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The Warsaw Voice » Business » December 1, 2014
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Orbis Goes International
December 1, 2014   
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Gilles Clavie, president and CEO of Polish hotel operator Orbis, talks to the Voice.

How would you describe the current position of Orbis hotels?
Today, Orbis is the largest hospitality player in Poland and has been listed on the Warsaw Stock Exchange since 1997. Our strategic partner is Accor and Orbis has been the master franchisor of Accor’s brands for Poland and the Baltic region since 2000. Orbis is a strong, historical leader on the Polish hotel market and it is also strong in terms of numbers. Our network comprises 68 hotels, including 63 in 32 Polish cities and five in the Baltic States. Orbis operates its own hotels and also operates Accor-brand hotels under management and franchise contracts that cover a wide spectrum of the entire market, from five-star hotels down to one-star properties. The company has established an ambitious expansion plan and we have been implementing this in recent years. We believe that the Polish hospitality market will be consolidated and new projects will emerge and independent hotels will join chains in the years to come. Today, only roughly 14 percent of all hotels in Poland are branded ones. This means that there is room for expansion through management and franchise. In terms of the number of rooms, branded hotels represent a quarter of the entire hotel room stock, though branded hotels tend to be a little bit larger than others.

But now it looks like Orbis is entering a new era by taking over Accor’s operations in Central Europe. A deal is to be signed soon. What will the main consequences of this be?
Orbis has been delivering good and stable profits for years and we were looking for creative value development opportunities. In mid-November, the supervisory board of Orbis accepted the offer of its strategic partner Accor to conclude a new master license agreement and to take over a network of 46 hotels in Central Europe, significantly upscaling its business.

Under the deal, Orbis is also to become the sole master licensor of all Accor brands in 16 countries, and a leader in the hospitality industry in this part of Europe.

The deal is a milestone for Orbis. The transaction perfectly matches our strategy as we have been eyeing wider development in the region for some time now. Entering new markets gives us an opportunity for more robust growth as 76 percent of these hotels are located in capital cities such as Prague, Budapest, Bratislava and Bucharest.

Also, and I believe this is very important, with this transaction Accor is mandating Orbis to be its management platform for this dynamic part of Europe. We see this as a form of recognition for our past achievements and as a strategic step forward in our development. We have a deep understanding of the region and will be able to capitalize on strong brands. Significant business enlargement will also translate into value creation for our shareholders.

The total price for the deal is 142.3 million euros. How will Orbis finance the transaction?
Orbis has a very good cash position today and in addition, is debt free. Therefore the deal is going to be financed from our own funds, as well as from bank loans, which we may replace by proceeds from a bond issue in the future.

Orbis is listed on Warsaw Stock Exchange. How will the transaction affect Orbis’ investors?
Orbis has been conducting a consistent dividend policy for the past three years. This transaction will be closed at the beginning of 2015 so it will not impact the 2014 results. And, since it is going to increase EPS (earnings per share), there is no reason why it should alter our dividend policy in the future. On the contrary, it is going to foster Orbis’ capacity to maintain its status as a consistent dividend payer.

The deal means that Orbis, a well-known Polish brand established in 1920, is becoming a serious regional and European player. How has the Orbis team reacted?
Orbis has very committed and very professional teams already working in an international environment. Their reactions were very positive and that was really heartening for me as I had a very clear vision for Orbis—to be the most profitable hotel player and a trendsetter in this part of Europe.


Factfile
The Orbis Hotel Group comprises the largest network of hotels in Poland with 63 hotels in 32 cities in this country. It also manages five hotels in the Baltic States. That adds up to a total of 12,000 rooms. The hotels operate under the brand names Sofitel, Novotel, Mercure, ibis, ibis Styles and ibis budget, as well as Orbis Hotels.

Orbis’ strategic investor is Accor, the world’s leading hotel operator, with around 3,600 hotels and 470,000 rooms, in 92 countries across all hotel segments: luxury-upscale (Sofitel, Pullman, MGallery, and Grand Mercure); mid-scale (Novotel, Suite Novotel, Mercure and Adagio); and economy (ibis, ibis Styles, ibis budget and hotelF1).

Under a deal effective as of January, Orbis will have the right to operate hotels under Accor brands in 16 countries: Bulgaria, the Czech Republic, Estonia, Lithuania, Latvia, Poland, Macedonia, Romania, Slovakia, Hungary, Croatia, Slovenia, Bosnia and Herzegovina, Montenegro, Serbia and Moldova. As a result, Orbis is taking over all 46 hotels managed in these countries by Accor, including 11 owned (1,974 rooms), 17 leased (3,573 rooms), 11 managed (1,685 rooms) and seven franchised by Accor (821 rooms). Seventy-six percent of these hotels are in capital cities.
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