Sébastien Bazin, chairman & CEO, Accor, said the company said that it had “never seen so many enquiries” from small and medium-sized groups, commenting: “it won’t be one by one, it will be groups of hotels of 10,000 rooms and above”.
The group’s first-half results saw it announce a €200m cost-saving plan, including “simplification and realignment of operating structures in different regions and automation of tasks for repetitive processes”.
Bazin said: “Travelodge would have never happened without this crisis being there. Travelodge is a very fine brand and it’s a question of structuring an inability to pay rent. There is probably a way where we can be inventive, innovative and audacious, providing the Ibis Budget brand. I have no idea whether we will have 20 or 500 hotels.”
“There are other stories like this of people looking for the size of Accor’s strength.”
Looking at the cost savings, Bazin said: “We knew that we had to adapt the asset-light model to full asset-light company. It was time to do it. We mapped 7,000 different tasks across the regions, selecting what were activities we don’t get paid for and where there is not enough margin.” Bazin said that the group was looking at a leaner management structure, frugality, “real estate - using less square metres all around the planet. Automation - less human interaction”.
He added: “We need to finish the job and go full asset-light, we will have a stronger Accor and greater profitability. If anything, Covid is an accelerator. We are in a world where there is no margin for error. The team is aware what is going on, all the technology is shared and people will be made accountable.”
Bazin said that he hoped to compensate for the drop in corporate business by offering hotel rooms as an alternative to working from home or working in an office. He added: “You can travel 10 minutes to the neighbourhood hotels of Accor, do it on a subscription and why not? I am convinced that you can have 5% to 10% of room count transformed into offices.”
As of 3 August 81% of the group’s hotels were open. On the same date, the company said that occupancy in China was 60%, 56% in France, 39% in Germany 39% and 35% in UK. And, Bazin said, it was “increasing with every passing week”. He added: “In Europe, 60% of all the bookings today have been made with less than five days’ notice. Exactly double that of last year.”
The anticipated drop in traveller numbers, by one billion people, according to the UNWTO, meant, Bazin said, that the sector would see the “same number of travellers as 1985, so we have to accept that we are going back 30 years”.
He added that Airbnb was “one of our biggest competitors - they are looking for someone else’s home to feel safe”.
Accor had already launched a €60m G&A annual cost savings programme which was 60% achieved by the end of June 2020. The company said that it had then undertaken a review to shift from its new asset-light business model to an asset-light company.
Revpar was down 59.3% in first-half 2020. Consolidated Ebitda was negative €227m in the first half of 2020, down 153.7% like-for-like and down 160.5% on a reported basis compared with first-half 2019. Sensitivity of Ebitda to revpar changes amounted to less than €20m for each percentage point decline in revpar.
The group’s monthly cash burn came to €80m on average over the first half of 2020. Combined with two undrawn renewable credit facilities, totalling of €1.76bn to the existing cash and cash equivalent, Accor had more than €4.0bn in liquidity.
The company said that it was seeing signs of recovery, first in Asia-Pacific where revpar had been down 77.4% in the second quarter, before gradually spreading to other regions, particularly Europe, where revpar had been down 90.6%.
During the first half, Accor opened 86 hotels, and the end of June had a pipeline of 206,000 rooms, of which 75% was in emerging markets.
The group said that it would not be providing full-year Ebitda guidance
Bazin concluded: “You learn from the crisis, you can try to anticipate how guests change their behaviour and then you can build the future structure of Accor. The first two and a half months you are in the water, then the next two and half months you are safe on your paddle board. We are safe on the board, we can see what is happening around us and we can choose whether we can surf.”
Ina note to clients, Credit Suisse's Leo Carrington said: "We see the core challenge for Accor its 30% of management and franchise fees being driven by incentives (based on hotel profitability), exposing the group to significant challenges in right-sizing its cost base in an extended recovery. As such, we believe that the €200m cost cuts announced today might only be sufficient to meet the revenue declines, and with the company looking for a recovery to 2019 earnings levels by 2022/23, investors will need to wait to see any structural benefits of the restructuring."
Insight: Accor, Bazin said: “is not a bank”. Our eyes are still on AccorInvest and problems with one of its members to see whether Accor will have to start acting more like a bank and is forced to get back into asset ownership, but that’s another thought for another time,
As the Travelodge project shows, Accor is, indeed, not a bank. The group is offering around £1,000 per key to aid the rebranding process should it prove attractive to the posse of landlords, which is about enough for a fancy sign and not a lot more. The other aspects of the new lease structure are hoped to be enough of a lure, rather than chucking cash around.
With a €200m cost-saving target, Accor will have to sell owners on the size of its distribution and the power of its brands, somewhere the company has seen issues in the past, given the scale of Marriott International. But this is the time for Accor to play to its strengths.
Aside the ongoing thrill of Accor and Marriott International merging in our dreams, when it comes to the recovery, budget brands are expected to be first to feel better about things and Accor is the king of budget and economy, particularly in Europe. Bazin said: “We have 40 brands, but the bigger segment in terms of performance is the budget and midscale segments. Don’t discount the force of being available to provide very cheap entry points to the domestic leisure market”.
This is neat, undiluted hotel-ing. The loyalty programme barely came up. With corporate travel coming down, you wouldn’t expect it to.
This is not the thrilling reorganisation that observers were dreaming of. Accor did not buy IHG or Expedia, or Space X. But for owners, who are the primary customer - more so with no guests coming in - comments about cutting out flabby costs are worth more than a dramatic purchase, and are, in their own way, all the more dramatic.