Hotels and Services: Growth Drivers Driving sustainable, profitable ...

The business originated
with an outstanding
product:
the Ticket Restaurant ®
meal voucher, which
was created in the
late fifties to enable employers who
did not have a staff restaurant to offer
their employees a subsidized lunch.
Along with Ticket Alimentacion ®,
which is used for food purchases in
supermarkets across Latin America,
Ticket Restaurant® generates 78% of
service business revenue.
In response to emerging needs, Accor
Services has expanded this approach
over the years, launching a wide range
of other products and services that
are deployed in four services lines—
three for companies and one for institutions
(see box).
Other countries
4%
North
America
1%
France
20%
Latin
America
39%
2005 Services Revenue
by Region
This innovative, efficient business has
become the global industry leader,
with operations in 35 countries. It now
must continue deploying products
and services to drive sustained organic
growth while stepping up the pace
of acquisitions.
Three growth drivers
Accor Services' markets are growing
rapidly in the current environment.
Higher living standards and demand
FOCUS ON… ACCOR SERVICES:
WIDENING OUR LEAD
Creating a strategic fit with the hotels business, because of its low capital
intensity and sensitivity to economic cycles, Accor's second business
enjoys solid margins and high potential for long-term growth.
Europe
(excl. France)
36%
6 LETTER TO SHAREHOLDERS - APRIL 2006
for better working conditions are the
main reasons, albeit with major differences
depending on economic and
social conditions. In mature markets,
demand for sophisticated, differentiated
products is being driven by increases
in the percentage of women in the
workforce and in travel time, as well as
by a growing need for a better worklife
balance and retirement financing
solutions. In emerging markets, initiatives
to provide life's basic needs and
reduce unreported employment have
created demand for simple, reliable
products.
The second growth driver is the
convergence of stakeholder interests.
Government authorities, especially in
France and Belgium, want to create
jobs in the people care sector, reduce
unreported employment, and ensure
that allocated funds are used as
intended. Companies, for their part,
want to increase employee loyalty,
through a modular compensation policy
that offers tax-exempt solutions to
help boost purchasing power, while
improving productivity. For beneficiaries,
the goal is to provide additional
income, incentives and recognition.
And for restaurants, supermarkets,
service stations and other affiliates,
the objective is to increase revenue.
The third growth driver involves using
the Internet, terminals, databases and
other technology-driven opportunities
to win new customers, like small and
mid-size businesses. The goal is to
improve understanding of users and
affiliates so that they can be informed
and provided with new products and
services. Products are becoming
easier to use, thanks to magnetic and
microchip cards that are gradually
replacing vouchers, for obvious reasons
of convenience, security and costsavings.
The number of cardholders
now totals 4.7 million (of which 1.6 million
loyalty cards) in 16 countries, including
Brazil, France, Sweden, Mexico, Turkey
and China.
Pursuing
organic growth
Every year, Accor Services develops
new products, introduces existing
products in new markets and sets up
operations in new countries. This
strategy requires close relations with
the various countries, whose legal and
regulatory frameworks are of crucial
importance. Changes in legislation
may create new beneficiary categories
in traditional markets (e.g. French and
Italian civil servants have been entitled
to Ticket Restaurant® since 2004) or
increase tax-exemption ceilings (e.g.
for childcare services in the United
Kingdom or for public transportation
in the United States since 2005).
2005 Services
Key Figures
Revenue:
€630 million
(8% of Accor revenue)
Operating profit before tax
and non recurring items:
€226 million
(37% of Accor total)
Ebitdar margin:
40.4%