Accor CEO Defends Hotel Giant’s Latest Reorg

Accor put in place the pieces for a corporate re-organization this month. But this re-org is one of a few over the roughly decade-long reign of Sébastien Bazin, chairman and CEO. The latest changes have prompted some eye-rolling from analysts at investment banks and executives at competitor hotel giants.

Bazin defended the changes as necessary at the $7 billion Paris-based hotel conglomerate to stay abreast of an evolving market during an interview with Skift on Monday at the Americas Lodging Investment Summit (ALIS) in Los Angeles.

“So the financial analysts don’t like it because they have to change their models,” Bazin said. “My competitors are barking about it because they see it coming and I’m not sure they like it that much. But to me it’s super-clear. We’re getting focused in the right way.”

Bazin, group deputy CEO Jean-Jacques Morin, and their team saw that Accor’s lifestyle and luxury brands were a critical growth area for the company even though they currently represent a minority of the total rooms under Accor’s umbrella. They decided around July to make sure that the execution of the business strategy for Accor’s lifestyle and luxury brands was clear, fast-tracked, and coordinated.

“You can’t expect a boss in Europe to cover 46 brands scattered worldwide with the same level of expertise,” Bazin said. “When you have Qataris owning a billion-dollar asset like a Raffles in Paris and other owners having an [economy brand like] Ibis, allocating the same time for each of them is ridiculous.”

In October, Accor’s management began to split the company into two groups.

One group focuses on “luxury and lifestyle,” including the brands Raffles and Orient Express; Fairmont; Sofitel; the soft brand collections MGallery, Emblems, and Handwritten Collection; and the Ennismore joint-venture. This group will be very “brand-led,” with the creation of CEOs for four major “brand pillars.” In recent weeks, Accor has named a handful of executives to lead the luxury and lifestyle brands, including this month’s decision to appoint Omer Acar as CEO of Raffles and Orient Express, a new position, effective March 1.

Second in Luxury, Aiming for First

This isn’t Accor’s first time at the re-org game. In 2014, it began re-organizing the corporate office to reflect a changing company moving from owning a lot of real estate toward an asset-light model. In 2015, it began a parallel re-org as it expanded from primarily having hotels based in Europe that were heavily in the economy-end of the scale to having a global presence with a full range of offerings. During the pandemic, the company reorganized again in response to the severe disruptions to staffing and operations.

All of the changes were real. Accor went from having about 10 brands in 2014 to having more brands than any other hotel company today. It’s at about roughly 46 brands — depending on how you count. A majority of its hotels are outside of Europe today, in a reverse from the past.

“We didn’t exist in luxury and lifestyle 10 years ago,” Bazin said. “Now in the luxury and lifestyle segment, we’re number two in the world.”

Accor has separately created a unit for its “premium, midscale, and economy” brands.

“We’re trying to copy the best of Choice and Hilton, meaning their predictable, cash-flowing, resilient, simple models,” Bazin said. This will require Accor to lean away from management contracts and lean into the franchise model that the U.S. hotel groups have favored.

“I also want a twist of freshness,” Bazin said of the collection of Accor’s premium, midscale, and economy properties. “I want some design that is a bit trendy to do in the lobby of many of those 4,800 hotels.”

Luxury Brands Need Guardians

Bazin argued that Accor’s former organizational structure didn’t let its star brands shine and then it wanted to learn from how fashion houses have made their brands shine by devolving many decisions to creative chiefs. He also cited how Sonia Cheng has incarnated the Rosewood hotel brand, how Adrian Zecha incarnated the Aman resorts brand, and how Isadore “Issy” Sharp has led Four Seasons. Bazin wants Accor’s own flagship luxury and lifestyle brands to be led by impresarios.

Without forceful creative individuals acting as guardians and stewards of brands, the brands can run aground inside large corporations, Bazin argued.

“Barry Sternlicht was a curator of Starwood Hotels,” Bazin said. “Since he left, those brands kind of lost a bit of their souls.”

Corporate Hiring Spree

One possible headwind facing Accor’s reorg is hiring. The hotel sector hasn’t traditionally had the same magnetism as some other sectors, such as airlines, management consultancies, tech startups, and investment banks. Many top hospitality schools find as many as half of their recent graduates have developed careers outside of hospitality.

Several of the names given top jobs in the Accor re-org come from inside hospitality. Does the sector need fresh talent?

“On the contrary, we’re very happy with our hiring,” Bazin said. “Out of my top fifty or so executives, I would say about 80 percent weren’t there five years ago, and between a third and a half of them had no prior hospitality experience.”

Bazin — who himself came from outside of the sector, having previously been a buyout chief and investment banker — said his team so far has had no trouble filing corporate positions with candidates from within and outside the sector.

“I’ve never received as many resumes as in the last four months,” Bazin said. “For luxury and lifestyle, we’ll be hiring about 500 people.”

Hybrid Hospitality Is What’s Next

Given Accor’s serial re-shapings, some observers suspect another change is inevitable. Within a couple of years, Accor might pick up the baton on shifting the industry away from having the traditional hotel structure be the main organizing principle of business decisions.

Multi-use is an old concept that’s lately been getting a new twist. For decades, hotels have been anchor tenants alongside residential, retail, wellness, and other offerings that are mutually reinforcing drivers of demand. Today’s next wave of “hybrid hospitality” blurs boundaries further, with the same real estate shifting purpose depending on need.

Accor has been ahead of its global peer companies in experimenting in this space, with early attempts at learning how to sell and re-sell and cross-sell access to the same square footage via different channels and packages.

“The big example is Ennismore,” Bazin said, referring to a joint venture with the lifestyle company. “About 55 percent of Ennismore hotel revenue isn’t from rooms, of which about 25 percent to 30 percent is flex-office and guests coworking in the lobbies.”

The challenge of creating and selling space as different products in response to shifts in demand is difficult, especially when trying to stay in compliance with different regulations — while making the products in dozens of jurisdictions and making them bookable through different channels.

Accor is more aligned on driving gross operating profit for owners than its U.S.-based peers, Bazin said, because Accor’s contracts are typically two-thirds fixed, one-third incentive — much greater than the customary U.S. proportion. Given Ennismore and its fifty-odd food-and-beverage concepts, Bazin believes he is proving to owners of higher-end properties that restaurants and bars should be included in the base for calculations because the concepts are helping to drive the owners’ overall profits.

Bazin believes Accor’s re-org will give his company a competitive edge, helping its brands up and down the scale steal share in the Americas from its U.S.-based peers while leading the race to convert many independently run properties in Europe, the Middle East, India, and Asia-Pacific.

“I’m extremely admiring of the robustness of the size and profitability of the U.S. hospitality market,” Bazin said. “The margins are better because they [the largest hotel companies] control the pricing. I’m trying to do as well elsewhere, but I don’t have the same scalability. The only place you could probably do it again [the market consolidation witnessed in the U.S., where about two-thirds of rooms are branded] is China. But then you will be competing with Chinese operators.”

“Accor isn’t an imitation [of its U.S. peers] because it hasn’t had the benefit of a unified U.S. market, having instead grown up in fragmented markets, starting with multiple European countries,” Bazin said. “Chris [Christopher Nassetta, CEO of Hilton] and Tony [Anthony Capuano, CEO of Marriott], I know they’re puzzled about it. They don’t understand why Accor is doing this and that. But I’m missing scale.”