AccorHotels CEO sees bright future ahead - Insights

AccorHotels CEO sees bright future ahead

Sebastien BazinIn less than four years, AccorHotels Chairman and CEO SŽbastien Bazin has changed the direction and perception of a French hotel company that not too long ago was considered budget-focused and not very forward-thinking.

He has quickly moved AccorHotels into multiple complimentary digital business such as Onefinestay and Travel Keys, has gone upscale and lifestyle with its hotel collection by acquiring FRHI, Mama Shelter and 25Hours, and he even talked former French President Nicolas Sarkozy into joining the board of directors and aid the push to make AccorHotels less French and more global in positioning. Some analysts say AccorHotels is evolving and growing too quickly, but Mr Bazin quickly insists he is not moving fast enough, channeling his private equity background when saying, Òyou have to accept that you’re not going to be right all the time.Ó

Mr Bazin is further emboldened by what he considers unique circumstance. ÒI have something which is a great luxury Ð the backing of my main shareholders,Ó he says. ÒI have a true trusting relationship with my board of directors, and I have team all paddling in the same direction. Usually, you’re missing one of the three. So, let’s take advantage of this united front and move.Ó

HOTELS’ Investment Outlook caught up with Mr Bazin during a winter trip to Chicago to learn more about how he plans to keep moving forward.

HOTELS’ Investment Outlook:ÊWhat are your thoughts about the geo-political landscape and the new US President Trump?

SŽbastien Bazin:ÊTrump, I’m watching carefully. I can’t comment because I’m not an American citizen, so you voted for somebody who is at least coherent, but it is fascinating to watchÉ

When you can’t predict easily because the world is moving so fast, the only thing I want my company to do is have agility and ability to adapt to unforeseen circumstances. That’s exactly where I’m trying to get this company. Going one step further, we are trying to project Accor in the world of tomorrow, which means daring and maybe going in some directions which are a bit unplanned.

The hospitality industry, which is a very viable and good business, will be growing probablyÊ2 per centÊto 6 per centÊper annum but will never grow 10 per centÊanymore. And the cost of doing our business is probably much more costly today than it’s ever been because you end up being in the hands of very big animals Ð extremely sophisticated and very legitimate Ð named Google, Trivago, Expedia, Booking.com, Airbnb, etc.

You’d better not be in denial as people use them because they probably have better technology. If you want to be customer-centric, don’t blame your customer if they’re going to technology better than yours. Just either adapt the technology or partner, or create some joint venture agreement with those who have better technology.

HIO:ÊThere is a lot of talk about the geo-political Òchilling effectÓ on travel. What are your thoughts?

SB:ÊI dispute this. I’ve been living here (in the US) for seven years, and I think I have a grasp of what’s going on. I say never ever bet against America, neverÉ So, Trump is here. There’s going to be somebody else after Trump. People will still travel to America because it is one of the greatest countries on earthÉ You have fun and feel safe, and it’s fascinatingÉ The only thing which is gray in some regions of the world with some big family owners who feel they’re being attacked by the current president is the development pipeline for Accor could be enhanced because if they were to hesitate and go for a non-American hotel flag. But that’s going to be miniscule, and I’m not going to be making a bet, nor am I going to be forcing that issue.

HIO:ÊCan you explain your plans for ÒAccor local,Ó offering services to locals in urban cities?

SB:ÊWe have been perceived by hotel neighborhoods as outsiders because we only service outsidersÉ Since last May we have had 50 people only working on defining the services, how many of them should be free to enhance brand value, how many should be billable, whether there should be a subscription fee or have technology embedded into itÉ We finally launched a test in Paris with 10 GMs across segments. Only two of the 10 had made the effort to introduce themselves to understand who is working next to them. That is the beginning of the journey. You have to educate the local guy that there’s a lot of services that they can be rendered at the hotel next to themÉ

John Paul (the concierge service provider acquired late last year) is in the middle of all of this because the digital concierge helps facilitate the interaction between a traveler or a non-traveler and getting services rendered either digitally or physically. The loyalty card also helps quite a bit as 99 per centÊof my clients using one never ever think of using it when they’re back home. Why is it?

HIO:ÊYou are entering the shared economy space with brands like Onefinestay. How much business do you project coming from the Òadjacent space?Ó

SB:ÊSince I’ve been in this job we’ve been saying whatever we do next has to be customer-centric and no longer brand-concept-product-centric.Ê Those days are over. So, if you want to be customer-centric, then you better listen to what a customer wantsÉ

Onefinestay is by far today still the best brand in the upscale luxury private rental with service in New York, Los Angeles, Paris and London. We’ve decided two things: we’re going to grow from four cities to 20 and we’re going to deploy all the logistics of back-of-the-house for things like linens, amenities and toiletries. We can do it at a far cheaper cost than if Onefinestay remained autonomous.

