Accor SA (EPA:AC)

Earnings Call: H2 2016

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Feb 22, 2017

Good morning. Good morning to all. We're going to talk you through our results. Our results are good. We're going to talk to you about 2016, which was a complex year, a busy year. In preparing for this meeting 3 or 4 days ago, we said to ourselves, "Well, 2016 is something that we tend to forget about all too quickly." But when we spent 2 minutes thinking about it, we actually came to realize that a lot of unusual things had actually happened. Quite a number of events that hadn't been foreseen this time last year when I gave you our results for 2015. I remember at the time I told you that we would probably be posting record results. Well, that's what happened, in fact, except that the breakdown isn't quite what we thought it would be. In fact, the prevailing environment wasn't quite what we thought it would be. Had you all foreseen Brexit? Some of you had, maybe, but not all. Not that many of you, in fact. What about the outcome of the U.S. elections? Well, not many of us either saw that coming. Could we have foreseen what is happening now in the Middle East? Well, more so. Brazil? Maybe. Maybe we might have foreseen that. What about France and the various dramatic events? There was no foreseeing that. So the macroeconomic and geopolitical environment was a very difficult one to guide the boat through. But we've continued on track. We've continued to do what we had to do, which was all about focusing on hotels business, the operational side of the business, the focus on our development. The interest rate environment was conducive, even though the trend has been reversed over the last 5 or 6 weeks. But I think the most important thing to take away is that even despite these great uncertainties, a group like ours has always borne in mind what it is we are expected to do. That is to improve our results and the return. Now, I have 10 small boxes here. I'd prefer 12, one a month, but we haven't. We have 10 small boxes. But that's a lot of deals, and they're very different transactions. Different times of year, of course. 2 of them are probably bigger than the others. When I say bigger because of the fact that they can have a transformational effect on the group. One of them has been completed, and I'll come back to you on this in just a few seconds. That's the acquisition of Fairmont Raffles. And Swissôtel was signed in December and closed in June. That completely changes our perception of the group, completely changes our positioning, our strength, size. There's a second deal that's going to have a major effect. That is the Booster project that I'll be telling you more about a little bit later on. It was announced last July. It will be carried out by June of this year. But over and beyond that, there are quite a number of smaller deals, smaller in size, but that also have a considerable impact on how the group is perceived, how the group is positioned, but also in terms of the initiatives we're taking. So we have bought into John Paul, Banyan Tree, or 25hours. I'll tell you more about that a little bit later on. Now, here we have what we call a pivotal movement, a change of axis. With the group with 4,144 hotels, which is a very big portfolio. I will say this, I have said it time and again, in fact, it is not that it is a bigger portfolio than our American counterparts, but 99% of it is outside of the U.S. They have 60%, 70%, maybe 80% in the U.S.A. So we have much greater depth and much greater diversification than our American counterparts. I talk about the pipeline as well. We have 910 hotels that have been signed up and that will be opening up over the next three or four years. It is very impressive to open a hotel every 36 hours as we do in this group. You see that 2016 was a record year in terms of openings. This is the first time we ever opened 38,000 hotels in the one year. We have six important brands here: Raffles, Fairmont, Swissôtel, Onefinestay, Oasis, Travel Keys, and so on. These are segments that we were not present in or were not very present in. In luxury hotels, we had Sofitel, but we only had Sofitel. All of a sudden, we have Fairmont and Raffles. We now find ourselves ranked number two in luxury hotels in the world. Managed hotels. We were probably ranked 12th or 13th before the acquisition. Another segment we were not present in was the one in which we have what we call lifestyle hotels, Mama Shelter. These are boutique hotels that meet demand on the part of people who are young and maybe sometimes not so young, but who are non-conformists, who are off the beaten track. And of course, there is the resorts where we had very little presence, where we now are with Banyan Tree. Now, that was not fortuitous. We really needed it to become involved in a certain number of areas because that is what our customers wanted. As I said, I also confirm it here that we need to diversify outside of hotels. Not that we do not like hotels. We do, and we will continue to work in hotels for the next 50 years as we have over the last 50 years. But we will certainly improve our results in hotel. But as we have 240,000 employees in the world, over 4,000. But what about when our colleagues want something more? What about when people want more than just a hotel room? This is why we have become involved in what is known as private rentals. This is the renting of private apartments, homes with Oasis, Onefinestay, Squarebreak, or more recently, the deal we signed with Travel Keys. That is all within less than 12 months. Within 12 months, we have become the world leader with 9,300 homes listed, and with services to hotels as well. But we have decided to go a step further, and I will be telling you more about this a little bit later on, tell you how we catalog all these initiatives. We have another one that is much more transformational than would appear, and that is John Paul concierge services. Because this is all about what we call customer care. When you have a Visa card or a Gold Card or an Air France card or an Allianz or Amazon card, you have people answering the phone to meet your needs in terms of services. These are what we call white label services. You think you are dealing with Visa, or you think you are dealing with Volkswagen or Air France, you are not. You are dealing with somebody else, and these people are very often called John Paul. What they do is they make your life easier because they solve your problems for you. But for our travelers, for our personnel, for our future residents in our rental homes, with John Paul in the digital world, we are capable of providing all these services to people in their daily lives. This is enriching our database of the various and very, very numerous people that need these services throughout the world. Fairmont Raffles, let me spend a minute or 2 here. Some of you have quite legitimately asked if Accor is capable of withstanding the onslaught of 115 hotels with a very different culture, with very different positioning. There is a risk that amounts to EUR 2.7 billion. Do we have the culture to integrate luxury brands? Weren't we going to lose talent? Wouldn't there be a talent drain? Wouldn't we lose contracts? Because these very wealthy hotel owners could have felt, well, not too comfortable with Accor managing our hotels. What's actually happened is exactly the opposite. This is what we were convinced, we in management, when we took on this deal, when we talked about it at board level. Not only have we not lost a single contract, the talent drain has been very nominal, very often people that we didn't want to retain anyway. Within barely 7 months, we have signed 20 new contracts, Fairmont Raffles, more than they had signed over the last 2 years, in fact. These Fairmont Raffles owners are also signing up contracts with Pullman, with Novotel, Sofitel, with ibis, whereas a lot of them would never have even considered signing in any other segment than their luxury segment. The synergies are there. We have achieved them. We are probably going to be a year ahead of schedule in terms of realizing these synergies. So in terms of talent, in terms of dealings with the owners, in terms with brand positioning, in terms with the pricing, we have become number 2 in the world in this segment, which proves that it was a really great idea, the Fairmont Raffles deal. That has also changed the perception of the group, because we are now present in all segments right across the board. Huazhu changed everything, too. Huazhu is a Chinese company that's listed on the Nasdaq. It's called China Lodging now on the Nasdaq. It's headed by a marvelous gentleman called Tian Qicheng, with whom we decided a year ago that we weren't going to continue to develop alone, not through our ibis, Mercure brands. If we were to grow in China, we are better through a deal with the Chinese counterpart than to go alone. Yet we had gone it alone in China for 30 years. Admittedly, at the time, we also decided that we would keep the Grand Mercure, Pullman, Sofitel under our own structure, in which Huazhu has a 25% stake. I think we were right to do that for several reasons, at least 2 or 3. The first of these is that Tian Qicheng is keeping every single one of his promises. He said, "I want to be capable of increasing the number of openings." Well, 70 hotels were signed up under our brands in China in 2016. That is three times more than we did two years ago. In addition to those 70 hotels, there is another 150 that are in the pipeline. Remember, the Huazhu Group opens over 500 hotels a year in China. However, over and beyond our ability to open our own brands through the Huazhu network in China, we decided that we wanted to take a stake, a 10% stake in the share capital of Huazhu, and that I would join their board of directors, which is exactly what happened. That was all in January of last year, $193 million. Yesterday or the day before, it was worth $390 million, which means that we more than doubled the value of our investment. That is because this market cap has increased from EUR 1.9 billion to EUR 3.9 billion on the Nasdaq market cap. In the last year in China, we probably made much more than we made in China over the last 35 years. That was exactly what we told you we would do a year and a half ago when we talked with you about this partnership with China. This does not in any way question our discussions with Jinjiang, the Jinjiang group, which is a competitor. Wu Xia and Jinjiang know one another well, respect one another, admire one another, probably. We have a partnership agreement with Wu Xia and a cross-shareholding with Jinjiang. We have also ventured into a whole series of new businesses. I will keep it simple by giving a vertical presentation. On the left-hand side, we have what I mentioned earlier on, the world of private rentals. We have a wonderful company called Onefinestay that we now wholly own. Yes, the CEO left three months later. He did not fully agree with the roadmap, not entirely anyway. So we have taken on new management. The two co-founders are working with the new manager, our CFO from the U.K., everybody knew when to join them in Onefinestay. It is all working very well. Within barely a year, we have increased what we call the average RevPAR by over 20%. We have also