2013 Registration document and annual financial report - page 139

Registration Document 2013
137
Corporate Governance
3
Risk Management
Target breakdowns between fixed and floating rate debt are
determined separately for each currency, giving due regard
to anticipated trends in interest rates and to changes in the
composition of debt as a result of new borrowings and the
repayment of existing borrowings. These target breakdowns are
reviewed at regular intervals and new targets are set for future
periods by Executive Management. The related financing strategy
is implemented by the Corporate Treasury, Financing and Credit
Management Department.
In view of the average 5-month maturity, cash is invested at
variable rates.
The most commonly used instruments are interest rate swaps and
caps, which are contractedwith banks rated investment grade based
on the model recommended by the French Banking Federation
At December 31, 2013, the volume of interest rate hedges
represented €4 million.
Accor does not conduct any trading transactions and has no plans
to engage in this type of activity. Neither the parent company nor
the Group has any open currency or interest rate positions that
would be likely to expose the Group to significant risks.
3.4.3. SENSITIVITY ANALYSIS
Based on reported 2013 data, sensitivity analyses have been
performed to measure the impact on EBIT
(1)
of any changes in (i)
RevPAR (revenue per available room, as calculated bymultiplying the
occupancy rate by the average room rate) and (ii) the euro exchange
rate against the main operating currencies. A sensitivity analysis
has also been conducted to assess the impact on operating profit
before tax and non-recurring items of fluctuations in interest rates.
Sensitivity to RevPAR
A 1% change in RevPAR would impact EBIT as follows:
1% decrease in RevPAR
Upscale & Midscale
Economy
Total
Impact on EBIT
€(11.0) million
€(7.7) million
€(18.7) million
1% increase in RevPAR
Upscale & Midscale
Economy
Total
Impact on EBIT
€8.4 million
€5.5 million
€13.9 million
In absolute value, a 1% decline in RevPAR has a larger impact on
EBIT than a 1% increase.
Any rebound in hotel demand initially results in an increase in
occupancy rates. This feeds through to higher variable costs, which
in turn weigh on growth in EBIT. In a second phase, the stronger
demand drives an increase in average room rates, which does
not affect operating costs and therefore has a stronger impact
on growth in EBIT. The flow-through ratio
(1)
for a 1% increase in
RevPAR resulting from higher average room rates is higher than
the flow-through ratio for a 1% increase in RevPAR resulting from
higher occupancy rates.
Sensitivity to exchange rates
A 10% increase or decrease in exchange rates would have the following impact on EBIT:
Currency
EBIT impact of a 10%
increase/decrease
in exchange rates
GBP
United Kingdom
€5.9 million
BRL
Brazil
€3.8 million
AUD
Australia
€3.4 million
USD
United States, Southeast Asia
€2.3 million
PLN
Poland
€2.2 million
(1) When like-for-like revenue goes up, the ratio of the change in like-for-like EBITDAR/change in like-for-like revenue is known as the flow-through ratio.
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