Accor: room for improvement? - FT.com Paying dividends is paying . . . well, dividends for Accor. The hotel chain on Wednesday announced that it would almost double its annual pay-out to €1.15 per share. That, along with the one-third jump in annual earnings before interest and tax, fuelled a 4 per cent rise in its share price which now trades at 22 times this year's expected earnings, almost one-third higher than London-listed rival InterContinental. On the face of it that premium appears strange. Over two-thirds of Accor's operating profits are from Europe and less than one-tenth from North America. In contrast, InterContinental makes two-thirds of its operating profits in the US. And the US is a much better hotel market. Three month average revenue per available room expands at about 8 per cent annually in the US, while in Europe it is falling at about a 2 per cent, estimates Goldman Sachs. In addition, the supply of hotel rooms in Europe is growing at about 3 per cent, dampening prospects for revpar growth. In the US, a lack of supply growth should support room rates. Despite Europe's weak outlook, the main reason investors love Accor is its drive towards being "asset-light" - meaning it relies on managing and franchising hotels rather than owning them. Currently about two-thirds of the group's hotels operate this way and it plans to raise this to 80 per cent by 2015. This should boost returns on equity in the long-run and the cash from sales can be returned to shareholders now. This expectation of more cash generation (whether in the form of dividends or not) has helped Accor's valuation. In the long-run, though, the group is still exposed to Europe - half the new rooms opened last year were on the continent. Investors considering buying in now will have to bet that growth in the old-world will return before the asset-light programme ends.