set up our distribution system. We have been thinking about the back of the house. We have rethought about it. These clients that we do not see. What about the soaps and the washing, whatever, and how Accor can help through more efficient logistics. As planned, we opened up in Rome and Miami, and we have four new cities this year. So Onefinestay is flying. It is growing. The difference is that now it is fully integrated into the Accor Group while remaining independent. They have their own head office, their own staff, their own roadmap. We are just providing with the means to accelerate their growth and to grow without us intervening in their business plan. The same thing with Squarebreak and Travel Keys, which we expect to complete a deal. We expect to complete over the next few months. This is a wonderful sector. You will probably hear more about this in the Q&A session, but Airbnb with Luxury Retreats, which is a competitor of these companies. We have had discussions, and that is a very good thing because it shows that this segment is a very profitable one. Airbnb is not getting involved for any old reason. We too are getting involved. Fastbooking is completely different. Fastbooking has two businesses. First of all, digital services, how to help independent hotels by buying keywords on Google. How do we help them with revenue management or yield management? How we help them with distribution channels, how we help them to make up a website, organize media campaigns, be it in digital, offline or online. This is what Fastbooking does, digital services, and this is expanding very rapidly. They have 4,000 independent clients in the world. We've also decided that through Fastbooking, we would offer a certain number of independent hoteliers our distribution capacity, our booking system. So we would plug them into our distribution database. 2,200 have been signed up. 1,800 hotels are now online on our websites in the main destination. So that too is working well. The real difficulty with the marketplace isn't the development. We could probably sign on another 2,000 hotels this year. Our difficulty is to distribute them, not just to integrate them. We have to be able to distribute them as well, and that we may develop that in the Q&A session as well. The third business is John Paul, which I've already alluded to. Everything to do with customer care is extremely important and is channeled through John Paul. John Paul is in not just travel, but also in local communities. And we have plans for John Paul. We're going to make it bigger and stronger, as you'll see. This brings me to lifestyle hotels. We began with Mama Shelter. If you've plans to go to Rio de Janeiro, we felt, well, let's go. Mama Shelter opened up 4 months ago. Believe me, it's magnificent. It's in Santa Teresa. It's a magnificent product. So we help them exactly like Onefinestay. We've a 30%, 35% stake in Mama Shelter, and they are completely independent. They have their own management, and they are managed by the very competent Trigano family. We've just given them a bit of clout, we've given them oxygen, and we've given them growth opportunities. We're trying to move ahead as fast as possible, but Mama has great strength insofar as Mama has a concept and a code that they wanted to preserve. That's what makes Mama Shelter unique. Go to see them in Miami, too, if those of you who haven't stayed at Mama Shelter yet. They're doing very well, and here we're speeding up the pipeline with Mama Shelter. We're looking at 15 new units over the next 15 months or so. JO&JOE, if you have time, maybe you haven't planned, but when you leave the room here, go up to the sixth floor. On the sixth floor, we have a JO&JOE. We also in the bar here have a JO&JOE to show you what we call the front of the house. This is working much better and much quicker than our greatest expectations. If you've nothing to do in May, go to the World Paddle Championships in Hossegor near Biarritz. This will be the first JO&JOE will be associated with Quiksilver. This will be a surf and paddle camp. For those of you who want to stay a bit longer, we have the World Surf Championships or Surfing Championships in Biarritz just before that. That's underway elsewhere in Bordeaux. We probably have about 20 JO&JOEs signed up just over the last 4 months. The JO&JOE is not a hotel, it's what we call an open house. This is a place where people, residents, guests, meet. It's completely off the beaten track. It's a very interesting concept. We owe that to 80 people who spent three months working on the JO&JOE concept. 25hours dovetails nicely with Mama Shelter. It's fewer norms. It's the same intelligence about understanding clients. The same very well established in large German cities. In particular, Christoph, who's in charge of that 25hours, was Hotelier of the Year in Germany. They opened one up in Gare du Nord in Paris. This will move ahead very fast, just like Mama Shelter. They all know one another, meet one another, they all work together, and we have, I think, a very good, strong backbone that's called the Accor Group. A number of people have asked me, "Oh la la, do you think the Accor brands still have sex appeal?" People love to knock a brand. There's no better answer to that question than to say to people, "Do you believe people would entrust me with EUR 150 million every 36 hours for a brand that has no sex appeal?" That's the number of hotels that we opened over the last 12 months. Just look. 38,000 on an organic basis. With the breakdown, very much the breakdown we've had over the last 10 years, 15, 80% in luxury and upscale, 35, 37% in the mid-scale, that's Novotel, Mercure, Adagio, and 45%, maybe 50% in the economy segment with ibis. Except in the meantime, we bought Fairmont Raffles, which you see in orange, yellow there. Fairmont Raffles is only luxury and upscale. Over the year, you see the shift in terms of the group's positioning, which is actually going to accelerate its market share in the luxury and upscale. Yes, the Accor brands have sex appeal. Yes, we have the capacity and better than ever before to roll these out worldwide. That is the world in which we operate. Interesting on this slide, you see that, my goodness, France and Central Europe, 5 plus 17, this is where we're growing slowest, except that 17 and 5 is 22. If you look at the figures of our American counterparts, even with 22,000 hotels in France and Central Europe, that's more than they do any of them in Europe. We are continuing to grow our market share in Europe. Remember this, we've said it before, we have over 300,000 hotel rooms in Europe. Number 2, 3 and 4 between them combined haven't even got that number. We have more than the next 3 combined. Nobody will be taking over from Accor in terms of market share in Europe. We are continuing to accelerate, maybe less rapidly than elsewhere on a selective basis, but we're continuing to develop in France, Germany, Poland and the U.K. But where we have great rollout capacity is Asia Pacific. It's almost 50% of the 900 hotels we'll be opening over the last three or four years. Asia Pacific, Malaysia, Indonesia, Myanmar, Korea, Australia, Japan, Vietnam, India. That's where we're going. It's all happened very rapidly. It's another 76,000 hotel rooms in China through Huazhu. We're not overlooking Latin America because we are also the strongest of all hotel groups in South America. Another 26,000 rooms, a lot in Brazil, because it's very often in difficult times that we should invest. It's a good time to invest in Brazil, even though we don't know whether it'll take a year, two years, three years to turn the situation around. It's important to know when to invest. When you look back on all that's happened, should we have invested in the U.S. four years ago? Should we have invested in Spain three years ago? Sometimes you think, "Yes, well, maybe we should have done that." Except that at that time, that particular point in time, people haven't the courage to invest. Except that we do, and we are investing in Colombia, Chile, Uruguay, Argentina. Africa and Middle East, 48,000. That's almost 60% of the existing portfolio in sub-Saharan Africa and the Middle East. Things are moving very rapidly in this part of the world. This brings me to Le Club. Here too, you remember that only three or four years ago, we said that we weren't very good. Our loyalty program wasn't as good as it might be. 14 million clients, they contribute 15% of our revenue, whereas most large hotel groups have between 40% and 60% of their revenue coming from loyalty card holders. The last three or four years, this is going to be a top priority. 7 million additional members joining our loyalty group every year. We've increased from 18 to 25 to 32. From 32, we'll reach 36. Of course, 4 million from the Fairmont Raffles. The President's Club is a marvelous loyalty program. For those of you who have the President's Club card, there's great finesse, great recognition, marvelous profiling of clients. They know what your expectations are, they know what your shoe size is. People who have this loyalty card know how important it is to have these little bits of attention. If you need jogging shoes, in every Fairmont Hotel, they will have jogging shoes in your size, and they'll have a T-shirt and a pair of shorts. They know your size, so they'll have them there for you everywhere you go in the world. We've also signed agreements with Huazhu. We've merged our two programs. So we have, in fact, inherited 70 million loyalty cardholders in China. So all of a sudden, the acceleration is exponential. 30% of the group's revenue is now represented by cardholders. Tomorrow, it'll be 35%, 40%, 45%. Why is that so important? Well, it's important because for quite some time, I've been telling you that one of the ways of controlling what we call customer acquisition, asserting links, establishing links without paying online providers. Cost of acquisition is 98% of cardholders do not transit via online travel agencies. If they did or if they do, they will not get the loyalty points or the special benefits they get through the card. The more you increase the proportion of cardholders, the more you reduce the share of OTAs in your revenue. It's as simple as that. Before giving the floor to Jean-Jacques, I think we show you this every year. There's an awful lot I could say about this. The first thing that stands out as of this group has never before reached EUR 696 million in EBIT. Never before did the group achieve an EBIT margin of 12.4% of revenue. This is a breakthrough here in 2013, which has nothing to do with my arrival. This was all because of a decision taken by the group. That was the decision that we in this group actually have two businesses, one called HotelServices, as operators, franchisors, developers, and loyalty program, digital technology, customer relations, marketing, what have you. That is HotelServices. The other business line is called HotelInvest, which is the business of a builder or asset manager. When we separated these two businesses, when we separated the two business lines, the two sets of personnel, when we made people accountable for the risks they were taking on and managing, when they made them accountable for the performance, that's the leap forward. The second thing that happened in 