Upscale Hotels Asset Management Strategy

accor

Upscale Hotels Asset Management Strategy

� Fixed leases

� 100% owned

� Reduce earnings

volatility

� Reduce capital intensity

Upscale Hotels

Asset Management Strategy

Management contracts

with minority stake

� 10 Sofitel

� Cash impact: €100M to €150M

� Schedule: 2005/2006

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An initial major transaction in March 2005

with Foncière des Régions

�Long term partnership with a consortium led by "Foncière des

Régions" which includes Assurances du Crédit Mutuel, Generali,

Predica (Groupe Crédit Agricole)

�128 hotels in France (16,714 rooms): Novotel, Mercure and Ibis

�Value: €1,025 million

�Variable rents set at 15.5 % of revenues with no minimum

guaranteed

�Duration: 12 years, renewable 4 times per hotel at Accor’s discretion

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�Impact on profit before tax: + €10m

�Renovation program financed by the investor: €100m

�Capital gain: €120m

�Cash: €140m

An initial transaction in March 2005

with Foncière des Régions

Good financial conditions

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� Owned

� Leased

�Optimize ROCE

Hotels disposals in non-priority locations

� Franchise

� Sale

� 30 hotels in Europe

� Impact:

€130m to €150m in cash

� Schedule: 2005/2006

44


� 2004 Results

� 2005 Q1 sales

� Strategic Vision

� An international strategic investor for

Accor

� A new asset management policy

� Accelerated expansion

Outline

45


� A more favorable business environment

� New financial leeway

Accor is is stepping up up

its its growth strategy

Growth strategy

46


Economy hotels in Europe:

� Weak penetration of hotel

chains in a growth market

� Competition still limited

(except in UK and France)

� Accor’s expertise in this

segment

� High return

Strengthening leadership positions in

Economy hotels in Europe

Target markets:

� Expansion focused on

major cities in Spain, the

United Kingdom, Central

Europe and Italy

� Opportunistic expansion

in Germany, France and

the Benelux countries

Initial three-year budget: €300m

Stepped up up expansion: an an additional €150m

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Growth drivers:

� Large populations

� Exponential growth in

demand

� No economy hotels and

fragmented supply in

other segments

Growth drivers in emerging markets

Target markets:

� China, India, Russia,

Latin America, Middle

East

� Using joint ventures/

management contracts /

variable-rent contracts

Initial 3-year budget: €100 million

Faster expansion: + €200 million

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� Economy hotels:

� 1et Ibis Tianjin opened in 2004

Average occupancy rate: 94%

ROCE: 13% from the first year

� 10 projects already underway

� Objective: 50 Ibis units in 2010

Upscale and midscale hotels:

� Sofitel and Novotel: 50 hotels under

management contract in 2010

The breakthrough in China

Average investment over three years: €100 million

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Vast VastMarket Market

Basic

Sophisticated

40%

2004

Services growth strategy

Strong Stronggrowing growing market

market

2025

70%

% of the world’s population living in cities

(target population)

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