Accor CEO: Purging Weak Hotels, Defending European Turf, More Luxury

Accor Group CEO Sébastien Bazin has a message for investors: The hotel company's frequent reinventions are done for now.

After a decade of four reorganizations, the Paris-based hotel operator is settling into what Bazin says is a focus on execution.

After Bazin took over Accor in 2013, he transformed the company from a European-focused, midscale operator into a global player with 47 brands spanning everything from budget roadside lodgings to ultra-luxury properties.

Bazin says Accor has a clear, predictable model. The CEO reiterated the financial targets laid out in 2023 for a time span through 2027: revenue growth of 6-10% annually and EBITDA growth of 9-12%.

Bazin spoke on Thursday to the media in New York City, where he and other top executives had begun a roadshow for investors. The CEO talked about the company's missteps, recent gains, and what's next in luxury and lifestyle expansion and its geographical ambitions.

Playing a Game of Catch-Up

The company has spent the past couple of years being "very disciplined on refocusing Accor on the 47 brands, on the geographies, on meeting double-digit growth in revenues and operating income, and less so on doing anything additional," he said.

In a rare moment of corporate candor, Bazin acknowledged Accor has often lagged behind its American competitors on a few metrics.

"Pretty humbly, I always think we've been late," he confessed. "We've been late on lifestyle, we've been late on loyalty programs."

This acknowledgment came as Accor has recently strengthened its position in the luxury and lifestyle segments and improved its hotel loyalty programs — areas where U.S.-based chains have traditionally dominated.

About 15% of the company's network is now in the luxury and lifestyle category, up from very little a decade ago, according to CFO Martine Gerow. About 25% of its hotel development pipeline is in luxury and lifestyle. (Lifestyle hotels emphasize design, local culture and social spaces, with bustling lobbies where TikTok influencers pretend to work on MacBooks.)

Accor's loyalty program has grown by 54% in member count since the program's rebrand and relaunch in 2019. The rewards program is expected to have 100 million members by March.

"We added, last year, 11 million members," Bazin said. "We share that, within five years, we'll be at the 150 million member mark."

Luxury and Ultra-Luxury Push

Accor has been intensifying its focus on luxury hotel brands, a segment where Accor was once an afterthought but now competes seriously with powerhouse brands from Four Seasons to Aman.

Not long after Bazin joined a decade ago, only 6% of Accor's rooms worldwide were luxury, and it had only two luxury brands: Sofitel and MGallery. Bazin went on a shopping spree, adding brands like Raffles and Fairmont.

"Probably 50% of the outside world was absolutely negative, as in, 'What are those guys doing? They're never going to be credible in the luxury side,'" Bazin said. "We didn't have the brands. We didn't have the talent."

Today, at least 10% of its over 800,000 rooms are in the luxury segment, and the group offers a broader range of brands.

"Five years ago, if a hotel investor wants to buy and go into that luxury and lifestyle segment, we were invited maybe one time out of 10 to offer our brands," Bazin says. "This year, we'll be invited 10 times out of 10, and I think we will win half of these."

In the fourth quarter, Accor had three times as many openings in luxury and lifestyle hotels as pre-pandemic. Luxury hotels saw revenue per available room increase 9% year-over-year, driven by both higher occupancy and nightly rates. Signings in euro value grew 39% for luxury and lifestyle hotels last year.

Accor is now pushing beyond luxury into ultra-luxury, thanks partly to a partnership with LVMH, the luxury titan. In 2026, Accor will join LVMH in debuting the first two Orient Express overnight trains, whose first routes will crisscross Italy. LVMH became an investor in the project last year.

Hotel Purge: Dropping the Dead Weight

This acknowledgment of past missteps comes as the company reported 3.5% net unit growth for 2024, lower than U.S.-based competitors Marriott and Hilton. However, Bazin explained that this figure masks a more nuanced story: Accor has been intentionally removing properties that don't meet brand standards at a pace twice as high as its American rivals.

"Part of the 3.5% net unit growth, we had 2% of what I should call 'intentional exiting,'" Bazin explained. "Cleaning the network.

Accor has been deliberately removing properties that don't meet brand standards. About 400 properties of all kinds were recently evaluated and removed.

The purge will continue through 2025, after which the company expects net room growth to accelerate to "probably at the upper end of the 5% a year" by 2027, the CEO said.

The group should also make more money on the remaining properties.

"Every single new hotel open has a 26% larger room count than an existing hotel, so we make more money from the next hotel than we're making from the last one," Bazin said.

The company is investing heavily in upgrading properties across segments, from economy brands to luxury flagships. About 20% of its Sofitel brand, for example, is getting renovated.

Future Consolidation

Bazin estimates that the hospitality sector represents "10% of the world's GDP and 10% of the world workforce," saying that there should be plenty of business to go around for the major groups.

Looking ahead, the CEO wants to defend Accor's base in Europe, where it operates about 357,000 rooms.

"Accor is ultra-dominant in Europe," Bazin said. "That doesn't mean the Americans aren't entering. And we have to be careful. But we still have the biggest market share of hotel openings in Europe."

Bazin said the Middle East and Asia Pacific represent 60% of Accor's hotel development pipeline because that's where the fastest growth will be over the next couple of decades.

Bazin predicts that U.S.-based companies will find it hard to expand outside the U.S., which has a unified regulatory scheme, currency, and marketing culture.

"As they expand in China, the fees they earn will be less," Bazin said — saying that when Accor eventually expands in the U.S., it will have more upside in fees to gain.

The CEO said Accor is on track to meet its targets laid out in 2013 thanks to supportive tailwinds in most of its key markets.

"Demand is exceeding supply by three times," Bazin said. "If the question is 'Should you play in the hospitality market,' the answer is obviously yes."

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