GO
Loading...

INTERVIEW-UPDATE 1-Accor rules out HotelInvest spin-off for now

* Accor has no plan to sell HotelInvest, brands for now - CEO

* CEO says that longer term "nothing is taboo"

* HotelInvest could perform as well as peers in 2-3 years -CEO

* HotelInvest buys 97 hotels in Europe for 900 mln euros -Accor

(Adds details, CEO comments, HotelInvest announcement)

PARIS, May 27 (Reuters) - Europe's largest hotel group, Accor, has no plans to spin off its HotelInvest real estate business or sell any of its hotel brands, but "nothing is taboo" in the long term, Chief Executive Sebastien Bazin said.

Nine months after taking the top seat at Accor, whose 14 hotel brands range from budget Ibis to luxury Sofitel, the 52-year-old private equity specialist is restructuring the group's hotel portfolio to boost profitability while speeding up expansion in China, India and the Middle East.

Bazin's first move was to split the company into two divisions - HotelServices and HotelInvest - to separate its operating and franchising business from its real estate activity.

The reorganisation has fueled speculation that Bazin, who left U.S. private equity firm Colony, one of Accor's biggest shareholders, could later seek to spin off the group's property business, having unsuccessfully pushed a similar strategy at retailer Carrefour a few years ago.

Bazin said in an interview it would take two to three years for HotelInvest to catch up with rival hotel investors like Host Hotels and Resorts in the United States, which operates luxury hotels.

"After that we will ask ourselves questions," he said, when asked about a possible spin off.

Bazin also said he was convinced that Accor could become "the best performing and best valued" hotel operator, though he could not say how long it would take to achieve that.

Accor, the world's fourth-largest hotel group by revenue behind InterContinental, Marriott and Starwood , has lagged the margins of its rivals while it also faces competition from online rivals such as Expedia.

Accor's 2013 EBIT (earnings before interest and taxes) margin was 9.7 percent of sales against 35.3 percent for InterContinental, the world's largest hotelier.

Bazin left Colony after 16 years with the $27 billion U.S. private equity firm to head Accor, which had 2013 revenue of 5.5 billion euros and 3,600 hotels in 92 countries.

Colony and fellow private equity firm Eurazeo are Accor's top investors with a combined 21.4 percent holding.

Bazin, who had been unhappy with the pace of change under former CEO Denis Hennequin, is under pressure to prove he can improve the group's performance.

"I am demanding and impatient but I am convinced I can make it work," said Bazin, who last week plunged fully clothed into the legendary art-deco Molitor swimming pool in Paris - now part of the Accor-operated luxury McGallery hotel - to inaugurate its renovation.

Splitting Accor into HotelInvest and Hotel Services was a U-turn from the previous management strategy of selling property to cut debt and expand by operating more hotels without owning them.

The HotelInvest division owns 300 of the 1,400 hotels in its portfolio and they generated 54 percent of HotelInvest's net operating income in 2013. The goal is to increase this figure to 75 percent over the medium term. It manages the other 1,100 hotels via leases.

Under that strategy Accor said on Tuesday that HotelInvest had agreed to buy the assets of 97 hotels in Europe it was operating under variable leases for about 900 million euros ($1.23 billion) in a deal that will boost Accor's 2014 EBIT.

Accor is more exposed to Europe than any other global hotel operator with more than 60 percent of its hotels located there but has been expanding to fast-growing markets of Asia and Latin America to offset weak growth in Europe.

"We are opening 150-200 hotels per year and half of that is in Asia-Pacific," Bazin said.

China is a priority. Accor has 250 hotels in the country and planned to open a further 150 within four years, he said. It also targets 100 hotels in India in five years, against 25 now.

Accor's shares have risen by more than 9 percent this year, extending gains of 28.5 percent last year and outperforming a 5 percent rise in the European travel and leisure index on hopes Bazin can improve the group's performance.

Accor shares trade at 21.5 times forward earnings, below 22.6 times for InterContinental, Starwood and Marriott.

($1 0.7325 euros)

(Editing by Andrew Callus and Susan Fenton)