Accor has plenty of opportunities to transform itself into more of a lifestyle brand, but every one of its competitors is playing this strategy to some degree. Finding a way to stand out is easier said than done.
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A downturn is a terrible thing to waste, business sentiment generally goes. Paris-based Accor certainly hasn’t wasted time accelerating plans to transform the hotel company.
The company faced a massive financial setback last year due to the pandemic and its significant exposure to Europe, where lockdowns lasted longer than markets like the U.S. and China. But Accor leaders went to work speeding up plans to beef up the company’s presence in the so-called lifestyle hotel sector, properties that focus more on local experiences and food and beverage outlets.
Accor also launched its own special purpose acquisition company and other endeavors focusing on revenue streams beyond the traditional hotel model. How much of that relates to the pandemic? Accor CEO Sebastien Bazin let Skift know in an interview ahead of his appearance later this year at Skift Global Forum, Sept. 21-23 at the TWA Hotel in New York City.
Answers have been edited lightly for clarity.
Skift: How do you see both your company and the hotel industry as a whole growing in the next few years? Will there be that wave of mergers and acquisitions most expected a year ago, or will it be more organic growth of a company’s own brands?
Sebastien Bazin: I would say there are three priorities we will be concentrating on at Accor over the coming years. First, of course, we will continue to help and support our partners and employees who have been impacted by Covid-19. That’s always been the most important thing through the crisis. In 2020 we created the ALL Heartist Fund, a €70m-fund which exists to provide financial assistance for employees and individual partners affected by the pandemic.
Second, we will remain fully committed to our “Augmented hospitality” strategy, which we are constantly enriching. The hotel sector is evolving rapidly and our goal is to adapt to guests’ changing needs. We want to deliver tailor-made, personalized services and lifestyle experiences to our guests so they can “Live, Work, and Play”, as we call it – the idea of making hotels places that offer more than just a bed and a shower.
Lastly, I would say there are many, many development opportunities in the market right now. The hospitality market is fragmented and growing, particularly on the hotel owners’ side, where there are many hotel owners and independent hotels. So, I look at that and think there is ample room for development and Accor has the ideal portfolio of brands and the best talents.
With all of these things, it’s very important that Accor continues to seize every opportunity as the world recovers from the Covid-19 pandemic. Covid has hit the hospitality and tourism sectors the hardest, no doubt. But make no mistake that our industry remains blessed. It accounts for 10% of global GDP and one in 10 jobs around the world. And despite the pandemic, the appetite for travelling is undeterred: people are filled with dreams of holidays, discoveries and fulfillment. I know that with the current vaccination campaigns being deployed in all regions, travel will rebound in the near future.
Skift: “Lifestyle hotel” is the industry buzz word as of late, and Accor has been the most bullish on this sector over the last year — particularly with the planned Ennismore spin-off. Why put so many resources in these kinds of properties, and is the emphasis on lifestyle brands how Accor differentiates itself from competitors during the ongoing travel recovery?
Bazin: This is true, the lifestyle segment is one of the fastest growing sectors in hospitality, and the quickest to bounce back from the pandemic. It’s a key area for Accor, for sure. And we have built a leading position in that space with the strong ambition to transform our hotels into real places of life. Even before the crisis, we had started adapting to consumers’ new behaviors: the desire to socialize and enjoy free time, seek differentiated and authentic experiences, and engage with local culture.
Accor’s strength is that our lifestyle hotels and venues are authentic destinations where we create unique experiences. The brands are varied but they have a few fundamental ingredients in common: a vibrant atmosphere, great [food and beverage] and entertainment, all delivered with our hospitality expertise. These destinations attract travelers and locals alike, and they are increasingly what our guests want to see.
With Ennismore, Accor is further strengthening its position here and we are strongly accelerating the international expansion of our lifestyle brands. That’s for the simple reason that this segment is one of the most promising engines of our future growth. We plan to triple the number of lifestyle hotels by 2023; these properties currently represent 25% of our development pipeline by value.
