AccorHotels looks to online, luxury to boost earnings

(Adds CFO, CEO details from Investor Day)

By Dominique Vidalon

PARIS, Oct (Shenzhen: 000069.SZ - news) 5 (Reuters) - AccorHotels is banking on its online business and expansion in the luxury hotel sector to boost earnings after a planned sale of most of its property business, CEO Sebastien Bazin said on Wednesday.

AccorHotels which has 3,900 hotels ranging from budget Ibis to luxury Sofitel, competes with InterContinental , Marriott and Starwood and is undergoing a reorganisation initiated by Bazin, who took over in August 2013.

Luxury hotel operators can earn profit margins two to three times higher than those of budget hotels. AccorHotels has also expanded its digital expertise to respond to fierce competition from online travel agents which has hit margins.

Bazin's first move was to press for raised profitability by reorganising AccorHotels into two units -- HotelServices and HotelInvest. That split its operating and franchising business from its real estate and asset management activity.

The $2.7 billion acquisition of FRHI Holdings, owner of London's Savoy and New York's Plaza hotels, could lift the contribution from the luxury sector to the earnings of the HotelServices division to over 50 percent by 2020 from 15 percent, Bazin told an investors meeting.

"The integration of FRHI Holdings is on track in terms of timing and synergies," Chris Cahill, head of luxury brands, told investors.

AccorHotels has said that the FRHI deal would boost earnings starting from the second year, with 65 million euros in cost synergies expected.

The group recently announced plans to turn HotelInvest into a subsidiary ahead of opening a majority of its capital to institutional investors to raise cash for the group's expansion.

After the sale of HotelInvest, whose assets are estimated to be worth 6.5 billion euros ($7.3 billion), AccorHotels could double its Earnings Before Interest and Taxes (EBIT) margin by 2020 from 11.9 percent in 2015, Chief Financial Officer Jean-Jacques Morin told investors.

As part of the restructuring, Bazin has expanded the group's business in China and strengthened its digital expertise with a flurry of small deals to fight the rising challenge of companies such as Airbnb and online travel agents Expedia (NasdaqGS: EXPE - news) and Booking.com.

Last month AccorHotels said it was launching a youth hostel brand called Jo&Joe to tap the spending power of young adults in a high-growth sector.

The group's ambition is to generate by 2020 some 30 percent of its revenue from these new businesses, which notably include concierge service John Paul and British serviced home rental company OnefineStay.

AccorHotels is also seeking to limit a push by top Chinese shareholder Shanghai Jin Jiang International to increase its 12.6 percent stake in the company.

To do that AccorHotels started talks with Jin Jiang and other shareholders Eurazeo (LSE: 0HZC.L - news) and Colony focused on board organisation and shareholdings, a source told Reuters in June.

Bazin told reporters on Wednesday there was nothing new regarding the Jin Jiang situation.

"No good news and no bad news", Bazin said, adding he would meet Jin Jiang representatives in China next week as well as officials from other Chinese companies.

($1 = 0.8922 euros) (Reporting by Dominique Vidalon; Editing by Keith Weir and Elaine Hardcastle)