CASE: TWO EUROPEAN HOTEL GROUPS

CONTENT
1
Financial statements ........................................................................................................................ 3

1.1 Impact of operating leases ............................................................................................ 3 1.2 Depreciation rates ......................................................................................................... 3 1.2.1 Accor ...................................................................................................................... 3 1.2.2 NH …show more content…

The problem is that these different categories each have different depreciation rates.
Secondly, Accor and NH Hoteles compete in the midscale segment of the hotel business. For this segment Accor applies an estimated useful life of 50 years, while NH Hoteles applies an estimated useful life of 33 to 50 years. It is notable that this is a difference of 17 years for some of NH Hoteles’ hotels. Due to the lower estimated useful life, NH Hoteles will have higher depreciation expenses. This will result in lower earnings, in lower net book value and lower net profit.

1.3 Bad debt percentages
We calculate the bad debt percentage as the portion of provisions in trade receivables.

1.3.1

Accor

(in millions €):
•
•
1.3.2

2005:67/1,575= 4.2539%
2004:70/1,342= 5.2906%
NH Hoteles

(in thousands €):
•
•
1.3.3

2005: 11,228/141,584= 7.9303%
2004: 11,042/92,467= 11.9416%
Conclusion

We can see that NH Hoteles has a much higher bad debt percentage than Accor. This means that risk of non-payment is higher for NH