors that have been more resilient revenue streams throughout the pandemic.
Accor’s legacy brand names were 27 percent off 2019 efficiency levels at the end of in 2015, but Ennismore’s lifestyle hotels were just down by 8 percent– something Bazin credits to a much faster healing in dining establishments and bars than hotel guest spaces.
“The Ennismore way of life section, 55 to 60 percent of total revenue has absolutely nothing to do with a shower and a bed. It’s people coming to dine or invest a couple hours and have a coffee or to fulfill someone,” he included. “It’s the individual who lives next door and comes by foot or bike.”
Accor likewise sees chance in its upscale and high-end brands, as designer interest is up with brands like Fairmont, Mövenpick, and Raffles. The company also relaunched its Orient Express ultra-luxury brand, which also includes a train service slated to begin in 2023.
The high-end and upscale segment– which likewise includes way of life hotels– accounts for 40 percent of Accor’s future hotel openings, up 12 percent over the last four years.
“We ‘d do definitely whatever for that 40 percent to be closer to half in the years ahead, which is why we have been assembling the portfolio of brands we have today,” Bazin said.
But he also added a significant merger or acquisition isn’t in the cards for Accor to achieve its recovery objectives.
“We are not looking at any M&An opportunities,” Bazin said earlier in the call to an analyst. “We have not been looking for the last two to three years. It’s not in my list of [top] 10 top priorities.”
While the Ennismore offer may look like a quasi-merger, both parties included call it a joint endeavor due to the name service maintaining a one-third share.
A Demand Shift
Accor still has a methods to precede it sees a complete rebound. The business’s total earnings per available room, the market’s crucial efficiency metric, was down 46 percent from 2019 levels last year.
It is no surprise the business is putting more of an emphasis on luxury and lifestyle hotels that cater more to leisure traffic and local business. While 40 percent of Accor’s demand originated from leisure travel traditionally, another 20 percent originated from global company travel– and Bazin expects that sector to still be at half its pre-pandemic performance level this year.
Accor leaders wish to see company travel return, as “those clients wind up paying a higher rate per space since of their purchasing power and the people who send them abroad,” Bazin stated.
However business leaders acknowledge they can’t keep waiting on the uncertain revival of this sector.
“I did state publicly that I was afraid that we’re going to be losing most likely 20 to 25 percent of that [global company] client base permanently, and individuals doubted about it. I keep duplicating today that we stand to lose 25 percent of that global business travel permanently,” Bazin said. “Regrettably, it does work to be utilizing tools like Webex and [Microsoft] Teams.”