Accor boss flexes his muscles

Accor said last week it would divide its hotel business in two in a bid to improve the group’s performance and boost shareholder returns.

The strategy includes a new organisation built by geography and an executive committee of 10 members, including five regional heads of operations, Accor said.

Three months after becoming chief executive of Accor, former private equity boss Sebastien Bazin said he was splitting Accor into a fee-oriented hotel operator and franchisor, HotelServices and a hotel owner and investor, HotelInvest.

The new strategy will see the end of expansion through leases, as well as no further disposals of owned hotels unless they are underperforming assets.

“I want Accor to become the world’s best-performing and best-value hotel group,” Bazin told journalists.

Bazin did not provide any targets under his plan but said those set under a three-year revamp initiated a year ago by predecessor Denis Hennequin were no longer valid.

“We are banking on returns well above the previous plan,” he said.

Bazin confirmed Accor’s target to achieve operating profit of 510 million to 530 million euros in 2013, however, compared with 526 million ($713 million) last year.

Bazin, previously Europe head of Colony Capital, one of Accor’s top shareholders, had been unhappy with the pace of change under Hennequin and is under pressure to show how he can improve the group’s performance.

Accor, which competes with InterContinental , Marriott and Starwood , has lagged the profit margins of some of its peers as a large part of its hotels are owned or leased, generating lower profitability and returns on invested capital than franchise hotels or those under management contracts.

Under the new plan, HotelServices will operate nearly 3,600 hotels and 460,000 rooms worldwide under 14 brands and will be “a high margin and cash generative business”, Accor said.

HotelInvest will start with a portfolio of 1,400 hotels of which nearly 300 are in full ownership.

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