Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Hotels vs Accor Hotels - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jun 3, 2003

    Indian Hotels vs Accor Hotels

    The global tourism industry has been in doldrums for the last couple of years due to various geo-political concerns, which surfaced around the globe. Concerns regarding the prospects of the industry started with the 'September 11' WTC attacks in 2001 and was further dented by the war in Afghanistan, the second ‘Gulf War’, and the spread of the SARS virus. The slowdown in the global economy and cost-cutting measures adopted by companies globally have hurt the sector. We take a look at the performance of domestic hotels as compared to international hotels.

    (Rs m) Accor Hotels** Indian Hotels EIH
    Sales* 550,733 5,415*** 3,700***
    Number of rooms 440,807 2,797 1,925
    Average occupancies during the year 58.0% 58.0% 55.0%
    OPM 17.1% 17.3% 11.6%
    NPM 6.1% 13.9% 9.5%
    P/E (x) 11.6 24.0 23.6
    P/E (without amortised goodwill)(x) 9.2 - -
    Market Capitalization to Sales (x) 0.7 1.4 2.8
    Book Value per share (Rs) 364.1 197.1 197.8

    * converted at Rs 76.30 per pound  **December 2002  *** Trailing 12 months

    Accor Hotels is one of Europe’s leading hotel chain having its presence (3,654 hotels and 440,807 rooms in FY02) in almost all regions of Europe, US and other parts of the world. The hotel chain has its presence largely in the economy class hotels as well as in the business and leisure segment. During 2002, 38% of its total revenues came from the business and leisure segment, while 32% came from the economy class hotels. The economy class usually involves motels and budget hotels (mostly in Europe and North America). In 2002, over 69% Accor's total revenues were from room revenues. Normally in most international hotel chains, casino and betting revenues form a large part of total revenues. However for this hotel chain, revenues from casinos were only 5%. For Indian Hotels and EIH, food and beverages are the second largest source of revenues (after revenues from rooms).

    During the last few years, particularly in 2002, the global tourist traffic declined by 0.6% as a result of which occupancies around the world slipped to around 55%-58%. Both Accor Hotels and Indian Hotels saw their average occupancies decline from over 60% to 58% in FY02. EIH (Oberoi Hotels) was more affected as its average occupancies declned at 55%. Although occupancies for the industry did bounce back in the latter part of 2002 from the 'September 11' lows of around 45%-50%, but occupancy rates are still lower than the average of over 60% achieved prior to '9/11'.

    On an operating margin basis Indian Hotels fares favourably with Accor. However on the NPM level the Indian hotels are doing better than Accor. But, as the table above indicates, this is due to the fact that Accor, like other international hotel chains, have acquisitions which results in good will on their books. This goodwill is written off every year (amortized) and because it is treated as an expense there is an impact on the NPM. The Indian hotel chains are not known to make big-ticket acquisitions either in India and overseas.

    Over the years, the operating margins have declined due to the deterioration in the overall business environment. The decline in the RevPAR (revenue per available room) is due to a combination of less visitors and higher discounts to attract those fewer visitors. This has forced many hotel chains, including Indian Hotels and Accor, to sell their non-performing hotels. Accor has sold some hotels in North America and Europe while Indian Hotels has sold some of its smaller hotels in India.

    On the valuations front, the hotel majors are trading at a higher P/E than their respective country’s stock markets. However, valuations on a P/E basis are skewed as we are penalizing these companies by using their current profits that are, arguably, the low point in their cycle. Going forward we believe that the worst seems to be over for this sector indicated indicated by the improving occupancies and that investors in hotel stocks may witness better times sooner rather than later.



    Equitymaster requests your view! Post a comment on "Indian Hotels vs Accor Hotels". Click here!


    More Views on News

    Indian Hotels: Domestic Operations Performs Well (Quarterly Results Update - Detailed)

    Oct 17, 2016

    Indian Hotels has reported a 5.6% YoY increase in the consolidated topline and a consolidated loss of Rs 1,695 m for 1QFY17.

    Indian Hotels: On the Slow Road to Recovery (Quarterly Results Update - Detailed)

    Jul 4, 2016

    Indian Hotels has reported a 9.6% YoY increase in the consolidated topline and a consolidated loss of Rs 605 m for FY2016.

    Indian Hotels: Recovery Still Far Away (Quarterly Results Update - Detailed)

    Mar 28, 2016

    Indian Hotels has reported a 13.2% YoY increase in the consolidated topline and a standalone net profit of Rs 1.2 m for the quarter ended December 2015.

    Indian Hotels: A good operating performance (Quarterly Results Update - Detailed)

    Nov 24, 2015

    Indian Hotels has reported a 13.2% YoY increase in the standalone topline and a standalone net profit of Rs 1.2 m for the quarter ended September 2015.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in THE INDIAN HOTELS with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks



    Detailed Quarterly Results With Charts