October 5, 2016 / 8:43 AM / in 3 years

AccorHotels looks to online, luxury to boost earnings

PARIS (Reuters) - AccorHotels expects investment in its online business and its expansion in the luxury hotel sector to lift earnings and allow it to triple revenue in the coming years, CEO Sebastien Bazin said on Wednesday.

The logo of French hotel operator AccorHotels is seen on top of the building company's headquarters in Issy-les-Moulineaux near Paris, France, April 22, 2016. REUTERS/Gonzalo Fuentes/File Photo

AccorHotels, which competes with InterContinental, Marriott and Starwood, is undergoing a reorganisation initiated by Bazin, who took over in August 2013.

Bazin told reporters ahead of an “Investor Day” that AccorHotels expected to triple its business volume within 3-4 years from a current 12 billion euros (10.61 billion pounds) thanks to digital investments.

Bazin’s first move was to press for raised profitability by reorganising AccorHotels, which has 3,900 hotels ranging from budget Ibis to luxury Sofitel, into two units — HotelServices and HotelInvest. That split its operating and franchising business from its real estate and asset management activity.

The acquisition of FRHI Holdings, owner of London’s Savoy and New York’s Plaza hotels, would lift the contribution from the luxury sector to the earnings of the HotelServices division to over 50 percent by 2020 from 15 percent, he said.

AccorHotels recently announced plans to turn HotelInvest into a subsidiary ahead of opening a majority of its capital to institutional investors to raise cash for the group’s expansion.

As part of the restructuring, Bazin has also expanded the group’s business in China, and increased its exposure to the luxury sector with the $2.7 billion acquisition of FRHI Holdings.

“The integration of FRHI Holdings is on track in terms of timing and synergies,” Chris Cahill, head of luxury brands, told investors.

AccorHotels has said that the FRHI deal would boost earnings starting from the second year, with 65 million euros in revenue and cost synergies expected.

AccorHotels has also been strengthening its digital expertise with a flurry of small deals to fight the rising challenge of companies such as Airbnb and online travel agents (OTAs) Expedia and Booking.com.

AccorHotels is also seeking to limit a push by top Chinese shareholder Shanghai Jin Jiang International to increase its 12.6 percent stake in the company.

To do that AccorHotels started talks with Jin Jiang and other shareholders Eurazeo and Colony focussed on board organisation and shareholdings, a source told Reuters in June.

Bazin told reporters on Wednesday there was nothing new regarding the Jin Jiang situation.

“No good news and no bad news”, Bazin said, adding he would meet Jin Jiang representatives in China next week as well as officials from other Chinese companies.

Reporting by Dominique Vidalon; Editing by Keith Weir

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