AccorHotels (re)invents the future of hospitality
The hotel sector is undergoing far-reaching changes as it seeks to address travellers’ new expectations. AccorHotels has already begun its transformation, adopting an asset-light model that will keep it at the forefront of hospitality. Sébastien Valentin, the Group’s Senior Vice President, Investor Relations, tells us more.
Consumers on a quest for experiences
“It’s not for nothing that English speakers wish you a ‘safe trip’ when you set off on a journey. Safety is the foremost need of every traveller.” Once you feel safe, you start looking around. According to Sébastien Valentin, the ability of digital devices to improve safety is the reason why the quest for experiences is the hotel sector’s big new trend. In the past, hotel chains, with their standardised processes and products, offered peace of mind to people travelling to far-flung spots. Nowadays, internet-savvy travellers can quickly figure out their destination. An hour on average is all they need to browse the online booking sites, check out photos on Google Earth and get the last pieces of info from the hotel website. “And we’re just at the first steps for this digital ecosystem”, Sébastien enthuses. “What’s more, we’re starting to use AI to analyse customer expectations in a predictive manner.”
Modern travellers are bolder and more inquisitive than their predecessors, no longer needing the reassurance of chain hotels. On the contrary, in fact, they want to be surprised and are seeking out services that set hotels apart. AccorHotels is riding this trend, which has prompted it to revisit some aspects of its basic approach. Ever since 1967, the core idea behind Novotel has been to offer the same room with the same layout everywhere in the world. But the latest addition to the family has been designed in an utterly different style. Located in London’s Canary Wharf business district, the new generation 39-storey Novotel boasts ultra-modern meeting rooms and a panoramic restaurant that was listed as one of London’s top ten best new places to eat in 2017. This was a significant first, considering that Novotel has not been particularly known for its catering services in the past. AccorHotels began embracing the trend towards differentiating services back in 2012 by launching Ibis Style, a mid-range offering that eschews the usual Ibis standard features and takes a franchise approach inspired by the Mercure model. The customer quest for experiences has been the driver for major work in numerous areas, including design, architecture, furniture and catering. Even internal HR processes have been impacted, with AccorHotels launching its “Heartist” initiative to identify people capable of adjusting to the challenges of today’s more casual client relationships. Typifying this trend, instead of the usual check-in desk, Accor hotels have roving receptionists who are free to move around the lobby with their tablets, ready to greet travellers as they arrive.
Harnessing know-how to build a more diverse range
While Airbnb is seen as a disruptor in the lodging sector, according to Sébastien, the Group’s strategic repositioning is primarily linked to the many changes resulting from digital technology. “Google was there before Airbnb”, he reminds us. And while AccorHotels hotels book an average of two nights for two people, compared with approximately five nights for four people at Airbnb, the two are not operating in the same segment. To set itself apart, AccorHotels is counting on two big initiatives: it wants to harness its hotel know-how and offer luxury private rentals to serve the business and premium segment, while also tapping into the backpacking market with the launch of Jo & Joe, a brand-new “open house” concept. In the space of 18 months, AccorHotels has made three major acquisitions in the high-end travel rental segment – Onefinestay, Travel Keys and Squarebreak – which have been combined under the Onefinestay private rental brand. This is a sector that complements the group’s core business, Sébastien tells us. Jo & Joe houses, meanwhile, represent the next generation of youth hostels. Geared to sell beds rather than rooms, they promote themselves as places to meet and relax, and are hip to the latest digital innovations. Following the opening of the first Jo & Joe in Hossegor in southwestern France, 20 or so other projects are underway around the globe, with a further 100 under discussion.
Given that AccorHotels’ 80 million annual customers stay in a Group hotel three times a year on average, the key challenge is to create more frequent links and build loyalty. Like Google, Apple, Facebook and Amazon, which “talk to consumers several times a day”, AccorHotels plans to increase its points of contact with customers over the course of each day. A key component in this process is the move to a phone-based approach, embodied in AccorLocal, a dedicated e-concierge app developed by John Paul, the global leader in concierge services acquired by the Group in September 2016. With the new app, AccorHotels is targeting not only tourists, but also people who live in the vicinity of its hotels, offering them a suite of local services, from dry cleaning to flower delivery, with reception providing the drop-off point for customer orders. This is a way to harness underused property assets, by marketing hotel services during quiet periods, and not just the more familiar spa, fitness, catering and pool services. AccorHotels is also targeting travellers who are not guests in its hotels, offering support services such as assistance if they lose their passport, for example. “We are harnessing our know-how in the hotel business by offering this type of service, because we are very familiar with these issues”, explains Sébastien, who likens the Group’s diversification strategy to a ball of wool, with one service leading to the next. For now, these are pilot schemes. AccorHotels is still in the test & learn phase as it tries out these new value creation drivers, notably through its dedicated disruption team.
An asset-light model to refocus on hotel management
While AccorHotels has a proud history of owning and investing in hotels, the Group is now refocusing on hotel management through its new asset-light model, which has seen it sell some properties to real estate investors. “Most of our rivals began divesting back in the 1990s to concentrate on the operating side”, explains Sébastien. In 2013, Group Chairman and CEO Sébastien Bazin decided to reorganise the Group into two distinct entities, HotelServices and HotelInvest, with the latter, which was renamed AccorInvest in 2016, entrusted with owning the buildings. After an initial phase of restructuring the property portfolio, AccorInvest invested €1.7 billion, which included putting €600 million towards a plan to develop and revamp its hotels. The transition forms part of a bold vision for AccorHotels, which wants to double EBITDA to €1 billion by 2021. Of the targeted €500 million in additional EBITDA, €350 million is to come from hotels and €150 million from new services.
The benefits of the model include less cyclical earnings, lower investments and direct cash flow (around €4 billion), which will allow the Group to strengthen its structure and profitability while also cementing its foundations with new acquisitions. Just recently, AccorHotels announced the takeover of Australian firm Mantra, which will bolster its leadership on the hotel market down under. With these regional reinforcements, a more diverse service line-up, plus investment in digital technologies, AccorHotels is well positioned to (re)invent the future of hospitality. Sébastien ends on a bullish note: “Supply in the hotel sector is expanding at 2%, but demand is increasing by 5%. The potential for growth is enormous!”