Investment Analysis and Recommendation
Lester E. Downing
Les Roces-Gruyére University of Applied Sciences
Submitted August 15, 2010
Investment Analysis and Recommendation
Accor is an international hotel group with corporate headquarters located in Paris, France. The company is publicly traded on the French stock exchange, the CAC 40. One of the largest hotel groups in the world (Sharkey, 2009), Accor operates hotels throughout the world in the mid-to-upper market and provides prepaid services through a joint venture with MasterCard Europe. During the fiscal year 2009, the Group made a number of significant changes in its Board of Directors by reducing the board to twelve members and by combining the positions of Chairman and Chief Executive Officer (Accor, 2010a). Also in line with these measures to simplify the company’s corporate governance, the Group reduced the Executive Committee membership to eight members. The purpose of the streamlining was done with the aim to accelerate chains of command, improve the decision making process, and improve team responsiveness across the organization. Operations were also restructured with the creation of three operating divisions: Europe, the Middle East, and Africa; the Americas; and, Asia-Pacific (Accor, 2010a).
Accor complies with the December, 2008, version of the AFEP-MEDEF Corporate Governance Code for listed companies (see Appendix A for a summary of the code). Based on the criteria of AFEP-MEDEF, Accor considers six of its current twelve directors to be independent. In accordance with Accor by-laws, Paul Dubrule and Gérard Pélisson, founding co-chairmen, attend board meetings in only a consultative capacity, and may be invited to attend meetings of Board Committees. The Audit and Risk Committee consists of five members of which three are considered to be independent. The Corporate Governance Committee also consists of five board members of which three are independent.
Board members are required to adhere to the Directors Code of Conduct which was included in the Registration Document. The Board is also required to complete a statement each year disclosing any and all direct or indirect ties they have with the company in order to prevent any conflict of interest. As stated by Philippe Citerne, Vice-Chairman of the Board of Directors (Accor, 2010a), the Board has worked closely with the executive management team during 2009 and 2010 “for the benefit of all shareholders” (Accor, 2010a, p. 5). Mr. Citerne sees himself as a contact person for all shareholders who wish to speak with a board member that is not part of the executive management team. Although the board has made progress in its restructuring there still remain members who are not independent. Mr. Citrine, however, has accepted the responsibility to lead the six independent members, to ensure the board’s neutrality vis-à-vis the Group’s executive bodies, and to ensure that the interests of all shareholders are taken into account (Accor, 2010a). Historical Trends: Accor vs. Marriott International
Accor and Marriott International compete in very similar markets (Accor, 2010; Marriott, 2009). Even though their markets are similar the business models employed are different. Marriott owns very few assets. In 2009, Marriott’s total investment in tangible assets represented only 17% of the company’s total assets (Marriott, 2009). Marriott has traditionally not owned the hotels it operates. Instead, Marriott receives fees for its services primarily through management contracts and limited franchises (Bouvier, 2007). Accor, on the other hand, has invested substantial amounts into tangible assets, i.e., hotel buildings, in the past (Morschett, Schramm-Klein, & Zentes, 2007). In recent years, however, Accor has moved away from ownership by selling a substantial number of properties, both in Europe and the United States, and then leasing these...
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