Analysis of The Three Financial

Statements and Ratio Analysis

A project by (following the alphabetical order of surnames):

Rita Gucciardi, Laureline Palmade, Cecilia Varela, Iulia Voinic
Accounting Analysis for Businesses in the Tourism Sector
Degree in Tourism
Universidad Rey Juan Carlos

Table of Contents
Accors History ..................................................................................................................... 3
Accor Brand Portfolio ....................................................................................................... 6
Global Situation of the Hospitality Industry ............................................................. 9
Key Findings .................................................................................................................................. 9
Global and Regional Performance ......................................................................................... 9
Competitive Landscape ...........................................................................................................11
Marriott ................................................................................................................................................... 11
Hyatt ......................................................................................................................................................... 11
Future Performance .................................................................................................................12

Overview ............................................................................................................................. 13
Variation of Total Assets, and Relationship between Total Liabilities and Total
Equity .............................................................................................................................................13
Analyzing the five steps of the Income Statement .........................................................16
Evolution of Net Cash From Operating Activities (NCOA) ...........................................22

Financial Statements and Ratios Analysis .............................................................. 23

Balance Sheet Analysis ............................................................................................................23
Liquidity Ratios 2010-2013 ............................................................................................................ 23
Working Capital in % 2010-2013................................................................................................. 24
Turnover Ratios ................................................................................................................................... 27
Asset Turnover ..................................................................................................................................... 28
Debtors and Creditors Turnover Periods ................................................................................. 29
Analysis of Income Statement ...............................................................................................33
Return on Sales % (ROS).................................................................................................................. 33
Return on Assets % (ROA) .............................................................................................................. 33
Return on Equity % (ROE) .............................................................................................................. 34
Gross Profit Margin ............................................................................................................................ 34
Growth in %........................................................................................................................................... 35
Over Sales in %..................................................................................................................................... 37
Earning Per Share (EPS)................................................................................................................... 39
Dividend Per Share (DPS) ................................................................................................................ 39
Price Earning Ratio (P/E) ................................................................................................................ 40
Cash Flow Analysis ....................................................................................................................41
Evolution of Net Cash From Operating Activities (NCOA) and Free Cash Flow ........ 41
Cash Flow Liquidity Ratio ................................................................................................................ 42
Quality of Income Ratio .................................................................................................................... 43

Comparison with Competition and Sector .............................................................. 44

Comparison with Meli, NH and Sector .............................................................................44

Conclusion .......................................................................................................................... 47
Appendix. Financial Statements and Tables (Magnitudes and Ratios) ........ 48
References .......................................................................................................................... 67

Accors History
Accor, worldwide known hotel chain is a Paris based Hospitality enterprise, is
currently ranked among the top 5 leading hospitality groups. Accor provides
hotels for every budget, from offering 5-stars hotels as Sofitel to a low budget
ones, represented by ibis brand.
The early days of Accor starts with Gerard Pelisson and Paul Dubrule, opening
their first hotel, Novotel, in northern France nearby Lille, on the side of a busy
road. French hotel industry back in those days was majorly covered by rural inns
or very luxurious hotels in the city centers, while roads or important access sites
as airports were not taken into account. Dubrule decided to build an American
highway inspired hotel together with Pelisson setting a medium price range for
its rooms. The opening was possible through Pelissons contacts in order to
secure the bank loans. The success of this opening was settled due to the
opportunities that the European market offered back then, which was at the time
quite unexploited. After the first opening of Novotel, few struggles in legislation
came but however soon there were hotel openings along the airports or at the
seaside and mountain areas.
The companys specialty has become expanding through variety, offering
possibilities for every need. Back in 1973 the Ibis brand was created and the first
hotel under this brand opened the following year. In 1975 the company acquired
Mercure hotel chain, which pushed the company into city centers and the
business travel market. During the late 70s the Novotel was the main hotel chain
in Europe with 240 hotels in Europe, Africa, South America and Middle East.
In 1980s Accor invested in Jacques Borel International, owning restaurants and
Sofitel luxury hotel chain, however soon the Pelisson and Dubrule bought Sofitel.
This hotel was aiming at leisure and business travelers with a taste for urban
lifestyle, nearby airports and positioned strategically nearby important tourist
areas. Sofitel made it to Accors higher end.
The company as well started to venture foreign markets, as trying to penetrate
(though failing) the American market, which by then was saturated. Despite of
this unsuccessful move, Accor opened Accor Academy, investing heavily on
training and exploring new technologies. During the 80s, the company has also
purchased Africatours, the largest tour operator for Africa, which became the
third largest investment of the company after hotels and restaurants.
In 1985 the company has developed a new brand called Formule 1, a one-star
hotel chain without reception nor staff, restaurant offering a bathroom for every
4 rooms, setting for truly competitive and budget prices directed to youngsters
and young families with low resources. The success of this chain was enormous
which pushed Accor to have another 30 establishments under construction
around 1987.
In 1986, Accor reached 2$ billion in revenue and 32$ million net profits. Novotel
present in 31 countries by then was the main source of profit while Sofitel had a
hard time facing competition in the luxury market. However Accor remained in
the top due to its quick expansion and fast moves in the European market.

In 1987, there was another idea for the future of the brand, this time focusing on
elderly housing providing through Hotelia a 24h of services. In 1988, Accor
invested in the important French fast-food chain, France Quick, launching the
Free Time fast food chain. The company was with no doubt expanding and
acquiring more recognition, however the bid that took place for the Hilton Hotels
empire as well as the merger with Club Mediterrane were not successful.
One of its biggest moves in the American market came with the purchase of the
Motel 6 hotel chain, in the early 90s, for around 1,3$ billion. This has made Accor
the second largest hotel company in the world (talking about rooms). Motel 6s
success during these times was related to Accors possibility to pay cash and the
purchase of company-owned properties.
Accor started a hotel rebranding back in 1993 in order to eliminate Pullman
Hotels International chain (acquired in 1991) and expand its Sofitel and Mercure
together with the restaurant chains. In 1994 Accor merged its own travel agency
with Carlson Travel Network, calling the joint Carlson Wagonlit Travel, owned
half and half.
The company suffered a slowdown in mid 90s due to the crisis in the travel
industry as well as its liabilities accumulated but soon found funds from Prince
Al Waleed. The business has started to get rid of the debt and raise funds for
more expansion through selling some real estate secondary elements of the
business. Despite this strategy, which was aiming to focus on the hotel business,
the other business Accor was managing was gaining more and more position in
the market. Eventually, the hotel business remained Accors principal source of
presence and recognition.
Now Accor divided its hotel business in 2 categories, business (Mercure, Novotel,
Coralia, Sofitel and leisure (Motel 6, Ibis, Formule 1, Etap Hotel).
In 1997 the two chairmen, Pelisson and Dubrule, reorganized the management of
the company by reducing their involvement in decision-making. In this same
year, Accor has started to restructure in order to reduce liabilities through
workforce reduction and selling properties in North America and Europe.
However the story was not over, the group has made another important move in
the American market buying Red Roof Inns, an upgrade of Motel 6.
During the early 2000s, Accor introduced finally its luxurious brand, Sofitel to
North America in major cities as Chicago, Huston, Dallas, Los Angeles, Miami,
New York, Washington D.C. and San Franciso, opening a total of 254 hotels of
which 12 were Sofitels. Another important thing to mention for this period is the
launching of the first website, Accorhotels.com.
Starting 2001, the group has started to focus on the Asian market and expanding
through the continents as well as launching a new brand called Suitehotel
especially designed to meet comfort and functionality.
The company teamed with Hilton International and Six Continents to launch a
new reservation system called WorldResEurope.

