Skift Take

The hotel welcome mat belongs to guests near and far. Accor CEO Sebastien Bazin's future vision for the future of Accor banks on the idea more business will come from next door neighbors checking out a restaurant, café, or meeting space.

Accor Chairman and CEO Sébastien Bazin spoke with Skift Hospitality Reporter Cameron Sperance at Skift Global Forum 2021. The two discussed the theme “Future Growth in Luxury, Lifestyle, and Sustainability” 

You can watch a full video of their discussion as well as read a transcript of it, below.

Cameron Sperance: Hey everybody, how’s it going? Hi, Sebastien. How are you?

Sébastien Bazin: Cameron, good to see you. So I’m succeeding Glenn Fogel. Wow, that’s going to be fun.

Sperance: Pressure’s on. Pressure’s on. So thank you for joining us. So we are going to be talking about topics that are pretty big on Accor’s orbit, ultra luxury hotels, lifestyle, and maybe a sprinkle of sustainability at the end there. But do you mind if we start with the basics because anytime I write a story about you, everyone without fail will ask, “What is a lifestyle hotel?” So how do you define it?

Bazin: I think we have probably many definitions, even within Accor. My simple answer to this, which I’ve been telling the owners, is you become a lifestyle hotel if you become a destination on your own, i.e., more than 50 percent of your revenue of that site comes from the local community. Meaning they’re going to be coming, spending two hours, spending the day, having coffee, inviting people to the restaurant, meeting somebody. That means you’re part of the local community. That means you know how to socialize, interact, care for others. That’s a lifestyle destination, of course. But this is a bit different from what has been done for the last 50 years, where before less than 20 percent of all the hotels on this planet have revenue from local communities. And we know why. So it’s time to shift your mindset and finally cater for the guy who lives next door. That’s a lifestyle hotel.

Sperance: So last year

Bazin: And it could be one segment. I don’t want anybody to tell me lifestyle is only for 150, couple hundred dollars a night. That’s not true. You can have a very nice lifestyle hotel at $30 or $60 a night, but that guy’s going to be coming in from next door. He’s not going to be sleeping over.

Sperance: So is this like a concept that’s maybe even bleeding into some of your brands that aren’t traditionally considered a lifestyle hotel?

Bazin: I think some of the legacy brands of Accor should have a lifestyle component. They should now rethink their own offer. They have to probably reshuffle the space, reinvent the (food and beverage) menu. And again, they should also cater for the local guys. It’s probably going to be more difficult because you haven’t thought about it from scratch. But of course they can do it and I hope they will succeed. And I’m pushing to get all the best practices from the 21c (Museum Hotels), Mama Shelters, Hoxtons of the world, to make sure that (they) could be incorporated into an Ibis, Novotel or Mercure. Why not?

Sperance: Great. Last year, Accor had a pretty significant corporate restructuring where ultra luxury lifestyle and lifestyle hotels became kind of their own independent divisions. On your earnings calls, you talk about how the relationship with those owners is a little bit different. They want a little bit more attention, but as far as a course future, should we also view this as those are the two segments where you expect to see the most growth coming for the next couple years?

Bazin: Well you know, Cameron, I’ve been at the helm this company for the last eight years, and I’ve been trying to wake up a sleeping giant, which Accor has been for a number of years. So I decided eight years ago to, and it took me five years of pain. And we have finally done it. Thank God on December 19, that was right on time pre-pandemic, and then decided that we should be moving away from Europe, which was 80 percent of Accor eight years ago. Now it’s 42 percent. And moving away from a upper mid-scale to go into our upper-upscale life scale lifestyle luxury. 60 percent of new signings today come from brands we did not have five years ago. But I pay a lot of attention to the legacy brands vehicle mid-scale, because this is my engine.

When I go to emerging countries, whether it is in South America or Southeast Asia or Africa, those brands are extremely valuable because they are reassuring. We know what works. It’s very a good return for the investor. So the more developed a country is, you could be audacious and therefore go into lifestyle, but it’s not one against the other. The good news about today? There is no empty hole that I want to fill. I knew exactly what I wanted to build. Now, the job is not entirely done, otherwise I’d be bored. But it’s close enough to have the perfect portfolio, the perfect brand segment and the perfect geography. I wish I could be much bigger in America. We tried and we failed. That was prior to me. So that’s, that’s a real fact.

Sperance: I want to walk down memory lane a little bit to last year at Skift Global Forum. You mentioned to one of my colleagues that 90 percent of revenue came from just 10 brands. Accor has 40. So I’m curious if all this growth potential in lifestyle, are we going to begin to see maybe less of a revenue concentration around those 10 brands you mentioned last year?