2011-2012, before I took up my position, the other thing that completely diversified the group was when we moved out into the international market, Middle East, Latin America. Look at Europe, for instance. We're not very happy to see France at the level it's at. Up until, say, 2012, France always accounted for between 35% and 60% of the group's performance. Look at where France is now. In EBIT, it's probably 22%, 23%. That's on the right-hand side. Yes, a lot of this is because of the very complex environment we operated in in late 2015 and throughout 2016. But yes, the group is intentionally accelerating its diversification into Europe, Central Europe, Asia-Pacific, and the Middle East. That's the lie of the land. That's where we are. You can see that we will continue to accelerate this trend throughout 2017. I'll come back to you in a few minutes' time, five minutes' time, three quarters of an hour. How long do you want, Jean-Jacques? We'll see. Jean-Jacques. Jean-Jacques Morin. Good morning to you all. Thanks, Sébastien, for giving me the floor. Delighted to be with you today to present the full year financials for 2016. They're very good. Before going into the details, two key items that I'd like to stress that account for the financials. Last part, acquisition of Fairmont Raffles since July 2016. They're included in the Accor accounts and the Booster project for the end-of-year accounts lead us to use IFRS 5 concerning activities held for sale. So for the sake of comparison with previous years and also comparison versus guidance given for 2016, we begin by presenting our accounts under their usual form. Then I'll return later on the implications of the presentation on IFRS 5. All in all, group's results reflecting good performance in a very contrasted environment. Group revenue's up 2.2% on a like-for-like basis. Constant currencies comes in at EUR 5.6 billion. EBIT is up like-for-like 3.8% at a record level of EUR 696 million, and the EBIT margin is up 20 basis points on a like-for-like to come in at 12.4%. These like-for-like result reflects good control over our operations. Cash generation's in line with an FFO of 6.4% at a level never previously reached of EUR 868 million. On the basis of the items presented to the board, it has decided to propose to the shareholders the payment of a dividend of EUR 1.05 for 2016. That's an increase of 5% over last year. Just to return to what Sébastien began to introduce about FRHI, here's a chart that summarized the contribution of Fairmont Raffles to Accor's financials. Fairmont Raffles benefited from a sustained increase, 3% of RevPAR on a like-for-like basis, buoyed by good performance in the Rockies and also the center of Canada, with a windfall effect for the U.S. customers given the difference between the U.S. and Canadian dollars. Revenue of FRHI is close to EUR 2 billion in the second half. Contribution of Fairmont Raffles to EBIT stands at EUR 48 million. That's about 7% of the total. You have the split on the chart, the difference between HotelServices and HotelInvest. HotelServices margin at 25.1%, HotelInvest 6.1%, pretty comparable with what we achieve. In terms of net income, the contribution of Fairmont Raffles stands at EUR 37 million. Deferred taxes in the U.S. for EUR 62 million, offsetting the restructuring costs as part of the Fairmont integration. Looking at the balance sheet, group balance sheet is strengthened by EUR 2.5 billion in assets, including the brands Fairmont Raffles Swissôtel, but also EUR 800 million goodwill. Cash generation strong, with recurring free cash flow of EUR 53 million, which is a cash conversion rate of 83%. Mentioned the integration of Fairmont Raffles. You see on this chart that we've delivered EUR 45 million in synergies in exit run rate at the end of 2016, and that when we look at what's to be found in the accounts for the period concerned, that's EUR 13 million in synergies at group EBIT. So EUR 65 million in synergies that we mentioned when we announced the deal are secured to the tune of 70%. Today, we're delivering, as you can see, a plan for 2019, a year ahead of time. On the cost front, costs linked to the Fairmont integration were in line with the total package of EUR 120 million, and this year we've spent EUR 55 million. To that, we can add commercial synergies thanks to the combination of the loyalty programs, also better use their customer base using what Sébastien introduced about John Paul, the conciergerie services. Other important point, the integration of Fairmont Raffles, is that the hotel owners will also benefit from synergies, notably through group contracts that are more attractive, such as contracts with OTAs. Turning now to RevPAR. Just turn to organic performance. RevPAR overall is up 1.1% in 2016. If we take the key regions, what we see in France is Q4 was the first quarter where we're back to breakeven, zero, in RevPAR, whereas full year, we'll have delivered -3%. Situation's improving in Paris, going from -18% in Q3 to 6% Q4. Province continues to grow with a RevPAR of 5% in Q4. RevPAR in France in January is up 10%, buoyed by the Handball World Cup, trade fairs, good performance. The U.K. now. Q4 was the strongest quarter of the year. The slide in sterling buoyed business with increased foreign visitors to the U.K., and we also saw staycation where they stayed for their vacation in the U.K. because of the slide in the pound. And this good trading is reflected in London, also in the provinces of the U.K. January, RevPAR is up 10%, and with London, 13%. Germany now. It's a real engine for the group, saw its RevPAR grow by 3%, buoyed by a good economy and favorable calendar for 2016. We had drupa, Düsseldorf, bauma fair in Munich, and a little impact of the attacks in Munich and Berlin in the 2016 numbers. If we look to January, what we are seeing is that in Germany, RevPAR has grown by 7% for Accor. That is fine momentum achieved in the RevPARs for our key markets. Moving on now to the split between the revenue growth, like-for-like, 2.2%, and reported growth at 0.9%. In this chart, we have the explanation, the key effects of the group's transformation launch, both expansion via Fairmont Raffles and also everything we achieved in terms of asset management, also what we did on Grape Hospitality. To give you a bit more color, the growth of the hotels includes FRHI consolidation, other acquisitions. That growth has a positive effect of 7.5% on revenue on a total of EUR 418 million. Disposals accounted for 6.4%, and that includes the 85 hotels sold and franchised in June to Grape Hospitality for about EUR 100 million, and the impact of the franchise or management sales of last year's deals, notably part of the Moor Park portfolio. It includes also the sale of hotels to Huazhu in the first half. Currency effects were, on the whole, negative the year, accounting for 2.4% with the pound that remained weak versus the euro. Devaluation of the Argentine peso in percentage terms and the Brazilian real had a negative impact of EUR 12 million on the year in spite of a recovery versus the euro in the second half of the year. All in all, revenue comes in up 0.9% on a reported basis. Look at revenue now in greater detail by region, by segment, the two segments, HotelServices, HotelInvest. HotelServices puts in a better performance than HotelInvest, as always. Better geographic split, greater exposure to non-European markets, but above all, because in like-for-like revenue, we include expansion management and franchise mode. All regions are up, save France, with a notable drop at HotelInvest. HotelInvest, in fact, more exposed in Paris than HotelServices. We have a lot of HotelInvest properties in Paris. Other regions, posting performance in line with what we saw for the first half. NCE region up 4.1%, driven by the two engines, actually three engines, U.K., Germany, and also our Polish unit, Orbis, covering all our activities in Central Eastern Europe. Then we have MMEA, Middle East and Africa, where we have continued growth of Spain and Portugal this year with revenue that is up over 10% like-for-like. That is very significant. Acceleration of ASPAC with the expansion you saw in the previous slides. Then the Americas revenues up 4.7% like-for-like, in part driven by inflation in these Latin American countries. Worldwide structures, that is where you find the revenue of Fastbooking and Onefinestay, and now for 2 months of John Paul, the new businesses that we integrated last year. Moving on now to the contribution of both business lines to EBIT, HS and HotelInvest. We are above EUR 1 billion, EUR 1 billion 57, and EBIT margin 70 bps above 2015. EBIT margin is record level. For memory, corporate Intercos, the items of elimination of fees between HotelInvest and HotelServices and also the corporate results. If we now look at the bridge between 2015 EBIT margin, 2016 EBIT and margin, what the bridge reflects is shown on the slide. Sound operating resilience. Our EBIT grew EUR 31 million this year, and the EBIT margin is up 50 basis points. That is 20 points like-for-like. The prime effects are expansion to the tune of EUR 38 million, with a contribution of Fairmont Raffles EUR 48 million, Fairmont Raffles in the second half. Conversely, a negative contribution to the tune of EUR 17 million for new business, EUR 14 million for Onefinestay, and John Paul contributes positively for two months for EUR 2 million. New hotels contributed EUR 8 million to EBIT growth. Activity is up EUR 25 million, reflecting sound operational management. We will see that for France in a universe that was very mixed, both economically, politically, as you all know. Next, we have disposals. All the disposals, Grape Hospitality, which accounts for EUR 15 million, and Forex, the usual suspects, pound sterling, EUR 14 million. Giving a bit more detail, the cross chart between segments and regions, what we see is that operations are holding up well. Operational EBIT, EUR 754 million, up 5% on the like-for-like. If we detail this performance by geography, France obviously hurt by activity that sharply down, notably in Q3. We were hurt by a very poor Q3 after the Nice attack. HotelInvest is hurt the most because in Paris, we have about 140 hotels in the HotelInvest scope. Americas post a drop of 18% like for like, and that is primarily due to Brazil, which is struggling to emerge from its political economic crisis. Other countries in the area that are fairing as they did in H1 last year, Chile, Peru, all the other smaller countries where performance is very robust. Other regions of the group are driving growth with NCEE contributes 50% of EBIT of the regions of the year. We have the U.K., Germany, Orbis in NCEE. Asia Pacific benefiting from its expansion in the region with close on 30,000 rooms opened full year. Growth in MMEA, which is driven by HotelInvest and benefits from the rebound of Spain and Portugal as we saw last year. After some difficult years, two fine years for Portugal and Spain. Worldwide structures are impacted, notably by the integration of Onefinestay. If we now focus on HotelServices, revenue reaches over EUR 15 billion. Integration of Fairmont, close on EUR 2 billion. Organic growth 38,000 rooms. Revenue close on EUR 1.6 billion, half for fees, franchise and management fees, and 36% from sales, marketing, and distribution funds reflective of the expansion of the group on asset light. Fairmont's integration fees paid by HotelInvest to HotelServices went from 55% 2013 to 38% that you can see on the chart here in 2016. EBITDA comes in at EUR 450 million. That is a margin of 28.7%, slightly down, but that is due to the lesser performance of France and Brazil. CapEx, in fact, reflect the digital investment return to that amount. What it shows all in all is a HotelServices demonstrating its resilience in terms of cash conversion and profit generation. What about the digital plan? The digital plan is rolling out as planned. We are at about 70% of the amount of EUR 250 million. That was the plan set out just over two years ago. For 2016, the spend total is EUR 90 million in cash. That is in line with the plan. H2, there was rebalancing between CapEx and OpEx that we discussed at the first half results presentation. That was one of your questions. The P&L impact for 2016 is EUR 54 million, EUR 34 million OpEx, as well as the depreciation of the run of the application. 