During this time hard times hit Accors main competitors, leaving the group as a
strong pillar in the market hoping for more expansion and aiming to close the
year 2003 with 4000 hotels worldwide. The group has almost made it, closing
2003 with 3894 hotels opened at the time, while the American budget brands
and the other services (restaurants, casinos, travel agencies, etc.) were suffering
a decrease while the European luxury and economy brands.
In 2011, Accor introduced its new slogan Open new frontiers in hospitality
while rebranding its umbrella. The group has also started a partnership with
Europcars and sold its stake with Group Lucien Barrire for 268 million euros
and planning on a new expansion with Mercure brand through UK using the
franchising model. They also promote and unveil a new strategy in order to
rebrand its economy brand ibis: ibis style and ibis budget.
In March 2012, Accor opens its first Mercure hotel in Russia, hitting a new record
in expansion and a healthy increase in revenue due to the new management
system of franchising. In May the same year, the group sells Motel 6 for 1,5
billion dollars allowing the business to reduce its net debt by 780 million euros.
As of year-end 2012, the consolidated hotel base totaled more than 450,000
rooms, of which 37% were located in emerging markets and 57% were operated
under management or franchise contracts.
In 2013, Accor re-emphasizes the groups two core competencies, i.e. asset
management and services to owners, by separating their functions, their
missions and their targets in order to build a better performing business model.
Nowadays, the worlds leading hotel operator in the economy and budget
segment with over 1,700 hotels is celebrating today its 1000th ibis hotel around
the world. Accor is the largest hotel group operating on French and International
market

Accor Brand Portfolio

Accors brands are divided in 14 branches, serving budget, economy, midscale,
and upscale and luxury markets. The actual brands are: Sofitel, Pullman,
MGallery, Grand Mercure, The Sebel, Novotel, Suite Novotel, Mercure, Adagio,
ibis, ibis Styles, ibis Budget, hotelF1 and Thalassa Sea &Spa.

Sofitel: These hotels are made with the intention

of providing the clients the French luxury and the
best things about its culture mixing art, comfort
and modernity. This chain started in 1964 and
joined Accor in 1997, it has 120 properties in 40 different countries.
Pullman: Upscale lifestyle hotel brand, they are a
new generation of Accor. It is formed by 89
resorts along 26 countries based on a warm
welcome and a customized treatment to provide
the clients all their needs being there for business or leisure.
MGallery: Its full name is Mercure Gallery, and its a collection of 50
hotels in 21 countries with a luxury architecture and design. They have
a strong relationship with the culture and heritage of the places where
are located, and they try to transmit a unique and memorable
experience to the visitor.

Grand Mercure: This chain is mainly located in

Asia, they are an upscale collection of hotels and
apartments and they are known by different
names depending on the country, in China its
name is Mei Jue, while in Indonesia it is Maha
Cipta.
The Sebel: The Sebel is a brand of apartments that
offer the clients an independence and control in
luxury places where they can feel like being home.
There are a total of 19 apartments in 2 countries
and with more than a thousand of rooms.
Novotel: Novotel counts with around 400 hotels and
resorts in 58 countries, in the main international cities of
business and touristic destinies.
They are all homogeneous, provided to facilitate the needs
of the travelers enabled for working activities and offering
services like child spaces, rooms for meetings, relaxing
areas and a kind team of employees.
Suite Novotel: Suite Novotel offers as its name says suites
of 30 2 enabled with many amenities like the Boutique
Gourmande and the loan of a car. It has more than 3500
suites in 9 different countries.

Mercure: With more than 750 hotels in the city, the

beach or the mountains, Mercure is the only midscale
hotel brand that combines the strength of an
international network with a strong quality
commitment and that offers a warm welcome and
treatment to their clients, and experience related to
the culture of their locations, showing its own personality.
Adagio: Offering modern and spacious apartments
with a fully equipped kitchen, and as well hotel
services in urban locations for extended stays,
based on attractive tiered pricing from fourth
night onwards. The brand provides two product
ranges: Adagio, contempory midscale aparthotels
at the heart of Europes leading cities; and Adagio access, economy range,
functional aparthotels located on cities doorstep.
Ibis: European hotel economic leader, offers the ultimate comfort: a new
innovative bedding designed by the ibis Research Department, a comfortable and
well-equipped room, modern and design welcome areas. Caring and efficient,
ibis ensures the highest level of service of its category: a 24 hour reception,

breakfast from 4:00 am to midday, light meals

served round the clock and a non-stop bar. An ISO
9001 certified guarantee of quality and illustrated
by the "15 minutes satisfaction" contract. With
more than 983 ibis hotels in 58 countries, whatever
the reason for your stay, ibis has the hotel you are
looking for!
Ibis Styles: A non-standardized economy and
design brand aimed at all those who are looking
for the best of the best, ibis Styles offers an allinclusive package, with room rates including
breakfast and Wi-Fi access.
Situated in the heart of cities and in other major
centers of activity, each establishment has its own
distinct personality and reflects a colorful, bright and energetic brand spirit with
a hint of humor.
Ibis Budget: Accors benchmark brand in the
budget segment. This nifty, casual brand
offers a simple, no frills solution and has made
essential comfort at a budget price central to
its thinking. With more than 500 hotels in 16
countries,
ibis budget offers
its
guests
comfortable rooms with fluffy duvet and
pillows, free WI-FI (except in Australia) and a gourmet breakfast buffet. In 2012,
ibisbudget redesigned its public areas with a focus on optimizing these lively
spaces in a nifty, playful way and creating a warm, friendly atmosphere.
hotelF1: Offers access to 238 budget hotels all
over France. Sleep well in a trio room or a duo
room from 19 a night. In business for over 25
years, hotelF1 (former Formule1) offers clean, convenient rooms for 1, 2 or 3
people at the lowest price, 24/7.
Thalassa Sea & Spa: Prestigious seaside destinations,
breathtaking scenery, and premium teams of health and
beauty specialists, 14 beautiful destinations in France, Italy,
Morocco, and Bahrain.

Global Situation of the Hospitality Industry

The global hotel industry is reaching new heights prompted by strong growth in
tourism flows globally. Sales continue to shift towards emerging markets at the
expense of developed markets, especially Europe. However, the hotel industry
now grapples with the rise in peer-to- peer lodging, with Airbnb leading the
market. Going forward, technology will shape the industry with regards to
distribution, marketing and guest experience.

Key Findings
Recovery persists: In 2013, the global hotel industry achieved its fourth
year of consecutive growth with sales of US$480.8 billion.
Industry Dynamism: The global hotel industry saw great dynamism in
2013, marked by Hiltons IPO, Marriotts brand launch of Moxy and the
acquisition of Protea, Hyatts move into the all-inclusive space and
everyones pursuit of millennials.
Peer-to-peer a problem?: As peer-to-peer lodging grows in awareness,
companies such as Airbnb repeatedly made headlines, especially with its
valuation of US$10 billion, sparking conversations about its impact on
hotels.
Luxury troubled in China: Despite their focus on China, luxury hotels are
facing challenges with the governments crackdown on corruption and a
slowing economy.
Business travel on the rise: Business travel is expected to continue to
grow faster than leisure between 2013 and 2018, which will help hotels
increase sales.
Western Europe struggling: A slow economy and oversupply are
undermining Western Europes leading position in the global hotel
industry.
Innovation: Global hotels are reaching out to a new generation of
travelers by embracing mobile technology, incorporating social media
and updating the design and style of their brands.
Non-stop growth: Hotel sales are expected to grow every year over the
period to 2018, prompted by increased tourism flows and higher
spending business travelers.

Global and Regional Performance

In 2013, global real GDP growth slowed slightly, falling from 3.1% in 2012
to 3.0% in 2013. Many regions still struggled with low output growth as
the global recovery took longer than expected to gather steam.
Tourism flows maintained an upward trend in 2013, mainly driven by the
increased growth stemming from emerging markets.
Domestic trips outperformed arrivals between 2009 and 2013, as tourists
opted to stay closer to home and spend less money. In emerging markets

with strong economic growth, residents took their first domestic trips,
which contributed to positive results.

