Is Accor ever going to have the same U.S. portfolio size as Marriott or Hilton? Almost certainly not. But targeted focus on higher-end segments can make the Paris-based hotel company a formidable player on the highly competitive American hotel playing field.
It’s easy to write off Accor as not being much of a force in the U.S., but that could change thanks to its new lifestyle hotel venture.
The Paris-based hotel company has significantly beefed up its North and Central American portfolio, particularly in higher-end segments, thanks to the expansion of brands like Fairmont and introduction of others like Raffles. Accor has also made several acquisitions over the years of U.S. companies and brands like SBE and 21c Museum Hotels. Many of those brands are now parked under a lifestyle hotel joint venture with Ennismore.
With that deal — Accor has a two-thirds stake in the company, which also includes brands like The Hoxton — now closed and settled, the partners see the U.S. as a top target for expansion.
“There’s no doubt that the focus for Ennismore in terms of growth is the U.S.,” Philippe Zrihen, head of the Americas for Ennismore, said in an interview with Skift at this week’s Americas Lodging Investment Summit. “It is the most underserved market. It is underserved relative to our lifestyle brands and relative to Accor, so it kind of ties in nicely.”
Accor had about 8,500 hotel rooms across North and Central America at the end of 2015, added Mark Purcell — the company’s senior vice president of development for the region. That has since swelled to nearly 36,000 through the various acquisitions. Last year was a record-breaking year for new deal signings in the region, the company announced earlier this month.
“We feel like we’re kind of a player in North America,” Purcell said. “We’re not like the U.S. companies, but we’re at a point where we’ve got a critical mass to build on and drive from.”
This is quite the tonal shift from just a few months ago, when Jean-Jacques Morin, Accor’s deputy CEO, described the company’s struggle to gain much traction in the U.S. relative to competition like Marriott, Hilton, Hyatt, and IHG.
“The U.S. is overpopulated by competition, and this competition is, in fact, doing extremely well,” Morin told Skift last November.
Accor’s CEO Sebastien Bazin indicated the company’s limited U.S. presence even had the company on a nine- to 12-month pandemic recovery delay compared to its competitors. Morin last November indicated more mainstream brands like Novotel and Movenpick would need to be deployed in the U.S. to reach customers at a variety of price points and gain significant market share — but that would also mean going more directly eye to eye with some of its U.S.-based peers.
“We tried it before, and we didn’t succeed,” Morin said. “Motel 6 was just a lot of money burnt in the air.”
Accor previously owned Motel 6, which it sold in 2012 to Blackstone for nearly $2 billion (and is reportedly once again getting shopped around to potential buyers). That transaction was fueled by Accor moving to an asset-light model that didn’t involve real estate ownership. The company also redirected to Motel 6 resources to focus on expansion in Europe, Latin America, and the Asia Pacific region.
The new Ennismore U.S. expansion strategy doesn’t mean Accor is coming to America to duke it out on the playground with the Hampton Inns and Candlewood Suites of the world. Accor’s growth, if all goes according to plan, will be très chic.
The company is handling its own expansion in the region with brands like Fairmont, Sofitel, the MGallery Hotel Collection, and the introduction of the Raffles brand to North America with a hotel and condo project currently under construction in Boston. The luxury expansion is certainly one to watch, and the MGallery push makes Accor suddenly another competitor with global reach vying for independent hotels in the vein of Marriott’s Autograph Collection or Hilton’s Curio Collection.
But the strategy that might really cause a loss of sleep in the C-suite in certain hotel headquarters in Chicago, Bethesda, or McLean is the Ennismore push into the U.S.
Avoiding the Lifestyle Expansion Trap
Accor’s most competitive playing card in the hotel strategy shift during the pandemic is its play for lifestyle hotels — which has a lot of definitions in the industry, but Accor leaders often say means at least half the property’s revenue comes from business beyond guest room rates. A lifestyle hotel is about generating demand as much, if not more, from locals as it does from those spending the night.