2017, cash out would total EUR 59 million, which is also in line with what we said previously. For the P&L, what we say is the OpEx reduction will be offset by an increase in amortization and the run costs. So the P&L cost is EUR 50 million, whereas it was EUR 54 million for 2016. If we now take a closer look at EBITDA and EBITDA generation for HotelServices. EBITDA management franchises up 54.6% versus 54.1% illustrates the resilience of the HS model and scale effects because we're in fact developing the network. Increasingly, sales, marketing, digital is break even before the impact of digital plan and negative after other activities. The EBIT margin is due to the integration of new business. Same thing, Onefinestay, John Paul, and Fastbooking to a lesser extent. Moving on now to a focus on AccorInvest. AccorInvest transformations continuing. Transformation that was initiated early 2014 is continuing. Activity levels in Germany and Spain offset the difficulties experienced in France and in Brazil in AccorInvest. EBIT goes from EUR 378 million to EUR 385 million. That's an increase of 50 basis points and reaches a record level of 8.3%. If we look back, we were at 4.1% 2013. We more or less doubled the EBIT margin since 2013. Renovation CapEx have remained flat and development CapEx up 42% 2016, notably with the development programs for new hotels launch, the Canary Wharf Novotel opening this month, and the Arnulfstrasse Novotel in Munich. When we now look at how GAV gross asset value of AccorInvest has trended, we see that it's continued to grow to reach EUR 7.6 billion at the end of 2016. If we look at this with Historically, we look at GAV between 2013 and 2016, we have a gap of EUR 3.1 billion, EUR 1.7 billion asset management, EUR 1.4 billion value creation numbers that are significant, really illustrating the continuous effort that was put in by the AccorInvest team in order to generate value for the group. 2016, in fact, the main changes are as follows: acquisitions, EUR 400 million, notably integration of the seven hotels owned and leased for Fairmont disposals, the same Grape Hospitality, Huazhu. We invested, as we just see, in renovation and maintenance. And that's the bridge between the EUR 6.9 billion and EUR 7.6 billion of GAV December 2015 through December 2016. Just as a reminder, this Booster, which is a subset of AccorInvest that we published in January of 2016, is EUR 6.6 billion at December 31st. Part of the EUR 7.6 billion, EUR 6.6 billion that are Booster, the gap between the two, primarily Orbis. If we now come to everything that is below from EBIT to net profit, financial income's down EUR 54 million. You probably recall our financial expense, we had an opportunity for deferred purchase for the headquarters. Interest rates led us to secure financial terms. In exercising this put option, we hedged against the rate rise until expiry. Change in value of the hedging instruments impacts the P&L without any cash impacts. At the end of H1, we had a number of EUR 41 million. At the end of December 2016, we have EUR 24 million. That, in fact, reflects what happened in H2, that is a sharp hike in interest rates. Added to that, the EUR 12 million that concerned the hedge that we put in place for the acquisition in dollars of Fairmont, Raffles. One-off costs are stable over 2015. Restructuring costs that are significant for Fairmont, also a little for France. Impairment costs that are stable year on year for about EUR 60 million. Costs linked to Booster and Fairmont integration, deal fees, et cetera, and some capital gains on asset sales, notably the two sales, Grape Hospitality and Wazoo, where we generated book profits when we sold the assets. Taxes down 60%. That's quite a remarkable number. What's happening here is that, in fact, we had deferred deficits following the Motel 6 deal in the U.S. Now that we have Fairmont, Raffles in the U.S., we can activate those deficits in the balance sheet. By activating them in the balance sheet, that's generating a tax profit of EUR 62 million. That's a knock-on effect from Fairmont, Raffles that's very useful. Turning now to cash, going from EBITDA to recurring fee cash flow. There, it's in line with 2015 because we don't have the non-cash portion of the second hedge. Then we have FFO trending in line with EBITDA. Funds from operation increase of EUR 52 million to come in at EUR 868 million. As detailed in the review of the segments, HS HI, CapEx are up 14%, linked notably to all the expansion initiatives in the HI segment that we want to push. The EBITDA to cash conversion comes in at 31% owing to that investment. Moving on now to the balance sheet at work, the debt situation. Net debt comes in at EUR 1.2 billion at the end of 2016, whereas we were net cash to the tune of EUR 200 million end of 2015. The key items of this transition are, of course, Fairmont, Raffles that we acquired for EUR 2.5 billion, financed in part through a capital increase for EUR 1.7 billion and partly in cash. We have HotelInvest for EUR 300 million acquisition, new business, John Paul, Onefinestay, for a total of close on EUR 300 million, and also investment in Wazoo, EUR 152 million. Change in working capital is negative this year. It was positive last year, and that's due to lag in tax payments. We had receivables, very significant receivables, collected last year. Here, it's the opposite, payables. So there's quite a significant one-off effect there on our tax payment. We also sold 85 hotels to Grape Hospitality, which are WCR positive, contributing positively to the group. We don't have those any longer because we've sold them. Other items impacting net debt are non-recurring, linked notably to restructuring costs that I referred to earlier and the acquisitions in 2016. Net debt. Looking at our debt profile now. In 2016, we continued to optimize our debt profile at the end of December. Our average maturity was 3.6 years at a cost of 2.85%. In January of this year, we made a EUR 600 million bond issue. We had a record coupon of 1.25% dual impact. We've extended the scheduling to 4.2 years after 3.6 at the end of last year. We've also reduced the cost of debt, which is down from 2.85% to 2.57%. The other thing I wanted to draw your attention to is that I can confirm that we have committed to remain investment grade, as we say every year, and S&P and Fitch recently confirmed these ratings. That was in December, in fact. That just now brings me to the proposed dividends. Based on the aforesaid, we will be submitting to the AGM convened for the 5th of May next. We'll be proposing the payment of a dividend of EUR 1.05 per share. The payout ratio will be 64%. That's on recurring profits. Remember that we invested 46 million in shares of 20% of the total share capital in July. That's from the Fairmont Raffles acquisition, which has increased the number of shares in circulation. This dividend can be paid fully in cash or fully in shares at a discount of 5% to recent trading. This brings me to the second financial presentation. It would be a shame if we only had one. This is our second financial presentation. So this is Accor financials from present to IFRS 5, and to future financials. As I mentioned at the start of my presentation, in the course of the presentation, we explained what we're doing and how we compare with the former guidance. Obviously, with Booster is classified as assets held for sale. So what we're doing here is simply applying the rules as the famous IFRS 5. Why? Because the sale process is underway, it's been approved by management, and we expect the sale to take place over the next 12 months. The amounts are under discussion, but the group intends to relinquish the majority of the capital, and under contractual terms, Accor will be relinquishing its control over the Booster perimeter. So 430 reporting entities, 40% of the group, and part of the holding costs that need to be reclassified as assets held for sale. Now, in the financial statements, after application of IFRS 5, intercompany costs between Booster and the rest of the group will be eliminated. We're mainly talking about management fees, which is nothing more than what we do as things stand. But to give you some order of magnitude about what we're talking about with Booster, we're talking about a total of some EUR 4 billion in revenue, EBIT of EUR 300 million, net assets of EUR 3.3 billion, of course, and a recurring cash flow of EUR 130 million. Now, let me give you some details. On the left-hand side of this chart, you see the present financials under what we call the historical methods. This is what we've called present financials, where you will find HotelServices, HotelInvest, corporate intercos, and Accor pre-Booster. Second from right, you have the IFRS adjustment, and on the right-hand side in red, you have the financial statements as we will report them. Now, what we've taken out of this Booster scope, Booster is a subsection of HotelInvest. What happens when we transfer or we take Booster out of the accounts of Accor? We do not transfer Orbis, which is our listed entity in Poland with a revenue of approximately slightly over EUR 300 million. We do not transfer the management lease on EBITDA. This is mainly with regard to Brazil. And we do not transfer, though the amounts are small, subsidiary hotels that will have been disposed of before Booster is closed down. That's a total of EUR 300 million. Looking at corporate costs, what we do transfer is a net amount of, small, it's EUR 1 million, which corresponds to personnel costs at head office. That's approximately 20% of staff, offset partly by the discontinuation of fees to head office currently paid by Booster entities to Accor S.A., and commission on rent guarantees given to the subsidiaries by Accor S.A. This is a synopsis here. I think it's important at this point in time to explain what will happen once the Booster deal goes through. Once Booster and Accor become two separate groups, transactions between the two groups, which are what we now call intercompany deals, will no longer be eliminated. This will be the case of fees that Booster pays to Accor and to a much lesser extent, discounts on purchasing commission on loyalty programs. These will be restated and will increase revenue by approximately 