The other part of the story is here I am lesser in the hands of the online booking engine. Why? Because I have 160 million people staying in an Accor hotel room every year, of which 14 million happens to be in my upscale luxury category. If I convert only 1 per centÊthen I multiply the Onefinestay revenue by tenfold. It doesn’t cost me anything.

HIO:ÊWhat is happening with Fastbooking, the digital channel manager which has allowed you to open your website to independents?

SB:ÊWe’ve signed many more hotels than expected Ð over 2,000 hotels in 10 months in 25 different countriesÉ We are not asking for any retainer Ð just giving access to another channel, which happens to be a big channelÉ My owners understand that I’m adding non-branded hotels to the Accor store, but by adding it, I’m increasing traffic because I’m playing the curator game. The hotel has to be the best in town on TripAdvisor.

Now I need to get traffic to those hotels as 90 per centÊof my customers going on Accorhotels.com have no idea I have independent-selected hotels. I need to spend the extra dollars to get the awareness, visibility, distribution and traffic within Accorhotels.com to benefit the independent guy. And that line needs to be crossed, which we knewÉ

At the same time, let’s be very clear. I’m not launching a third OTA. There is no place for a third OTA. But there’s a place for being there for those 4,000 or 5,000 hotels in the key 300 cities in the world.

HIO:ÊAnd that can drive some nice incremental revenue?

SB:ÊIt’s not really a way to make money. It’s a way to amortize, mutualize the technology investment. My customer reservation system costs a fortune. Since I have it built for 4,000 hotels, why don’t I just expand it to 10,000 hotels? It’s just a way of mutualizing my cost.

HIO:ÊWhat are your expectations for your Òopen houseÓ brand, Jo&Joe?

SB:ÊThe potential is huge. We went into that space because our customers are aging. I think 60 per centÊare over 45 years old. But we misread the new millennial generation market, and we left most of it to Airbnb and some other trendy brands, which is why we acquired Mama Shelter and 25hours. We need to regain possession of that generation because we’re going to need them badly in 20 years from today.

Jo&Joe is a response to two needs: the millennial generation thinks about a price per bed and not a price per room, and for them a bed is Û12 or Û20 maximum, and we offer them a Û60 Ibis with two beds, so they can’t afford it. And it’s too rigid.

We needed to respond to the users of Airbnb, to locals who feel a hotel is an outsider. How can I integrate the locals with the travelers and make it affordable?

What we developed is funky. It is fun. It is different. We are developing and won’t franchise it until we operate it and probably own it. The first one is in Hossegor, France Ð a Jo&Joe Surf Camp (opened in late May). It’s not a hotel Ð it’s called an open house because the success will be in mixing those local guys, some of them being students or foreigners but living next door.

We’re signing Jo&Joes all over (five signed, 40 in discussion in March), and it’s refreshing because Accor has invented a brand. It’s been long time since we have done it.

HIO:ÊAre you making yourself obsolete by launching so many businesses? (Mr Bazin was up for board renewal in May)

SB:ÊThe honest answer is the minute my ego surpasses my thinking they have to get rid of me, seriously. You can go in many directions, as long as it is properly thought up, there is reasoning behind it, and you have priced and measured the risk associated with failingÉ The minute I go too fast and don’t spend the time on the proper measurements that means my ego is driving me, and then I need to go.

About 80 per centÊof digital startups fail within year three. Those that remain alive, in between year three and half and year eight, usually need big brothers. Passing year number eight or 10, it’s too late as they become US$5 billion to US$20 billion companies. Onefinestay, Travel Keys, all those guys are in between those years where it is time to be there. This is the only thing I’m doing.

HIO:ÊWhy did you bring former French President Nicolas Sarkozy to the board?

SB:ÊSarkozy is going to do something, which is needed. I’m trying to diversify Accor away from France, which will represent 22 per centÊof our business next year where it used to be 50 per cent. I’m still building in France, but now I’m moving into all different jurisdictions, which means if I want to accelerate the pace of development outside of France, I’m going to have to seek partnership, alliances and acquisitions locally.

I wanted to create a subcommittee of the board, where I could face four people and not 14 people on some basic initiatives that I want them to challenge. That committee was endorsed by the board, but we needed a head of that committeeÉ I asked them whether Nicolas Sarkozy should come onboard and, to my great surprise, both accepted, which was for me a great proof of how much trust exists. So, he’s going to be an accelerator of our expansion internationally. And yes, he can.

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