I also strongly believe this Lifestyle expertise will benefit all our brands. What we are doing in our [economy] and midscale segment with the ibis family and Music, for example, and more recently with the Novotel revamping concept and the refresh of the Mercure identity is another way of responding to new guests’ demand.
Skift: We’ve seen Accor get into coworking, there’s the SPAC announced earlier this year, and you’ve spoken in the past about other revenue streams outside the traditional hotel room. What’s the motive to get into such alternative business lines beyond hotels, and did the pandemic accelerate this desire to diversify the company?
Bazin: Let me tell you something, this is not actually linked to the pandemic. As you may know, Accor has now completed its business model transformation – something we started long before Covid hit – and we are now an asset-light company, a real service provider. All these activities have one purpose in common: to reinforce our Augmented Hospitality strategy by providing high quality and diverse services for our clients. We have been diversifying our activities beyond traditional hotels for years because we want to offer the additional services and different experiences which enrich our guests’ stays and – this is important, too – are attractive to hotel owner.
ALL- Accor Live Limitless, our powerful lifestyle loyalty program, was launched at the end of 2019 and is a keystone of this strategy. We are accelerating it to offer our guests enhanced personalization, benefits and money-can’t-buy experiences, all managed through a holistic ecosystem. I’m talking private rental, co-working, concierge, entertainment, for example. This offering is totally in line with emergent customer trends identified before the pandemic and our strategy to extend our relationship with clients into their daily lives.
So, the newly created SPAC that you mentioned is a vehicle to further enhance this long-term shift and finance our Augmented Hospitality strategy. With it, we aim to follow the journey of the traveller, to extend the experiences beyond hospitality and offer services for non-travelers to make hotels places to Live, Work and Play. And we’ve chosen this innovative structure because it means we can do all this work with minimal funding from Accor, allowing the Group resources to be focused on its core business.
Skift: Accor’s more significant portfolio exposure to Europe has not helped the company over the last year due to more prolonged restrictions compared to markets like China, the Middle East, and the U.S. How do you manage the ambiguity with the various restrictions across Europe? Does this make you consider building up more in these other regions to be less exposed to any one particular part of the world?
Bazin: It’s true that European countries have taken different regulatory measures, and at different paces, to tackle the health crisis since the pandemic started. This heterogenous situation – and the ongoing volatility of all the different variants we have seen – led to a rebound in EU that was, shall we say, less steep than elsewhere. So, I would say we need more support, cohesion and convergence from governments to drive Europe’s recovery, definitely.
But it is also of course natural that the recovery will not happen at the same time and at the same pace in each region of the world – that’s just a fact. So for Accor, the key to managing this variation and uncertainty has been to give more autonomy to our local teams. They are the ones who best know their markets and are best equipped to react quickly to the circumstances in their area; this decentralized approach has served us well throughout the pandemic.
Skift: Vaccine distribution is accelerating now around the world, and we’re beginning to see more travel restrictions lifted. But there is also the threat of variants heading into the latter part of the year. What has you optimistic at the moment, and what’s keeping you up late at night with concern?
Bazin: Yes, vaccination rates have accelerated in all regions. We are now in a situation where 3.5 billion doses have been administered globally. But uncertainty remains, and that means my teams and I must continue to focus on what we call “controlling the controllable”. What do I mean by that? I mean focusing on our brands, our people, being true to our values and continuing to be financially disciplined.
If we get this right, then I know I can look ahead with confidence, because I know that travel – and especially leisure travel – will rebound and be boosted by the momentum of vaccine rollouts. It comes back to what I said earlier about hospitality being a blessed industry. Despite everything that has happened, I have great confidence in its long-term growth trajectory. Travel continues to inspire, and the desire to travel will always remain. I have no doubt that we at Accor will be ready to welcome those guests.
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Photo credit: Accor CEO Sebastien Bazin (pictured) is leading the charge of transforming the Paris-based company into much more of a lifestyle brand meeting customers beyond just the walls of a hotel room. Skift