This week’s Accor AGM came with the news that the company would use its first-half results on 4 August to announce a reorganisation. This tidbit came after the other delights that see most people avoid an AGM - chat from the audit committee springs to mind - and some rucking from shareholders about not being able to meet in person. CEO & chairman Sébastien Bazin said he’d happily meet any shareholders wherever and whenever, although, given the group’s share price, keeping these chats on Zoom might be preferable for now.
Detail was light. Bazin said that he would be “clearer about the amount involved and the type of organisation we want” in August. Casting back through the AGM for clues, he told shareholders that “the crisis has revealed a still-too-rigid cost structure, set costs don’t vary as revenue varies, we have to adapt the cost structure to ups and down”. He also muttered about not wanting the company to pay for services that the owners weren’t using.
Not much to go on, but then who wants to be denied the joy of speculation, particularly when it’s Accor and there's the potential for something truly astounding, outside the expected job cuts and office merry-go-rounds we are already seeing at other groups.
The comment about not wanting to pay for what wasn’t being used was the one this hack is fixated on (like I said, these are not rich pickings) and which also speaks most to the times. What we have seen so far during this pandemic is agitating amongst the different players in the hotel stack, played out most graphically at Travelodge, where the landlords felt themselves powerless, unprotected by government. Travelodge was an unusual case - one observer confessed themselves split between considering it a win-win or a lose-lose - but it showcased the anger investors could muster.
No one party wants to be left carrying what is likely to be a big can during this - to quote Bazin - “plummet”. Investors want brands who are truly aligned with what they want (income, asset appreciation, no can carrying) and so anyone who speaks like one is going to pique their interest. It’s worth noting, at this juncture, that until recently, Accor was a major investor and, with a stake in AccorInvest, still has an interest.
Things are afoot at AccorInvest. This week saw Gilles Clavie to take over from John Ozinga as CEO. Clavie was president & CEO Orbis since 2014, where earlier this year Accor completed the sale of an 85.8% stake to AccorInvest for €1.06bn. Ozinga was supposed to make his exit in Spring next year, but, as many have noted in this pandemic, acceleration of events has become a thing.
What will Clavie have to cope with? Shareholder Colony Capital for one, which reported in May that its portfolio companies had defaulted on $3.2bn of debt secured on hotels and healthcare-related properties. Then-CEO Tom Barrack said that the company “has begun discussions with advisors to evaluate strategic and financial alternatives to maximise the value of its hospitality assets”.
‘Then-CEO’ because Marc Ganzi has now become president and CEO, in a planned move. Colony’s board voted last year to turn away from traditional real estate, including hotels, and transform into a Reit focused on converged communications and digital infrastructure.
Shortly after Colony Capital started to think about a sell off, AccorInvest said that it was not planning to seek support through the French government’s state-guaranteed loan programme, after reports that it was in talks to raise up to €500m. Prior to the denial, rumour had suggested that, in return for the loan, banks would ask the group to commit to rebalancing its accounts by the end of the year via a capital increase to be subscribed notably by Accor and Colony.
It seems unlikely that Colony would be in for that, hotels not being part of the digital infrastructure, but would Accor want to get deeper into ownership? Bazin was vehement about making the move to asset light not just a strategy for real estate, but for the way the company operated, so hedging on a ‘no’ here. Someone will need to replace Colony at some point and that investor will want to know that the brand has its back. Expect the August reorganisation to be heavy on nimbleness and fat trimming.
At this week’s In Focus Alexi and I talked about how adding technology could also add service - and cut costs. Accor is very keen on its Heartist programme, which sees employees as real people with real aspirations towards providing hospitality. Service through people aided by technology and not trouser presses, excessive brand standards and pillow menus? Will this be the acceleration hotels build on during the pandemic? Will brands learn to set themselves apart with the intangible rather than neon signs? There’s no second-guessing Bazin. But we have hope.