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Economy segment drives Accor performance

Economy star: Formule1 Auckland Airport

The Asia-Pacific region and economy hotels lead the way in Accor’s ‘robust’ Q3 revenue growth and as a result, the company has a positive outlook for rest of the year.

Here is a summary of Accor’s Q3 results.

2011 Nine-Month Revenue: Robust growth in the third quarter
In summary:
·Positive trends in the third quarter: revenue up 2.7% as reported and 5.8% like-for-like despite high prior-year comparatives;
·Nine-month revenue up 3.8% as reported and 5.8% like-for-like;
·Faster third-quarter growth in the Economy segment led by strong demand and a solid increase in average room rates;
·Expansion at September-end: 28,000 rooms opened, of which 86% through management contracts and franchise agreements. Full-year goal of 35,000 rooms confirmed.

Nine-month revenue at September-end 2011 up 3.8% as reported and 5.8% like-for-like
Revenue for the first nine months of 2011 amounted to €4,597 million, shaped by the following factors:
·Expansion added €80 million to revenue and 1.8% to reported growth. The increase was attributable principally to the opening of 224 hotels, representing nearly 28,000 rooms, during the first nine months of the year.
·Ongoing deployment of the asset-right strategy reduced revenue by €163 million and reported growth by 3.7%.
·The currency effect was a negative impact of €7 million or 0.2%, due to the unfavourable change in the US dollar rate beginning in the second quarter (which reduced revenue by €33 million), while the Australian dollar continued to have a positive impact on revenue.
Underlying revenue growth came to 5.8% in the third quarter, lifted by a steady rise in occupancy rates and a recovery in average room rates in all segments.

Third-quarter revenue up 2.7% as reported and 5.8% like-for-like
Third-quarter revenue amounted to €1,623 million, shaped by the following factors:
·An ongoing overall improvement in RevPAR led by occupancy rates and average room rates.
·Expansion, which increased revenue by €30 million, adding 1.9% to reported growth. The increase reflected the opening of 116 hotels representing nearly 14,300 rooms, of which 4,700 related to the acquisition of Citea and nearly 2,700 related to the 24 Mercure hotels in the United Kingdom taken over under franchise agreements.
·Changes in the scope of consolidation arising from the ongoing deployment of the asset-right strategy reduced revenue by €61 million and reported growth by 3.9%.
·The currency effect was a negative €18 million or 1.1%, mainly reflecting the unfavourable change in the exchange rate for the US dollar against the euro, while the Australian dollar in particular had a positive impact on revenue.
At constant scope of consolidation and exchange rates, the like-for-like increase for the first nine months of the year was 5.8%.

Upscale and midscale Hotels: revenue up 5.3% like-for-like to €907 million in the third quarter 2011
Revenue in the upscale and midscale segment rose 3.3% as reported in the third quarter, including like-for-like growth of 5.3%. Despite less favourable prior-period comparatives than in the first two quarters, RevPAR in the third quarter posted substantial gains, led by increases in occupancy rates and average room rates.

Economy Hotels excluding the United States: revenue up 7.5% like-for-like to €516 million in the third quarter 2011
Revenue from Economy hotels excluding the United States rose by a very solid 5.3% as reported and 7.5% like-for-like. Revenue continued to increase at a faster pace, mainly driven by improvements in occupancy rates in Europe.

Geographic focus – Third quarter
The third quarter saw a solid performance in France, one of the most dynamic markets in Europe, with increases of 6.7% like-for-like in the upscale and midscale segment and 7.1% like-for-like in the Economy segment. Growth was led by an exceptional summer season, particularly in Paris.
·In the upscale and midscale segment, RevPAR again rose sharply in the third quarter and remained mainly driven by average room rates. All the brands benefited from summer season demand and posted robust improvements in key indicators, especially Sofitel with a double-digit rise in RevPAR.
·In the Economy segment, occupancy rates continued to improve, gaining 1.9 points over the quarter, while average room rates recovered sharply, with a 2.6% increase. Revenue growth was mainly driven by demand, especially in Paris.
The third quarter also saw stronger demand in other regions. Demand remained very strong in emerging markets. In the Asia-Pacific region, revenue grew 10.0% like-for-like in the upscale and midscale segment and 10.9% like-for-like in the Economy segment.

Outlook for 2011: continuation of positive first-half trends
With a good revenue performance in the summer months and in September, the third quarter was in line with the positive trends noted in the first six months of the year. Revenue growth was faster in the Economy segment, led by strong demand and a recovery in average room rates.
The Group maintained its sustained expansion dynamic, opening 28,000 rooms during the first nine months of the year, of which 14,300 in the third quarter alone, and has confirmed its full-year target of 35,000 rooms.
Against this backdrop and in light of the following factors – Ongoing sustained sales in the fourth quarter and the absence of any signs of a slowdown in demand, and a flow-through ratio objective unchanged at 50% – Accor is confirming its full-year EBIT target of €510-530 million.

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