Management Accounting Assignment

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Management Accounting Assignment

Executive Summary

This report is a financial analysis of the Accor Hoteles hotel company from the viewpoint of financial analysts wishing to purchase shares in the hospitability-leisure business. Along with Accor Hoteles, we chose two American hotel chains, Hilton and Marriott, and one European chain, Accor as industry alternatives.

Management Accounting Assignment


The years 2008 and 2009 were very difficult for both travel industry and global equity markets. In light of these developments, we believe a hotel business with a strong capital structure and cash flow would be in an excellent position to wait out the economic downturn and be in a position to take advantage of weaker rivals and any economic recovery. In terms of fundamental analysis we are looking for a moderate gearing ratio, sustainable liquidity ratio, and moderate to good ROCE and asset utilization ratios. 2

The analysis of Accor Hoteles share price started with the articulation of a desired set of fundamental financial ratios using macro level information about the hotel and the leisure industry and the global equity markets. We then compared Accor Hoteles and competitors with these targets to estimate future performance and to identify strong performers within the sector. We used the annual reports of all companies analyzed.

Industry Background

Europe has long been a popular place for tourists which has helped the hotel industry flourish. However, when the first war on Iraq broke out the vulnerability of this industry to the world economy was starkly affected. To accommodate these tourists European hotel chains have been and still are building more hotels. The chains do this to gain market share and to secure European wide coverage. 3

However big the companies have become, they all felt the economic bubble bursting. The economic implosion and September 11th put tourism in the doldrums, and the industry was dealt further blows by the second war on Iraq, the Severe Acute respiratory Syndrome (SARS) and the terror attacks in Bali. The Economy started to improve in mid 2003 after the war in Iraq ended quickly without major international terrorist incidents. However according to Klancnik (2003) the number of visitors to Europe is still down 15%, because of the fear of terror attacks and the strong position of the Euro.2

Overview of Accor Hoteles

Accor Hotels is a Spanish hotel chain based in Madrid and is become the fastest growing chain of Europe and became third largest business hotel group in Europe 2009. Following the acquisition of the Dutch Krasnapolsky chain in 2000, the Mexican Kristal chain in 2008 and the German Astron chain in 2009 it has currently 242 hotels in operation, with 34,876 rooms in 16 countries, in Europe, Latin America and Africa4. A Hoteles employs more than 12000 employees with 78 different nationalities. (Accor Hoteles 2003) The European Business market is the major market Accor Hoteles is operating in. It is targeting this market with 4 and 5 star hotels in the major cities of Europe. It distinguishes from other hotels by its service, interior decoration, good food and ...
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