Lifestyle hotels of today are the latest iteration of the boutique hotel craze sparked from the likes of Bill Kimpton and Ian Schrager. The problem with lifestyle hotels is that they often get sanitized down and standardized when the big hotel conglomerates get their paws on them after a major buyout.
The key to beating out competitors at the franchise negotiating table is showing you’re the company who can operate a truly unique experience for a neighborhood and not just plop something down that was thought up thousands of miles away without much due diligence.
“There is quite a lot of unsolicited interest from investors in terms of what Ennismore is doing,” Zrihen said. “The fact that you have this compilation of lifestyle brands under a certain umbrella, which has been attempted to be done before but failed in a lot of different cases: IHG with Kimpton. Hyatt and Two Roads Hospitality — [there are] a lot of horror stories about brands being commoditized. There’s a major, major focus on that not happening here.”
Schrager even alluded to the fact that some of the more successful instances of scaling up a lifestyle hotel mean keeping a strong creative team in place. Marriott partnered with him on its Edition brand.
“I think the exciting ideas come out from the innovators and the big companies, you know, are really more about execution. Maybe a marriage of those two is a good thing,” Schrager told Skift last year. “You have to take a look and see whether or not you think that person is going to be able to make sure there’s not too much meat on a ham sandwich when it gets sent down to the dining room.”
Accor often does partial investments in companies and keeps original teams in place. The Ennismore venture aims to show a big hotel company can provide these brands with the careful attention to detail and autonomy needed to keep a grip on the cool factor. This isn’t going to be an instance of suddenly having 400 Mondrian hotels in a matter of a couple years across the U.S.
But, if this pans out as Accor intends, it could make it where the French company is suddenly top of mind for American investors when they want to move ahead with one of these kind of hotels in the U.S. or anywhere else.
The partners expect 10 of the 14 brands under the Ennismore umbrella to gain traction in the U.S., and several are already in the U.S. like Morgans Originals — a nod to Schrager’s Morgans Hotel Group that Accor eventually acquired via its SBE buyout — SLS, and other former SBE brands like Mondrian. 21c, a brand that includes art galleries within the hotel, is also garnering investor interest.
Ennismore’s The Hoxton is growing its footprint in major U.S. cities, and the company expects a significant push for more affordable lifestyle brands like Mama Shelter — which currently only has Americas locations in Los Angeles and Rio de Janeiro — and Tribe, which doesn’t yet have a presence in the region.
Now is the time to throttle up growth in North and Central America because there is so much cash on the sidelines waiting to deploy on the hotel sector. Blackstone executives on a fourth quarter earnings call this week doubled down on their upbeat outlook on the broader travel sector and its potential for a financial upside during the pandemic recovery.
Having an extensive line-up of these lifestyle brands at all price points also enables Accor to look beyond America’s largest cities to park a new hotel.
“You couldn’t necessarily take an SLS and pop it into Des Moines, Iowa. But a Mama Shelter could be the coolest hotel in a market like that,” Purcell added. “So, I think that’s part of that as well. We have product now that can meet a variety of different markets and be super successful there.”
Future 21c Museum locations include St. Louis and Des Moines.
But Accor’s other trump card in continuing to scale up in the U.S. can also be what it has been faulted for in the past as a weakness during the pandemic. Eighty percent of the 68 million members in the company’s loyalty program come from outside the Americas.
The pandemic put an enormous emphasis on the strength of domestic travel, but real estate is a long-term play. Investors are already looking for ways to capitalize on the expected return and flood of international travel into the region by the time many of these hotels in development open their doors.
“One of the things investors quickly gravitate to is [the question], ‘Can you help us bring an international customer to the U.S.? In other words, we’re in the U.S. We think we can get a proper market share of the U.S. customer through your assistance into what we know, but the Holy Grail is bringing this to international customers, and Marriott can’t do that,’” Zrihen said. “It’s a clear-cut differentiator in terms of distribution.”
Photo credit: Accor's accelerating expansion into the U.S. includes smaller cities (pictured: the rooftop terrace at the 21c Museum Hotel Oklahoma City). Accor