Accor considers splitting into two stand-alone businesses

Accor considers splitting into two stand-alone businesses

Accor, Europe’s largest hospitality group, said it may split its hotels operations and services division into two separate companies.

Shares in the group rose as much as 10 percent on the news, despite the group announcing a €150m net loss in the first half due to restructuring costs and weak demand.

Accor said its board have approved a proposal by Chairman and CEO Gilles Pelisson to assess the possibility of splitting the company into two separate businesses. The idea has gained popularity among analysts and shareholders in recent months as a means to lift Accor’s share price.

But earlier this year Accor dismissed splitting hotels from prepaid services, which include luncheon vouchers and prepaid bank cards, saying services was key to supporting earnings as it countered the cyclicality of its hotel business.

The two divisions have become increasingly distinct from each other with very limited synergies between the two activities, Pelisson told analysts.

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Accor’s hotel business was hit hard by the economic downturn as companies and holiday makers cut back on travel. The group posted a €150 million net loss for the first half compared with a €310 million net profit a year earlier. Pre-tax operating profit was €182 million, down from €393 million a year earlier.

In July, the company had already said that its first-half revenue was hit by a decline in its services division, its core growth driver, falling 9.3% to €3.41 billion from €3.76 billion. At the time, Accor executives attributed the steep decline in the division to falling interest rates across the globe and rising unemployment.

Accor said Thursday it expects to post-full year operating profit before tax and non recurring items of €400-450m and doesn’t expect the hotels business to improve in the second half this year.

The group’s brands include Sofitel, Ibis, Novotel, Mercure, Formule 1 and Etap.