Sebastien Bazin, chairman and CEO of Accor Hotels, thinks the hotel industry has been a self-inflicted victim of inertia, having failed to respond over the last 15 years to the emergence of online travel agencies, their integration of travel metasearch, and now the sharing economy.
Appointed chairman and CEO of the hotel group in 2013, Bazin is determined to shake things up, having invested in digital assets, making overtures to independent hoteliers, and trying to change management culture by tying managers’ compensation to the guest perception of the brand and properties.
“Accor is not going to be a spectator of its own life,” Bazin says. “We’re an actor.”
He doesn’t mince words, describing the hotel industry’s joint booking initiative in Roomkey, as “pschitt.” [The French slang terms doesn’t have a direct translation, but it comes from the sound of opening a can of soda as in something that blew up.]
Skift sat down with Bazin in Hollywood, Florida at the Phocuswright conference yesterday and discussed how Accor hotels is adapting to the sharing economy, investing in travel startups, and why he views Sub-Saharan Africa and Iran as extremely attractive expansion opportunities.
Skift: AccorHotels.com was one of the early partners in TripAdvisor Instant Booking. How has that been working out for you?
Sebastien Bazin: Well, it’s been good, but it’s not transforming. Did it impact my direct booking? No. Did it slow down the OTAs’ (online travel agencies’ booking? No. Is it additive, is it a good future? Yes.
Skift: Are you content with the branding that you get within TripAdvisor as part of that Instant Booking process?
Bazin: Yeah, we’ve been from the very early stages. We’re very friendly, very positively minded towards Trip Advisor and all of their initiatives. We worked very closely with them. I think it’s a good thing they’ve done it. It’s cheaper for me.
Skift: Cheaper for you than OTAs? Is it strictly on a commission basis?
Bazin: Yes, it’s purely on a commission basis, and the commission is lower than the one I pay to Booking.com and Expedia.
Skift: Now, what about Book on Google? They are starting something similar although it’s commission or by cost-per click.
Bazin: We haven’t seen it yet. We’re considering absolutely everything with everyone if they’re serious about it. I think they (Google) haven’t decided yet whether they want to go in that direction or not. They’re talking about it. They’re mumbling about it, but you and I know that one of the biggest competitors to Google is Booking.com. The second is likely to be Expedia. Between those two, Google probably has over $2 billion worth of revenues, the sum of those two platforms. For Google to go commercial and to take the market share from the OTAs, it would have to be worth the trip. They really have to go and shoot for a $4 billion or $5 billion profit.
Which they could, but I think that they’re hesitating between doing what they do best, which is giving advice, and before they’re going to go commercial, looking at the impact on their two best clients.
Skift: Well, that’s the perennial dilemma for Google, right?
Bazin: I’m sure they have the ability to do it. They know they have the technology, they have the platform, they have the financial metrics, they have the relationships, they have access to supply. They have it all, but, they could be destroying somebody else’s business.
Skift: What about your own digital initiatives in terms of putting independent hotels on your platform. How has that been working out? You think more comprehensiveness in providing a variety of hotel options will bring you bigger volumes overall?
Bazin: We announced it on the third of June this year. We worked on all of this between June and early September. We haven’t launched any commercial activities in terms of looking for prospects. Even though we haven’t launched it, we probably have 10 times more independent owners asking to join than we could really accept. We started on the first of November. We were shooting for 500 hotels by the end of this year, and we’re going to have 500 hotels in only a couple of months. We have far more basically asking to join and a lot of them we will not accept. As you might remember, we’re trying to be hyper-disciplined on that marketplace, saying we’re only going to be having probably 12,000 hotels in the world. Out of which probably 3,000 is going to be our own hotels.
I’m going to go slowly. We went in basically five different pieces of puzzles. The first piece is you saying 70 percent of international travelers, whether it’s business or leisure, about 1.3 billion travelers, will go on a hotel website before booking. On average, they go on two sites. The second is 70 percent will go to 327 cities, which is the bulk of the traffic. The third piece of the puzzle is 90 percent of the bookings are going to be done on page one and page two on those websites. The fourth piece is whatever we do in terms of digital spending would be inflationary. I need to armortize my spending of a greater amount of supply of which I only have 4,000 hotels. Piece number six is the hotel industry is fragmented except in North America, so globally it is 70 percent mom and pops, and 30 percent hotel chains.
If you put the six pieces together, you’ll say that’s a basket which I’ve never addressed in these services. They are suffocating because the independent guys don’t have the money. They don’t have the expertise. They don’t have the technology, and they don’t have the vision. We need to make sure those hotels independently owned are run properly located and sizable enough to drive volume. Then there are site inspections. Since we have a couple of hundred thousand people on the ground, my people, it’s easy for me to ask them to cross the street next door and to visit the property for hygiene, security, fire, bedding, comfort, and so forth. I can say I know I’ve met the owners and I’ve met the manager.
