4500 Hotels Closed

Old Apr 23, 2020, 5:58 pm
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4500 Hotels Closed

From the Accor Q1 2020 presentation



https://group.accor.com/-/media/Corp...42020-vDef.pdf

Not looking good for the asset light management model.
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Old Apr 23, 2020, 10:23 pm
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Interesting map...I'm curious which hotels they have closed in e.g. Finland, Iceland and Faroe Islands?
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Old Apr 23, 2020, 11:08 pm
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Wow. Accor must not have an extended stay brand, because most of those are still open.

I'd rather be in Accor's position than be in MGM's position, that is to say needing the hotels open to earn money to make the payments on a huge amount of debt.
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Old Apr 24, 2020, 4:26 am
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Originally Posted by R2
Interesting map...I'm curious which hotels they have closed in e.g. Finland, Iceland and Faroe Islands?
Just to be clear - the map has nothing to do with Accor. It is simply the Johns Hopkins map of relative numbers of coronavirus cases worldwide.
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Old Apr 24, 2020, 4:41 am
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3544quebec you're right, thanks. I didn't notice that. The title of the chart / page is not very clear, is it.
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Old Apr 24, 2020, 4:43 am
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Two Maps

One showing Accor Hotels ( open or not )



Link here : https://all.accor.com/gb/booking/map-search.shtml

and one map from John Hoskins as per the Accor presentation.



Link Here :https://gisanddata.maps.arcgis.com/a...23467b48e9ecf6


Both maps will change.

My point about the asset lite is that during therese sad and worrying times, in my view, the franchise have to make their own choices as to what to do, before they will run out of cash. This may lead some of them to either simply liquidate if heaverley mortgaged, or even change flag when the time comes ( I know that there is natural churn on both of these - but the situation may make it worse ). If Accor owned the properties the situation would be different. However that would have meant a much slower opening of hotels in the past. All I do know is that there should be some clear and present leadership shown.If you are a shareholder, it is unlikely that you will have seen much ( if any ) share price rise under the present team at HO.

The link I gave to the main ( non booking site ) has lots of documents to read - as you are not flying or staying in hotels.

Stay Safe.
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Old Apr 24, 2020, 4:55 am
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That pdf linked in the OP is interesting

I'm staying in a Mantra apartment in Brisbane. When I checked in yesterday the FDA told me that I was only their second check-in in 3 weeks. Here you must present a letter confirming that you are travelling for an approved purpose and the FDA told me that the police had been around a couple of nights ago to check that they had the appropriate documentation for all guests. There are a significant number of longstay guests (eg overseas students) and some owner occupiers in Mantra properties and that is the only reason that some of them remain open. The two non-apartment Mantra properties in Brisbane closed 2 weeks ago. I was tossed out of one of them

Last edited by 3544quebec; Apr 24, 2020 at 5:08 am
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Old Apr 24, 2020, 5:17 am
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Originally Posted by hotel_user
My point about the asset lite is that during therese sad and worrying times, in my view, the franchise have to make their own choices as to what to do, before they will run out of cash. This may lead some of them to either simply liquidate if heaverley mortgaged, or even change flag when the time comes ( I know that there is natural churn on both of these - but the situation may make it worse ). If Accor owned the properties the situation would be different. However that would have meant a much slower opening of hotels in the past. All I do know is that there should be some clear and present leadership shown.If you are a shareholder, it is unlikely that you will have seen much ( if any ) share price rise under the present team at HO.

The link I gave to the main ( non booking site ) has lots of documents to read - as you are not flying or staying in hotels.

Stay Safe.
being asset light, Accor has the least to lose especially compared to the building owners who still have to share whatever % they receive (if they're even open) with Accor.

what would be interesting now is to see how many of these international chains are willing to "prop up" or assist the properties which fly their flag or will be cut loose and wait for the industry to restart to fish for new properties.
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Old Apr 24, 2020, 5:29 am
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Originally Posted by hotel_user
Not looking good for the asset light management model.
Given the choices, I'd much prefer to be asset light than asset heavy in the current environment....much easier to walk away when you aren't swimming in hundreds of millions of dollars in debt.
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Old Apr 24, 2020, 6:13 am
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Originally Posted by moondog
Given the choices, I'd much prefer to be asset light than asset heavy in the current environment....much easier to walk away when you aren't swimming in hundreds of millions of dollars in debt.

There are good arguments for both models. I prefer to "own" what I use to trade from.

The other method is to go to some form of liquidation, or administration, and then do a pre-pack deal. Been done before. ( and will be done again by many in a few months time I think ).

