Over the past three weeks, the COVID19 crisis has grown to almost unbelievable proportions, with over half of the world's population either confined and/or under lockdown. With so few people now travelling, more than half of Accor-branded hotels worldwide have already been closed, and this is likely to increase to over two thirds in the coming weeks. The company has over 5,000 hotels and residences across 110 countries in its portfolio.
One piece of good news is the hint of initial recovery of the Chinese hotel market, with mild improvements in occupancy and F&B activity.
In order to limit the impact on earnings and cash, and to prepare for the post-crisis recovery, the company has implemented the following measures:
- Travel ban, hiring freeze, reduced schedules and/or furloughing for 75 per cent of global head office teams for Q2, resulting in a minimum €60m reduction in G&A for 2020;
- Reviewed recurring investment plan for 2020 resulting in a €60m reduction in capital expenditures; and
- Further streamlining all other costs (e.g. sales, marketing, IT), in line with lower system wide revenues.
Accor can today rely on a strong balance sheet, with more than €2.5bn in cash on hand and an undrawn revolving credit facility of €1.2bn.
While much uncertainty remains on the duration of this crisis, the group expects a severe impact on its 2020 performance but remains bullish on the long-term perspective of the hospitality industry, for Accor, its employees, its owners and shareholders.
In these unchartered territories, Accor’s Board of Directors has decided to complement the actions outlined above, by withdrawing its proposal for a 2019 dividend payment of c. €280m.
After consulting with the Group’s main shareholders, JinJiang International, Qatar Investment Authority, Kingdom Holding Company and Harris Associates, Accor has decided to allocate 25 per cent of the planned dividend (€70m) to the launch of the “ALL Heartist Fund”, a COVID19 special purpose vehicle. This fund will typically assist:
- the group’s 300,000 employees, pledging to pay for their COVID19-related hospital expenses, for those who do not have social security or medical insurance:
- on a case by case basis, furloughed employees suffering great financial distress;
- on a case by case basis, individual partners facing financial difficulty; and
- in addition, the group will further deploy its solidarity initiatives to support front-line healthcare professionals and non-profit organizations.
Sébastien Bazin, Chairman and CEO of Accor, said, “Welcoming, protecting and taking care of others is at the very heart of what we do. In light of the urgency and the scale of the situation, we have decided to act in an immediate and meaningful way, in the spirit of our values and commitments. Through this impactful gesture, we wish to express our solidarity and gratitude to all those demonstrating courage and selflessness during this crisis. On behalf of the board, I would like to thank the group’s main shareholders. Without them, the “ALL Heartist Fund” would not have been possible. I also want to pay a special tribute to the Accor teams around the world. They are facing the current crisis with admirable courage, dedication and professionalism. As our industry is going through tough times, we have to make tough decisions, but Accor has a strong balance sheet which will enable it to withstand this crisis and emerge with strength during the recovery period. I am confident that Accor will soon rediscover the road to growth.”