Accor CEO on big mergers, summer deals (not counting them) and fighting Marriott and Hyatt in Europe
Perpetual rumor in the hotel industry is to be based in Paris Accor – which owns brands such as Raffles, Sofitel and Fairmont – will merge with the UK-based company IHG . Hotel & Resort. IHG is the group behind the Holiday Inn, as well as higher-end services like InterContinental and Regent.
Marriott bought Starwood in 2016 for $13 billion in a massive merger that brought in brands like St. Regis, Westin and W under the same umbrella as The Ritz-Carlton, Edition and Residence Inn. For anyone to be able to compete with this new Goliath, there will have to be more major mergers across the industry, the thinking.
Hyatt is also said to be in talks to buy Starwood. Left on the altar after Starwood ran away from Marriott, the Chicago-based hotel company was suddenly lumped together with IHG and Accor as everyone wondered who might be the next couple.
In recent years, the focus has narrowed to IHG and Accor, as their networks complement each other. Accor’s strengths lie mainly outside of the US, while IHG — although based in the UK and with its own strong European network — has a presence primarily in the United States.
“Well, the only thing that came out more was Jen and Brad getting back together,” IHG CEO Keith Barr told me with a laugh two years ago.
It seems that the other CEO present at the merger table had similar thoughts about the concept of a super merger comparable to Starwood and Marriott.
Accor CEO Sébastien Bazin said in an interview with TPG during this week’s Americas Residency Investment Summit in Los Angeles: “Those mergers make sense on paper when you’re the investment banker. “They make economic sense, but they fail in enforcement, and are unnecessary.”
Bazin, like other major hotel CEOs, instead favors a brand-by-brand approach to growth today. Acquisitions in recent years have been more about a fast-growing strategy to fill a geographic or brand gap than a transformative approach like the Marriott-Starwood joint venture (which created the company). largest hotel in the world). Accor has been more successful than most, as the company has only a few brands remaining shy of reaching the 50-brand mark.
Accor’s recent growth includes the addition of a single brand like the Emblems Collection. It has also joined forces with Ennismore, owner of brands such as The Hoxton and Gleneagles, to create a lifestyle hotel arm with select Accor brands such as Delano and 21c Museum Hotels.
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Leadership teams at Hilton, Marriott and IHG have Similar stance on mergers. Bring what?
“The reality is the execution, the ability to close the deal and then the culture gap,” Bazin listed reasons for not pursuing a major merger. “Transnational, transcontinental mergers, I think two-thirds of them fail.”
If anything, Accor and IHG behave more like competitors than potential partners: Planned hotel by Faena, Accor .’s partner for New York City at the expense of the planned Six Senses. It will be the first outpost in New York for the ultra-luxury brand IHG.
A spar brand on both sides of the Atlantic
A battle is raging between the major hotel companies as they begin to infiltrate each other’s historical geographies.
Hyatt, Marriott and Hilton each pushed significantly more into Europe, where Accor has the largest presence of all the major hotel groups.
“They killed me in the US and I guarantee they won’t grow as fast elsewhere,” Bazin said of the American brands that are suddenly making their way into Europe. Accor has around 350,000 rooms in Europe across all of its brands.
By the end of 2021, Marriott has more than 133,000 rooms in Europe, according to the company’s most recent annual filing with the US Securities and Exchange Commission. By comparison, Accor has more than 102,000 rooms in the Americas, according to the most recent financial documents. Marriott has nearly 1 million.
However, American tourists will feel French hospitality in the years to come.
Accor recently restructured in a way to spur further growth among its luxury hotel brands. It even houses the headquarters of the ultra-luxury Orient Express and Raffles brands in New York City. Additional growth plans stem from the Ennismore lifestyle hotel arm and further expansion of Sofitel, Fairmont and some of the company’s soft brands.
However, all of this growth requires infiltration with American hotel owners and developers.
“Can the lifestyle make our mark in the US as a niche player? The answer is definitely yes,” said Bazin. “Is it difficult? That’s right, that’s it. It’s a market controlled by six gorillas. They know that the street, the neighborhood [and] The tourists are much better than me.”
“If we want to go with Mama Shelter, Hoxton or Delano or SLS more than in the US, I need a partner. I needed a US partner that I could rely on, who brought me knowledge and I could give them a new brand experience,” he added.