Skift: You’re definitely going to curate who gets in?
Bazin: Oh yeah, but I don’t want to be the judge so I want to make sure that particular hotel is in the first 10 to 20 percent ratings on TripAdvisor for that location. For the independent owners, I’m not asking them to pay me any retainer fee. It’s purely optional. I’m not even asking them to renounce to Booking.com or Expedia. They are going to continue working with those people, but they are going to have an additional feature through Arcohotel.com. We’re going to send them traffic at a price that is much cheaper than the one provided by Booking, Expedia. And an additional feature is I promise my marketplace member that any information I will have on a client will be 100 percent transparent and shared with the independent guy.
Skift: I guess Booking.com wouldn’t retaliate against them?
Bazin: They might. Absolutely, they might.
Skift: Yeah, do they generally play hardball like that? Are they known for that?
Bazin: Of course they are. But, they’re known to be professional. So is Expedia. We live in an adult world. We do things. They do things, and we all battle for the same customers. We’re trying to be as efficient as possible. It’s life. It’s not a justice. It’s fine. I’m happy with this, but we’re big guys as well.
Skift: OK you can take a punch.
Bazin: Accor is not going to be a spectator of its own life. We’re an actor.
Skift: How does the Marriott-Starwood merger impact you? Were you guys at all involved during the sales process or looking at it?
Bazin: It’s too soon to figure it out because it doesn’t close until mid-2016, so it remains to be seen. I’ve been saying for the last couple of years is inevitably you will see a consolidation in the hotel industry. I said that for the last 24 months with no hesitation whatsoever, so it’s coming now, and it’s going to be accelerating for sure. I think this is the first step of many other steps, and I think it’s rational. I think it is a smart move. It makes a lot of sense. It’s going to create synergies. It is good for the clients. It is good for the team.
Skift: Why now? I mean it would have created synergies five years ago too.
Bazin: Absolutely, because five years ago people were not lucid.
Skift: Well, were they asleep at the wheel five years ago?
Bazin: All of us. For the last 15 years, we’ve been sleeping. I said that publicly and I got yelled at by my peers. Let’s face it, we’ve missed three waves in the digital revolution. The first wave 12 years ago, the OTAs. Did we move? No, of course not. Yeah, we tried Roomkey. “pschitt.” [The French slang terms doesn’t have a direct translation, but it comes from the sound of opening a can of soda as in something that blew up.]
Skift: I totally agree.
Bazin: We missed it. We felt, I guess, it (the OTAs) would be inconsequential. Yeah, well it’s now a big feature and we should have actually paid attention. Then, three or four years later it was metasearch. Did we do anything about it? Of course not. We’ve done nothing. Then the OTAs vertically integrated buying Kayak and buying Trivago so they actually figured it out. Number three is the sharing economy. Have we missed it? Did we move with Airbnb, and Uber, and Lending Club? Yeah, we’re certainly watching and we’re saying, “Well, we better move.” Well, it’s about time to move because we’re going to have a fourth wave and a fifth wave.
Skift: Okay so how are you addressing it? Hyatt invested in Onefinestay, part of the sharing economy, but in most of the hotel earnings calls, the CEOs are saying, “Oh, there’s no big impact from Airbnb.” They’re really sort of running away from it. How are you addressing it?
Bazin: I guess we’ve done two things. One, we’ve bought a company called Wipolo, which is an aggregator of tickets from rail, cars, museums, hotels, you name it, you have your own mobile application. We integrated all of the team, and we integrated the Wipolo application into the AccorHotels.com application. Then we bought Fastbooking, which was 120 people, and is basically a digital channel service provider for the outside independent owners. They have offices in Singapore, in India, in Germany, and in France. It’s working well and we narrowed it to 80 people, and since then, we’ve hired another 120 people, dedicated to digital expertise.
We’re looking for other ventures. We just bought a small piece of a company that is big in video content for the use of millennials between 12 and 18 years old.
Skift: But none of these directly address the sharing economy?
Bazin: No, sharing economy, you’ll have news by mid-December. I have huge respect for Airbnb. I said that. I know the guys. I think what they created is strong, formidable, scalable, and provides actually a good service. But, it is competing with us, and it would be foolish to say it has no impact. Of course, it has an impact.
But, it is not because they’re doing it that we can’t do similar metrics offering the same surprises, emotion, local content to my clients, which is why I’ve been moving this company from being less and less dogmatic, and less and less standardized. There’s nothing more boring than having the same room in different countries and you don’t know where you’re waking up, where you are. You can move away from that. That’s easy.
It’s not a blending or co-venturing with them. I’m not at all going that direction. I’m just saying what the client of Airbnb likes about Airbnb hosts we could provide a third, 50 percent, or 70 percent of the same features if he was going to a hotel. It’s doable. We have the local content. We have the local experience. We have the local knowledge. We have access to the tips, to the restaurants, to the photos. There’s a lot of things we can do.
