A lot has happened since Skift sat down with AccorHotels CEO Sebastien Bazin on July 14, just hours before a terrorist attack took place in Nice, France, taking the lives of 84 and injuring more than 300.
We met with Bazin in the iconic Palm Court at The Plaza Hotel New York, arguably one of the city’s most famous hotel landmarks — and the newest addition to AccorHotels’ growing portfolio of brands.
Fresh from a successful close of Accor’s $2.7-billion acquisition of the Fairmont, Raffles, and Swissôtel brands on July 12, Bazin was more than happy to talk to Skift about the purchase, as well as his vision for the future of hospitality.
Unlike a lot of his contemporaries, Bazin isn’t afraid to go against the grain, or to take risks. A former private equity investor, he’s been outspoken and often critical about the industry, saying, “All of us. For the last 15 years, we’ve been sleeping. I said that publicly and I got yelled at by my peers.”
He’s also invested in a number of companies that his peers haven’t, from alternative accommodations providers like onefinestay, Oasis Collections, and Squarebreak, to innovative technology providers like Fastbooking and Wipolo.
Last week, the company announced its intent to buy a majority stake in John Paul, a Paris-based customer and employee loyalty company that specializes in providing 24/7 concierge services and customer relationship management.
Perhaps the most telling moment of our interview with Bazin came soon after he’d answered our questions about the company’s newest brands, direct bookings and OTAs, and how hotels need to evolve to meet the needs of their consumers. Eyeing another group’s elaborate, three-tiered afternoon tea display, Bazin asked the wait staff if he could try “just a few of the desserts on a plate.”
That small request sent the staff into a bit of a panic. They were serving their brand-new CEO after all, and they wanted to make a solid impression, so they headed straight to the kitchen to prepare another elaborate afternoon tea set, complete with finger sandwiches, desserts, and much more. It was delivered six or seven minutes later.
And while Bazin appreciated the staff’s efforts, he turned to us, and more or less said, with a bit of a sigh, “That’s what I’m talking about. We need to be able to be more flexible with the guests. If a guest asks for just a small plate of desserts, we need to be able to give him that. We need to give them exactly what they want.”
As you’ll see as you read on, that moment perfectly encapsulates Bazin’s hospitality philosophy: to succeed in this business, you’ve got to be flexible, you’ve got to be fast, and you’ve got to be able to respond exactly to your customer’s needs and wants.
Note: This interview has been edited for length.
Skift: How does it feel to finally close the deal with Fairmont Raffles?
Bazin: It feels very good, because we had no choice but to be successful. It would have been a disaster if we had not been successful, for many reasons. We’ve been so engaged in making the process a success. We’ve been spending so much time in between the teams of Accor, the teams of Fairmont Raffles, in Toronto, in Dubai, in Singapore, in Zurich. Since the time we signed the deal in December, we’ve felt the deal was already done. I am very fortunate, that the shareholders approved the timed actions, as you may know, with a 98 percent positive vote. Which for me, it’s a great signal from the market, that the market is endorsing the strategy of the board of directors, recommended by the management. It’s a good thing, and it feels good. We feel privileged, and very proud.
Skift: There’s been a lot of consolidation going on in the industry. Accor and Fairmont is just one of many big mergers that’s taking place this year. There’s another big one on the way, Marriott and Starwood. Do you think that merger is going to impact your business, at Accor, in a major way?
Bazin: No. First, I think what Marriott has done with Starwood is a very good move, and a very wise move. I’m sure it will be successful. What HNA has done with Carlson is also a good momentum for HNA, and for Carlson. We’ve obviously done something similar with Fairmont Raffles. Are those mergers indispensable to really grow hotel companies? I don’t think they are. Are they additive? Of course they are. I’ve been saying for a long time that the hotel industry is likely to consolidate, which we’ve seen coming for the last few months. But it maybe won’t stop there.
What the nature of our business is, it’s more and more client driven. If you want to follow your client, you need to follow them in those 300 cities where they spend 80 percent of their time. Much more than scale and size, what you should be driving from is, in those particular 300 cities, how could you be of best service, in terms of market share, penetration, diversity of segment, and under common umbrella, which is the reassurance.