550 million. This is why we have the column in red on the right-hand side, which will show you what Accor will be in the future once Booster has been carved out of the Accor financial statements. That's important because you see that revenue increases. You also see that EBIT remains pretty much at the same level, so the margin will be reduced from 24% to 18%, approximately. From present to published financial cash flow, this is the same process, the same thought process. The impact of Booster on recurring cash flow. You have the tax and financials are mainly taxes paid by the Booster subsidiaries, whereas the burden of debt remains with Accor. IFRS adjustments do not include the future cost of funding Booster, because Booster is going to incur debt, approximately 2 billion, as we told you before. This will not be included under IFRS 5 and the funds from operations at Accor will be approximately EUR 400 million. This will be offset by a decrease in CapEx, which mainly could concern HotelInvest. Ultimately, this will give us a recurring free cash flow of close to EUR 200 million, which is an EBITDA conversion rate of approximately 40% for the new entity. I'm now going to give the floor back to Sébastien Bazin to conclude our presentation. In fact, my job is easier than yours. I had to make two presentations, you see. I was just watching you from back up behind the room. It was very interesting. He's actually much funnier than you might think, but I can assure you can spend a whole hour with him. He's great fun. Let it rip, Jean-Jacques. Let it rip. No, well done. Thank you. For those of you who haven't been to Singapore, this is the Singapore Raffles. It's actually closing down in 3 weeks' time, so you better hurry up if you want to see it. We're closing it down for a year's renovation work. EUR 250 million being invested by the Qatar Investment Authority, that's QIA, who own Raffles Singapore. So it's a magnificent hotel as it is, but it's going to be absolutely stunning when the renovation work is completed in between 12 and 15 months. The doorman actually at this hotel has been there for 42 years, so if you want to meet him, hurry up. He's the same guy with his turban. He's been the same guy for the last 42 years. Okay, let's talk to you about Booster. I know that's why you came, or largely the reason that you came today. Booster, if needs be, is a code name. It's one you will have forgotten, that I'll have forgotten as soon as this deal goes through. We are in the process of subsidiarizing in a Luxembourg-based holding company, through a certain number of legal entities. We are subsidizing the whole hotel portfolio, with the exception of assets that are owned through our listed entity called Orbis. The EUR 6.6 billion in value will be held by this Luxembourg-based holding company. It's going to have a name. It's not going to be called Booster, nor will it be called HotelInvest. It will be called AccorInvest, and that's not haphazard, believe me. Very good reasons for having Accor alongside Invest, because we are probably going to remain by far the main shareholder. Just because we will have AccorInvest tomorrow doesn't mean that it won't be part of Accor. It will. It'll be a vehicle that we are very close to in terms of personnel, in terms of local partners, in terms of the various people we work with in a different line of business. Except in this instance, we will be relinquishing control. We will not have a controlling stake, but we'll be the biggest shareholder for a very long time, I expect. A number of facets to this type of deal. The first one I want to talk to you about is that it's in our interest to ensure that from the social, fiscal, legal point of view, that it's all watertight. This is a very, very big deal. So we've been working over the last 15 months on accounting, legal, and fiscal aspects. We've been working at length with our social partners, as we call them, to ensure there's great transparency and I hope a great mutual receptiveness about how we proceed, because this is a transaction that has done wonders for AccorInvest, but also for AccorHotels. So nothing is to the detriment of anybody else. This is a growth rationale for AccorInvest, as you will see in a few seconds, but indeed for AccorHotels. So the legal, fiscal, social roadmap is underway. There'll be no bad news. It takes time, and it's perfectly natural, but we're not behind schedule. We're on track. The second important facet is that in this exercise, we said we would take on EUR 2 billion in new debt in the new entity, which we call pushdown debt. These 2 billion, as the debt does not exist, are the- The proceeds will actually benefit Accor. Except that you don't just find 2 billion by lifting up a stone. In fact, there's not just 2 billion new debt, but there's 1 billion, 1.5 billion, that we want to secure in the form of a facility. Probably 1.5 billion plus 300 million in a revolving credit facility. We are talking about EUR 3.8 billion in debt to be agreed between now and the summer. Here again, we are on track. We have advanced discussions with 15 Tier 1, Tier 2 and Tier 3 banks, depending on their appetite, managed by Pierre Boisselier, who knows his job particularly well. We know where we're going, and we will be setting up this debt in good time, not just for the closing but also in the way that we use- Let me talk about the 1.5 billion straight away, then we'll have covered it. That was 1.5 billion, comprises three components. 500 million to be used to accelerate CapEx in renovation of part of these 1,200 hotels. Another 500 million that will be earmarked for the acquisition of further leased assets, something we've been doing for the last three years. A third 500 million that will be used to start developing and building greenfield projects. New buildings that we have authorized John Ozinga, here present, to do, and something he has done very brilliantly in Orly, Munich, Canary Wharf, and elsewhere. The new hotel in Canary Wharf opened up on the 10th of February. It is a marvelous example of a new generation, our new generation of hotels. If we want a growth rationale, we also need to invest in new developments. That's the approximate breakdown of those EUR 1.5 billion. That's why we need that additional funding. We have discussions ongoing with a certain number of institutional investors, three types. Insurance companies on the one hand, sovereign funds throughout the world, and long-term institutional investors. They are the three categories. They are sufficiently numerous for us to make this a successful transaction. In other words, we can afford to lose one or two along the way. They are sufficiently battle-hardened for nobody to challenge their ability. They are sufficiently wealthy to be capable of taking part with important entry tickets. As I said in October, the rationale hasn't changed. The minimum entry ticket for investing in AccorInvest will be over EUR 200 million per investor. That's the entry ticket. The difficulty over and beyond the actual size of the deal, over and beyond the schedule, is that we are now heading for the final furlong, the home straight, where everything has been announced, everything has been analyzed, and now as a listed company, we are now facing you here and facing you here in the room or those of you following us on the web or elsewhere. We are now in a situation where in the next few weeks, the situation will become a little more tense. Our negotiations will be materializing. We'll see who's going to yield this, who's going to invest, who's going to yield in terms of governance, who's going to yield in terms of valuation. I will say as little as possible today to avoid weakening the group's hand. There is no question of disclosing here before you today what our expectations are. I know you are going to be disappointed because you are going to ask me how much will the shareholders get? Will you buy Hilton, Marriott, or whatever? I know you have all sorts of questions, but the last thing I intend to do here today is to make a commitment here about anything until I have the money in hand. The more I say, the stronger their hand will be. That is not the way I do things. The news is that we will very probably have the money as expected, and that everything should take shape between now and mid-July of this year, 2017. Slip of the tongue. I know I said 2016. 2017, of course, I meant. Now, look at this slide here. Two important slides in this presentation. One was my last slide on 2004 to 2016 on the EBITDA margin, 12.4%, and how the group had evolved in terms of this breakdown by segment, in terms of breakdown by region. But this is the other important one, because this is the one that gives Jean-Jacques, Pierre Boisselier, John Ozinga, and all our people the confidence that they have. This is the slide that makes us all confident. Why? Because between 2017 and 2021, we will simply be replicating what we succeeded in doing wonderfully between 2013 and 2016. We are not inventing something new. On the contrary, we are replicating what we succeeded in doing. This is a slide we give to the investor because it is probably 80% of the whole story. In 2013, we began with HotelInvest with 1,250 hotels, either rented or owned. At the time, that was revenue of EUR 4.1 billion. EUR 425 million in operating EBITDA. EBITDA margin of 10%. Remember, the EBIT margin was 4%. The gross asset value was EUR 4 billion. Within barely three years, we have accepted to reduce the number of hotels owned or rented by almost 20%, from 1,250 to 1,000 hotels. By relinquishing a certain number of hotels, by definition, we lose revenue. We are down from EUR 4.1 billion to EUR 3.9 billion, except that insofar as we have worked well and that we have released the poorer performers, and insofar as we have purchased rented hotels that were actually costing money because the rent was higher than the operating income, necessarily, by definition, we have improved our operating margin and operating EBITDA. So the operating EBITDA has been increased from EUR 425 million to EUR 600 million. The gross asset value, even though with fewer hotels, we have increased the value of the remaining assets from EUR 4 billion to EUR 6.6 billion. Now look at what will happen between now and 2021. It is the same rationale for almost exactly the same amounts. We will be reducing the number of hotels even more, probably have about 100,000 rooms. So we expect to lose a certain amount of revenue, not significantly different to what happened between 2013 and 2016. We will also improve EBITDA by a further 50%, from EUR 600 million to EUR 900 million, and we will improve the gross asset value of the portfolio, which I hope will border on the EUR 10 billion mark. That is what we call a growth story. To do that, we need that additional EUR 1.5 billion in debt that will enable us to do the three things I said we would do: to invest in the existing fleet of hotels, to build new hotels, and to renovate them. Same methods, same story, same people, except that we have 2 years more this time. What we were to do in 5 years, we did in 3. There are no lies here. There is no risk-taking that we do not control. That is the rationale behind AccorInvest. That is why I believe in this, and this is why I want Accor to remain a major shareholder in AccorInvest. There