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AccorInvest becoming more independent as Accor pursues a strong asset-light strategy

Only a year and a half after opening the company to outside investment, the Accor group is again selling a stake in AccorInvest to several existing shareholders. An operation that raises several questions about the future of the company.

Accor recently sold 5.2% of AccorInvest's share capital to several shareholders of the company (including Colony Capital), for a total value of 204 million euros. This transaction is to be completed by the end of the 2019 financial year, "subject to the approval of the relevant competition authorities". The hotel group will nevertheless retain a 30% stake in AccorInvest, which is "the minimum threshold agreed upon at the time of the sale of AccorInvest in 2018, and runs until May 2023". AccorInvest is thus valued at €3.9 billion (up +12.9% compared to the company's value at the time of the sale in 2018), which "reflects the positive effects of the transformation undertaken by the leading European hotel owner".

But this action raises the question of the future of AccorInvest. Indeed, as Olivier Chopin, General Manager, Les Hôtels de Bordeaux, President of the Association des investisseurs Franchisés Louvre Hotels, said in his speech at the Paris Asset Forum >hospitality, franchisees as franchisors are changing their behaviour:

Five years ago, a hotelier was historically linked to a group and there were no questions asked either way. Today, on both sides there are opportunity strategies. On the franchisor side, there may be a desire to favour a better opportunity in the same market. De facto on the franchisee side, this desire to move towards the most attractive, the one with the most notoriety that best corresponds to the market, the one that offers more attractive fees has also developed.

AccorInvest's properties, which are currently operated exclusively under the Accor group's franchises until 2023, could possibly turn up to other franchisors after that date. The appetite of foreign groups for European markets is growing. While AccorHotels remains the undisputed leader in France in 2018, as the largest owner operated under Accor group's franchises, the rise of other groups on the market is undeniable and tends to increased competition in the coming years. Chinese hotelier Jin Jiang (which acquired Louvre Hotels) reported slight organic growth of +0.3% in France in 2018. B&B increased its offer by +6.3%, Best Western by +1.2%, InterContinental Hotel Group by +3.8%, Brit Hotel by +7.2%, and Marriott International Group by +9.5%. The latter suggests a strong increase by 2021, as the arrival of two new hotels in the capital by 2020, to operate under the Sheraton and Moxy brands, suggests.

Indeed, the European markets, and especially France, are very attractive for hotel investment. Adrien Lanotte, Senior Analyst at MKG Consulting, explained during the MasterClass of the Worldwide Hospitality Awards (2019 edition) that "France is a good investment when the market could turn around", since it is be a "resilient market". Also, the major French metropolitan areas still have good growth prospects, particularly Lyon, Strasbourg and Lille. About metropolitan areas, Giorgio Manenti, partner at Eastdil Secured, testified at the Paris Asset Forum >hospitality to a change in the way investors think today. They no longer concider the countries but rather the cities. He explains that investors "look at these cities independently, at what makes those cities dynamic, and they rank them very similarly", further enhancing the attractiveness of European metropolises such as Barcelona or London, despite their national economic or political backgrounds.

AccorInvest owns 857 hotels, 86% of which are located in Europe. A total of 123,330 rooms are operated under Accor brand franchises. The total turnover recorded in 2018 was €4 billion. In May 2018, Accor opened the share capital of AccorInvest through a sale of 57.5% of the company's shares to several sovereign funds (Public Investment Fund (PIF) and GIC), institutional investors (Colony NorthStar, Crédit Agricole Assurances and Amundi), and multiple private investors. This transaction enabled the group to generate €4.6 billion in gross cash. From now on, AccorInvest is pursuing a strategy to optimize assets and maximize operational performance through its partnership with Accor, which will run until 2023, as explained before.

As for the Accor group, it maintains a strong asset-light strategy and multiplies its operations to generate liquidity. As with AccorInvest, the group previously sold a 5% stake in Huazhu’s capital, allowing it to recover $451 million in cash. Accor has also just announced the sale of its 85.8% stake in the Eastern European-based company Orbis to AccorInvest for €1.06 billion, which will take the form of a takeover bid in the first quarter of 2020, as well as the "Sale & Management back" of the Mövenpick hotels under lease for €429 million. 16 properties in Germany, Switzerland and the Netherlands will join the portfolio of HR Group, a German private fund, while continuing to be operated by Accor through a 20-year management contract.

The hotelier seems to be refocusing on its historical core business, management, which remains its area of expertise as a franchisor. In addition, the current CEO of the group, Sébastien Bazin, has just had his mandate renewed until 2023, in line with the expiry of the agreement concluded with AccorInvest.

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