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3. Stepping up the Asset Management program

Another core pillar of the transformation process is Asset Management.

Since 2005, Accor has been deploying a far-reaching Asset Management program aimed at reducing the capital intensity of the hotel portfolio as well as cash flow volatility. The program is unlocking the value of property assets and structurally improving margins.

The previously announced 2013-2015 plan, covering 175 hotels and designed to reduce adjusted net debt by €1 billion, has been stepped up with a new plan for 2016 that will restructure some 800 hotels, of which nearly 200 are owned and 600 leased. Of these, more than 80 % are located in Europe.

Asset Management (in number of hotels) New Plan 2013 - 2016

Conversions into Variable Lease contracts

Conversions into Management contracts c.125

Conversions into Franchise contracts c.600

Outright Sales or Termination of Lease contracts

Total c.800

The plan will reduce revenue by around €2 billion. The total impact on consolidated adjusted net debt will come to €2 billion by the end of 2016, of which €1 billion in the cash impact and €1 billion in the impact on the net present value of minimum lease payments discounted at 7%.

Asset management of owned hotels

The first part of the plan concerns 200 hotels, which are currently owned and represent two-thirds of today’s portfolio.

Although they contribute nearly €500 million in consolidated revenue, their EBIT margin is at an average 6%, lower than the Group’s . Their sale will have a positive impact of around €1.3 billion on consolidated adjusted net debt as of end-2016.

Asset management of leased hotels

The second aspect of the Asset Management strategy concerns the restructuring of leased properties, whose performance falls short of Group standards. Optimizing these fix and variable leased hotels will structurally improve consolidated operating margin.

This part of the restructuring program will concern 600 leased hotels, which contributed €1.5 billion in consolidated revenue in 2012 but reported an operating loss of €50 million for the year. These transactions will give rise to exit costs or termination penalties, estimated at €600 million or , on average, less than three years of lease payments. Excluding the net present value of minimum lease payments discounted at 7% and proceeds from the sale of the related business, the impact on adjusted net debt will be a positive €700 million.

4. Improving organizational efficiency

To support and implement all of these projects, the corporate functions have been reorganized around two departments:

a the Operations Department, with, since January 1, 2013, an organization by brand in Europe committed to optimizing each one’s identity, reputation, distribution and asset-light development. Its primary KPIs will be the RevPAR index, EBITDAR margin, the flow-through ratio and expansion.

a the Property Management Department, which will be established in first-half 2013. Its central objectives will be to implement the Asset Management plan, manage and optimize capital expenditure, and manage property asset turnover. Its primary KPIs will be EBIT margin, capex, ROCE, the adjusted FFO/adjusted net debt ratio and the asset valuation.

These two departments are both committed to optimizing the generation of free cash flow, backed by the Group’s support functions.