Letter to Shareholders Letter to Shareholders

Letter to Shareholders Number 15 October 2000 2000 first half results Activity through August 2000 full year performance targets Growth strategy New technologies, Accor brand positioning, accor.com/finance Group news through August The Accor share “Carnet Evasion” Agenda Ibis and Novotel Homebush Bay, Sydney Sharp increase in first half 2000 results Our first half 2000 performance are outstanding – in terms of growth as well as in terms of quality. Once more, our results underscore the sustainability of our strategy – our positioning, particularly well-suited to the emerging characteristics of international travel and tourism, enables us to overcome the traditional cyclicality of the hospitality business. In Hotels and in Services, growth in activity goes hand in hand with improving profitability. We are proud to achieve such a strong performance after six years of uninterrupted double-digit profit growth. 20.2% 8.4% 7.8% 22.5% 22.9% Accor recorded strong growth in results and profitability in the first half of 2000. (€ million) Sales EBITDAR Total income from operations Net income, Group share Earnings per share (€) H1 1999 2,854 683 239 155 0.86 H1 2000 3,316 851 326 196 1.00 % change +16.2% +24.6% +36.1% +26.9% +16.7% Sales rose by 20.7% excluding disposals and currency impact, including 14.8% due to new business development (notably the acquisition of Red Roof Inns in the US in July 1999). EBITDAR (earnings before interest, taxes, depreciation and amortization, and rents) rose by 24.6%. Steady increase in profitability (as of June 30, 2000) 23.9% EBITDAR (as a % of sales) 25.7% 9.8% Jean-Marc Espalioux, Chairman of the Management Board 3.2% 6.4% Total income from operations (as a % of sales) 1996 1997 1998 1999 2000 European leader and worldwide group in the tra Reflecting operating productivity gains, gross operating margin (EBITDAR as a % of sales) rose by 1.8 percentage points to 25.7% in the first half of 2000. Total income from operations rose by 36.1%. Pretax margin (total income from operations as a % of sales) increased by 1.4 percentage points to 9.8%. Net income, Group share amounted to €196 million, up 26.9% over the prior year level. Reflecting conversion of bonds issued in 1991, earnings per share rose by 16.7%. Return on capital employed (ROCE) reached 11.3%, or 11.7% if hotels under construction are excluded. This represents an increase of 0.3 percentage point over the year earlier level. Economic Value-Added (EVA) rose to €244 million during the period despite higher weighted average cost of capital (WACC). The Group’s net debt-to-equity ratio improved to 73.5% at June 30, 2000. Favorable activity trend through August In the first eight months of the year, Accor’s hotel portfolio grew by 220 new units, representing 30,775 rooms. The increase in RevPAR (revenues per available room) during the period was fueled by higher average room rates. The strongest rise was recorded in European economy hotels, with RevPAR up 7.0%. In the US, economy hotel RevPAR increased by 2.8%. RevPAR in upscale and midscale hotels rose by a healthy 6.1%. August YTD 00/99 Hotels (RevPAR) – upscale/midscale – economy, Europe – economy, US Services (issuance volume) +6.1% +7.0% +2.8% +22.0% On a comparable structural and currency basis, revenues of Carlson Wagonlit Travel and Accor Casinos rose by 8.5% and 15.5%, respectively. The Supervisory Board approved the first half 2000 financial statements, following the recommendation of the Board’s Audit Committee, which noted the high quality of the Group’s internal audit function. Paul Dubrule and Gérard Pélisson, Founding Co-Chairmen of Accor, noted that “once again in the first half of this year, Accor has achieved a strong performance across the board, and is outperforming its major international competitors. Accor’s wellbalanced growth strategy is yielding steady, sustained increases in performance and profitability. With a successful long-term track record and a forwardlooking strategy, Accor is increasingly recognized as the benchmark in the hospitality sector”. Novotel Atlantis Shanghai Sofitel New York City, 45 West 44th Street, Manhattan 2000 performance targets In each of the past six years, Accor has achieved double-digit growth in earnings. For full year 2000, Jean-Marc Espalioux, Chairman of the Management Board, targets increases in total income from operations and net income of at least 20%. avel, tourism and business services Accor pursues a strategy of sustained, well-balanced growth In the high-growth potential hotel sector, Accor enjoys a unique positioning. As of August 31, 2000, the Group’s hotel portfolio comprised nearly 3,500 hotels (385,000 rooms) around the globe and across all market segments. With an annual 10% increase in the number of rooms it offers, Accor strengthens its European leadership, continues to expand its economy hotel activities on an international scope, develops Sofitel in major metropolitan gateways around the world, and selectively broadens its footprint in emerging markets and leisure hotels. This strategy is underpinned by a balanced, diversified funding policy, which does not require further capital dilution. Accor is therefore able to achieve sustainable profit growth and reduce the cyclicality of its activities. As of the end of August, Accor had 474 hotel under construction or in project stage, representing an additional 58,736 rooms. Services are a high-potential activity conducted in fast-growing markets and enjoying steady sustained growth. The development of Accor services is boosted by penetration into new countries – China and Lebanon in the first half of 2000 – as well as by diversification of products and technologies. Motel 6 Thousand Oaks, California New Sofitel Bercy in Paris Novotel Benoa Bali Coralia, Indonesia 3,454 hotels (385,427 rooms) in 90 countries as of August 31, 2000 Unique positioning Global presence and European leadership* North America 34% Europe 49% AsiaPacific 8% Latin America 4% AfricaMiddle East 5% Presence in all market segments* Upscale 7% Midscale 36% Economy hotel 57% Clean Way smartcard – dry cleaning of work