Global business trips, including arrivals and domestic trips, grew by 39%
over 2008-2013, to reach 2.2 billion trips. Global leisure trips experienced
35% growth during the same period, with 7.3 billion trips in 2013.
Domestic trips grew strongly in Asia Pacific and Latin America as these
economies were not as impacted by the global recession in 2009 and
more people travelled for the first time. Asia Pacific also led in growth for
arrivals over the past five years, while Western Europe experienced the
second fastest growth. Although the regional economy suffered, Western
Europe is a must-see destination for global travelers.
The global hotel industry grew by 4% in 2013 to reach room revenues of
US$480.8 billion, this being the industrys fourth year of consecutive
growth.
Asia Pacific and North America were the main drivers of hotel value sales
growth in 2013 thanks to strong demand and in the case of North
America, low supply growth.
Although Western Europe continued to account for the bulk of global
hotel sales, it experienced a sales decline of 1.4% in 2013 as a weak
economy continues to dampen demand for hotels and intra-regional
travelers increasingly turn to budget options.
Meanwhile, Eastern Europe recorded the highest value sales growth in
2013, 9.5%, followed by Latin America. Eastern European countries
benefited from a revival in European intra-regional travel.
The hotel industry is preparing for the next generation of guests Generation Y (those born between 1981 and 1990).
With Generation Y consumers entering their peak working years, global
hotel companies are reaching out to these travellers by embracing mobile
technology, incorporating social media and updating the design and style
of their brands. To promote these changes and attract Generation Y to

their brands, hotel players are shifting towards more digital marketing
and user-generated content.
Growing up connected, and bored with traditional marketing techniques,
it can be difficult to reach Generation Y, with many not particularly brand
loyal.
Although travel is a high priority for this generation, it also suffers from
high unemployment, with many still living at home.

Competitive Landscape
Marriott
Marriott remained the largest global chain and saw its global share increase by
20 basis points in 2013, to reach 5.3%.
A strong revPAR performance prompted by high occupancy rates and
favourable industry supply trends in the US and abroad helped sustain
revenue growth during 2013.
The fact that business tourism fully recovered also positively impacted
Marriotts results, mainly in the US.
Starwood also benefited from a stronger economy in the US, particularly
with its Sheraton and Westin brands. However, it experienced strong
growth in China and the United Arab Emirates where the company
continues to expand.
Occupancy rates in Europe remained high for Starwood Hotels, despite
the weak economic environment.
Accor Group, ranked fifth globally in 2013, saw a 10 basis points decline
in its global share to reach 2.6%. The decline related to the economic
weakness in Western Europe, which had a direct impact on operational
results.
Accor brands fared better in the economy than in the midpriced/upmarket segment and were particularly successful in the UK,
Germany but less so in France in 2013.
By 2015, Accor plans to expand its luxury and upscale portfolio - Sofitel,
Pullman, MGallery and Grand Mercure - from 300 to 400, with a strong
focus on Latin America, the Middle East and Asia Pacific.
Hyatt
In November 2013, Hyatt Hotels introduced two all-inclusive resort brands,
Hyatt Ziva and Hyatt Zilara, in Mexico. The initiative aims to capitalise on the
fast-developing all-inclusive segment and further gain penetration in Latin
America.
Additionally, it will enhance its loyalty programme by providing more
leisure destinations for redemption, giving the company the ability to
introduce this model globally in other resort destinations and introduce
new guests to the Hyatt brand.
However, there are risks with this move. Demand is highly dependent on
the US market and competition is strong from regional and global

companies. Hyatt has little experience in the all-inclusive market and

replicating an asset light model is very difficult with all-inclusive
resorts.
Hilton currently has 10 all-inclusive properties worldwide - five in Egypt,
two in Turkey, one in Costa Rica, one in Puerto Vallarta and one in
Jamaica. Meanwhile, Viva Wyndham has six branded all-inclusive
properties - three in the Dominican Republic, two in Mexico and another
in the Bahamas.
In addition to Hyatt Ziva and Hyatt Zilara, three further all-inclusive
resort brands are expected to be introduced in 2014 and 2015.

Future Performance
Although a great deal of economic uncertainty still exists, global real GDP growth
is expected to be positive and steady over 2013-2018.
More balanced than in 2013, growth will be driven by renewed economic
prospects in developed economies in 2014. Global real GDP growth is
forecast to be 3.7%, an 80 basis points increase on the 2013 figure.
Domestic tourism will continue to outperform international tourism
between 2013 and 2018, mainly driven by the increased domestic flows
in emerging markets.
In absolute terms, Asia Pacific is expected to lead in growth of domestic
and international trips, due to its strong economic performance.
Business travel is expected to continue to increase, experiencing faster
growth than leisure travel between 2013 and 2018.
Asia Pacific is likely to lead growth in the category, giving the hotel
industry ample opportunities to cater to business traveller demand in the
region.
Mounting tourism flows driven by higher spending business travellers
will positively impact hotel sales, which are expected to grow every year
over the period to 2018.
Hotel companies will continue to adopt the latest in technology and
integrate it into every aspect of their operations, to further boost guest
experience.
Mobile technology plays a crucial role, leaving the control at the hands of
guests.
Asia Pacific is expected to surpass Western Europe to become the largest
region for hotel value sales in 2014. This is much sooner than previously
anticipated.
Despite a slowing economy, China is still expected to experience
continued growth in sales and rooms over 2013-2018.
The Eurozones economic sluggishness is expected to cause Western
European hotel sales to stagnate in 2014, before beginning a recovery in
2015.
The industry is still waiting to see what type of regulations will be
introduced and the impact they will have on supply.

Overview
Variation of Total Assets, and Relationship between Total Liabilities and
Total Equity
With this analysis we are aiming to provide the reader with side-by-side
information on Accors assets, liabilities and shareholders equity for the time
lapse between 2010 and 2013, with the final purpose of developing a trend
analysis.
The monitoring of the Total Assets, Total Liabilities and Equity of the balance
sheet has special interest in measuring or determining the liquidity of Accor as a
business. Liquidity is essential for the ability to pay the debts in a timely manner.
The variation between the three mentioned elements for Accor for 2010-2013
are the following presented in the graph. All data presented in Millions.
10000
9000
8000
7000
6000
5000

Total Assets

4000

Total Liabilities

3000

Total Equity

2000
1000
0

2010

2011

2012

2013

Total Assets

8678

8000

7560

7060

Total Liabilities

4729

4232

4571

4304

Total Equity

3949

3768

2989

2756

From the chart above we are able to notice the following changes:
From 2010 to 2011, the Total Assets are decreasing (from 8678 to 8000)
mainly because of the decrease in non-current assets and especially the
gross property, plant and equipment. From what we can see when looking
at the Total Liabilities is that they decrease as well (from 4729 to 4232)
with a main decrease in total current liabilities and other current
liabilities. Meanwhile, the Total Equity decreases only from 3949 to 3768
millions, which is a quite stable change. The most important change in the
Equity comes from the additional paid-in capital, which escalated from a
negative figure to a highly positive in 2011 due to the plans purposed for
the hotel group for its changed schedules in 2012. We can therefore
conclude that a bigger part of the assets is financed by the equity, while
some of the short term and long term debts are being repaid.

From 2011 to 2012, the Total Assets are once again decreasing (from
8000 to 7560) because of the net property, plant and equipment (PP&E)
that have been fluctuating through the years. The Total Liabilities for this
period are suffering an increase (from 4232 to 4571) due to the current
liabilities by the company most likely related to their expansion in
Australia, New Zealand and Brazil, which headed to acquisitions of Mirvac
and Grupo Posadas. The Total Equity however, for this year, we can detect
a noticeable decrease (from 3768 to 2989) linked to the plummet loss in
Net Profit (from 27 to -599) because of the sale of Motel 6 to Blackstone,
agreement closed on October 2012. Important point to mention for this
period and linked to the operations of expansion is the fact that the
inventories increased 6 points (from 41 to 47).
In 2012, Accor opened more than 38000 rooms, excluding Motel 6 (which
we have previously mentioned it was sold) hitting a record, while most of
these new rooms were operated by franchise agreements in emerging
markets, which we can see impacted in the intangible assets account that
fluctuated (from 373 to 1104) until the end of the year.
From 2012 to 2013, the Total Assets are decreasing (from 7560 to 7060)
due to the decrease of non-current assets and a change in the intangible
assets. Talking about assets, we have still a healthy growth that started
back in 2011 in terms of total cash related to the groups transactions and
selling. The Total Liabilities are going to decrease a little (from 4571 to
4304) because of the big decrease in current liabilities; Accor has started
to get rid rigorously of their short-term debt in relation to the year 2012.
Total Equity has seen a decrease much modest than the one of the
previous period (2011-2012) and an important point to make here would
be the great increase in Net Profit, which escalated from loss of -599 in
2012 to a profit of 126 in 2013 December 31. Also important to mention
is the additional paid-in capital received from the investors, which
decreased drastically (from 2676 to 1729) which could be explained by
the prosperity of the company after revitalizing its brands and hotels.

