Long-Term Strategy Keeps Accor Calm In Rocky Economy

NEW YORK—With fourth quarter winding down, many hoteliers are eyeing what lies ahead in 2003 with trepidation they will not be able to get out from under the awkward economy or ratchet up RevPAR enough to turn the profitability line positive. But at least one hotelier is remaining sanguine. “Accor has been the hotel company worldwide that has been the least affected by the recession,” Georges Le Mener, president/CEO of Accor Lodging North America told HOTEL BUSINESS®. “We produced profit in 2001 that was equal to 2000, and we plan to be roughly 10% down in 2002, which is much better than most of our competitors.” At the end of third quarter (latest figures available), Accor’s total hotel sales were down 0.6%. Occupancy for its U.S. economy division dropped two points to 66.7%, and average daily rate declined 1.4%, driving RevPAR down 4.2%. In contrast, the European economy division showed a 2.9% increase in RevPAR from a 4.8% increase in ADR and despite a 1.4 point drop to 75.5 % occupancy. On the business and leisure side, U.S. occupancy for the period dropped a scant 0.6 points coming in at 63.4%, although ADR dropped 7.4%, putting RevPAR at a decline of 8.3%. In Europe, a 2% gain in ADR helped offset a 2.8 point occupancy drop to 64.1%; RevPAR declined by 2.2%. At the quarter close, Accor was forecasting its full-year RevPAR for its U.S. division would be down 3%. However, that dip is expected to be offset by a 3.2% gain in Accor’s economy lodging business RevPAR in Europe and a slight uptick (0.1%) in its European business and leisure product. The non-panic mode and the key reason behind the company’s better-than-industry-norm performance, according to Le Mener, “is the long-term strategy of Accor to be well-diversified among countries, well diversified among products and well diversified in term of financial schemes [plans]among company owned, leased, managed and franchised. When you put all that together, the fact that we are so well diversified means that not all the businesses are down at the same time.” These businesses include a services division that provides programs and services (e.g., food vouchers, incentive and loyalty programs) in 32 countries, as well as interests in casinos, restaurants, travel agencies and onboard train services. Indeed, Accor expects it will maintain its full-year profit objectives (before taxes) of approximately $697.5 million (EUR 700 million) and $2.19 (EUR 2.20) in earnings per share. Dean Savas, svp/franchise for Accor North America’s economy lodging division, which includes Red Roof Inns, Motel 6 and Studio 6, said “in franchising we see a lot more interest than we had in the past 12 months. It seems over the past two or three months there’s been a lot more interest because there’s beginning to be more opportunity with properties changing hands.” Overall, he noted, the industry during the past year has basically remained flat “and I can see it continuing to remain flat for probably the next 12 months. We don’t see things really improving that much.” David O’Shaughnessy, group evp for Accor Lodging North America, which also includes the Sofitel and Novotel brands, said, “When you typically go into a tough economic environment, people look to see which brands are the brands that are the strong ones, that survive in a recession,” he said, adding “our brands have typically always been good performers, even though business may be down…During times like this there’s a lot of concern: ‘What can I do? How long is this recession going to last?’ “People recognize that the economy is cyclical and are looking to see what brand they can put on so that when this happens again they don’t have to go through this type of change again. They look for brands that are good performers in bad times, and we’ve got those brands,” said O’Shaughnessy. “When you are significantly affected like we have been in the U.S.,” said Le Mener, “Europe then [vis-à-vis lodging] has been much better, the ser