Bazin: The answer is yes. Otherwise I’m doing a lousy job. So as of today, probably 80 percent from the same 10 brands, and let’s meet again in three years, that 80 percent will be 60 percent. (In) lifestyle alone, we assembled 13 brands through the newly established company called Ennismore in London. Those brands represent less than two percent of my room count today. They represent five percent of my fee volume. And for the last 24 months, they’ve represented 30 percent of the fee stream for the next (several) years ahead of me and likely, will probably go up to 40 percent. Of course we didn’t have at the time Raffles, Fairmont, Orient Express and the like, so those same 10 brands will represent probably 50 percent or 60 percent in three or four years. But (we will) keep growing. Anybody who wants to believe that I can no longer grow Ibis, Novotel and Mercure is severely mistaken.

Sperance: So I don’t want to bore you with a brand bloat question, but are the brands you have today enough or are you going to keep adding more? Any holes in the network?

Bazin: No, there are no holes in the network, but doesn’t mean I’m going to stop because I’m learning something new every day. And I know that I’m going to respond to new needs. And the needs of tomorrow are very different, so you have to be (flexible). And Accor has been probably more daring than other companies. And that’s pretty good.

Sperance: As far as building out more. And I mean like continuing, as you mentioned with the Ennismore spin-off with lifestyle, like what’s the lender appetite for these types of hotels? If this is a relatively new concept, are they willing to take the risk and finance these projects?

Bazin: 60 percent of all the hotels we sign per year, which is roughly 400 to 500, are new. 50 percent of those signings come from relationships with existing owners. And two-thirds of my existing owners are interested in going (into) lifestyle. And many of them of course have no lifestyle hotels. So they are extremely happy that through the trusted relationship with Accor that we’ve built over the last 20 years, we actually offer them with a new lifestyle brand, a new luxury brand that we never really had the capacity to offer before. So, don’t worry, there. You’ve seen it with the pricing of our friend Shore House. You’ve seen it with the pricing of Four Seasons, which is probably scary if you want to actually think about it. For the next two or three years, there will be plenty of money in the world chasing hospitality — whether it’s that or whether it’s equity.

Sperance: Great, great. I was also going to ask, along with that lifestyle spin-off with Ennismore, Accor announced plans to sponsor a corporate specific purpose acquisition company earlier this year. How’s that going to fit in to all of this?

Bazin: Different team, different team. It shouldn’t be a distraction. It’s not a distraction. I am the non-executive chairman of that SPAC. It is run by Amir Nahai, who is a former food and beverage executive member of Accor but he as left (Accor). So he is now fully dedicated to this SPAC. And Accor is a 20 perecent shareholder in the SPAC and we are kind of actually the general partner and all the investors actually (are responsible for) the investments. And it’s up to (Amir). He’s probably talking to a lot of food and beverage, tech-related players. And whenever he is ready, he’s going to come back to the board with our chair. I’ll then play Devil’s Advocate and tell him whether it’s the right or wrong. The only thing which is meaningful for me is there is the space for a lot of existing, independent family-led branded players, where they could benefit from those fine hundred hotels we sign every year.

People don’t realize it, but it would be true as well for Hilton, Marriott and all my good friends. That means that I guess it’s probably couple hundred stock operators that you have to sign every year. And that means probably over 700 restaurants name that you have to fill in, into the new hotel you sign. So the trouble challenging aspect of Accor to help a family-led business very (strong) in one (region) and help him it in South America or in Asia. If he’s not there, it’s actually not tough for us. So it’s just common sense but believe me, that’s not my turf until they bring me the ideas and I’ll say yes or no. Until then, he’s on his own, as he should.

Sperance: I was going to ask that too. I mean, you do have here in the U.S. a lot of people saying there’s this SPAC bubble that got overheated. I mean like how do you address those concerns that it’s become too heated of a market?

Bazin: So it’s Cameron, it’s actually very easy. First you address it before you raise the money. Because if you don’t have the right pitch, they’ll turn you down. People are not fools. They’re never going to give you a dime. The only mega difference between Accor SPAC and any private equity-led SPAC, we bring a network of 5,000 hotels. We bring 11,000 restaurants and we increase the capacity to grow. So we don’t only bring money and our brain. We bring the 50 year history of a group and speed and skills for other brands are not part of Accor system. That’s something that many of other SPACs don’t have because they’re led by individuals. I’m not saying it’s bad. I’m just saying here we are rather different.

Sperance: Okay. So shifting gears a little bit this week, Accor joined the Sustainable Hospitality Alliance. Europe is generally seen though as further ahead with regards to sustainability than some of your competitors in the U.S. So I mean, how should we read this news? What are you going to be doing that you’re not already doing in this realm?

