Following turbulence, signs of improvement for Accor

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The lobby of Accor’s Novotel in New York. The property underwent an $85 million renovation in 2013.

Now that the leadership situation at Accor appears to be settled, the Paris-based hotelier is working on a multipronged strategy that involves deriving more profit from its fully owned hotels, taking on a partner for its China expansion and shoring up its digital efforts.

So far, the results are slightly better than expected.

Last fall, the company, whose brands range from luxury badges Sofitel and Pullman to upscale brands like Novotel to economy badges such as Ibis, set out to spend about $263 million during the next five years improving its digital presence for both the general public and its loyalty customers.

Accor took the first step in that process last month by revamping its website to better lay out the company’s geographic presence and make it easier for potential customers to book stays via desktops, tablets, computers and mobile devices.

December also marked the beginnings of Accor’s effort to rethink its strategy regarding its operations in China, where the performance of its 144 Sofitel, Pullman, Novotel and Ibis properties has recently lagged other regions.

The company last month acquired a 10% stake in Huazhu Hotels Group (also known as China Lodging Group), which has more than 1,900 China hotels under brands such as Joya, Manxin, Starway and Hi Inn. As part of the agreement, Accor, which declined to say how much it is investing in Huazhu, granted that company the right to franchise as many as 400 hotels under the Accor brands.

Those plans followed up a late-2013 announcement that Accor would focus on generating a greater percentage of its profit from owned hotels and would divide the company into two new divisions: HotelServices (largely franchising operations) and HotelInvest (owned facilities).

At the time, Accor, which owns about 1,400 of its 3,600 hotels outright, said it was looking to boost the percentage of company profits from the HotelInvest unit to about 75% from a current 50%. Accor’s owned hotels accounted for about 80% of its revenue last year.

So far, the strategy appears to be working. Last week, Accor said that while its 2014 revenue was little changed at 5.43 billion euros ($6.27 billion), its same-store revenue rose 3.8% from a year earlier, with properties in the Mediterranean region, Middle East and Americas leading the way (the company does not disclose GAAP net income figures and did not disclose earnings numbers last week).

One of the world’s largest hotel companies with a substantial luxury presence (InterContinental Hotels Group, Hilton Worldwide and Marriott International all have between 4,200 and 4,800 hotels), Accor has spent the past year outlining its expansion plans following a turbulent period of revolving strategies and leadership. 

The company named former Colony Capital executive Sebastien Bazin as its CEO in August 2013 after cycling through three chief executives in less than three years (his predecessor, Yann Caillere, held the post for just four months).

The company also had previously vowed to reduce debt and clear up cash for potential China expansion. With that effort in mind, Accor sold U.S.-based budget chain Motel 6 to Blackstone Group in fall 2012 for $1.9 billion, reducing its U.S. presence to fewer than two dozen properties in the process.

What this means now for Accor’s future U.S. prospects still remains in question. Earlier this month, the company opened its North America, Central America and Caribbean headquarters in Miami, combining previous operations in New York and Dallas and easing communications to Accor’s Americas headquarters in Sao Paulo, Brazil, in the process.

While Accor said it will make a U.S. development announcement “later this year,” the company declined to be more specific about its domestic plans.

Still, Accor’s prospects appear on the upswing after a few years of instability. Last week, the company said its 2014 operating profit before interest and taxes grew about $683 million, up from its prior forecast of about $666 million.

“Accor’s growth in 2014 is even more remarkable in light of the mixed economic environment during the year and the fact that a major transformation was underway within the group,” Bazin said in last week’s statement.

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