Red Roof Inns may be for sale
French parent Accor plans strategic review after reporting better-than-expected first-half profit.
LONDON (Dow Jones) -- French hotel group Accor SA on Wednesday announced further shake-up, including a strategic review of the Red Roof Inn chain in the U.S. and a significant expansion in emerging markets, as it unveiled a forecast- beating 54% rise in first-half profit.
The group is also increasing the planned sale of hotels and non-core assets and promised to return the cash to shareholders.
Net income at the owner of the Motel 6 and Sofitel chains improved to 241 million euros ( $310 million ), or 1.06 euros a share, from 156 million euros, or 0.72 euros a share, a year earlier.
Profit in the first six months of the year was boosted by a capital gain of 129 million euros on the sale of 68 hotels to Fonciere des Murs.
Operating profit before tax rose 36.7% to 282 million euros .
Accor reported on July 20 that first-half revenue climbed 8.4% to 3.4 billion euros, or 6% on a comparable basis.
The group confirmed it sees 2006 operating profit before tax and non-recurring items in the range of 680 million to 700 million euros for the year, a rise of more than 20% on a proforma basis.
In July and August, revenue per available room climbed 10.4% in Europe upscale and mid-scale hotels, 6.3% in Europe economy hotels and 3.6% in U.S. economy hotels, Accor added.
" While expectations for Accor are high, we feel it has announced enough to keep investors happy, and the company is moving towards our bull case of 63 euros a share," Morgan Stanley analysts told clients.
Accorshares advanced 0.9% to 49.86 euros in Paris morning trading.
Makeover continues: Red Roof Inn could go
Gille Pelisson, who took over as chief executive in January following a rift among feuding factions on the company' s board, wants to refocus Accor on its hotels and its services arm, which includes a luncheon voucher business.
The company has already sold its 50 % stake in Carlson Wagonlit Travel, which books flights and hotel rooms for business travelers, and most of its stake in Club Mediterran & #195; & #169;e, the holiday resort operator.
Among the stepped up efforts announced on Wednesday, Accor said it is conducting a strategic review of the Red Roof Inn chain in the U.S.
Morgan Stanley analysts said they believe a sale is likely and should raise at least 500 million euros .
In Europe, the hotelier plans to create a new brand for non-standardized economy hotels. The new format will be offered to independent franchisees beginning in 2007 in France .
In the upper upscale segment, the Sofitel brand will be repositioned, while in the mid-scale and economy segments, the Formule 1, Ibis and Novotel brands will be re-launched with a new design.
Accor is also accelerating its program to divest its hotel property assets and plans to sell 3.2 billion euros of property by 2008. Proceeds from the sale will be returned to shareholders, it said.
The group confirmed it will open 200,000 new rooms at a cost of 2.5 billion euros by 2010, including 51% in the economy segment and 34% in the mid-scale segment. More than two-thirds of them will be opened under management or franchise contracts.
The expansion plan is focused on emerging markets in the Middle East , Latin America and in the " BRICs" with Brazil , Russi , India and China representing 50% of openings.