Skift Take

Deal by deal, AccorHotels is taking bold steps to bring the traditional hotel company into the future and its newest pilot is absolute proof of that.

AccorHotels is undergoing a major transformation in an effort to become a new breed of hospitality company, and the biggest example of that is the company’s most recent pilot program.

Dubbed “Accor Local” by AccorHotels CEO Sebastien Bazin during the company’s analyst conference on February 22, this pilot brought to life a concept that Bazin first mentioned to Skift last year, shortly after the company completed its $2.7-billion acquisition of the Fairmont, Raffles, and Swissotel brands.

“Ninety-nine percent of what we have done for 50 years has been based on the guy coming from outside of town,” Bazin told Skift. “A traveler, from a different city, from a different country, which I think is interesting, but not too smart. Because we missed a population which is 100 times greater and better and easier: The guy living next door. The local inhabitants. They live around the hotel, or they go to an office around the hotel, and 90 percent of them never dared coming into the property, because they’re fearful that we’re going to be asking, ‘What’s your room number?’ They don’t need a room, but they may need a service.”

Bazin said there are “zillions of services we’re going to get into,” among them having hotels assist locals with simple tasks and solving everyday solutions like holding packages or keys or recommending the best services nearby.

“[The hotel will be] a place that will make your life easier,” he said. “It’s giving a purpose to the Accor people, because they’re going to be feeling very proud, proud of bringing that additional service that people need, and are afraid of asking for.”

Redefining the Meaning of “Local” with the Accor Local Pilot

The two-month-long pilot program, Bazin said, took place in Paris most recently with property managers from 10 different hotels across Paris, all of whom were instructed to get to know, on a first-name basis, the service providers who reside in their respective districts — dry cleaners, florists, bakers, shopkeepers, etc. And after doing that, the managers were told to start establishing relationships, and building services with these providers to give to the local community.

“The first thing is to go and talk to people who are already providing [these community] services,” Bazin explained, as the instructions given to these hotel managers. “[Tell them] that you are one of them. They have looked at you for 50 years as someone who only talks to foreigners.”

An example of the types of local services to be provided by AccorHotels included the following scenario, as described by Bazin: “[Maybe] the dry cleaner has someone’s dress or suit, but he has to close his shop at 7 p.m. Why doesn’t he drop the dress off at the hotel next door, and send a text to the customer and say it’s waiting at the front desk? It’s so easy. That’s what Accor Local is all about.”

It’s clear that with this desire to enter into the “local services” space, as Bazin called it, AccorHotels wants to change the way people interact with their hotels. The hotel, according to Accor, is no longer just for travelers or guests, but for everyone and anyone who has the ability to interact with them and to use them.

“What can I offer them by way of service?,” Bazin asked. “Food and beverage? Dry cleaning? Key service? Leave their luggage? Recover a rental car? Drop it off? When you enter that universe, you say, ‘My God, I have everything that the digital world wants.’ I have John Paul [concierge services] where I can interact with them. [We’re] changing, radically, your mindset, and entering revenue that can grow 20 to 30 percent a year.”

Bazin didn’t divulge any other specific details about how the Accor Local pilot will continue, or how it’ll be rolled out to other markets going forward. Skift contacted AccorHotels for additional information as well, but company representatives said there was no further information available at this time. However, Bazin did say that the underlying platform for being able to provide and manage all these local services will be AccorHotels’ loyalty program, Le Club AccorHotels.

That loyalty program, which today has 32 million members, will be the shared customer relationship management platform across all three of the company’s verticals going forward: the traditional hotel business; the travel space (accommodations outside hotels); and community services (the likes of which the Accor Local pilot was testing).

Including members from Fairmont’s President’s Club (4 million) and those from AccorHotels’ partner in China, Huazhu (70 million), the number of loyalty members whom Accor can already reach totals 106 million. The company did not say whether it would eventually combine all of these programs into a single loyalty program.

A New Hospitality Business Model for the Future

Those three business verticals, Bazin said, are all part of a “pivoting business model” and a “change of axis” for the 50-year-old hospitality company.