Skift: How are guests’ expectations changing and what are some of the things you’re doing to meet those expectations?
Bazin: It changes rapidly because they are better informed. The level of expectation for them is higher, more demanding, and then they write about what they like, what they don’t like. The less you’re going to be interfacing with them (social media platforms), the less loyal guests are going to be, and the less they’re going to be accustomed to your website.
You need to basically make sure that you think of what it is that you should be doing to multiply by two or three or five times the level of interaction. The only way you can do it is by accepting that what we’ve been doing for the last 60 years is only offering a bed and a room, and they stay two or three times a year. We’re saying to our guests now we have to shift away by being a travel companion. I know this is what Marriott has said and we’re saying now for the last 24 months is to be at the contact with our client [from the dreaming phase to the stay and after the trip].
Skift: Are you getting into digital check-ins and keyless entry and all that sort of thing as well?
Bazin: Yes. We are going through or we have a program called Welcome, which is all done through SMS, texts, where a week before you come, you receive confirmation. Then, in a couple of days, we tell which room number you have, and then when you land, we’ll tell you where the traffic is, where you should be taking the Metro, how to get to the hotel. Then all the pre-check in has been done, so when you come to the hotel you have nothing to do except go directly to your room.
But the one thing we decided not to do as of yet is the digital check-in through the hotel door knob. I don’t want a guy to come with his cellphone and open the hotel room. It’s absolutely feasible. Of course, technology permits it. I just don’t want to do it because I need to keep an interface between some of my employees, the client, not to waste the guy’s time, but I need to basically provide some emotions. I need to listen to him. He needs to listen to me because contrary to all the digital players, we have warm content and information. We have physical contact. All the other guys never, ever have physical contact.
Skift: You talked about your staff being a differentiator in terms of dealing with the guests instead of the keyless entry we were talking about. What kind of changes are you making to the training of the staff in order to meet future expectations of guests?
Bazin: Yeah, plenty. Out of the five big topics that I have in front of me, one of the five is management culture. Which probably is the most difficult one because it is the one which is qualitative and not quantifiable. We have a new head of human resources. We changed the human resources department to Talent and Culture. It’s symbolic, but I wanted to change it. She’s non-French, which is also symbolic, but it’s good. She’s a Spaniard and she speaks six languages. What we are trying to do is we’re trying to get everyone within the group, whether they are in the headquarters or whether they are at the hotel level, to be 70 percent incentivized on the perception of our service, the perception of our hotels in the eyes of our clients.
Skift: You’re talking about their salary and their compensation based on the perception of … ?
Bazin: Yes. That should be the marker.
Skift: What are your views on global expansion?
Bazin: We are in 95 countries. We open one hotel every two days in the world so it’s a big expansion machine. We have by far the greatest pipeline of anyone in the industry if you exclude the U.S. because the pipeline from all the big American guys is still 60 percent U.S.-centric. I’m extremely bullish on sub-Saharan Africa, east and the west Africa. I’m very bullish on Nigeria, on Ghana, on Kenya, on Mozambique, on the Ivory Coast, Senegal, you name it.
Skift: What is so attractive about those markets?
Bazin: Sub-Sahara, black Africa is great. Second, or of equal size, is Iran. I’m a big believer in Iran, and third, of course, is India. Those three have in common many, many different things. Number one, enormous demography growth. Number two is the emergence of the middle class, which is very good for Ibis, for Novotel, and for the small and medium-sized enterprises. For my Ibis brand, all over the world 90 percent of the clients are domestic. Then, I’m not depending on international travelers. Chile, Peru, Colombia, Indonesia, Philippines, Thailand, you name it, it’s 90 percent small and medium-sized enterprises. Number two, they have a lot of history, civilization, architecture, geography. Number three, each of them has less than 1 percent GDP dependency on tourism, where all the other markets in the world it is between 7 percent and 15 percent. You know it’s going to go from minus one to three, four, five, six percent. The reason it’s not there is either geopolitical or it’s corruption or it is lack of infrastructure or lack of local talent.
Skift: Is it important to you to pay attention to travel startups?
Bazin: We’re going to be investing in 10 different startups. Two are going to be exceptional, three are going to be lousy, and three or four are going to be mediocre. I have to diversify but I’d rather be there too soon than too late.
Skift: Sure, so do you have active plans to make investments? Is there a specific amount of money you have set aside?
Bazin: No, it doesn’t matter. We have that money. The beauty of coming from our side is we have capacity, we have size, we have access to capital. The other side of the coin is we have inertia. That is a big company to move, and certainly when it comes to culture. Shifting the culture takes money. It takes time.
it’s going to be interesting. We’re on the move. For sure, we are. I am a believer that whatever is happening in the world for the last five years is a huge opportunity and not a threat, if you play it right. Some of us are going to play it right, and some of us is going to be miserably failing.
Skift: To be determined.
Bazin: To be determined, in a couple of years.