Working capitals year to year variation

Working Capital
700
600
500
400
300
200
100
0
2010

2011

2012

2013

Working Capital

3500
3000
2500
2000
Total Current Assets

1500

Total Current Liabilities

1000
500
0

2010

2011

2012

2013

Total Current Assets

3123

2962

3081

2972

Total Current Liabilities

2714

2382

2772

2359

From the graph, we can observe how for the year 2010 and especially 2012, the
assets and liabilities were having a risky closed relation, the Working Capital is
seen affected, and meaning that this is decreasing significantly. We can observe
how the Working Capital of Accor has been changing up and down as a
rollercoaster for the period between 2010 and 2013, with two peaks in 2011 and
2013, which were healthier figures in comparison with 2010 and 2012, when
these figures decreased. The decreasing of the figures in 2010 and 2012 signify a
deteriorating health since there is less cash for capital expenditures. The way to
know how good or bad the company is doing would be measuring the relation of
the Total Current Assets and Total Current Liabilities, as these show a significant
difference between them, and while the Assets are surpassing in good amount

the Liabilities, the company is liquid enough. In the case of Accor, we can see
however how in 2013 the figures are showing a good healthy prospect.
To conclude, the company has a good liquidity without problems in the short
time and maintains enough assets to cover their current debts. The year that
shows the greater worrying figure, 2012, it can be explained through the
rebranding and renovation of ibis brand from 2011 as well as the expansion and
massive openings.

Analyzing the five steps of the Income Statement

Step 1: Revenues Cost of Sale = Gross Profit
2010
2011
Revenue
5948
6100
- Cost of
Revenue1

Gross Profit

2012
5649

2013
5536

5948

6100

5649

5536

Gross Profit
6200
6100
6000
5900
5800
5700
Gross Profit

5600
5500
5400
5300
5200
Gross Profit

2010

2011

2012

2013

5948

6100

5649

5536

In the first step of the Income Statement analysis, we are able to observe the
decrease on Gross Profit over the years despite a slight increase in 2011. As
general rule, the Gross Profit is the first level of profit of a business; hence we
spot an increase when the Total Revenue increases as well, as in the year 2011.
What made 2011 so special in revenues?
Expansion, thanks to opening 38700 new rooms, part of 318 different
hotels, the performance recorded for 2011 has actually exceeded the first
objectives with a 108 million addition to the revenue

Since we are analyzing the statements of a Hotel Company overall, we will consider there are no
Costs of Sales or Cost of Revenue. However Accor reports some costs related to the activities of
the F&B services in their Restaurants in Hotels. We will consider these costs 0.

Changes in the scope of consolidation, from the deployment of the assetright strategy of Accor which has reduced revenue but reported growth
by 4,3%
The currency effect
Like-For-Like, rising revenue by 5,2%
The upscale-midscale hotels occupancy (f.e. ibis family hotels)

Step 2: Gross Profit Operating Expenses = Operating Income (EBIT)

2010
2011
2012
2013
Gross Profit
5948
6100
5649
5536
- Operating
Expenses2

5502

5570

5123

5000

Operating
Income
(EBIT)

446

530

526

536

Operating Income
600
500
400
300

Operating Income

200
100
0
2010

2011

2012

2013

For this second step in analyzing the Income Statement, we are looking at the
Operating Income, which is equal to Earnings Before Interest and Taxes (EBIT).
This will give us an idea about how efficient and profitable Accor is, taking into
account that these quantities are actually representing the earning power from
the ongoing operations before any interests or taxes are applied. It can be seen
that Accor is doing quite good, maintaining this amount quite stable through the
years, despite having a little decrease in 2010 that might be due to higher
expenses. As we can see the Gross Profit is quite high comparing to 2012 and
2013, however the expenses are higher than the mentioned years. The year 2010
was overall a good year for Accor that was on ongoing recovery process since the
first half of the year, from the crisis of the hotel industry. During this year the
2

Operating Expenses amounts in the table are reporting: Operating Expense, Rental Expense and
Depreciation&Amortization accounts.

biggest drivers for the company were the hotels hosted in countries as United
Kingdom and Germany, together with France, though the figures were hold back
due to the crisis of Spain and Italy for instance.
The Operating Expenses suffered a growth in 2010 due to Other Purchases and
External Charges in which may fall the devaluation of the Venezuelan Bolivar
Fuerte.
Step 3: Operating Income +/- Non Operating Revenues & Expenses =
Income Before Tax (EBT)
2010
2011
2012
2013
O.I (EBIT)
446
530
526
536
- Net Financial
Expense
+ Share of Profit
- Reconstructing
Costs
- Impairment
Losses
+ Gains and
Losses (hotels)
- Gains and
Losses (others)

134

97

75

92

22
31

5
40

17
40

2
133

284

113

119

89

60

11

68

35

19

81

33

Income
Before Tax
(EBT)

-12

326

239

259

This third step consists of adding or subtracting the accounts or operations that
are not extremely important for Accor in order to find out the earnings before
taxes. Once again here we can appreciate, as mentioned in the previous step, the
decline of year 2010. For a more explicit result, consult the graph under.

EBT
350
300
250
200
150
EBT

100
50
0
-50
EBT

2010

2011

2012

2013

-12

326

239

259

Once again we can relate this graph with the effects that the market price change
has possibly affected the growth in 2010, as the devaluation of the Venezuelan
Bolivar Fuerte.
Step 4: Income Before Tax Provision for Income Tax = Income From
Continuing Operations
2010
2011
2012
2013
EBT
-12
326
239
259
- Provision for
Income (Income
Tax Expense)

Income
From
Continuing
Operations

392

274

143

121

-404

52

96

138

Income From Continuing Operations

200
100
0
-100
-200

Income From Continuing

Operations

-300
-400
-500
Income From Continuing
Operations

2010

2011

2012

2013

-404

52

95

138

Step 5: Income From Continuing Operations +/- Non Recurring Items = Net
Income
2010
2011
2012
2013
Income F.C.O.
-404
52
95
138
- NonRecurring
Items3

4014

(679)

+1

Net Income

3610

50

-584

139

In this step of the Income Statement analysis, we can obtain the results of the
income before the nonrecurring items charge (these are expenses that will occur
only once due to an unpredictable event). Once again we see how year 2010 is
having the biggest decrease.

Net Income
4000
3500
3000
2500
2000
1500

Net Income

1000
500
0
-500

2010

2011

2012

2013

-1000

In this final step, taking into account basic knowledge of accountancy, we know
that if revenues are increasing but costs of revenue are increasing more than the
increase in total revenues, the Net Income would be affected and decrease. What
happened with Accor? At the beginning we mentioned how we wont take into
account any Cost of Revenue since we have considered Accor as a solely hotel
company, but the truth is that there do are certain costs of the revenues earned
due to the fact that hotels operate as well restaurant services, where costs are
appearing from managing Food and Beverage department. Lets take a look at
the costs reported by Accor from 2010 to 2013 that would be included in the
Total Operating Expenses.
2010
Cost
Revenue
Revenue

of

2011

2012

2013

399

391

388

406

5948

6100

5649

5536

Non Recurring Items are referring to the account of Net Profit or Loss, Group Share from
discontinued operations.

In the following chart above we are able to see growth in Revenue vs. Cost of
Revenue, which will give us the reason why Net Income is affected in 2010
increasing and why in 2012 decreasing.

% Difference of Growth Revenue vs

Costs of Revenue
8,00
6,00
4,00
2,00
0,00

% Difference of Growth
Revenue vs Costs of Revenue

-2,00
-4,00
-6,00
% Difference of Growth
Revenue vs Costs of Revenue

2010

2011

2012

-4,56

6,63

6,64

We can see that the smaller amount of Costs of Revenue against Revenue
happens in 2010, reason why the Net Profit is at its highest. In 2011-2012 (in
chart 2011) however we can see the drastic change where the difference
between Costs and Revenue is bigger, holding more costs than revenue in
percentage of growth.
106,00
104,00
102,00
100,00
98,00
% Growth of Costs of
Revenue

96,00
94,00

% Growth of Revenue

92,00
90,00
88,00
86,00

2010

2011

2012

2013

% Growth of Costs of Revenue 97,99 99,23 104,64

% Growth of Revenue
102,56 92,61 98,00

The data from the chart of 2010 is actually valid for the period of 2010-2011, the
date for 2011 is for 2011-2012 and for 2012 is actually valid for the period 20122013. That is the reason why 2013 does not appear, though is included in the
chart.