A big part of this change is being driven by an upcoming sale of the company’s $6.9 billion property unit, HotelInvest, which is expected to close by July of this year. Accor plans to retain a 30-percent stake in HotelInvest following the sale, and its seems likely the company will use this cash to fund its continued expansion.

That evolution is best demonstrated by the pattern of deals the company has made within the past year — 10 to be exact — and another one in the works, with the planned acquisition of luxury rental broker Travel Keys.

Last year, Accor’s major purchases included the Fairmont, Raffles, and Swissotel brands, as well as onefinestay, and as well as major investments in digital concierge provider John Paul, 25hours Hotels, and Banyan Tree.

And with each acquisition or investment, AccorHotels is becoming a new kind of hotel company that can compete in an increasingly digital environment, as well as one with plenty of competition from sharing economy innovators like Airbnb.

“Digital doesn’t scare us,” said Bazin. “All these [companies] with big market caps like Snapchat, Facebook, Airbnb, and Uber, there are two things they’ve avoided doing: they don’t want to have capital tied up in physical property or bricks or mortar or people. They are capital light and labor light. We are capital intensive and labor intensive. Through Booster [the code name for the sale of HotelInvest], we’re freeing up some of this capital and giving it to people who want yield. Except we [also] have the cost of the 4,100 addresses [hotels] in the world. So, why not turn those weaknesses into a strength? We’re perfectly capable of melding the physical and digital worlds. Throughout these assets and addresses I’m already open 24/7 and I have 240,000 people. What can I do to improve the life of citizens?”

No doubt Accor’s majority stake in John Paul’s digital concierge services will help power its expansion into local services as well as the customer care provided to guests who stay in its hotels and its non-hotel accommodations, too.

Offering more on-the-ground, concierge-like services is also something Airbnb CEO Brian Chesky has noted as a future product for his company as well. And as rumors have swirled that Airbnb may start getting into the business of flights, similar talk has been made of Accor’s potential pilot into selling flights on its own digital platform as well.

And unlike its traditional hotel peers, Accor is unique for its direct investments into the sharing economy. In addition to owning onefinestay, the company is a major investor in two other alternative accommodations providers: Oasis and Squarebreak. And soon, like Airbnb just did with Luxury Retreats, Accor hopes to own luxury vacation rentals platform Travel Keys, further deepening its investment in this space.

“We’re turning the company from the culture of a very large matrix pyramid structure to an entrepreneur structure,” Bazin said on stage. “Those [acquisitions and investments] must remain self-standing. The more we have autonomous, self-standing units, the more it will benefit us. There will be mistakes, but it doesn’t matter one iota … We’re entering a new adventure where there’s boldness, innovation, and risk taking.”

In Other Accor-Related News

Yesterday, the company also announced that former French President Nicolas Sarkozy has joined the company’s board of directors to lead its International Strategy Committee. Sarkozy replaces former board member Nadra Moussalem following Colony Capital’s decision to sell its 4.9 percent of stock in the company. No mention of Sarkozy’s appointment was made during the company’s earnings presentation.

During the earnings presentation, however, Bazin confirmed what many had suspected about former onefinestay CEO and founder Greg Marsh’s abrupt departure only three months after the Accor acquisition last year. Of Marsh’s resignation, Bazin said, “Yes, the CEO left three months later … he didn’t fully agree with the roadmap, not entirely anyway.”

Bazin also noted that since Accor acquired onefinestay, the company’s average revenue per available room has increased by more than 20 percent and the company will expand to four new cities this year. “It’s flying, it’s growing. It’s fully integrated into the group by remaining independent. We’re just providing the means for accelerating their growth without intervening in their business plan,” he said.

And although the macroeconomic and geopolitical climate in 2016 was very challenging, Bazin said the company’s financial performance remained very strong with record operating profit that beat expectations. Net profit for the year was up 8.1 percent to nearly $281 million. System-wide revenue rose 0.9 percent to 5.63 billion euros ($5.94 billion). Strong demand in Germany and Britain also helped the company offset slumps in business in France last year.

The company didn’t provide a financial outlook for the year ahead in terms of guidance.

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Tags: accor, earnings

Photo credit: AccorHotels chairman and CEO Sebastien Bazin said the company was undergoing a major transformation. AccorHotels

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