is a certain logic in financial investment here for people investing EUR 4.5 billion gross asset value from EUR 6.6 billion. Take away EUR 2 billion in various new debt. It gives us net equity value of EUR 4.5 billion. This net equity will probably grow by an annual 10%. This is an annual internal rate of return, 10% per annum. Of these 10%, we will pay out 4%-4.5%. That is an annual coupon. That is a yield of 4%-4.5%. These sovereign funds, institutional investors, insurance companies, and Accor, which it is probably 25%, 30%, 35%, we will all benefit from this accretion of 10% per annum between 2017 and 2021. This is a very good story, one that we have good control over. This is why Booster is going to happen. There is necessarily a before and an after, since we will no longer have 100% of AccorInvest, it means that very soon priorities must, not be repositioned, but they must be re-thought, consolidated, improved on the Accor hotel group that will become what the Americans call an asset light company management contract or franchise contract. Except that none of our assets, at least these 4 disappearing, it is the same that have existed for 50 years in the group. Far and away, the prime amongst these assets are the 240,000 employees, and I am not saying that because it is good to talk about the people. For 3 and a half years, I am amazingly struck. I am admirative of the quality of the people in this group. I started, I said the 2016 environment where we really, everything happened, adverse headwinds. We did not know what was happening in Brazil. U.S. market was working better. We did not know the impact of Brexit, if the results is there. People in the company who are incredibly responsible for their destiny and for their business. We have 240,000 employees in the group, and we are hiring 15,000 employees a year net. In fact, we are hiring 70,000 people a year, except there are 55,000 who leave us, 90% in ASPAC, primarily in China, Malaysia, Indonesia, because these people are trained by international companies. As soon as they are trained, local companies poach them for $100 more. That is the price to pay for all the global industries in ASPAC today. There are nevertheless 15,000 net. They are the people we hire, these famous 240 hotels that we open every year. But we also have 4,100 addresses in 95 countries where we are probably lead 50 out of 95 countries ahead of the competition, Latin America, Europe. We have an IT system that allows us to generate EUR 16 billion in revenue. We invest EUR 100 million out of the EUR 220 million of the digital plan to triple its size of the business volume. That was not possible three years ago. So we have all the means to consolidate our technology and our distribution network. We are far and away perceived as the leading hotel operator for operations. 75% of our hotels we manage, we are hotel operators. It is our people were there to provide a result to the hotel owner. The other groups, foreign groups, are most cases between 60%-85% franchises. When you are a franchiser, you are not an operator, you are a brand distributor. You give a brand, a concept, a promise, and traffic, but you do not manage the hotel when you are a franchiser. We are exactly in the opposite situation. Ask all the hotel owners in the world, they say that the finest hotel operator who can transform revenue into income is the Accor Group. That is why I started out by saying that the operational lever of the group, we have 0.6% increase in revenue and 8% net income. We can turn lead to gold. It is not easy to do in a number of countries. So of course, we are spreading our wings here after three and a half years consolidating the groups. We are really giving it a strength, a bedrock. So we have a core business, which is the dark blue bull's eye, hotel distributor, customer relations, brand and guest services. Since we feel a little cramped in our core business, there are many other businesses muscling into the act that have multiplied the touch points. I have not mentioned the touch points for a while. Why do we want to go to the gray, to the red? Because we have one flaw that we have offset with Vivek, with the customer journey, the before, during, and after, the dream, the select and all those steps. We have a customer relationship that is perhaps three, four, five times a year when we see you in our hotels. Facebook has a relationship with its customers seven times a day. Amazon, eBay, two, three times a week, and I am at three to five times a year. So I have absolutely to ensure that this group leverages interaction with its customer more than three, five times. I am not going to ask you to travel once a month. So I have to enter your daily life. What can I do for you when you are not traveling? What can I do for you when you are not traveling with me? Even if you are going to Marriott or Airbnb, even if you are visiting your granny. You want a number of services when you travel. Why can not I give you these services even though you are not in a Novotel, Pullman, Raffles Hotel? What does it matter? Since I have 240,000 people, I can meet your needs. I have John Paul with a digital conciergerie. I can interact with you, not necessarily physically. So these three circles, we are going to be a bit more granular in five seconds. This is what we are entering into. It did not exist in 2015. Everything I showed you in 2016 is the beginning of this story and the three verticals. Because we have a strength and a weakness. In this digital world, we are beginning to know, not inside out, but we are beginning to read it better. There is one thing for sure, which is that all these big market caps, Snapchat, Facebook, Airbnb, Uber, there are two things they have avoided doing, and that is for 15 years. They do not want to have capital tied up in physical property, bricks and mortar, cars. They do not want too many people. They are capital light, labor light. What are we? We are capital intensive, labor intensive. So through Booster, we are freeing up some of this capital and giving it to people who want yield, hence the deal. Except that we have the cost of the 4,100 addresses in the world. We also have major responsibilities to 240,000 people in the world. Why not transform that weakness into a strength? Because we have it. That is exactly what Bompard is doing with Fnac and Darty. Where some were saying it is dead, it will go under. No, it is not dead. We are perfectly capable of melding the physical and the digital worlds. So through these assets, these addresses that are open 24/7, opening a department store in Paris, you cannot open. I am already open, 24/7. I have 240,000 people. What can I do to improve the life of citizens? Sorry, they are striking. We always talk about 1.3 billion travelers worldwide. That is exact. That number is going to grow to 2 billion by 2035, 2040, and 40 million Chinese, that will grow to 200 million Chinese visitors, without a doubt. So we are blessed by the gods, but it is even more blessed than that with 6.7 billion people living on planet Earth, except there is only 1.3 billion who travel. That means that I have 5.4 billion who do not travel. Another 5.4 billion that do not. I have 1 billion living in cities, and according to the stats, that 1 billion in 2035 will be 2.5 billion. That 1 billion people living in cities, I am sure that 500,000 of them know my hotels because they walk past them every day. They saw the sign. But 449 million have never entered one of my hotels. There is no need for them to do. They have a bedroom, except for when they go to the restaurant. Why do not I put my hotels and addresses available to that 1 billion people to improve their daily life? What can I offer them by way of service, be it F&B, be it dry cleaning, key service, leave their luggage, recover a rental car, drop it off? Credible number of things. When you enter that universe, you say, "My God, I have everything that the digital wants. I have the size. I have growth capacity. I have a digital world, John Paul. I can interact with them." So, entering this vertical, you are changing radically your mindset and entering revenue that can grow 20%, 30% a year, whereas in my core business, it is growing 3% to 5% a year. The EBIT and the people, so my margin is way above. So we did a test, Accor Local, with 10 hotels in the Paris region, Paris, north, south, east, west. Different brands, ibis, Novotel, Pullman, Sofitel. I saw the 10 hotel managers had three years of experience in their hotel, was here a month ago. So we launched the pilot Accor Local. The 10 were here, men and women managers. They were keyed up as ever. John Paul, we gave two people from our shadow ComEx who went off with him to be more self-reliant and more agile. I talked to the 10 who had prepared their visit here because for 2 months here, they were confidentially informed. It was not premeditated because I put the question to them like I am talking to you now. We want to develop this in the local neighborhoods, communities. "Okay, well, I am interested." So you are all in a district. Give me a frank answer. How many of you out of the 10, how many of you can give me the name and first name of the pharmacist, of the dry cleaner, of the shoemaker next to the flower shop, lives next to you? 2 out of 10 had done that over the past 3 years, had introduced themselves to the dry cleaner, to the florist. What we are talking about here is to contact the people in your district. The first thing is to go and talk to the people, those of you who are already providing services, that you are one of them. They have been looking at you for 50 years as somebody foreign who only talks to foreigners. Because a dry cleaner has a dress or a suit of a gentleman, and he has to close at 7:00 P.M. He is a good customer. He knows that that woman is going to need her dress that evening, but he knows he has to close at 7:00 P.M., and he cannot keep the shop open till 8:00 P.M. Why does not he drop the dress off at the hotel next door and send a text message to the customer, "Do not worry, I dropped your dress off. It is waiting for you at the front desk of the Novotel." It is so easy. That is what Accor Local is all about. Believe me, it is going to grow and grow and achieve considerable size. That is why we have 3 verticals here. First vertical, you know it, inside out. We have been doing it for 50 years. It is our core business. It is going to continue to grow because we are opening 340 hotels and because we have very significant market shares in the world's largest countries. We are entering the travel space that is disconnected from the hotel room. That is where you find private rental activity, Fastbooking, partnerships with hotels where the customer is not my hotel, he is somewhere else, but I am servicing him. Then the third vertical has nothing to do with travel, but it is plugged into community services. But the 3 have something in common, and it is very important. It is CRM, customer relationship. The database will be common to the 3. The loyalty program will be common. Technology will be common because the 3 will mutually enrich each other. It is the first that will nurture the second and the third. Half of you probably have an Accor Le Club loyalty card they are going to use 90% when you come to one of our hotels. None