Don’t look at it as being the world. It’s no longer the world; it’s no longer countries. It’s cities which matter the most.
Skift: Would you say that competition in those cities is becoming tougher?
Bazin: It’s becoming tougher for two reasons. One is because old hotel companies have a very good expertise and professionalism. There’s no amateur in that game. The independent hotels happen to also be very good operators in those cities, and I think the clients are more and more demanding, more and more selective. Because they have more and more information. What’s driving client retention is experience. It’s not really price; it’s, what are the memories of them staying some place, and being happily surprised, and what’s the emotion driven to that place. But it’s fine. The more demanding it is, the better it will be for companies like ours, where we feel we can provide a different experience.
We have something which is very valuable, which you may not have noticed. Accor is by far the biggest hotel operator in the world. With 75 percent of the 4,000 Accor hotels, we are the direct operator, which is very different from many of my peers like Marriott and InterContinental, where they’re mostly franchises. Which means the on-the-field experience is driven by franchising, not directly by the corporate brand. Which is OK, it’s a good business model as well. I’m just saying it’s different.
Skift: What do you think the advantages are of having that direct operator model, versus franchising?
Bazin: The biggest advantage is the way you can execute and implement new ideas. Since you are directly responsible for the people on the ground, if the corporate office has new ideas on check-in/check-out, mobile applications, a lot of things in service that the guests need when they physically come into the hotel, you can deploy that new initiative within 12 months, which we’ve been doing on this mobile check-in/check-out application. We’ve deployed in 2,500 hotels in less than 12 months, which is impossible if you have the same amount of franchises, because you have to convince the association, and convince each of them to deploy it, which takes three times longer. That’s the good news.
On the other side of the coin, it is absolutely true that if you are only a franchiser, you’re likely to have a better margin business, and less risk. Because you don’t have all the intricacies of dealing with the customer.
My model, I think is better, because what’s going to be counting the most in the years ahead is, what is the level of touch points, interaction you have with your guests. How much data would you have on your guests, so that you understand that he wants to be on the fifth floor, away from the lift. That he wants to have a banana when he comes in the morning. That he’s going to be running every other day. All that information. You actually record them, you share them, and the customer will see a difference if he’s sticking with your network. It’s much more difficult for the franchise model, to record the information, and then to share it across the system. But again, there’s pluses and minuses with both systems.
About the OTAs and the Direct Booking Wars
Skift: We also wanted to ask you about the online travel agencies (OTAs), and how that works in terms of distribution. Expedia, for example, says that it wants to be hotels’ friends, and that it wants to aide hotel brands and their direct marketing efforts. That it wants to enhance hotels’ loyalty programs. Do you buy that?
Bazin: I do. One, I buy it. Two, I think they mean it. Three, I think they’re correct. As much as they want to be friends of the hoteliers, I also want to be a friend of theirs, and we are. We are from the very early beginning. We are, with Priceline, Booking, and Expedia. The only limitation to our friendship is, what is the cost of that friendship? They provide a fabulous service, at an acceptable rate. It’s expensive, but it’s acceptable, for a first time customer.
A guy in Minneapolis who wants to come to a Novotel hotel in the south of France would have never heard of Novotel Hotel in the south of France if Booking or Expedia did not exist. They’re providing me with a first-time client, at a cost which is cheaper than me creating a sales engine in Minneapolis. Then the name of the game for us is, when the client comes into your hotel, we need to make sure the client has been welcomed, identify him or her, and invite that person, whenever they would come back to the AccorHotels network in the world, so the second time around they don’t have to go back to Expedia and Booking. That’s called the retention program.
I’m doing it in a very transparent manner, even vis a vis Expedia and Booking. They know we’re doing it, and they’re fine with it. Because most of their volume is first-time customers, which means we don’t have common interests, but we have common ambition, which is to develop the travel and tourism world. My answer, however, is very different from the answer of the small independent hotel owner and operator. Because if I have a retention program, that means I want that customer to benefit from the other brands, and the other 3,999, which is my strength. If you are an independent hotel, and you only own one hotel, every time you’re going to have to pay Booking and Expedia, because you don’t have something else to offer them.