It was very clear this week during the ALIS conference – which could seem like a giant dating group of hotel brands vying for new deals with developers and lenders to drive growth – that Accor means business.
The company has a significantly larger presence with executives than in previous ALIS conferences. It came shortly after the company reorganization; There are various CEOs under Bazin who now oversee the entire brand instead of geographical regions.
Maud Bailly – who served as CEO of Accor in Southern Europe and is now CEO of Sofitel and the MGallery and Emblems collections – previously told TPG that she is aimed at the US with the brands she leads today.
Some might scoff at the idea of Accor ever gaining a foothold in the US, but the signs are that owners are willing to deal with the companies simply because they’re not a Hilton. or Marriott. Sonesta International Hotel Group boom in growth during the pandemic, in part through the conversion of various Marriott and IHG hotels.
A hotel needs more than a living room
US travelers should not expect to find Accor hotels in the economy area. Hilton makes moves to boost luxury economy recently announced Spark-branded hotels and Marriott acquires affordable City Express brand out of Mexico. This unexpectedly places two of the world’s largest hotel companies in a segment of tourism that they are not usually known for.
Accor has some budget brands like Ibis and Greet, but those brands are not part of the US expansion strategy. The company previously owned Motel 6 before selling it to Blackstone in 2012 for nearly $2 billion. It is unlikely that Accor will reverse the trend of low-cost hotels in the US
“In the US, it’s already been done,” Bazin said of the economic segment. “In Europe, we control that game.”
Instead, he pointed to the more recent publication Handwritten collection, a mid-range soft brand, as a way to grow. The brand caters to the growing travel preference for more experiential offerings and better connectivity to the neighborhood. It’s part of Accor’s larger push into lifestyle hotels. (Corporate leaders have previously defined lifestyle hotels as properties that earn at least half of their revenue from food and beverages.)
Achieving the lifestyle ethos requires building more hotels that cater to local residents, who spend their money in bars and restaurants rather than upstairs guest rooms.
“Don’t build for tourists,” Bazin said over the weekend during a joint session at the conference. “It’s the recipe for the future.”
Finishing the product
Accor’s smaller presence in the US could give it an edge in terms of customer experience; Tourists here may just associate the company with more upscale hotels that include powerful bars and restaurants.
Some guests have complained about sporadic experiences between hotels affiliated with all the major brands; this is especially true considering how brands have relaxed their standards during the pandemic. Hotels are not being renovated to their normal schedule as big brands prefer to allow owners to keep cash during such uncertain travel times.
While Accor may not face the same sporadic customer experience problem it has in the US, Bazin admits it’s still a problem the company has to deal with in Europe.
“What’s happening with the traditional, established U.S. brands is that they’re facing the same problem that I’m having in my home market,” he said. “We didn’t pay enough attention, [and] the owners have been friends for 40 years, so you are not harsh with them. That is a real problem. It needs to be fixed.”
Luckily, owners are getting the idea to renovate their hotel quickly, as that means they can start charging extra for rooms.
“A lot of owners realize that if they spend money, they get a lot of profit,” says Bazin. “That was not the case before COVID-19. Today, prices are very strong. Every hotel we renovate in France gets payback after two and a half years. I’m sure it’s very close to that in the US as well.”
Another summer in an expensive hotel
While the global economy may have a big question mark on it, that doesn’t mean there will be a wave of bargains at your favorite Accor hotel. Again, summer can be great for hoteliers but not so great for your wallet.
“I am starting with the truth [and a] big statement: 2023 will be better than 2022 – no doubt,” Bazin said.
The optimism comes amid widespread sentiment that a recession, if any, is likely to be brief this year in certain parts of the world. Marriott CEO Anthony Capuano also told TPG this week that he sees no signs of a hotel discount this year.
Bazin is optimistic about travel demand in the Middle East and Southeast Asia amid China’s reopening. He also pointed to destinations like Egypt, Turkey and Brazil that are in growing demand. The continued diversification of the Accor network and worldwide expansion help boost the Accor CEO’s outlook.
“When 80% of companies were focused on mainland Europe 10 years ago, my answer would have been different,” says Bazin.
