Accor said that it the number of its closed hotels to increase from over half to more than two thirds in the coming weeks.
The company added that had set up a €70m fund for employees, paid for with 25% of the group’s planned dividend
The group said that the “abrupt deterioration” in the situation had prompted it to take “drastic actions across its global operations”, which it described as “aggressive, incremental actions”. These included: a travel ban, hiring freeze, reduced schedules and /or furloughing for 75% of global head office teams the second quarter, resulting in a minimum €60m reduction in G&A for 2020 and reviewing recurring investment plan for 2020 resulting in a €60m reduction in capital expenditures.
The board had also decided to withdraw its proposal for a 2019 dividend payment of around €280m and after consulting with the main shareholders - JinJiang International, Qatar Investment Authority, Kingdom Holding Company and Harris Associates - had decided to allocate 25% of the planned dividend to the launch of the ALL Heartist Fund.
This fund will assist: the group’s 300,000 employees, pledging to pay for their COVID-19-related hospital expenses, for those who do not have social security or medical insurance, as well as furloughed employees suffering “great financial distress” and individual partners facing financial difficulty.
In addition, the group said it would support front-line healthcare professionals and non-profit organisations.
Sébastien Bazin, chairman & CEO, Accor, said: “Welcoming, protecting and taking care of others is at the very heart of what we do. In light of the urgency and the scale of the situation, we have decided to act in an immediate and meaningful way, in the spirit of our values and commitments.
“Through this impactful gesture, we wish to express our solidarity and gratitude to all those demonstrating courage and selflessness during this crisis.”
The group added: “One piece of good news is the confirmation of initial recovery of the Chinese hotel market, with mild improvements in occupancy and F&B activity.”
Last month Accor reported that it was Accor said that was “agile” after completing both the sale of an 85.8% stake in Orbis and the sale of Mövenpick hotels’ lease portfolio.
Through the end of February, the group recorded a 4.5% decline in its revpar on the same period in 2019 like-for-like. Revpar in February was down by 10.2%. Over the first two months of the year, this net decline in activity due to COVID-19 has had a €20m impact on EBITDA. Since the last week of February, the group had seen a strong acceleration of the decline in the activity across Europe, particularly in Italy, France and Germany.
Insight: Accor is indeed agile. The group has more than €2.5bn in cash on hand and an undrawn revolving credit facility of €1.2bn. In the times when cash is king, these are the numbers which would be enough to save many an empire and this particular emperor needed a win while activist shareholders made grumpy noises about splitting the group up and feasting on its succulent parts.
This hack was hoping that ‘agile’ would mean a return to the deals frenzy of recent years and provide us all with some much-needed light relief, but only a few weeks later the picture has changed completely. As we come out of the outbreak, there are likely to be deals aplenty, with the listed groups suffering particularly publicly, but at the moment there is lots of potential, but no actual action.
For now, the plan is survival. Accor has taken a step further than many of the other operators in setting up a fund to help its employees, which is in line with its position as the self-described largest hotel management company in the world. Unlike other groups who have skewed towards franchising, it has remained closer to those who run its hotels.
It is also less exposed to the US, which is, thus far, the most brutal location in which to be furloughed. Most of the countries in Europe, where Accor has its stomping ground, have governments which have stepped in to pick up much of the wage slack and also have health systems which don’t discriminate by how much an individual pays into them. The fund should therefore go further than if it had come from a US-based firm.
Much of the planet is currently united against a common enemy and there is little shrift for executives who decide that, despite their riches, they can’t pay their employees - yet expect to rehire them, company loyalty intact. Accor has secured its loyalty here and loyalty goes both ways - it can be no coincidence that it uses the ALL loyalty name. The company has stepped up and others will have to follow.