Bazin: You lost five years with the former government. So that’s why you’re late. It’s been part of Accor’s DNA since 1978. And you know why? It’s because Accor, by far, is the largest hotel operator in 110 countries. And in thousands of cities, Accor manages 83 percent of hotels. So all the employees actually work for the same big entity. And 98 percent of Accor is in the hands of locals, whether they are in Nigeria, Sri Lanka or in Chile. So by definition, since we have been opening so many doors, and we have a true responsibility for the last 30 years. And we know that when we hire one guy from Sri Lanka, four people in his family depend on us. And you’d better think ahead about how much water you’re going to be consuming?

How are you going to be doing the procurement and (how much are) the emissions? What should it be doing with human rights? How should it be a social elevator? People don’t see it. But I keep saying it, we hire every year, 80,000 new people — 50,000 for the newly opened hotels, and 30,000, which is 10 percent of the turnover. So be I mean, we know quite a bit when it comes to how to be respectful of the local academy, local education, local government, local craftsmanship. This is part of our DNA for the last 40 years. We just have to be methodological. We have to explain it. We don’t have to be gimmicky about it. And we have to give proof of it to my investors, but I’m not reinventing anything. I’m just putting things in order so people could visualize it. So, no, we’re not late. We probably have already been in the game for 20 years, at least.

But this is why I’m saying it now with passion. It adds up a lot of different pieces. Some of those are really socially-related that I talked about, but it includes diversity, inclusiveness, and many other things. Some of it is biodiversity. Some of it is energy-related. So you add up everything and then just make sense out of it and be proud about it.

Sperance: Definitely.

Bazin: And that comes along with financing. You’re going to see Accor has been doing a lot of green financing on those premises and Accor will continue going to those lenders with that green element, which is what people are looking for now.

Sperance: Do you see it getting to the point? Is it going to be a massive undertaking to go retrofit older properties? Do you have to start considering things of like where you even want to locate a property if you’re having the sustainability conversation?

Bazin: That’s a very good point. I have, we hired a former French government minister, Brune Poirson. She just joined four months ago, and she has already been telling me (things) in a very blunt way. She says, “Sebastien, I’m telling you in my new job as Chief Sustainability Officer, I will probably stop you from developing (undeveloped) land in the new hotel, because this is exactly what we should not be doing.” Is it going to be decreasing (the number) of openings? I doubt it, but is she right in advocating this? Of course, she is.

So it is certainly today, even though we’ve done it the last 30 years, no question, I’m putting additional pressure on my developers by telling them don’t go for volume, go for weight. Make it make sense for the local ecosystem. And yeah, we’ve been probably stopping deals more so than we have done before, including myself. I was in the South of Europe last week. I won’t tell you where. And I walked for two and a half hours on the site. And that deal won’t happen because this is not a location that we should not be sacrificing.

Sperance: Good to hear. I do want to look at, while we have you for just last couple of minutes, future outlook. In recent weeks, you have some of your U.S. based competitors signaling that they want to get into Europe a little bit more. How do you defend the home turf?

Bazin: Yes, sure. They should. They’ve been crushing me in America and in China. I won’t crush them because Europe is big, but I’m not going to make it easy for them, which is fine. Let’s occupy our own space. That being said, I have been spending a lot of time now with the last eight years with whether it was formerly, of course, Ani, and now with Chris and Tony and, and Mark, there is, I’m not saying that viciously, there is a lot of respect in between the different groups. Yeah, of course we hunt probably in the same territories, but from my prior life, when I was in banking, investment banking, private equity, we’ve been boxing against one another. That’s not the case in hospitality. There is I think the generosity, the kindness and caring for others is probably part of the DNA of each company, which means that there is space for everybody. I wish (I could have a bigger space) in America. That being said, everybody’s welcome. That’s fine.

Sperance: Great. Real quick. You only have a couple of seconds left. I mean, I have to ask, fall outlook into next year. I mean, the Delta variant obviously is delaying the return of business travel. What’s your take? And when can you see some meaningful recovery?

Bazin: Probably sooner than people would expect. I was smiling when, when Glenn was referring to Greg O’Hara and the Golden Age. It’s going to come back and Brian Chesky sees it — I think they’re right. It’s the envy of discovering the world, to socialize, to finally breathe and to open the door, the window and to go and being able to work at the same time from any places on this planet, makes our industry as blessed as it was before. And you know, we know today vaccination works. And the only thing we have to be very careful about is that people have access to hospitals if needed and don’t die (there). But if you have a severe flu for three days, we are going to be able to overcome this. So no. Count on me. The days of tomorrow are going to be rather different, but that’s going to be fun.

Sperance: Wonderful, Sebastien. A pleasure. Our time is up. Thanks for joining us today.

Bazin: I enjoyed this much as well.

Sperance: Thank you.

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Tags: accor, sgf2021

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