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Sat 13 Dec 2014 10:35 AM

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Time to shake things up: Sébastien Bazin on his plans for the world's largest hotel operator

It can be the worst nightmare of an employee or a shareholder: a new CEO sweeps in and shakes things up. But Sébastien Bazin says his radical makeover of leading hotel owner Accor will make the company a household name

Time to shake things up: Sébastien Bazin on his plans for the world's largest hotel operator

Sébastien Bazin says he was made chairman and CEO of the world’s largest hotel operator, Accor, last year, because the board “made it that way”.

But, reluctant or not, within three months the former finance adviser had declared a “shake-up” of the 45-year-old company that has seen it split in half and move against the rest of the hotel industry by actively seeking out stronger bonds with “disruptive” online booking sites.

“For the last 45 years, Accor has been conducting under the same hat, with the same decision making processes… This company needed to be a bit shaken,” he tells Arabian Business from the top floor of the new Sofitel Downtown Dubai.

Bazin says one of his key problems is that few people, even in the industry, know who he or the Paris-listed company are, despite Accor having 3,600 hotels in 92 countries. Its brands — including Sofitel, Novotel, ibis and Mercure — are more identifiable but Bazin is out to make a name for the entire company.

“Accor is the world’s best kept secret because [at the moment] Accor as a name does not ring a bell,” he says.

“Marriott, InterContinental, Hyatt — they’re the same size as me; when their CEOs enter the room, they’re somebody. For me, as a CEO I’m nobody. So Accor has to get out there and be more visible.”

One way to do that is to increase footprint and Bazin is in Dubai to announce the company will double the number of rooms in the Middle East to 30,000 by 2020, across its 11 brands in the region. It already has 100 hotels either open or in the pipeline but, considering there are only two hotel rooms per 1000 inhabitants compared to 15 in the US and 10 in Europe, Bazin says the Middle East will be a growing force in Accor’s future development.

“Accor is opening one hotel every two days as we speak. Seventy-five percent of the hotels happen to be in three regions: Asia Pacific, the Middle East and Latin America and we’re growing very fast in those three regions,” he says.

“Today they represent 35 percent of Accor’s footprint — we still have 65 percent of existing network in Europe — so over the years obviously we’ll be diminishing Europe and increasing in the emerging markets.

“I’ll be back [in Dubai] and I will tell you in three years we’re going to be doubling again from where we are now.”

While the company has been in the UAE for 35 years, it is now concentrating much of its growth in Saudi Arabia, where the kingdom’s population of 27 million is increasingly travelling domestically and tourism numbers — particularly related to the Islamic pilgrimages of Haj and Umrah — are soaring as the kingdom opens up to outsiders.

Qatar also can expect more Accor hotels — and not just for the FIFA World Cup in 2022.

“I believe Qatar has more robustness than people believe,” Bazin says. “They’re really building the foundation of their local economy and growing outside of international events, but they needed international events to be there first to drive the market [because] Qatar doesn’t have the same size population as Saudi Arabia.”

A new 300-room ibis hotel also is due to open in Manama, Bahrain, before the end of the year.

As for Dubai, Bazin reckons the development of luxury hotels will soon be outweighed by those in the economy and mid-scale segments — Accor’s speciality. He recently launched a new serviced apartments brand, Aparthotels Adagio, to address the shortage of accommodation for corporate long stays, as well as an Arabesque chain called Majlis Grand Mercure.

“People talk about Dubai as [having only] luxury hotels; there’s another Dubai that people don’t talk about but it is growing as fast as luxury hotels and is more resilient: economic hotels,” he says. “It’s not as appealing as a luxury brand — well, I’m not in an appeal business, I’m in a business that is providing sustainable cash flow and return for my shareholders.”

Accor already has been cashing in at the lower end of the scale, particularly with its well-known brand ibis. It has 1,800 ibis hotels globally and is opening a new one every three days. 

“Forty percent of development in the GCC is upscale and luxury. We believe that where we can make a major push in this region is by boosting the economic, low and medium segment because this is where you have the demand among the local population. They ask for international standards at an accessible price; that is exactly what ibis is about,” he says.

“If you go from 13 million to 20 million international travellers, some of those are going to be attracted to the luxury and upscale segment, which means we’re not at saturation as of yet, but you have to watch out. The vast majority of that 7 million additional travellers will need extended stay apartments, will need [hotels in the] economic, middle segment much more so than luxury.”

Dubai also is involved in Accor’s recently revealed digital strategy — a significant€225m ($281m), four-year plan.

The emirate is one of a handful of locations to trial Accor’s new mobile phone welcome service, which includes features such as a text message informing customers how to travel to their hotel when they arrive in the country, through to the final bill, which allows them to pay online rather than at check-out.

Bazin says Dubai was chosen along with India because it has a high mobile penetration.

“The development of my digital strategy is going to be faster in the GCC than elsewhere,” he says.  

Mobile phones are central to the new digital strategy and Accor has launched a new app that allows customers to book a room, provide personal details that can be used to enhance their stay and access information about their destination.