Evolution of Net Cash From Operating Activities (NCOA)

NCOA Evolution
900
800
700
600
500
400

NCOA Evolution

300
200
100
0
NCOA Evolution

2010

2011

2012

2013

850

746

709

855

Free Cash Flow

350
300
250
200
150
100

Free Cash Flow

50
0
-50
-100
Free Cash Flow

2010

2011

2012

2013

95

-41

90

304

NCOA is decreasing slightly between 2010-2011 and 2011-2012 and increase

then rapidly, between to 2012 and 2013. Eventhough the FCF follows the same
pattern, in 2011 it decrease from 95 to -41 to increase to 95 in 2012. If we
compare it to the net Income which is really low in 2011 and negative in 2012,
we can say that their numbers are not made up. Moreover, because the NCOA is
still positive, we can conclude that the reason why the FCF is so low during those
two years are not linked to the operating activities.

Financial Statements and Ratios Analysis

Balance Sheet Analysis
Starting to analyze Accors financials, the Balance Sheet information is the first
one we should take into account, having a closer look at the main variations and
compare the years of study chosen for analysis, from 2010 to 2013.
a) Vertical analysis=> percentage of each grouping of assets or liabilities in
relation to total assets: CA>CL; debtors+cash & bank = CL; equity=30-50%
of total liabilities
b) Graphical representation of balance sheet
c) Horizontal analysis=> compare BS to different date with trend analysis
(divide line by the same line from base year)
Liquidity Ratios 2010-2013
1,40
1,20
1,00
0,80
0,60
0,40
0,20
0,00

2010

2011

2012

2013

Current Ratio

1,15

1,24

1,11

1,26

Quick Ratio

0,84

1,06

1,04

1,22

Cash Ratio

0,43

0,59

0,69

0,83

Current Ratio

Quick Ratio

Cash Ratio

Between 2010 and 2013, current assets increase even though they decrease
slightly in 2012.
But because the main activity is in the services, they receive the payments fast
and they pay their suppliers late, which means that having a low working capital
is not necessarily bad.
The quick ratios are increasing year after year and they correspond to the
sectors average (around 1): Accor can meet its short term debts. The low result
for the current ratio was in fact due to the stock, which is not taken into account
in the quick ratio, as it is not easy to liquidate.
To finish, the cash ratio, also increasing on the period, and with a result higher
than the sector average (0.3), confirms the fact that Accor is liquid and that it can
pay its debts on time.

Working Capital in % 2010-2013

30,00
25,00
20,00
15,00
10,00
5,00
0,00

2010

2011

2012

2013

Working Capital Over Assets

4,71

7,25

4,09

8,68

Working Capital Over CL

15,07

24,35

11,15

25,99

Working Capital Over Assets

Working Capital Over CL

The working capital over assets ratio is increasing on the period 2010- 2013,
with a decrease in 2012. This is a good sign as it shows that the companys
liquidity is improving. The working capital over Current liabilities is following
the same path than in for the previous ratio, which means that the company is
liquid. However, they are lower than average (between 50-100%), this can be
explain by the same way than for the current ratio: as being part of the service
sector, Accor may have some special agreements regarding its payables and
receivables, which means that a low working capital is not necessarily bad.

Gearing Ratios 2010-2013

Part 1
5,00
4,00
3,00
2,00
1,00
0,00
-1,00
-2,00
-3,00

2010

2011

2012

2013

Gearing Ratio

0,54

0,53

0,60

0,61

Self-Financing Ratio

0,84

0,89

0,65

0,64

Distance From Insolvency

Ratio

1,84

1,89

1,65

1,64

Permanent Financing Ratio

0,69

0,70

0,63

0,67

Repayment Capacity Ratio

3,79

1,13

-2,08

0,56

Gearing Ratio

Self-Financing Ratio

Distance From Insolvency Ratio

Permanent Financing Ratio

Repayment Capacity Ratio

The gearing ratio on the period 2010-2013 is slightly increasing, but stays within
the rate range of the sector (0.4-0.6), which means that the company doesnt
have too many debts.
The self-financing ratio is decreasing which shows, as we saw above, that is
getting more and more debts. However, the ratios are all situated within the
sectors range (0.7-1.5), which is good.
The distance from insolvency is also good as it is superior to 1, even though it
decreases slightly over the years.
The permanent financing ratio is stable over the year, and quite high, which
shows that the company is relying more on its permanent sources of financing
than on the Long term Liabilities. However, from the increase of the debt
observed in the gearing and the self-financing ratio, and from the slight decrease
from the permanent financing ratio, we can say that Accor has taken long term
debts to pay its projects.
Unfortunately, according to the repayment ratio, which is constantly decreasing
until -2.08 in 2012 to increase just above 0 in 2013, Accor may have some
difficulties to repay its loans.

Part 2
16,00
14,00
12,00
10,00
8,00
6,00
4,00
2,00
0,00

2010

2011

2012

2013

Average Cost of Debt Ratio

4,71

4,88

4,37

3,86

Average Cost of Capital Ratio

10,86

9,44

14,34

9,17

Average Cost of Debt Ratio

Average Cost of Capital Ratio

In this second part of the gearing ratios analysis of Accor, we can see how the
Average Cost of Debt is maintaining quite constant along the years while the
Average Cost of Capital is growing highly in 2012 (from 9,44 to 14,34), meaning
the company pays its debts on a basis where the cost of the funds used to finance
the business are too high in 2012. This might be related to the fact that Accor
suffered ongoing changes in 2012, with less revenue than in 2011 and more
economic instability related to the Western European crisis.
Part 3

Interest Cover Ratio

8,00
7,00
6,00
5,00
4,00
Interest Cover Ratio

3,00
2,00
1,00
0,00
Interest Cover Ratio

2010

2011

2012

2013

3,33

5,46

7,01

5,83

Moving on to the Interest Cover, we can see Accor has reached its peak in 2012
when the interest expenses were down to 75000, while the income before
interests and taxes was 526000. This situation provoked the companys ability to
pay more interests on the outstanding liabilities than usually, the debt expenses
were payable. This result indicates us that despite Accor struggling to pay its
debts in 2012 (when the repayment capacity was negative), the company didnt
have any problem paying its expenses, this being a good sign.
Turnover Ratios
Part 1
8,00
7,00
6,00
5,00
4,00
3,00
2,00
1,00
0,00

2010

2011

2012

2013

Fixed Assets Turnover Ratio

1,07

1,21

1,26

1,35

Average Age of Fixed Assets

Ratio

6,06

6,43

7,15

7,23

Current Asset Turnover Ratio

1,90

2,06

1,83

1,86

Fixed Assets Turnover Ratio

Average Age of Fixed Assets Ratio

Current Asset Turnover Ratio

From the graph we can observe how the quantity of sales generated by Accors
non current assets was greater in 2013 and this meaning that there were less
noncurrent assets involved in the generation of the sales, which might be a result
of the ongoing asset-light strategy the group has started to persuade after
discussing the wish of franchising and managing hotels rather than owning them.
The strategy and as the results show, will allow the business to accelerate pace
with limited capital investment. Due to this also the annual depreciation charge
is getting smaller every year while the accumulative depreciation, obviously
grows, this will produce the effect of the longer age of fixed assets as seen in
2013.
Lastly we can also see how the Current Asset Turnover maintains itself between
1,80 to 2 during these years, while the group operates with less assets, the ratio
decreases in 2013 from 2,06 in 2011, to 1,86.

