A couple of regions are performing well for Accor, the France-based hotel company. But let's not confuse this with those booming pre-pandemic times. The Covid hotel industry recovery still has a long way to go.
Despite calling the war in Ukraine a “tragedy,” Accor CEO Sébastien Bazin said the company does not plan to pull out of Russia, noting it never has stopped operating in a war-torn country in its 50-year-history, including most recently in Myanmar, site of a bloody 2021 coup.
“We have been in countries of war probably 30 to 40 times over the last 50 years on different continents,” Bazin said Thursday at Skift Forum Europe in London. “Accor never pulled out of any hotel activities at the time employees needed Accor the most.”
At least in Russia, Bazin argued profit has nothing to do with the decision. Accor long has struggled in Russia, he said, where occupancy is 35-40 percent and where the company “does not make a dime.” Instead, he said, Accor is staying because the company is betting it can provide a valuable service to Russia’s remaining visitors, some of whom are loyal Accor customers.
This includes journalists, non-governmental organization employees and Western diplomats staying in Russia hotels. Bazin said they need a safe place to go during the day, where they can trust hotel employees to take care of them, and where they know their gear will not be stolen.
“Otherwise, you won’t have any Bloomberg or CNN or any people basically on the news,” he said in conversation with Skift CEO Rafat Ali. “They believe that the brand will be a caretaker of their belongings.”
In addition, Bazin noted Accor’s employees in Russia should not be punished for government actions.
“This is not their decision,” he said. “I’m making a very distinct decision between the Kremlin and Mr. Putin and the population of Russia. And I can tell you, being on the phone with them, they are in tears. Those employees in Russia. they don’t understand what’s going on.”
While the company still operates most of its Russian hotels, it has made some changes to its operations. Accor has suspended new hotel openings in Russia and closed five of 56 hotels in the county because the hotels owners were sanctioned by Western governments, Bazin said.
Middle East Is Booming
In other regions, Accor’s properties in the Middle East are “on fire,” with travelers and locals in Doha, Abu Dhabi and Dubai paying robust room rates while spending substantial sums on food and beverage, Bazin said.
“Pricing is through the roof, and traffic is extraordinary,” he said. “The Middle East is just very robust.”
The United States is another bright spot, Bazin said, even if the company is undersized there. Bazin said the U.S. market is “almost on fire,” with average room rates up 18-25 percent, an increase that outpaces rising U.S. hotel labor costs, which have gone up by roughly 12 to 18 percent. Other relatively strong markets include France, England and Canada, the CEO said.
Elsewhere, though, including in the rest of Europe, the news is less rosy. Southeast Asia is improving, as more countries open, but the base is low — the region for a long time saw occupancy rates of 10 percent, Bazin said — so full recovery will take time. Meanwhile, Japan, China and South Korea remain effectively closed to many foreigners, making a hotel recovery impossible. In addition, Accor continues to struggle in India, Bazin said.
“It’s a large domestic market, and we never made any money in India,” he said. “We probably will never make any money in India. But we happen to be a large operator.”
More Local Visitors
While Bazin said he’s generally bullish about an overall industry recovery, he said he still predicts a substantial amount of business-related traffic will not return, arguing hotels need creative solutions to replace corporate visitors.
“We stand to lose 20 to 25 percent of the international business travelers forever,” he said. “And we will because the CEO or the CFO will tell the guy, ‘why don’t you start on Zoom and then if you feel there’s something travel.'”
To replace them, Bazin said he recommends hotels cater to locals, who can eat in the hotel restaurant, work from the lobby, or even rent a room. He notes people who can work from anywhere will need new places to spend time.
“That clientele will be additive to lifestyle and will be a new clientele for the legacy brands,” he said. “And that is heaven.”
It also could be beneficial for the environment.
“I can promise you this is planet friendly because a lot of those will come by bike by foot 10 minutes away from the home,” he said.
In some ways, Bazin admitted this new post-pandemic local business will provide him some vindication. In 2017, to great fanfare, he unveiled what he called Accor Local, a platform that would connect more local residents with a nearby hotel’s services. Bazin wanted to compete with new lifestyle hotels that earned a significant portion of their revenues from locals, including Hoxton, Mondrian and Mama Shelter.
But at Accor, it never caught on. Bazin told the Skift Forum Europe audience that his hotel general managers never bought into the idea, even though hotel brands like Hoxton make as much as 55 percent of their revenue on people who do not stay in a room.
“They couldn’t give a damn,” he said. “They said to me, ‘of course. Yes sir.’ But they didn’t mean it and it got no traction whatsoever.”