The Accor the hospitality industry has gotten to know is a rapacious group, habitually on the hunt, stalking its next brand prey.
The Paris-based hotel company has more than 52 brands today across a wide range of core and adjacent businesses, in segments from budget up to ultra-luxury. Back in 2022, owing to the volume of brands, Accor decided to reorganize its structure along two divisions: Luxury & Lifestyle and Premium, Midscale & Economy. Within each division, Accor appointed CEOs to lead each of the brands, reporting up to SĂ©bastien Bazin, Accor group chairman and CEO, and Jean-Jacques Morin, group deputy CEO and also CEO of the Premium, Midscale & Economy division.
For a company with such a voracious appetite as Accor, it has been quiet of late on the M&A front: it has not made a large-scale acquisition in the last 12 months; not out of complication, but rather strategy, standing pat on what it has, Morin recently explained from his company’s New York office. “We have everything we need right now,” Morin said. “The next step is to get the juice out of what we’ve been consuming for the past 10 years and we believe that the organization, as it is, with two divisions, is the right way. We’re exactly where we want to be, executing on those two poles, and getting the juice that we have not gotten over the last years.”
It’s a lot of pulp to squeeze, but wring it Accor has done, pressing out record results in 2023, with EBITDA exceeding €1 billion. And with major sporting events across Europe this year, including the Paris Olympics and UEFA Euro 2024, there’s ample reason why Bazin said: “We are blessed for the next 12 months.”
Forward March
Accor is a global company though its brand spread would be considered regional. Consider its Premium, Midscale & Economy (PME) category, where the vast majority of brands, from Pullman to Mövenpick, Mercure to Tribe, ibis to HotelF1, are located outside North America, across Europe, Asia Pacific and South America. It’s within the PME space that Accor sees more opportunity at expansion through franchising, which is still nascent in markets outside the U.S.
“There are places, like the United States, where the hotel business is so mature that everybody speaks franchise,” Morin said. At the same time, in European and APAC pockets, management contracts remain customary, but that is changing. Australia is a good example he said. “It’s getting more and more franchise contracts.”
Expansion through franchise agreements is typically an approach by lodging companies who want to grow bigger, faster. “As long as you can adapt the cost base, it’s one way by which you can develop faster,” Morin continued.
He offered that franchising will increase in the PME set, referring to it as an “accelerator.” It’s a little less than 50% of rooms now and less in fees, at around 30%, Morin said, but it’s his hunch that it will grow.
Maybe not in the U.S., however. Within the PME division, Accor currently has only four hotels in the U.S.: Novotel Miami Brickell, Pullman Miami Airport, Swissotel Chicago and Ala Moana Honolulu by Mantra. According to CoStar Group data, 80% of all the branded hotel room stock in the U.S. is controlled by six companies: Marriott International, Hilton, InterContinental Hotels Group, Best Western Hotels & Resorts, Choice Hotels International and Wyndham Hotels & Resorts. Independent hotels account for around 1.6 million rooms in the U.S.
Why can’t Accor edge in? It’s an ongoing question, noted Morin. “Is there an ask for our brands in the U.S.?” he said. “Absolutely.” But like breaking into Hollywood isn’t easy, the same goes for hotel brands. “There is already such density in the U.S. market for the brands that already exist that it is difficult to open a brand,” Morin said.
Accor has tried it before, but it was short-lived. In 2017, it opened ibis Styles New York LaGuardia Airport, but the hotel closed after a short stint. Accor had some success in New York with Novotel New York Times Square, but it closed in 2021. Part of the issue impacting why Accor hasn’t gone harder in the U.S. with its down-chain brands is because it can’t do it piecemeal. It would need to be done at a larger scale. “You can’t go and have one, two or three hotels,” Morin said.
A L&L Approach
Going big is key and Accor is candid about its difficulty in U.S. expansion, specifically with its PME brands. “It’s a much tougher play for us, but it doesn’t mean that there aren’t opportunities, but you have to be very surgical and very focused,” said Martine Gerow, group CFO for Accor, which is unequivocal when it discusses growth in the U.S.: it will come through its luxury and lifestyle brands, which account for the entirety of its U.S. pipeline.
Luxury and lifestyle is far different, if not also distinct in category and class, making the mode of growth dissimilar to that of Accor’s PME brands. Accor manages some of the most spectacular and legacy hotels in the world. Under its Fairmont flag, for instance, it manages the famed Plaza, along New York’s Central Park. Its Raffles brand is known the world over for its ultra-luxury accommodations, including those at Le Royal Monceau Raffles Paris, a Philippe Starck design. In Canada, Accor has more than 20 Fairmont properties, many of which are ski resorts. In October 2021, Accor and Ennismore completed a joint venture, which created a lifestyle monolith, with such brands as The Hoxton, SLS, SO/, Mondrian, Delano and 21C Museum Hotels. “The opportunity to significantly increase our footprint in the U.S. is on luxury and lifestyle,” Morin said.
Consider the Raffles brand: Twenty-one exist in the world and the opening of Raffles Boston, in September 2023, the only Raffles in the U.S., was one of the most anticipated luxury hotel openings of the year. Gerow said the Raffles brand is a focus for development. In February, Accor announced Raffles Trojena, set to open in Saudi Arabia in 2027 as part of NEOM, a new urban area planned by the Kingdom of Saudi Arabia that is being built up on the northwestern Tabuk Province.
Accor plays it closer to the vest at this end of the brand spectrum, less inclined to surrender control over operations. “We are much more protective,” Morin said, “because what we really want to ensure is that we protect the brand equity and the best way to do that is by getting a management contract, as you’ve got much more interaction with the owner.”
Accor doesn’t shy away from being open about its growth prospects, but in order to protect brand equity, it’s equally frank about its attrition plans and the actual reduction of its network. Morin said that Accor is currently in the process of scrutinizing some 400 hotels of its close to 6,000-hotel global portfolio to determine if they are still fit to be part of Accor’s network. “What matters is the quality of the brands,” he said. “We want to ensure that we keep a certain level to benefit all our owners and also benefit the customer experience.”
To that, Accor is less inclined to compromise brand standards. “There is good churn and there is bad churn,” Gerow said. “We don’t want to churn properties, but we expect owners to spend a bit on CapEx, particularly when you have a more limited number of properties in a market.” However, it is not against simplifying current brand standards to make them less onerous for owners. Consider bedding, where, Morin said, Accor had some solutions by region and by brand, “which were all different.” It looked to simplify by not, as Morin pointed out, having 10 variations on the same thing.
This year, Paris plays host to the Olympic Summer Games, July 26 to August 11. As a Paris-based company, Accor should have much to gain from the fortnight: as a premium partner in the event, Accor signage will be pervasive. But the overall impact of the Olympics on revenue might not be as prodigious as one might expect. Gerow said that Accor has around one-third of hotels in the cities where events will be held and that RevPAR will accelerate during the two weeks, but, she said, would likely be softer prior and post. “Overall, it’s going to be good for the French market,” she said, “but it’s not going to have a significant impact on Accor’s overall RevPAR, because France is less than 20% of our revenues.”