Accor has responded to the deepening Covid-19 crisis by announcing a series of cost cutting measures across its global operations designed to limit the impact on earnings and cash, and to prepare for the post-crisis recovery.
With over half the worldwide population either confined and/or under lock-down, Accor has closed more than half its branded hotels worldwide, likely over two thirds in the coming weeks.
“In these unprecedented times, the Group stands more than ever by its employees, partners and communities, providing time, resources and access to its local and global network,” Accor said in a statement.
Measures implemented as early as February include a travel ban, hiring freeze, reduced schedules and /or furloughing for 75 per cent of global head office teams for the second quarter. These actions alone will result in a minimum €60 million ($109 million) reduction for 2020.
Accor is also reviewing its recurring investment plan for 2020, also resulting in a €60 million ($109 million) reduction in capital expenditures. The Group is further streamlining all other costs such as sales, marketing and IT, in line with lower system wide revenues.
Accor has more than €2.5 billion ($4.5 billion) in cash on hand and an undrawn revolving credit facility of €1.2 billion ($2.2 billion).
“While much uncertainty remains on the duration of this crisis, the Group expects a severe impact on its 2020 performance but remains bullish on the long-term perspective of the hospitality industry, for Accor, its employees, its owners and shareholders,” Accor said.
Accor’s board of directors have also decided to withdraw its proposal for a 2019 dividend payment of €280 million ($504 million).
Accor will instead allocate 25 per cent of the planned dividend ($126 million) to the launch of the “ ALL Heartist Fund” that will help pay Covid-19-related hospital expenses for its 300,000 employees who do not have social security or medical insurance. The fund will also assist furloughed employees, employees suffering great financial distress and individual partners facing financial difficulty.
The board members collectively decided to reduce their attendance fees by 20 per cent to the benefit of the “ALL Heartist Fund”. Additionally, Sebastien Bazin, chairman and CEO of Accor, will forego 25 per cent of his compensation during the crisis, with the cash equivalent contributed to the Fund.
“In light of the urgency and the scale of the situation, we have decided to act in an immediate and meaningful way, in the spirit of our values and commitments,” Bazin said.
“Through this impactful gesture, we wish to express our solidarity and gratitude to all those demonstrating courage and selflessness during this crisis. On behalf of the board, I would like to thank the Group’s main shareholders. Without them, the ‘ALL Heartist Fund’ would not have been possible.
“I also want to pay a special tribute to the Accor teams around the world. They are facing the current crisis with admirable courage, dedication and professionalism. As our industry is going through tough times, we have to make tough decisions, but Accor has a strong balance sheet which will enable it to withstand this crisis and emerge with strength during the recovery period. I am confident that Accor will soon rediscover the road to growth.”