We just have to be very careful on which answer. The one thing they have to be careful is, that service has a price. I don’t want that price to be confiscatory. That’s basically where people have to talk, in a sense.
Skift: That’s why Accor has allowed independent hotels to advertise on its site, yes? You’re acting as a distribution channel.
Bazin: What we’ve been saying is under two premises. Number one, which is interesting, is, except America, the entire hotel industry is extremely fragmented. It’s majority in the hands of independent hoteliers. In Italy, for that matter, 95 percent of the Italian hotels are run and owned independently. In France, it’s 70 percent. Which means all of those independent hotels are suffering from the advent of new digital players, the OTAs the TripAdvisors, because they don’t have the technology, and they don’t have access to their clients anymore, as easily as in the past.
Groups like ours, we’ve been investing more and more in loyalty and technology, in CRM, and in data. We’ve actually missed offering to share our technology with the majority of the hoteliers, which happen to be independent. We actually never looked at them, except imposing our brands on them as a franchisee. In many occasions, you don’t want to impose the brand, because the hotel doesn’t fit your brand. What we’ve been saying for a few years, it is a bit rubbish. One ought to basically show hands, and open your arms to those independent hotels, because they actually need us. To pay for our technology at a much lower cost, and it makes them less dependent on the OTAs, so it’s a win-win.
At the same time, we’ve actually been telling them that all the client data, when they come to their hotels, even though they would have been sourced by AccorHotel.com, 100 percent of the data will be shared, and transferred to the independent hotel. You will know the name, the email, the address of your clients, which is not the case if you come to Booking. You’re the client of Booking, and I don’t have your email or your cell phone number. Which is something which is very difficult, because you happen to do the job, and it’s not really your customer.
We’ve been saying through that Fastbooking initiative, which is immensely successful, that it’s a win-win for the hoteliers in being independent, because it’s a cheaper commission, and data access. And obviously it’s not renouncing to Booking and Expedia. It’s just an additive measure. For me, it has a huge merit as being the first marketplace being curated by one hotelier, on behalf of hoteliers, and we’re going to be enlarging probably to 12 thousand hotels, from 4,000 today, of which two thirds are going to be independent. But they have to be the best hotel in town.
Skift: I know you guys were also an early participant in TripAdvisor’s Instant Booking. How has that been working out?
Bazin: It’s been working out very well. We, being the first backers of TripAdvisor, I think it was seven or eight years ago. It’s actually interesting, because most of my competitors said, “We’re not willing to put a TripAdvisor ranking on our hotels”. From the very first day, we said we should be transparent. Why not? We actually put banners with TripAdvisor. We have a very close and trusting relationship.
They want to have their own direct booking. We’ve actually been telling them, “Of course we can do it”. It’s been working very well with us. It’s not a penalty for me, because it’s similar pricing to Expedia. The reason they’re doing it is because they want to keep their relationship with the clients. Every time they have a client looking at the site, that client is actually looking through a booking engine. Why not have the same services on the same side? It is smart, and legitimate.
Skift: What are your thoughts on the other big brands’ direct booking campaigns? Do you think those are having an impact?
Bazin: I think so far it’s marginal. Let’s face it. The industry, whether it is our industry, or the e-commerce industry, people take leadership market share within five years. Eighty percent of the online traffic is in the hands of Booking and Expedia. Eighty percent of the recommendation side is in the hands of TripAdvisor. It’s a bit winner-take-all. Can they grasp some of the market share? Or course they can. Can they make a living out of it? Of course they can. Are they going to be successful in taking market share away from Booking and Expedia? I doubt it.