The ancillary information such as which floor a customer prefers to stay on or whether they want a restaurant booking will be saved and used by any Accor hotel, in what Bazin says will ensure a seamless service across all of the company’s hotels.

Businesses also are being targeted, with the development of an online booking platform for conferences and meetings and the addition of business services to the Accor website.

“[The strategy focuses heavily on mobile phones] because mobile reservation is only 12 percent… [but] bookings for Accor on mobile will probably go to 30-50 percent in two or three years,” he says. “It’s growing fast and most people have what’s called global information in hand, so they’re much more savvy and aware of what exists in the marketplace.”

Bazin says while much of the hotel industry is fighting against the emergence of online booking platforms and information providers such as TripAdvisor and bookings.com, he is seeking to take advantage of them.

“In the last ten years we had three big digital revolutions in the hotel industry. The first was 11 years ago — what we call the ‘innovators’, ie. the online travel agencies. Bookings.com and Expedia started in 2004 and they’ve been growing ever since,” Bazin says. “Hoteliers didn’t take much notice of them then — wrongly.

“Six years ago you had the ‘aggregators’: Kayak, TripAdvisor, those guys that are aggregating information and making the customer decision easier.

“The third revolution, 24 months ago, we call the ‘disruptors’ ie. the customer-to-customer new business model, which is airbnb, Uber and others.

“We’re going to have a fourth revolution and a fifth revolution. Since I joined Accor a year ago, I said ‘don’t talk about battling with the innovators, aggregators and disruptors, because they exist and they actually fill the gap.

“Just participate with them, team up with them on providing similar or better services to your client, because the world is changing’.

“It’s obviously true for the hotel industry — it’s true for any industry — but we’ve been thinking for too long that the hotel industry will not dematerialise; this is the wrong assumption.”

About 70 percent of Accor’s bookings are made through one of its own customer reservation systems but increasingly the company is using third party websites to drive up real growth during quieter times by allowing them to take bookings on behalf of the hotel. Bazin says that method allows Accor to take advantage of the third party website’s traffic at a minimal cost, while he can still save that cost during a hotel’s peak times by closing off outside bookings.

“I talk about them as partners because they provide very efficient technology, very efficient booking systems in terms of information, they’re very customer friendly, and they give access to my brands to people living in America who have never heard of Accor before,” Bazin says. “So, for me, clearly they help me grow my business and the cost I have with them is a cost I can sustain because it’s cheaper than me opening sales offices around the world.

“The growth of the OTAs [online travel agencies] and the Accor channel is what I call real growth [because it helps to] occupy my room nights where I had difficulty before. But, [in business districts] on Sunday to Thursday nights I close my hotels to OTAs because I can do the work myself. But you can only do that if you’re a big company; if you’re an independent owner and you don’t have the technology, you don’t have the size, you don’t have the smart pricing management tools, this is where greater problems are because the cost of OTAs have been tripling in the last five years.

“They wanted 6 percent commission, then it went to 12 percent commission and now it’s going to be 20 percent commission. For an independent owner, they can’t face that cost of intermediation.”

Bazin warns the impact on independent hoteliers could have wider ramifications for local economies and the tourism industry as a whole.

“Of the entire world’s tourism market, 70 percent is in the hands of independents; chains account for only 30 percent. So any government is going to have to look very carefully at the impact of the internet on fragilising their country as a destination because a lot of independent owners suffer from the increasing cost of bookings,” he says.

Accor’s new digital strategy will limit customers’ interaction with hotel staff, with the intention of minimising the check-in and check-out processes, but Bazin has been careful not to entirely eliminate personal contact.

“The only thing we don’t want to do is give you access to your room through your phone. Technology permits it but we still want to have contact with the guest, handing him over the key… because if you don’t, then you’re entering a motel, it’s not the same experience,” Bazin says.

“Technology permits you to do everything but you have to stop somewhere. I want to shake hands and I want to have that emotional moment; a lot of people also go into hotels because they actually want that interface, otherwise they’re going to go to airbnb.com and sublet something, which is not my business.”

Actually, Bazin has split his business into two. HotelServices now operates and franchises the hotels, while HotelInvest, as the name suggests, does the investing.

Bazin says he formally separated the businesses because they were “very different”. Fourteen months later, he is not yet willing to comment on the impact of his shake-up.

“Whether it’s improved since then, I don’t know yet,” he says, despite revenue rising by about 3 percent to $183m during the third quarter, although the share price has remained stable.

But Bazin is not shy in making future predictions on Accor’s presence. While agreeing that the lack of an Accor-branded hotel makes it difficult to promote the name over those of Sofitel or Novotel, Bazin dismisses the idea of a renaming. Instead, he is taking up the challenge to make Accor a household name.

“We could [name the company after one of its hotel brands] but on a top five priorities [list] this is not one of them,” he says. “Plus you don’t know which brand you want to put at the top and Accor has been there for 45 years; it’s very well known in Australia.

“Priority number one is to transform the company with those two businesses, then you look to digital, then you’re going to have to [reassess] F&B, then it is development. So the name of the group… don’t worry, I’ll make some noise about it — that Accor exists.”

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