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Accor will close up to two-thirds of its hotels under the Accor brand

The containment measures put in place worldwide to deal with the spread of the coronavirus have a direct impact on hotel occupancy. Revenue per available room could fall by 66% in the second quarter of the year. Accor, which does more than half of its business in Europe, reported that the pandemic had an impact of around $21.5 million (€20 million) on its EBITDA in January and February.

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This picture show an Accor Hotel

While containment decisions continue to multiply around the world, there is, of course, one sector that is suffering in particular, that of hotels and tourism. As a direct consequence of this situation, Accor is being forced to close its hotels one by one.

“To date, more than half of the hotels under the Accor brand have been closed, and two-thirds should be closed in the coming weeks,” announced the group on Thursday evening, March 2nd, which is facing a “brutal” deterioration in its activities.

Accor also announced new “drastic” cost reduction measures and the cancellation of its dividend for the 2019 financial year in order to cope with the economic consequences of the coronavirus epidemic.

In this context, it is only logical that Accor’s management has decided to lay off or partially lay off three-quarters of its head office staff worldwide in the second quarter. This will enable it to reduce its costs by at least $65 million (€60 million) by 2020. Recurring capital expenditure will be reduced by the same amount this year.

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Dividend payments for 2019 will be suspended

Nor is it illogical for the hotel operator to withdraw its proposal to pay the dividend planned for 2019, i.e. $302 million (€280 million). $75 million (€70 million) of this amount will be allocated to a fund specifically dedicated to helping employees hospitalized for COVID-19 infection or in financial difficulty. The group’s CEO, Sébastien Bazin, has waived 25% of his remuneration for the duration of the crisis.

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Nevertheless, a small positive tone should be noted, which comes from the Chinese hotel market. Accor is seeing a gradual recovery in occupancy rates and in the restaurant business. As for the reassuring elements of this development, the group has more than $2.7 billion (€2.5 billion) of available liquidity and an undrawn revolving credit line of $1.3 billion (€1.2 billion).

Falling income per available room

In any case, one thing is certain, the impact of this health crisis will be strong on Accor’s 2020 accounts. As a result of the drop in hotel occupancy, Oddo BHF estimated that income per available room (RevPAR) will now fall by 32% this year. That is almost twice as much as in the last assessment when the rate was estimated at 18%. With relatively comparable trends in different parts of the world: -32.5% in Europe, -37% in North America, -32.5% in Asia-Pacific, -33% in Latin America. The impact will, of course, be stronger in the second quarter (-66%), after -13.5% at the end of March. However, the recovery will only be very gradual, since the company still estimates a 34% drop in attendance in the third quarter and a 14% drop in the last three months of 2020.

Accor, which does more than half of its business in Europe, reported that the pandemic had an impact of around $21.5 million (€20 million) on its EBITDA in January and February. For the year as a whole, Oddo BHF is revising its forecast for the decline in EBITDA for the year from 17% at the beginning of March to 21%.

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(Featured image by Maibp85 via Wikicommons)

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First published in LesEchos investir, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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Suzanne Mitchell juggles the busy life of a full-time mom and entrepreneur while also being a writer-at-large for several business publications. Her work mostly covers the financial sector, including traditional and alternative investing. She shares reports and analyses on the real estate, fintech and cryptocurrency markets. She also likes to write about the health and biotech industry, in particular its intersection with clean water and cannabis. It is one of her goals to always share things of interest to women who want to make their mark in the world.