Every time there is a new site, it’s a stimulus for all of us. It’s a wake-up call. Because that new site has an extra technology which is smart, which is what the clients want. But it is so transparent, accessible, I guarantee you every time we see something smart, we try to steal it away, to incorporate that in our own system. But again, you’re going to see many of those new sites, of which 80 percent will fail. Twenty percent will be successful. Half of that 20 percent is going to be bought out by the big guys. It’s the nature of the game, which is what happened with Kayak, what happened with Trivago, they were bought by Booking and Expedia. HomeAway, Abritel [the French HomeAway], all of those are being bought by the same people.
Skift: Do you think we’ll ever see a direct booking campaign from Accor, or are you not going to waste your time on that?
Bazin: I don’t want to create a third OTA. I have my own direct booking, which is AccorHotels.com. I have my own channel. But, am I going to be a big distributor or many brands to 500,000 hotels? Never ever. This is not my business. I’m not a digital platform, and I’m not a distributor. I’m a hotel company, and the service is a guest, and anything which is guest related, which means interfacing with the guests. You’re going to see me more and more in creating new supply. But on the pure digital distribution hand? No.
Skift: We spoke earlier this year, and you said it’s foolish and irresponsible to ignore the sharing economy.
Bazin: Yes. I want to be provocative.
Skift: I know a lot of your fellow hoteliers have said that the sharing economy, Airbnb, can co-exist with traditional hotels. But what they have a problem with is commercial operators who are abusing these platforms. Do you agree with that strategy they’re taking, in terms of dealing with the sharing economy?
Bazin: The last thing I’m going to do is make a comment on my competitors. One, because I respect them, I enormously respect each of them. Two, because we have different models. Most of them are franchisers, they are in America. I am not a franchiser really, I’m not in America. We have different diagnostics because we have different tools. Which is absolutely okay.
What I’m saying however is, Airbnb is growing. Airbnb is impactful in the big capital cities. It’s true for New York, it’s true for San Francisco, it’s true for Barcelona, it’s true for Paris. By definition, they are taking away some of our clientele. Those clients, which are extremely price sensitive, which are the budget economy low scale, because they actually get an offer which is cheaper, they feel it is more spacious, with a better experience. My view is simple. Don’t ever think it is injustice.
Now, somebody smart created something which is functioning. Put yourself into the shoes of, who is using Airbnb? If you understand the reason, which is the one I just talked to you about, then why don’t you basically recreate what they want within your hotel space? Which you can. Can I get more leisure capacity in my hotel? Or course. Can it be cheaper? Of course. Can you have a better food and beverage experience? You’re going to give them exactly the same thing, plus a better security system, better comfort, better hygiene, and not the agony of not knowing whether the kids are going to be there before you leave, or when you get in.
You’re going to see, we’re going to be announcing new innovation, a new niche market, which is exactly … it’s not really tapping on Airbnb. It’s really providing, to the guests of Airbnb, which are the guests of Accor, something different. It’s being innovative, and being bold and audacious. But it’s not a lost battle at all. Again, Airbnb is going to keep growing. So are we.
Skift: What should the hotel industry be doing? What should it be focusing on more? What areas should it be paying attention to more? Experience?
Bazin: It starts with, you have to get away from being transaction, commercial minded. Which has been the case for too long. You have to be client, experience, you need to give a purpose to your service. You need to understand why all those small companies got created and have been successful. You need to have a good read on what’s happening around you. You need to understand that the clients of yours are going to have more and better information. Any new concept is going to hurt, but it’s going to be heard about. They might have experienced it, and if it’s not him directly, some of his friends have experienced it, and it will be on Facebook.
If you continue on the normal standards, being dogmatic, you’re going to lose your clients, because they’re going to be disappointed, and they know someone else is doing something different and better. Which is why you have an obligation to be bold. You have an obligation to destroy some of your physical space. Probably, it starts with, you need to make the first look at your hotel space when you enter from the street, it has to be cozy, trendy, spacey, noisy, fun. If it’s rigid, if you only see a front desk and a line, and a sign, they’re going to walk away from you.
Which again, it’s good. It’s forcing you to … Which is why I’ve been saying, “wake-up call,” all the time. Anybody who’d been blind, deaf, is going to have a tough time.