Part 2

Stock Turnover Ratio

160,00
140,00
120,00
100,00
80,00
60,00
40,00
20,00
0,00
Stock Turnover Ratio

2010

2011

2012

2013

145,07

148,78

120,19

131,81

Stock Turnover Ratio

The quantity of sales generated from the inventory decreased in 2012 due to the
fact that the company has seen affected in terms of revenue, this being not in
accordance with its stock that was growing for the period of 2011-2012.
However the stock decreased in 2013, due to the asset-light strategy and the
model acquired by the company of operating under lower inventories, while at
the same time the revenues in 2013 has been decreasing comparing to the other
years (we have 2010-2011 and 2011-2012 with lower inventories and bigger
sales). We could say that Accor for 2012-2013 has been holding its stock longer
than 2010-2011.
Asset Turnover

Asset Turnover
0,80
0,78
0,76
0,74
0,72
0,70

Asset Turnover

0,68
0,66
0,64
0,62
Asset Turnover

2010

2011

2012

2013

0,69

0,76

0,75

0,78

This ratio is a way to measure Accors profitability and how efficiently is the
company using their assets to generate revenue. We can see that overall the
turnover is quite stable but had a great peak in 2013 most likely due to the
higher occupancy rates along the hotels, which means more revenue through
less used assets.
It is said that the ideal result should be around 1 meaning that Accor would use
their assets efficiently, while we can observe that the company is approaching to
one through the years as the assets are lower and the revenues of the group are
higher due to its structural changes.
Debtors and Creditors Turnover Periods
Part 1
30,00
25,00
20,00
15,00
10,00
5,00
0,00

2010

2011

2012

2013

Debtors Collection Period

22,95

21,72

25,97

25,71

Creditors Payment Period

0,00

0,00

0,00

0,00

Debtors Collection Period

Creditors Payment Period

We can see how Accor is taking more time lately to collect its debtors while it has
no creditor payment period since there are no costs of sales considered for hotel
business.

Part 2
18,00
16,00
14,00
12,00
10,00
8,00
6,00
4,00
2,00
0,00

2010

2011

2012

2013

Debtor/Creditor Financing
Ratio

0,78

1,73

1,60

1,50

Stock/Creditor Financing Ratio

16,38

15,56

13,00

14,18

Debtor/Creditor Financing Ratio

Stock/Creditor Financing Ratio

Back in 2012 Accor used to hold more loans than equity, holding the biggest
difference between them when compared to the other years. This has been
summing up to the fact that by 2012, the company was holding more trades
payable related to hotel restructuring and rebranding than receivables. In 2012
we have encountered with more inventory than other years, making the
dependence on the creditors smaller than before, mainly because Accor recorded
a new record of openings of ibis hotels without acquisition of these properties,
with a total new rooms opened of 38085, in 266 hotels worldwide.

Current Ratio, Debt Ratio

A closer look at the financial status of Accor will help us understand better the
situation of the company, for that reason the next three points analyzed will give
us a better perspective of the liquidity and ability to meet the non-current
liabilities.
Another way to measure Accors liquidity for the 12 months would be the
representation of the Current Ratio, which related once again, Current Assets
and Current Liabilities, measuring the force of the Assets against the Liabilities
for the following 12 months.

Current Ratio
1,3
1,25
1,2
1,15
Current Ratio
1,1
1,05
1

2010
2011
2012
2013
Current Ratio 1,150700074 1,243492863 1,111471861 1,259855871

The Current Ratio is dividing the Current Assets by the companys short-term
debts or Current Liabilities. An ideal result for this relation would be a ratio
approximately to 1. Judging from the graphic above, Accor is doing good,
maintaining the ratio slightly above 1 for the whole period of time from 2010 to
2013. However we can see clear fluctuations and increases in 2011 and 2013, as
we have previously seen in the Working Capital, these years have meant a
decrease in Current Liabilities for the company (from 2714 to 2382 for the 20102011 period and respectively from 2772 to 2359 for 2012-2013 period).
Lastly in this section we will analyze the Debt Ratio, which will enable us to
measure the capacity of the company to cover its long-term debt, or Non-Current
Liabilities.

Debt Ratio
62
60
58
56
54

Debt Ratio

52
50
48

2010

Debt Ratio 54,49412307

2011

2012

2013

52,9

60,46296296

60,9631728

The Debt Ratio is represented in percentage and as we can see from the figures,
Accor doesnt exceed the 100% in none of the years studied but increases
significantly in 2012 and 2013 due to the project that Accor has been diving in.
These increasing figures are an effect of the decreasing Total Assets and the high
figures of Total Liabilities, as seen in the following figure.
The higher the percentage of the Debt Ratio, the riskier the company will be
perceived as. Accor has taken advantage from the years 2010 and 2011 to use
the low Debt Ratio as an opportunity to borrow at no dangerous rate.
10000
9000
8000
7000
6000
5000

Total Assets

4000

Total Liabilities

3000
2000
1000
0
2010

2011

2012

2013

Analysis of Income Statement

Return on Sales % (ROS)

Return on Sales (ROS)

70,00
60,00
50,00
40,00
30,00
20,00

Return on Sales (ROS)

10,00
0,00
-10,00
-20,00
Return on Sales (ROS)

2010

2011

2012

2013

60,69

0,82

-10,34

2,51

This ratio measures the performance of the company regarding its sales from
each euro of revenue. We can see that this chart is quite similar to the Net
Income, evidently.
We can see the highest profitability was back in 2010, when the costs were
reduced and the revenue was the quite high.
Return on Assets % (ROA)

Return Over Assets (ROA)

50,00
40,00
30,00
20,00
10,00

Return Over Assets (ROA)

0,00
-10,00
-20,00

2010

2011

2012

2013

Return Over Assets (ROA) 41,60

0,63

-7,72

1,97

This ratio measures how Accor have been using their assets in order to get their
revenue. This ratio basically gives the answer to the question of how many sales
are generated from each euro inverted into assets.
We can see how once again 2010 exceeds.
Return on Equity % (ROE)

Return on Equity (ROE)

100,00
80,00
60,00
40,00
20,00

Return on Equity (ROE)

0,00
-20,00
-40,00
Return on Equity (ROE)

2010

2011

2012

2013

91,42

1,33

-19,54

5,04

This ratio is actually measuring how Accor relates its Net Income through the
Equity. The graph shows how in years like 2010, Net Income is quite high, for
that reason the return on equity also reaches great limits contrasting with 2012,
when we have a greater amount of Equity from the stockholders rather than
gains in Net Income. This is also the year when Accor does one of its biggest
changes as we have mentioned at the beginning of the analysis.
In relation with Return On Assets, it is said that the company is doing better,
obviously, when ROE is bigger than ROA. We can see that Accor is doing well and
indeed for all years except 2012, their ROE is bigger with a significant different
than ROA, which means that there is debt to be paid.
Gross Profit Margin
Since we have discussed that Gross Margin is same amount as Revenues because
there are no Costs of Revenue theoretically, Gross Profit Margin is then 100%
in all cases.

Growth in %
25,00
20,00
15,00
10,00
5,00
0,00
-5,00
-10,00
-15,00
-20,00
-25,00
-30,00

2010

2011

2012

2013

Sales Growth

-14,68

2,56

-7,39

-2,00

EBIT Growth

-24,92

18,83

-0,75

1,90

EBITDA Growth

-19,41

5,45

-8,41

1,76

Sales Growth

EBIT Growth

EBITDA Growth

What we are going to analyze here is the percentage of growth of the main
accounts of the Income Statement.
For what that concerns the year 2010, Accor recorded an important decrease in
Sales, Operating Income (EBIT), as well as in EBITDA, if compared to 2009.
However, in 2011 the company seemed to experience a slow recovery from the
previous year, as the three above-mentioned accounts are slightly increasing,
with Operating income having the highest growth (Sales +2,56%; EBIT
+18,83%; EBITDA +5,45%). In 2012 the hotel chain has again a decrease, even if
not that significant as in 2010, but a warning sign for the company. Sales keep
decreasing in 2013, while we have a small growth for the other two accounts.

EBT Growth
3000,00
2500,00
2000,00
1500,00
1000,00
500,00
0,00
-500,00
EBT Growth

2010

2011

2012

2013

91,67

2816,67

-26,69

8,37

EBT Growth

Income Before Tax starts 2010 with a significant decrease with respect to the
previous year, while reaching its peak growth in 2011, with a considerable
increase. The following year, 2012, the EBT experiences again a decrease, until
the recovery of 2013, even if in small percentage (+8,37%).

Net Income Growth

2000,00
1500,00
1000,00
500,00
0,00
-500,00
-1000,00
-1500,00
Net Income Growth

2010

2011

2012

2013

1462,20

-98,61

-1268,00

123,80

Net Income Growth

The trend analysis of the net income is fundamental to understand the

performance of the company and its profitability. Accor recorded a considerable
increase and improvement in its performance in 2010, when the company
reaches a high net profit (3610), after a net loss of 265 in the previous year.
Unfortunately, the hotel chain has afterwards recorded from 2010 to 2013
negative growth, due to losses from discontinued operations, even if always
avoiding a net loss.

