Accor Finds Middle East Poses Unique Challenges After Acquisitions

Size can slow companies down — and in a competitive hospitality market, speed is everything. For the acquisitive hotel giant Accor, that presents unique challenges in the key and growing Middle East and northern African market. Its portfolio in the region has grown nearly 20 percent overnight. That growth spurt raises the question of whether its owners, previously used to dealing with a single-brand operator, can be satisfied with being part of a larger group of more than 30 brands.

With the acquisition of Mövenpick in September 2018, Accor’s portfolio grew by 85 hotels globally and 55 properties in the Middle East/Africa region alone.

Headed by the region’s CEO Mark Willis, the division oversees 265 hotels with over 60,000 rooms across 36 countries, with nearly 200 hotels and in excess of 40,000 rooms in the pipeline. His work is being supported by two chief operating officers responsible for different sub-regions: the North Africa, Levant, the Kingdom of Saudi Arabia, and Indian Ocean is overseen by Sami Nasser, while Marc Descrozaille is heading up the Gulf (excluding Saudi Arabia) and sub-Saharan Africa.

The team certainly has a lot to get on with. Accor has 20 openings on the cards this year across more than 4,000 rooms in the region. The next year will prove to be the bigger challenge with 10,000 rooms scheduled to open.

Owner Relations

Historically with mergers, a number of factors can be a cause of concern for owners. The Middle East, perhaps more so than any other region, is heavily relationship-driven and a change in personnel could cause alarm. However, as the CEO of consulting firm Ròya International, Kees Hartzuiker, pointed out, a number of Mövenpick veterans have stayed on after the acquisition, which provides some sense of continuity.

Previously, with the global headquarters for Mövenpick based in the Middle East, owners were also assured that their hotels were being overseen from within the region. What may help the new team on this front is its decentralization from Accor’s headquarters in Paris. “Many owners felt that our size would be overwhelming,” Accor’s Descrozaille said, “but we have the choice and the ability to make decisions that will impact the business and provide answers to owners without having to go back to Paris every time.”

Nevertheless, a cause for concern for owners is that a previously competing hotel next door is now considered part of the family. An example of that can be seen in Makkah, where multiple Accor-branded hotels now circle the Clock Tower with 7,000 rooms. Nasser, however, said that owners who were potentially apprehensive have realized the benefits of being part of a mammoth network whether from the point of view of distribution or procurement.

The other challenge will be to ensure owners still feel a sense of importance. “The fear is that owners are going from a smaller company where they felt they were a big fish in a small pond, and now all of a sudden they are one of thousands,” Ròya’s Hartzuiker said.

Future Outlook

One of the opportunities that presents itself is the potential increase in direct business, which is an expected positive development from the merger. Hartzuiker said, “From the dot-com point of view we think it [the acquisition] can almost double the contribution.”

Other opportunities include a stronger global RFP process for Mövenpick-branded properties, as well as better negotiating power for lower OTA commissions.

Rendering of Mövenpick Resort Al Marjan Island in the Arabian Gulf, now under construction. Source: Accor

Once the integration is fully completed, Hartzuiker said, hidden costs will have to be monitored. “We have seen in previous mergers a lot of the infrastructure charges that come back to the hotel’s P&L have sometimes substantially increased, and while we have no visibility at this stage, that will be something else we will be monitoring going forward,” he said.

Because of Accor’s current size in the Middle East, the obvious risk is that it could become a bureaucratic administration. The Accor executives say that this hasn’t happened, largely due to the entrepreneurial nature of the company’s chairman and CEO Sébastien Bazin. “The company is not bogged down in normality. We have a visionary CEO, and I don’t use the term lightly at all,” Accor regional CEO Willis said. “He’s looking forward all the time in an industry that is constantly changing.”

Mirroring his mentality, the new Middle East and African leadership team has set a strategic plan for the next 36 months involving greater transparency, faster decision-making, and deeper relationships with regional owners. What remains to be seen is whether these measures will be enough to stay nimble and match owners’ high expectations.