Accor, Europe’s largest hotel group, warned investors that profit could be below market expectations after demand for rooms in recession-hit southern Europe deteriorated further over the summer.
The French company, with more than 4,400 hotels ranging from the luxury Sofitel to the budget Ibis chains, on Wednesday said the trend for autumn bookings was “good” for the group overall, but it was difficult to make predictions for later in the year because of the uncertain economic climate.
Accor, the world’s fourth-largest hotel group, has 63 percent of its rooms in Europe which is struggling with a debt crisis. The rest of its business is in faster-growing emerging markets of Asia-Pacific and Latin America, with a tiny exposure to the United States.
“Summer bookings are in line with what we expected except in southern Europe,” chief financial officer Sophie Stabile said.
“In that region, we thought business would stabilise and we are seeing a deterioration like we did in the first half.”
In July alone, RevPAR (revenue per available room) fell 7 percent in mid and upscale hotels and 14 percent in budget hotels in southern Europe where the debt crisis is hitting hardest.
Accor predicted 2012 earnings before interest and tax (EBIT) would be in a range of EUR€510 million – EUR€530 million against EUR€515 million (USD$647 million) in 2011, restated for the sale of US budget hotel chain Motel 6.
Earlier this month, Intercontinental said half-year operating profit rose 6 percent and that it continued to see growth for the future.
Accor, which trails InterContinental, Marriott and Starwood chains in the global market, posted a 10 percent rise in like-for-like first-half EBIT to EUR€212 million, in line with expectations.
The company, which sold Motel 6 for USD$1.9 billion in May, is accelerating its growth in emerging markets and stepping up its shift to an “asset light” business model – operating more hotels under contracts rather than owning them – to cut debt.
The group set a new target to operate 40 percent of its rooms under franchise contracts, 40 percent under management contracts and 20 percent in owned and leased hotels by the end of 2016.
At end-June, Accor operated 25 percent of its rooms under franchises and 31 percent under management contracts.
Accor said consolidated debt climbed EUR€578 million, reflecting the acquisition of Australian hotel group Mirvac and the payment of a special dividend, with net debt reaching EUR€804 million at June 30.
The company, which opened 20,700 rooms in the first half, mainly under management and franchise contracts, said it hoped to end 2012 with a total of 40,000 rooms.