Over Sales in %
70,00
60,00
50,00
40,00
30,00
20,00

EBIT Over Sales

10,00

EBITDA Over Sales

0,00

EBT Over Sales

-10,00
-20,00

Net Income Over Sales

2010

2011

2012

2013

EBIT Over Sales

7,50

8,69

9,31

9,68

EBITDA Over Sales

14,79

15,21

15,05

15,63

EBT Over Sales

-0,20

5,34

4,23

4,68

Net Income Over Sales

60,69

0,82

-10,34

2,51

The net profit margin (EBIT/Sales) measures how successfully a company

manages its business cycle and expresses Operating Income as a percentage of
Revenues. The company is, after paying the expenses related to the business, as a
good performance, reaching the highest management of the operations in 2013,
when the EBIT represents 9.68 % of the net sales.
After attending the depreciation and amortization expenses, EBITDA also
reaches its highest percentage over Sales in 2013, while EBT records a
significant recovery from 2010 in 2011.
The Return on Sales, calculating by dividing the Net Income by the Sales, is
telling us about the profitability of the Hotel Chain. In 2011, it increases in
comparison to previous year, as for each euro of revenue, Accor has a net income
of 0.82%, while it shows a bad and worrying performance in 2012, as for each
euro of Revenue, the company records a net loss of 10,34%. Eventually, in 2013,
the profitability has a net increase, as for each Euros of Revenue, Accor presents
a
profit
of
2.51%.

Financial Leverage: Debt-To-Equity Ratio

Financial Leverage
1,80
1,60
1,40
1,20
1,00
0,80

Financial Leverage

0,60
0,40
0,20
0,00
Financial Leverage

2010

2011

2012

2013

1,20

1,12

1,53

1,56

As we have seen there is a difference between Accors ROE and ROA. In order to
explain it better we will need to have a look at the financial leverage, which will
help us understand to which extent will Accor rely on debt financing. We see
that the higher rate of Financial Leverage is on 2012 and 2013, when indeed
Accor has its highest rates of liabilities with fewer assets (that is the main
difference with the year 2010).
A higher debt-to-equity ratio typically shows that a company has been aggressive
in financing its growth with debt. Services, utilities and the industrial goods
sector, also tend to have higher debt-to-equity ratios. Considering Accor is
included in the services industry, we will consider a ratio of 2 as high, so we can
actually say that the current ratio of Financial Leverage of Accor is stable and not
risky for now.
According to Accor, its Debt to Equity is of 0.72 times. This is 13.25% lower than
that of the Services sector, and 17.24% lower than that of lodging industry.

Earning Per Share (EPS)

This will measure the amount of income that is generated by each single share of
Accor held by its investors.

Earnings Per Share (EPS)

20,00
15,00
10,00
Earnings Per Share (EPS)

5,00
0,00
-5,00

2010
Earnings Per Share (EPS) 15,94

2011

2012

2013

0,12

-2,64

0,55

The Earning per share in 2010 was equal to 15,94%, while only 0.12 in 2011
and with a negative value in 2012 to recover again in 2013.
Dividend Per Share (DPS)

Dividends Per Share (DPS)

0,90
0,80
0,70
0,60
0,50
0,40
0,30
0,20
0,10
0,00
Dividends Per Share (DPS)

2010

2011

2012

2013

0,62

0,65

0,76

0,80

Dividends Per Share (DPS)

This ratio shows the amount of dividends paid every year for each share of stock
held by investors. We see that for Accor, the year 2013 recoded its highest ratio,
when the shareholders were able to receive from their shares 0.80.

Price Earning Ratio (P/E)

P/E Ratio
180,00
160,00
140,00
120,00
100,00
80,00
60,00
40,00
20,00
0,00
-20,00
-40,00
P/E Ratio

2010

2011

2012

2013

2,09

164,58

-13,73

61,80

P/E Ratio

This ratio is a valuation ratio showing Accors current share price compared to
its per-share earnings. We can see here how the market is recovering; however
according to the financial standards, the negative P/E are not applicable. A low
P/E value suggests that an investor needs to pay a low amount for each dollar
of earnings made by the company. This could be used by investors as a sign that
the given asset is undervalued and a potentially good investment at current
levels. A relatively high P/E value is used to suggest that investors will need to
pay a high amount for the company's earnings, which can then be used to
suggest that the asset is relatively expensive and that it may be a good idea to
wait for a better entry. The year 2011 has been a strikingly positive because of
the small amount of shares outstanding compared to the other years.

Cash Flow Analysis

Evolution of Net Cash From Operating Activities (NCOA) and Free Cash Flow

NCOA Evolution
900
800
700
600
500
400

NCOA Evolution

300
200
100
0
NCOA Evolution

2010

2011

2012

2013

850

746

709

855

Free Cash Flow

250
200
150
100
50
0
-50
-100
-150
Free Cash Flow

2010

2011

2012

2013

-20

-99

-104

207

Free Cash Flow

NCOA is decreasing slightly between 2010-2011 and 2011-2012 and increase

then rapidly, between to 2012 and 2013. Even though the FCF follows the same
pattern, in 2011- it decrease from -20 to -99 to decrease to -104 in 2012. If we
compare it to the Net Income, which is really low in 2011 and negative in 2012,
we can say that their numbers are not made up. Moreover, because the NCOA is
still positive, we can conclude that the reason why the FCF is so low during those
two years are not linked to the operating activities.

Cash Flow Liquidity Ratio

This ratio will evaluate if enough cash is generated from selling inventory and
offering services. Similar to Cash Ratio, this will evaluate the short-term liquidity
of the company. A ratio above 1 will indicate enough liquidity and less than 1 will
warns inadequacy.

Cash Flow Liquidity

1,40
1,20
1,00
0,80
0,60

Cash Flow Liquidity

0,40
0,20
0,00
Cash Flow Liquidity

2010

2011

2012

2013

0,73

0,89

0,93

1,18

We can see that Accor has been improving during the past 4 years starting with a
sign of not enough liquidity to lifting up to 1,18 in 2013.
Back in 2010, Accor had high Current Liabilities and its lowest Marketable
Securities, which drove the figure to a decrease.

Quality of Income Ratio

If the quality of income ratio higher than 1 usually indicates high quality
earnings, while the ratio lower than 1 is considered to indicate low quality
earnings.

Quality of Income
16,00
14,00
12,00
10,00
8,00
6,00
Quality of Income

4,00
2,00
0,00
-2,00
-4,00
Quality of Income

2010

2011

2012

2013

0,24

14,92

-1,21

6,15

We can observe that Accor hasnt always had a good quality of income, as for
instance in 2010 and 2012 due to the instability that the renovations and the
high debts. In 2012, Accor had a loss in their profit of -584, which explains the
extreme fall in this ratio.

Comparison with Competition and Sector

Comparison with Meli, NH and Sector
Liquidity Comparison
The current Ratio of Accor compared to its competitors and the sector is higher,
which may make us think that Accor might not be managing its resources
efficiently for a maximum return. The quick ratio is of course also higher than
average and represents 96% of the current ratio, whereas for the competitors
and the sectors average it represents 79%. From this we can conclude that Accor
doesnt have as much stock than the others, probably due to its sale of assets to
replace them by franchisees.
To finish its cash ratio is also way higher than the average sector (0.33) and its
competitors (0.55 for Meli and 0.3 for NH). From those results we can say that
Accor doesnt have any troubles to receive payments from its debtors.
Gearing Comparison
If we compare the gearing ratio of Accor to NH and the sector average, we can
say that it is slightly higher, which shows that it has a little more debts. Its
competitor Meli, however, has a higher gearing ratio than Accor (0.65).
Regarding the self-financing, it is lower than the sector and NH (0.64 against
0.76), but higher than Meli (0.53), this means that they rely less on the Equity
than the competitors.
Regarding the Distance from insolvency ratio, here again Accor is slightly lower
than NH and the sector, which mean that it is less solvent. However, considering
the small difference, this result is quite good.
The Permanent financing ratio of Accor is lower than all its competitors and the
sector, which means that it holds too many Current Liabilities.
To finish the repayment capacity ratio is a lot lower than Meli and the Sector
(2.55 and 2.022) which shows that Accor has a lower profit and that it may be
difficult for it to repay its loans (which we have seen above is composed of 40%
current liabilities).
Turnover Comparison
Starting with the comparison of the fixed assets between the chosen companies
in relation to the sales generated by these assets, we can clearly say that Accor is
leading since it owns less fixed assets yet it generates higher sales through the
usage of smaller amounts of fixed assets. The ratio of Fixed Asset Turnover is
bigger than the others which tells us that the group is managing their noncurrent assets accordingly. Both Meli and NH, being smaller groups of hotels yet
ratio is considerably smaller in relation to the generated sales.

