Virginia Oceanfront Hotels|"Accor Hopes New Chief Will End Hotels Heartbreak"

Source              :  ft.com
Category        :  Virginia Oceanfront Hotels
By                  :  Adam Thomson
Posted By     :  Hotels in Virginia Beach South Courtyard

Vrginia Oceanfront Hotels

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. During the past few years, Accor has earned a reputation for feisty boardroom showdowns and sensational management reshuffles. On Tuesday, Europe’s largest hotel group by number of rooms named another new chief executive. At a board meeting the company confirmed that Sébastien Bazin, until now the European head of California-based Colony Capital, would become the new chairman and chief executive with immediate effect. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Even though Mr Bazin has ended all duties with Colony, his appointment is doubtless a victory for the private equity group, which holds about 11 per cent of Accor’s shares and has been trying to shake up the French hotelier ever since it bought a stake in 2005. Tom Barrack, Colony’s billionaire boss, on Tuesday said: “Sébastien’s move represents the perfect opportunity to optimise the company’s ability to drive a substantial enhancement of shareholder value”. Many investors will hope that the appointment will put an end to infighting at the company. At their heart, the struggles have centred on the frustration of Colony and Eurazeo, a French investment firm and shareholder, with what they see as the French hotel group’s relatively plodding adaptation to a fast-changing industry.

The two investors, which together hold 21.6 per cent of Accor’s shares, have for years urged the group to adopt an “asset-light” model, in which hoteliers sell off properties to concentrate on management and franchises. The model, which gives companies more capacity to reward shareholders and expand, was behind the decision by Accor rival InterContinental Hotels Group to return $1bn to shareholders last year.

IHG, considered the industry leader in the asset-light strategy, has seen its share price increase 131.6 per cent in the last five years. Accor, whose brands range from the high-end Sofitel to the economy-level Ibis, has witnessed its own share price fall 36.6 per cent over the same period. Despite this, Colony’s direct approach and shareholder activism have not always gone down well in a country where foreign influence is not always welcome and whose corporate sector is still dominated by old-boy networks.

Under Denis Hennequin, its previous permanent chief executive, Accor followed what it called an “asset-right” approach, considered by many analysts to be simply a slower and less-convincing version of what its rivals were doing. As a result, the group still generated about two-thirds of its operating profits from owned and leased hotels as of the end of 2012, compared with 14 per cent in the case of IHG. The glaring difference has left the group with a relatively poor return on capital employed – a measure of a company’s efficiency in its capital investments. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail.  Even though Mr Bazin has ended all duties with Colony, his appointment is doubtless a victory for the private equity group, which holds about 11 per cent of Accor’s shares and has been trying to shake up the French hotelier ever since it bought a stake in 2005.

Tom Barrack, Colony’s billionaire boss, on Tuesday said: “Sébastien’s move represents the perfect opportunity to optimise the company’s ability to drive a substantial enhancement of shareholder value”.

Many investors will hope that the appointment will put an end to infighting at the company. At their heart, the struggles have centred on the frustration of Colony and Eurazeo, a French investment firm and shareholder, with what they see as the French hotel group’s relatively plodding adaptation to a fast-changing industry. The two investors, which together hold 21.6 per cent of Accor’s shares, have for years urged the group to adopt an “asset-light” model, in which hoteliers sell off properties to concentrate on management and franchises.

The model, which gives companies more capacity to reward shareholders and expand, was behind the decision by Accor rival InterContinental Hotels Group to return $1bn to shareholders last year. IHG, considered the industry leader in the asset-light strategy, has seen its share price increase 131.6 per cent in the last five years. Accor, whose brands range from the high-end Sofitel to the economy-level Ibis, has witnessed its own share price fall 36.6 per cent over the same period. Despite this, Colony’s direct approach and shareholder activism have not always gone down well in a country where foreign influence is not always welcome and whose corporate sector is still dominated by old-boy networks. Under Denis Hennequin, its previous permanent chief executive, Accor followed what it called an “asset-right” approach, considered by many analysts to be simply a slower and less-convincing version of what its rivals were doing.

As a result, the group still generated about two-thirds of its operating profits from owned and leased hotels as of the end of 2012, compared with 14 per cent in the case of IHG. The glaring difference has left the group with a relatively poor return on capital employed – a measure of a company’s efficiency in its capital investments. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. On that measure, “it is clear that Accor has been left behind in recent years”, concluded Citi in a research note earlier this year. Analysts said Mr Bazin’s appointment would almost certainly mean Accor accelerating asset disposals. That, in turn, would potentially leave the group with flexibility both to return more capital to shareholders, but also to expand more quickly into faster-growing emerging markets. Unlike some of its main rivals, Accor has been particularly exposed to the sharp downturn in Europe, and the region still accounts for more than 70 per cent of the company’s global sales.

Analysts believe asset disposals will also allow the group to build up its Sofitel and Pullman high-end brands, which Accor has failed to establish in the market with the same success as its economy Ibis brand.

On Tuesday, Russell Kett of hotel consultants HVS, said of Mr Bazin’s appointment: “it should be good news for shareholders and it should be welcomed by shareholders.” Yet it is clear that Mr Bazin has a lot of work to do – and a lot to prove. In 2009, he successfully pushed for splitting Accor’s voucher business and hotel units, promoting the ire of other investors, including the state-owned strategic fund FSI. On other fronts, things have gone less well. He got Colony to try to replicate the asset-light strategy with French retailer Carrefour, luring French billionaire Bernard Arnault into the venture in 2007. The move, on the eve of the downturn, tainted Mr Bazin’s record as an investor and proved a drag on Colony’s returns in Europe during the past few years. The French retailer’s shares have slumped to €22.9 from about €55 in 2007. That mixed record, combined with the considerable work that Accor faces, may explain why investors on Tuesday appeared undecided about the latest reshuffle at the French hotelier.

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