apparel Focus on owned and leased properties* Owned 31% Leased 36% Franchised 15% Managed 18% Services – 11 million daily users in 31 countries * As of % of rooms New technologies and international brand recognition The Internet will energize the image, activity and profitability of the Accor Group. With 3,500 hotels online, the accorhotel.com website (including Motel 6 and Red Roof sites in the US) is visited by 35,000 websurfers each day, establishing itself as a new sales powerhouse. Reinforcing the international recognition of Accor and its brands, and making its products accessible on a global scale, the Internet already accounts for reservations in the equivalent of several dozen hotels each day. In the medium term, Accor expects a significant impact from the Internet in Europe as well as in economy hotel, a segment which is not sold through traditional distribution channels. As of late August, online reservations already accounted for 3% of all Motel 6 sales. accorhotel.com 3,500 hotels in 90 countries Worldwide Internet presence and umbrella branding throughout the network will strengthen Accor’s federating power. Accor.com/finance Access up-to-the-minute financial information or real-time share prices, retrieve recent messages from the Chairman, watch the video of the halfyear results analyst meeting, download consolidated statements – all of this and much more can be done through the www.accor.com/finance site of the Accor Group. www.accor.com/finance is your site. Through the Shareholder Pages, you will be able to contact us directly, to ask questions, to give us your opinion on recent Group developments and to rate the features of the Accor website. With a single click on, you can also penetrate the Accor universe, its profile, its brands and activities, its environmental policies, human resources, press releases – and of course you are also able to make hotel reservations directly from the site. Group news through August 2000 In upscale and midscale hotels, the key developments of the first half of 2000 were the opening of the New York and Philadelphia Sofitel hotels and of the Sofitel Bercy in Paris, as well as the extensive renovation of the “pagoda tower” of the Tokyo Sofitel. In Asia-Pacific, Accor also expanded its presence in China with the June 1 opening of the Novotel Atlantis Shanghai, and the addition of 27 hotels in Australia previously operated by the All Seasons group. In Europe, the Group took a 20% interest in the Polish hotel and tourism group Orbis. Through this strategic investment, amounting to €81 million, Accor strengthens its leadership in the Polish market, with the addition of 55 three- and four-star hotels (10,439 rooms) located in the country’s 25 largest cities and seaside resorts. Accor also boosted its European leadership position, notably in London, where the Group opened the Novotel Tower Hill and London Mercure. Sofitel Tokyo In economy hotels, Accor increased its presence in the UK market with the opening of the London Gatwick Airport Ibis hotel and the addition of eight new hotels to the Ibis network. In the US, 20 additional hotels joined the Motel 6 and Red Roof Inns network, chiefly through franchising. Services pursued their worldwide expansion. In China, local authorities have authorized the launch of a restaurant card in Shanghai and Beijing, in association with the Beijing Tourism Group. In Ireland, Accor Services acquired Irish Luncheon Voucher which, with 7,000 daily users and €6 million in annual issuance volume, provides a unique springboard for Ticket Restaurant and Childcare Voucher. The Accor share The Accor share continues to significantly outperform its major competitors over the long term. From January 1, 1997 through December 31, 1999, the Accor share price rose by 139%, from €20.04 to €47.97. In 2000, the Accor share recovered from its lows in the first quarter, when investors were focusing on TMT (telecom, media, technology) stocks. From January 1 to October 24, however, the Accor share recorded a 6.4% drop, reflecting rumors regarding the potential acquisition of the hotel activities of Granada Compass plc. On this occasion, Jean-Marc Espalioux noted that “Accor would carry out such a transaction only if it is financially balanced, well priced, and earnings enhancing”. The Accor share, January 1, 1997 through October 24, 2000 (Base 100) 300 ACCOR: +123% 250 €44.95 200 150 UK peer group: – 6% 100 US peer group: –33% Ja n Fe . 97 br Ap . 97 ri Ju l 97 ne Au 97 g. O 97 ct . D 97 ec Fe . 97 br Ap . 98 ri Ju l 98 ne Au 98 g. O 98 ct . D 98 ec Fe . 98 br Ap . 99 ril Ju 99 ne Au 99 g. O 99 ct . D 99 ec Fe . 99 br Ap . 00 ril Ju 00 ne Au 00 g. O 00 ct .0 0 Do not forget… Evasion Accor offers you happiness and evasion while saving up to 4,000 FRF in its hotels, restaurants and other tourism destinations and services, with the “Carnet Evasion”. With its 18 coupons, you will get discounted prices valid until March 31, 2001. Order your “Carnet Evasion”* now by phone (33.1.45.38.86.26) or e-mail comfi@accor.com without forgetting to give your postmail address. * Upon available stock The new “Carnet Evasion”, up to 4,000 francs discount on your travel accomodations and activities. Offer valid until March 31, 2001, upon request, limited stock available. Agenda November 17-18, 2000: Salon Actionaria, Palais des Congrès, Paris Building on the success of the two previous editions, Accor will once again meet its individual shareholders, potential investors, and the interested public at the Salon Actionaria investor fair organized in Paris for the third consecutive year. Accor shareholder relation representatives will be on hand to welcome you and answer any questions you may have about the Group and your investment. For any information, call Accor Shareholder Relations at +331.45.38.86.26 PARTENAIRE OFFICIEL ‘Letter to Shareholders’ is published by the Financial Communications department of Accor Tour Maine Montparnasse, 33, avenue du Maine, 75755 Paris Cedex 15 - Tel: 33.1.45.38.86.00 - Fax: 33.1.45.38.85.95 Editor-in-chief: Eliane Rouyer - Production: Bruno Giordano - English-language consulting: Taylor Rafferty & Ass. - Euro RSCG Omnium