of you, has it ever occurred to you to use the card when you go home? You may need something, a Novotel, an ibis, you need something when you are traveling, and you do not need it when you are at home. Why cannot we use your card when you are at home with the local hotels? If we do this right, vertical 2 and vertical 3 will represent 30% of mid-term results in 5 years' time. It is huge. Which means that by way of a conclusion, we have four things to remember. I'll come back to you on a plan 2017, 21 more granular that we'll do quietly over the summer. For the time being, we're focused on what must be delivered short-term. First thing is, of course, we must defend our market share and our profitability. We did it very well in 2016. We have to continue to do it in 2017, 2018, 2019. That's why you're investing. The second thing is digital doesn't scare us in any way. Vertical 2, vertical 3 wouldn't exist without digital. So they're amazing growth drivers for the group, in no way obstacles. Yes, it leads to requirements and consequences on vertical 1. We're going to face up to those and use them right to seek out new contacts and customers. Three, is what I mentioned earlier about the cultural transformation. It's far and away the most complicated, is to turn the company Accor from the culture of a very large matrix pyramid structure to an entrepreneur mindset. That's why the we polos, the Fastbooking, the Squarebreak, the John Paul, the Onefinestay must remain self-standing 30% of 100%. The more we have autonomous self-standing units, the more it will benefit us. We must think differently and take risks individually, also reward risk and not sanction those who've made mistakes. There will be mistakes, but it doesn't matter one iota. Don't think I must embark you. I have to embark the investors. I have to onboard the financial analysts, my owners, my people, the group managers, media. If need be, because we're entering a new adventure where there's boldness, innovation, risk-taking. Let me show you that we've charted a course that we can go into vertical 2 and 3 to address the digital world. So to embark you, since I've been a financier for 16 years, we need proof. If there's no proof, like St. Thomas every year, it's funny, it doesn't work. So we're going to embark you on a horizon of 4, 5, 6, 10, 15 years. At the same time, each and every year, we'll give you proof that the growth will be delivered when we take the initiative. Mean for Accor post Booster, EBITDA will double over 5 years. That's been done over three and a half years. There you have it. Q&A now, since we have 15 minutes for Q&A, it shouldn't take long. Thanks. Hurry up because we have only 15 minutes. If it takes 10 minutes for the first question. Who's first up? I don't know who has the microphones. We'll organize that. Microphone's coming. Henri Juliard from Kepler Cheuvreux. I have a couple of questions. Several questions? Yes, several questions. First question concerns catering, food, and beverage you didn't mention. Could you tell us what you've done over the last year? How about the recruitment of the person in charge of F&B? My second question concerns the Booster project. How much of the capital do you want to dispose of? Have you fine-tuned how much you're prepared to cede to investors? Thirdly, concerning development, you said you want to double the HotelServices CapEx over the next five years. Is that organic? Your development rather, is that organic or external growth? How does it break down? F&B, we didn't talk about it. Granted that, apologies, but there's a lot of things we haven't talked about. Amir Nahai is still in charge. His plan is a four-year plan. Taking this year's EBIT, we took in between EUR 13 million to EUR 15 million additional over last year. I think the plan is EUR 30 million to EUR 35 million in three years from F&B. That's the improvement. We've already achieved one-third of the progress we've planned. These are the part of the quick-win projects we've remitted. Yes, we haven't changed the person in charge. We haven't changed the course we're on. Some countries have performed better than others, but that's because of maybe the independence or the eagerness of certain employees. I say it very frankly. I think where the greatest efforts were made and the greatest results were achieved in terms of guests and in terms of margin, that's Central Europe and Germany. Central Europe and Germany did a great job in F&B. It's slow in ASPAC, and progress has been slower in Eastern Europe. As I've seen that it works well elsewhere, I think eagerness is contagious. It's expanding. Your second question concerns the proportion of capital I said 25%, 30%, 35% that we would retain. My gut feeling is that Accor will retain 30% of the share capital. It could be 25, it could be 35, but my guess is around 30%-33%. Not because there isn't any appetite, because that's what I'd like us to have. Also because we don't need to have a EUR 6 billion stake, and because a 10% yield is a very good yield for the years to come. Also because my investors want Accor to have skin in the game, as Warren Buffett says. They want us to be major players, to have skin in the game, as we say. Ultimately, it may even be 40%, maybe as little as 25, but it's there or thereabouts. As for our ability to double the group's EBITDA, when we give you that information, this does not include external growth. It's on a like-for-like basis or same scope of consolidation anyway, but the 40,000, 45,000 rooms that we will be opening, the record of 38,000 a year this year, that's a record that we intend to break in the years to come. We expect to be on a basis of 35,000-45,000, whereas we're well below that in the past. So that's the type of growth we're talking about. In doubling EBITDA, you will have the benefits of Onefinestay, John Paul, Travel Keys, and so on. These transactions, they aren't currently generating EBITDA, but they will in the future. But that does not include any major acquisitions. If I could just add to that. It's typically the type of area where the acquisition of FRHI is contributing a lot because they're really good in food and beverage. A lot of their revenue in their F&B is 30%-40%, in fact. So we expect synergies to boost our performance in this area. Maybe to qualify the figures Sébastien gave you a little bit better. In F&B revenue, we outperformed by 2%. In other words, our revenue is 2% better because of our food and beverage. 2% better than room service, sorry. You're a photographer. Could somebody give the photographer a microphone? Firstly, can you give us any more color on leverage for the remaining AccorHotels group going forward post the HotelBooster project? Secondly, can you perhaps give us some figures for what the pro forma performance of the FRHI business was in the year just finished and how it moved year on year? Thirdly, just with respect to the performance of the digital plan, can you tell us what the current system delivery is now? If you include the loyalty schemes, the digital platforms, what potential revenues is that generating? Z? On leverage, that is an easy one because, I mean, as Sébastien said, you will get a lot of cash coming from the transaction. Probably if you were to use the 70% that we just quoted, it means somewhere between EUR 4 billion-EUR 5 billion of cash on the balance sheet. Then you have a leverage which is just incredible, non-leverage, which is just incredible. The question, the real question is what do you do with the cash? I think the true answer to your question is going to be what we will comment during the next update on Booster. All in all, if you want to retain something, we will have a rating which is very much comparable to what our comparable competitor in the U.S. are having today. So double B kind of thing. On FRHI, you have the number for H2. The only thing you need to know is that H1, as it is in our business, is a little bit weaker than H2. Typically, the same kind of pattern on performance of HI, H1 versus H2. If you use that, then you are in the ballpark of what FRHI will generate in term of EBIT, 60/40 kind of. Then there was a question on digital. I knew you would give to me the third question because I have no. Digital is more intelligent, so I give it to you. Sir, I have no idea what you've been asking. System delivery means what for you? Oh, okay. Oh, that's on the What's coming through TARS, which is the customer reservation system, is today 65%-67% of total revenue of the group, okay? What's coming through the loyalty card is today 30%. It varies quite a bit in between region. For example, in Brazil, it's over 50%. In England, it's less than 30%. So depending on region, the percentage is actually very different. Overall for the group, between 30% and 31% coming from the 32 million loyalty card members, okay? It's probably for FRHI. I don't know what it is. Is it better for FRHI than 30%? I don't know. This compares to a number in 2013, 2014, which was in the ballpark of 20%. So we moved from 20% to 30%. So we are progressing year after year on that KPI. The online is still kind of actually stabilizing. Not stabilizing. It is like 36% to 37%. It was 33%. It is not going as fast as we expected. So we probably expected online to go quicker to 50%. It is far from being at 50%. What has been changing quite a bit is mobile online is taking a greater proportion today on the online business, booking through mobile as opposed to booking through tablets. What is the OTA percentage currently? That we do not give. Okay. We never did and never will. Wait, why do not you give it to your neighbor? Yeah. Good morning. It is Jamie Rollo from Morgan Stanley. Three questions as well, please. First, you have given us the pro formas down to the EBIT level, but could you give us a feeling so we can calculate your future associate income from Booster, what the cost of the 3.5 billion debt facility is, and also the tax rate on that business, so we can get a sort of net income, if you like, for 2016? Secondly, if I calculate correctly, the number of rooms removed in the year was about 14,000, so just under 3%. Is that the sort of future run rate for hotel exits going forward? Then finally, in terms of worldwide structures, I think you touched on some numbers, but could you please break those losses down in HotelServices between Onefinestay, John Paul, and give us a feeling for this year? There is quite a lot going on there on a year-on-year basis. Thank you. So, I take the two accounting questions? Yeah, go for it. You had a question on the kind of the rate that we're going to get on the structure of Booster going forward, right, for your modeling. We are just in the midst of negotiating this with 14 banks. It's not exactly the kind of information that I would like to provide publicly. But if you look at what you would expect this kind of transaction to yield, and taking into account what the debt structure of that entity is, you will easily find what the rate is, and it is less than 400 basis points all-in. There's someone. On the tax rate, again, it's a little bit preliminary, but I would say that if you want to use a proxy, use something around 28% as an effective tax rate. In the case of the worldwide structure, the amount that flows into that line is a minus EUR 14 million for OFS, minus EUR 13 