It is good to remember that Accor had a healthy 2013 with improved revenue for
hotel openings worldwide and strengthening of their brands especially midscale
and economy.
The average age of these fixed assets has been smaller when compared with
Meli, NH and the sector, which is explained through the fact that Accor has been
selling some of its hotels, so the costs of these have been removed from the
accounts. Accor has recorded 7,23 years against the 11 12 for the comparison
groups and sector.
Now switching to the comparison of the current assets in relation to the sales
generated through the usage of these, we see that Accor has clearly a higher ratio
than Meli but lower than NH and the sector meaning that Accor has a relatively
smaller amount of current assets (cash, receivables, inventory, etc.) that what the
sector would suggest, especially due to its light-asset strategy. If we consider
Accor as a massive hotel group operating worldwide we can realize how effective
their franchising strategy has been (which has been recorded as a 91% for
2013). However it is seen how Accor is operating under the sector average,
getting less revenues from its current assets than from its fixed assets.
Accor should invest more in current assets to receive more revenue, which is not
the ideal situation.
However the analysis of the stock turnover tells us one last thing about Accor,
the group is generating quite a bit of revenue when compared to the sector and
Meli and NH, meaning that despite of the worse positioning with its current
assets, the company does make good use of its inventory which is also a current
asset as we have previously mentioned. This high result has meant that Accor
has been investing less in its inventory but getting higher revenues through little
effort.
But
If the sector average is correct, in this situation would mean that Accor might
have a low inventory (since the ratio is 131,81 and the sector is 20,13) that
might lead to facing problems when demand is growing. However it is
improbable since the group is opening new hotels every year with a remarkable
speed.
Accor in 2013 has been known for making the difference through the increased
demand and an Asian expansion of franchised hotel properties.
Net Income Growth Comparison
Accors Net Income shows a better performance over the competitors for 2013.
ROS Comparison
As we can see from the results of the ratio, Accor has a return on sale whose
value is quite similar to the average sector (2,51% for the Hotel Chain and 2,9%
for the industry), meaning that our company has a return of profitability for each
sale made that is not too lower in comparison to the ideal values of the

hospitality industry. The other two companies, Meli and NH show a negative
amount, mainly due to a negative growth of their net income.
ROA Comparison
According to the values recorded, Accor is managing efficiently its assets, as the
return of profitability out of the assets has a positive amount, even bigger than
the average value for the sector in which it operates. Once again, Meli and NH
show a bad performance, as their productivity coming from the use of asset is
negative.
ROE Comparison
Accor group is the only hotel chain that presents a high return on Equity,
meaning that the shareholders are receiving a profit out of the net income, while
there is no data available for the competitors.
Cash Flow Comparison
The free cash flow cannot be compared to the sector since the average is missing,
however comparing Accor with Meli, we need to remember that these are not
competitors and have a very different number of operating hotels, expansion,
growth, history, etc. Taking all these things into account and not forgetting the
size of these two different hotel groups, Accor is seen to have a higher ratio due
to the fact of holding more cash, marketable securities and net cash from
operating activities related to the short-term liabilities, however reminding how
small Meli is compared to Accor, we can see that the latter is obviously more
able to purchase, pay dividends and reduce debt since also the debt is smaller in
this case than Melis, though compared with Accor we could say Meli is doing
quite well too having into account their size. Also when looking back at the Cash
Ratio, we see Meli approaching Accor with a 0,55 versus a 0,83, meaning they
are holding a good quantity of cash compared to their current liabilities.

Conclusion

ccor is currently leading the market in hotel operations in Europe and on

the worldwide scale, with 470,000 rooms in more than 3,600 hotels in 92
countries.
Under the leadership of the CEO Sbastien Bazin, Accor has redesigned its
business model around two divisions HotelServices and HotelInvest with a
view to boost operational efficiency and sustainable growth. HotelServices,
which goal is to maximize fees, speed up CRM and loyalty-building drives, shift
the group deeper into the digital realm, and roll out a strategy in each segment to
bolster the Groups brands and HotelInvest, to establish the leading hotel
investor in the economy and midscale segments in Europe, focus on cashflow generation and reduce result volatility, optimize CAPEX (Capital
Expenditure) allocation strategy and support Accors development by investing
selectively in properties.
This vision is based on a simpler and more agile organization, specific
performance indicators, and a structure built to maximize operational
performance and create value for every one of the companys stakeholders.
From the analysis of Accors financial statements we have just done, we observe
with details the groups future vision and intentions, together with the reports
and press releases. In 2012, they invested in new markets (such as South
America), meanwhile, they were continuing with their light-assets policies
through franchisees. Those points could explain the fact that their liquidity ratios
were higher than those of the competition and of the sector and that there
indebtedness is higher. However, the general good results of 2013 linked with
those of the ROA and ROE, show us that Accor is taking the good decisions to
maximize the use of its assets and generate the maximum of profit.
Weve also seen how the company has been majorly affected by the crisis in
Western Europe during the past years, especially the sales that have been
decreasing from Southern European countries, as Spain, Italy and even France,
for instance. However, Europe is still recovering and each day is a growth for
Accor slowly getting back in the French market building strong revenue. The
analysis however gave us an idea about the actual situation of the company,
which is at the moment prospering, and still in need to find a balance between
the debts and the assets management.

Appendix. Financial Statements and Tables (Magnitudes and

Ratios)

Figure 1 Ratios

Figure 2 Ratios

MAIN MAGNITUDES
CA adj
CL adj
AHFS
Cash&Cash Eq
Financial Inv
W.C. adj
TA
CL
non CL
TE + L
Equity
Net Profit
CA
Net Profit
Dep&Amort
CL with interest
nonCL with interest
Interest Exp
Dividends P
Share Capital
EBIT
Revenue
Total nonCA
Total CA
Acc Depreciation
Depreciation
Inventory
Trade Receivable
Trade Payable
Trade Credit
Trade Debtor
ST Loans
Average Debt
EBITDA
EBT
TL
NCOA
TCL
Gross Profit
Income Continuing
Operations
Marketable Sec
Asset Turnover
Gross Profit Margin
Financial Leverage
Share Outstanding
EPS
DPS
CAPEX
Free CashFlow
Cash
CashFLiquidity

2009

3254
-265

373
2475

594
6971

1350
709

1092
-144

2010
3123
2714
813
1143

2011
2962
2382
386
1370

2012
3081
2772
156
1878

2013
2972
2359
61
1928

409
8678
2714
2015
8678
3949
3610
3123
3610
429
205
1783
134
249
680
446
5948
5555
3123
2598
429
41
374
634
671,5
862
20
2848
880
-12
4729
850
2714
5948

580
8000
2382
1850
8000
3768
50
2962
50
398
124
1593
97
155
682
530
6100
5038
2962
2561
398
41
363
642
638
368,5
26
1988
928
326
4232
746
2382
6100

309
7560
2772
1799
7560
2989
-584
3081
-584
326
829
1552
75
269
682
526
5649
4479
3081
2331
326
47
402
580
611
382,5
34
1717
850
239
4571
709
2772
5649

613
7060
2359
1945
7060
2756
139
2972
139
328
514
1718
92
189
684
536
5536
4088
2972
2373
328
42
390
611
595,5
396
32
2381
865
259
4304
855
2359
5536

-404
1059
0,69
100
1,20
225838
15,94
0,62
621
-20
84
0,73

52
1279
0,76
100
1,12
227107
0,12
0,65
690
-99
85
0,89

95
1752
0,75
100
1,53
227266
-2,64
0,76
544
-104
122
0,93

138
1796
0,78
100
1,56
227613
0,55
0,80
459
207
132
1,18

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