AccorHotels Finds Competing With Expedia Is Harder Than Expected

AccorHotels plan to take on the likes of Expedia and Booking.com by opening up its booking platform to independent hotels appears to have suffered a setback.

Accor CEO Sébastien Bazin announced the “marketplace” initiative in 2015, saying: “We need to stop having the perception that the lowest price is on the online travel agent sites. We need to disseminate this truth.”

Marketplace brings independent hotels onto the AccorHotels platform and not only adds extra revenue through commission but also in theory would attract additional customers.

However, two years later and it appears as though AccorHotels is still searching for a winning formula.

Speaking after the release of its first-half results, Jean-Jacques Morin, the company’s chief financial officer, said that although there were around 2,000 hotels “onboarded” with a similar figure signed-up and waiting for implementation, the offering was not generating enough traffic.

“The issue that we have on marketplace is the traffic that is appearing at the AccorHotels website level because now we have the hotels but we need to increase the traffic,” he said.

Part of the problem, Morin said, was that last year the company had to spend a considerable amount of its marketing and digital effort looking after its own franchisees.

AccorHotels now has to make up its mind whether it will kill the program or push ahead, the latter of which would surely require an increase in marketing spending. The Priceline Group and Expedia spend billions of dollars each year with Google to drive traffic to their websites and their offering is already established. Expedia along increased its direct sales and marketing spend 25 percent in the second quarter to some $1.4 billion.

Morin said that AccorHotels now needed to decide how much effort it would put into publicizing the product "because today you’ve got the hotels but there are not enough people aware of it and hence the traffic is not at the level we would like it to be."

First-Half Results

While AccorHotels' attempts at becoming an aggregator might be faltering, the rest of the company is in good shape.

Revenue across the business increased by 34 percent to $1.1 billion (€922 million). The company said its slew of recent additions, including the likes of Fairmont, Onefinestay and John Paul had a positive impact of $194.9 million (€165.9 million). Net profit increased by 13 percent to $112 million (€95 million).

Bazin, said: "AccorHotels' results for first-half 2017 are particularly solid. They reflect growth in our hotel business, the rapid integration of recently acquired brands, our persistently dynamic development and the ramp-up of our new businesses."

AccorHotels is in the process of spinning off its owned hotels into a separate entity — a process many of its rivals have gone through. It will retain a stake in what it is calling AccorInvest but will at the same time look to raise funds by brining in others.

"The separation of AccorInvest into a standalone legal entity has been completed. Discussions about the opening of this business to outside investors are ongoing. Our pursuit of this growth strategy enables us to aim for another year of record growth in 2017," Bazin said.