Some sort of marriage, whether an outright acquisition or more of a loyalty alliance, is necessary to give Accor stronger footing in the U.S. But the pandemic didn't provide any opportunity to capitalize on takeover bargains.
When your portfolio is lean in the part of the world that is performing relatively well through the pandemic, it might be time to panic.
But Accor’s leaders have almost written off the idea of gaining more ground in the U.S.
“We’re probably going to be nine months to 12 months late to the recovery cycle compared to pretty much everyone else,” Accor CEO Sebastien Bazin said this month at the NYU International Hospitality Industry Investment Conference.
Paris-based Accor’s greater exposure to Europe compared to competitors like Marriott, Hilton, and IHG is largely why the company has fared worse during the pandemic. China and the U.S. led the hotel recovery thanks to strong domestic traveler bases while hotels in Europe, more dependent on long-haul international traffic, struggled to revive.
Even Accor’s Asia Pacific presence was an obstacle to overcome, as countries like China and Australia continue with stringent case containment policies severely hindering the travel climate.
“I simply don’t know. I’m depending on vaccination rates and government officials, and I hate it,” Bazin said in reference to stringent travel restrictions in China and Australia impacting his ability to give a performance prediction for next year.
Europe accounted for 44 percent of Accor’s room count at the end of June while Asia Pacific comprised 31 percent, according to an investor presentation. The Americas only made up 13 percent of Accor’s rooms, just a slight tick up from the nearly 10 percent figure in 2015.
It might seem like a no-brainer for Accor to just beef up its U.S. presence like some of its competitors have done in the past with respect to geographic regions where they fell short. Hyatt recently vaulted ahead with its European presence thanks to its $2.7 billion Apple Leisure Group acquisition.
Marriott expanded its network across Europe and sub-Saharan Africa with the acquisitions of the AC Hotels and Protea Hotels brands, respectively.
But it’s not as easy to do for a company like Accor trying to elbow into the U.S., company leaders say.
“That’s a tough one,” Jean-Jacques Morin, Accor’s deputy CEO, said in an interview with Skift. “The U.S. is overpopulated by competition, and this competition is, in fact, doing extremely well.”
Opportunities often arise coming out of a downturn like the pandemic because bargain prices for properties, or entire companies, accompany the ensuing performance plummet.
But the pandemic, through a mix of government intervention and flexible lenders, hasn’t sparked a massive wave of rock-bottom pricing.
If a company like Accor wants a deal to elbow its way into America via acquisition, the last 20 months weren’t the catalyst.
“It’s probably not the time to do anything,” Morin said. “But, you know, finding a way to become more present is most definitely something, but it would require some alliance or associate agreement.”
Accor leaders as well as their counterparts at IHG have remained tight-lipped when it comes to the perennial rumor the two companies would merge. But alliances aren’t abnormal in the hotel orbit: Loews and Omni formed one to complement each other’s U.S. network of leisure and city hotels.
Full Video: Accor CEO Sébastien Bazin at Skift Global Forum 2021
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.
It’s not that Accor doesn’t have a presence in the U.S., either. The company’s Sofitel and Fairmont brands are in major cities. Its network of lifestyle hotels acquired via the SBE takeover and now under the Ennismore label — brands like SLS, Hyde, Mondrian, and Delano — are also scattered across the U.S.
But to become a formidable hotel force in any region means being able to target guests at all price points.
Accor previously tried this via its ownership of Motel 6, which it sold in 2012 to Blackstone for nearly $2 billion. That deal stemmed from Accor trying to shed its exposure to owning real estate and instead devote those resources to growth in Europe, Latin America, and the Asia Pacific region.
Morin acknowledges which of Accor’s more mainstream brands could take off in the U.S., but it is hard to compete against the existing brand recognition and loyalty already baked into competitors.
Just three of the major hotel companies — Marriott, Hilton, and IHG — account for 68 percent of the U.S. hotel construction pipeline, according to Lodging Econometrics.
“If you really want to make an impact, then you need to be on the ground, which is much more like Novotel, or I would say Movenpick would also probably be a good thing, and be able to expand it. But then you’re face to face with Hilton, Marriott, IHG, and Hyatt — not easy,” Morin said. “We tried it before, and we didn’t succeed. Motel 6 was just a lot of money burnt in the air.”
It isn’t entirely bad news for Accor, though. Thanks to reopening borders and high vaccination rates, European hotels outperformed China in recent weeks, according to STR. There is swelling sentiment transatlantic leisure travel next summer will be a huge boost to hotel occupancies and airline seat counts.
In the meantime, company leaders joke there is opportunity for investors to flock to Acccor.
“[The recovery] is coming, so, all of you who missed the uplift in Marriott, Hilton, and IHG’s stock prices — mine is still in a rut,” Bazin said with a laugh at the conference before adding, “It’s recovering.”
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Photo credit: Accor's biggest brand in the U.S. is Fairmont, a high-end chain catering more to the meetings and events sector (pictured: the Fairmont Copley Plaza in Boston). Infrogmation of New Orleans / Wikimedia