million for Fastbooking. Then you've got a plus EUR 2 million for John Paul. The big amounts are those. John Paul is only two months of activity. One thing that I would like to highlight is that it did generate a very nice margin over the last two last months of the period. Just to highlight that. On a net closure, it is 14. It's roughly 14, 12 to 14,000. It is between 2.5% and 3.5% of total network, which basically closes every year. The more net we're going to have, so 14 may end up being 20,000. At the time, we're going to be having 700,000 rooms. So very similar to other people. Some of it is willing exits. Some basically franchise we have that we decided not to pursue anymore. Like the Booster project, a third of the network that we let go, we decided not to continue managing those assets. Wait, there's one here, and then it going to be Yes. Bonjour. Nicolas Bris, Equigest. Two questions. You gave us the contribution of FRHI to your revenue and EBIT. What about its contribution to the valuation of Booster? What FRHI assets are being sold in Booster, if you prefer? Second question concerning France. RevPAR is flat year-on-year, certainly in Q4, except that in Q4 2015, it was a very peculiar quarter because the first half was good and the second half was disastrous. Could you give us some idea of how Q4 2016 breaks down? Q3 was down 6%, I understand. In the first half of Q4, you're down 6%, but in the second half, were you up 6%? I think you need to take some private tuition with Sébastien Valentin over the next 10 minutes. Jean-Jacques, will you answer that? Concerning FRHI, we're talking about less than EUR 150 million out of the EUR 6.6 billion. The FRHI assets have a total value of less than EUR 150 million. A lot happened in the last quarter, as you know, the COP 21, the trade fairs. I think a lot of these events had an impact. I think offline, Sébastien will tell you some very interesting stuff. I know he does it with each and every one of you, so he will. Here, he is actually almost beside you. Do you all know Sébastien Valentin? It is hard not to know who he is. Yes. Question here. Tim Ramskill from Credit Suisse. Three questions as well, please. Just on the kind of rent renegotiation process, which is still ongoing, and seems to have had some good success in the year. Obviously, with the smaller landlords where there is not big announcements that you have made, can you just give us an update as to how that process is going and what you expect in the next 12 months? Overall, obviously, you have talked about a doubling of profitability, and within HotelServices, your margins have diverged very considerably from your peers in the last few years. So your margins have dropped quite meaningfully, and IHG yesterday obviously talked about their margins expanding over the last few years. That gap is now sort of roughly 23 full points. How do you see that closing and what are the key drivers of that? Maybe rolled into that, what are your thoughts on more digital investment, or are you convinced that enough is enough, or you have spent sufficient? You have not found anything good in what we have been announcing? I know you have. You have been gloomy on Accor for quite a while. Is there anything that I guess you are being positive about, or do you just want to focus on something you do not like? I just, I noted the fact that the lease progress looked good, so keen to hear more about that. If there is an opportunity to double margins, I would be delighted to hear about it. That is good. I am going to try to prove you wrong for the next 12 months anyhow. Do you want to? Well, I can talk a bit on the competition margin. It is a dicey exercise then to compare the margin to the margin of the competition. I do not have at all the same number as what you have on the 24% gap. Probably because we do not compare apple to apple because, as you know, what you need to do is you need to rework the facial number for the billables so that you come back to something which is much more comparable. On the contrary, you would find that the margin of Marriott are just ridiculous. Without going into the detailed exercise in front of everybody, if you look at the core business, which is the franchisor and manager business and compare that to the manager and franchisor business of our U.S. peers, you will find that it is not that different. If you account for things that we are much more manager than their franchise, if you account for a couple of the differences. That is, I think, a gap which is much, much smaller than the one that you have, and I will be happy to go in the detail of the analysis if you want to. You had a question on Dublin. Richard German Zinga, you want to go live on this one? Yeah. Since it is your turf. I think if I get the sense of your question, what we do, we renegotiate about 5% of our lease portfolio every year. We either convert them from fixed to variable leases, or we renegotiate the terms. We have done about 120 over the last three years. We will continue doing probably 40, 50 renegotiations every year. Then we have, of course, the major landlords. We did one with Foncière des Murs in 2016, and we will probably do one with another one this year. Good morning, Richard Clarke from Bernstein. Three questions. I will try and start off with a positive one. Your EBIT number came in above your latest guidance. I was just wondering where that extra money, where you see that extra money, which couch you found the extra money down for the beat there. The second question on, you have talked in the past about how you need to build the Accor brand, the name Accor to develop the digital platform. You did not mention that again today. You also talked about how you are letting a lot of your brands manage themselves. I was just wondering how those two strategies fit together, how Onefinestay, et cetera, can help develop Accor. Then the third one on France. I think one year ago, you had about 13,000 rooms in the pipeline. You've opened about 3,000, but your pipeline's gone down to 5,000. It looks like you've taken a lot of hotels out of the pipeline in France. I'm just wondering whether you can talk about the strategy there, why you're seeing less opportunities, and any cost incurred in taking hotels out of the pipeline. I can take the one on why the results are better if you want. Sure. I mean, in fact, okay. You saw the chart that we just went through on the RevPAR for the four key or the three key countries and the total of the group. In fact, when you take those three key countries, which are France, the U.K., and Germany, that accounts for more than 50% of the EBIT of the group. These are quite significant driver of what's happening in the group. To be very candid, the results of November and December were extremely good. Extremely good in the U.K. I mean, U.K., everybody was telling us that it's going to be a disaster and that Brexit is going to basically stall the corporate business and that you're going to have negative numbers. What we saw is we saw the strongest RevPAR in that quarter for the year. That helped a lot because, the U.K. is a very, very profitable region for us. Then in France, you saw also that we came back to zero. To be candid, also, we were not anticipating such a nice return that fast, okay? Then Germany, despite of what happened in the month of August and despite of what may have happened following Berlin, did perform also very well. All of that is in fact, have been driving the business. Plus the fact also that we've put everybody on cost control, and this is also paying off more at year-end than it is paying at the beginning of the year. The one thing that I would also warn is that you need to be careful on using that trend, which is only 2 months, plus a very strong month of January, by the way. The month of January has been extremely strong, as the basis for projecting the future. I think the future is a little bit more complex than using the last 3 months to go and figure out what it's really going to be. To start with the Brexit. God knows where it's going to go. But I would say that we've been surfing year-on numbers which were much stronger than anticipated. It's true, I guess we haven't talked about the AccorHotels portal or the AccorHotels name for the last 90 minutes. The one thing which is, and I did not because there's nothing really new here except we keep investing on the AccorHotels as a brand, is a digital brand for the group. We slowly, every month passing, investing less and less on novotel.com, ibis.com, pullman.accor.com because you cannot have 20 entry points. So we're basically getting and fueling everyone through accorhotels.com. It still exists. If you go on novotel.com, it's still open, but we're not investing on it, and then you're going to be automatically pushed to accorhotels.com website. The one thing which is to be noticed, and it's not there again by accident, La Bernache, the bird. 3 times you see the bird here on this podium. One, 2, 3. This is not by accident. 4 now. So Bernache is the emblematic signage you will see in all the different verticals, one, 2, 3, and some way, shape, or form on all the different brands. People will go into an Accor hotel universe and will know you're part of it because of towel, because there's a paper, whatever you will see La Bernache. Okay? That's where we invest in quite a bit. I need to actually check the account because it's true that if it was 14,000 and we've done 3,000 opening, 5,000 pipeline, we're missing 5 or 6 or 7,000. I need to check in, because there is no intention whatsoever to slow down the development in France. So we're sorry. We need to get back to you. It's maybe a mistake, but we need to check it out. Okay, because coffee is being served at 10:30 A.M., so let's take another question quickly over here. Hi, line Garnier. Quick one on new business and this target to double EBITDA in the next 5 years. Nothing in terms of contribution today on the new business. 30% planned 5 years hence. Competition is quite significant. What's your degree of confidence that you'll reach such a contribution on the part of these new businesses, and how do you see a trend? Short term, we saw the difficulties with Onefinestay. So how's all that fit together and what's the likelihood of reaching those targets? Okay, I'll give you the most honest answer in the world. When we did the HotelInvest plan, that plan, I did it between August 2013 and November 2013. Initially, I did it as a board member knowing nothing about Accor, then after three months in the company, we refined the plan with the numbers that I had available on hotel activities and its business. In the plan I said probably have to improve EBITDA by 50%, improve the value of the portfolio, double the EBITDA margin, probably go to 65%-70% of the NOI contribution in owned hotels. That was three and a half months. Three years, 80%-90% of all these markers have been delivered of those metrics. Exactly the same degree of trust that I have on 30% on vertical two or three happens to be down here. If you can't project to the outside world that you can get that 30%, if you say it's only 30%, the higher you put the bar, the more likely you are to reach it. Thanks very much.

Data Source: Quartr Last updated: Feb 22, 2017

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