Personally speaking, we own a number of warehouse units ( tenants getting Gov support - but will go bust ), but no mortgage. In a few years time we can re let. I have sold our last remaining house that we let to fund us though the two or three years that there will be no industrilal tenants. House prices will fall. I got 70% of value but I got cash. I can now ride it out.

Keep safe.
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Old Apr 24, 2020, 6:30 am
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Originally Posted by hotel_user
There are good arguments for both models. I prefer to "own" what I use to trade from.
I work with both owners and management companies, in some cases at the same properties. While my role doesn't pertain directly to the numbers, I have gleaned enough insights to realise that the owners are taking a much bigger hit. Some are using the dead period to complete long overdue renovations and even reflag though.
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Old Apr 24, 2020, 8:19 am
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Originally Posted by moondog
Given the choices, I'd much prefer to be asset light than asset heavy in the current environment....much easier to walk away when you aren't swimming in hundreds of millions of dollars in debt.
Easier to walk away, sure, but I don't think the shareholders of Accor are planning to just shut down the business and walk away. People will start to travel again.

As a shareholder, I would prefer to be an owner of a hotel that includes the real estate. The asset light management model that many chains use is fully dependent on the revenue stream from operations, and your investment can plummet quickly. If you are backed by a real estate asset which isn't going anywhere, you are more diversified, and your holdings will retain more value during a downturn like this. But it doesn't really matter, because the current model is the only one possible for Accor anyway (and most other chains).

Purchasing all of the properties under Accor's brands is way beyond their ability. Ownership of real estate requires pockets much deeper than what Accor, and many other hotel chains, currently have. Take the Canadian Fairmont properties for example. It would require billions to acquire that real estate, and that's just for a dozen or so properties here. What would it take to buy up 5,000 hotels around the world? Most of the Canadian Fairmonts are actually owned by the pension funds of the Ontario and Quebec provincial and municipal employees. These are very expensive and long term real estate investments suited to organizations with vast amounts of money to invest. These hotels are not owned by highly leveraged firms taking out mortgages and investing in property. These hotels survived the great depression in the 1930s, and survived complete hotel closures for a few years during WWII. The properties will survive this too, and will be around long after Accor is gone.

The ownership of hotels and the management of them are just two completely different businesses, suited to different types of investors.
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Last edited by CanadaDH; Apr 24, 2020 at 8:24 am
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Old Apr 24, 2020, 9:05 am
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Originally Posted by CanadaDH
Easier to walk away, sure, but I don't think the shareholders of Accor are planning to just shut down the business and walk away. People will start to travel again.
Let's say you own a 400 room hotel with an ADR or $150 and 80% average occupancy. By my math, this puts the property's gross revenues at just shy of $1.5 million per month. Slash away 100k of this for the management fee, and you're at 1.4 million.

If occupancy drops to 10%, you're looking at a bit less than 200k in gross revenues, and a trivial management fee.

Let's further assume that your total costs, including debt service, are 800k per month at 80% occupancy and 650k at 10% occupancy.

This means that you're losing 450k while the management company is at zero. I'd rather be at zero with minimal exposure than pissing away 450k per month.
As a shareholder, I would prefer to be an owner of a hotel that includes the real estate.
Some chains (e.g. Shangri-La and Wanda) try to own as high a percentage of their properties as possible, others invest in properties on an opportunistic basis (e.g. Hilton, Marriott, Hyatt), and the rest are 100% asset light. I'm not sure which model is best, but all 3 have strengths and weaknesses.
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Old Apr 24, 2020, 8:58 pm
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Originally Posted by moondog
This means that you're losing 450k while the management company is at zero. I'd rather be at zero with minimal exposure than pissing away 450k per month.


Some chains (e.g. Shangri-La and Wanda) try to own as high a percentage of their properties as possible, others invest in properties on an opportunistic basis (e.g. Hilton, Marriott, Hyatt), and the rest are 100% asset light. I'm not sure which model is best, but all 3 have strengths and weaknesses.
Bingo. And this negative 450k/month is just on the Operations Account. We haven't accounted for Depreciation which is typically 10% / year, so Owners only have a 10 year period to breakeven and this pandemic has likely taken 2 of those years away at least.

For those saying owners will be able to "cash out" by selling the property, it really depends on how much they bought it for. Properties don't increase in value by default, and the building + equipment automatically looses value once it is recorded on the books.

Look at cities like Detroit, big city in the world's richest nation can still become a ghost town in this day and age.
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