It might be easy to assume the hotel world is dominated by Marriott and Hilton, but don’t discount their scrappy, luxurious French counterpart.
Paris-based Accor’s brand-led reinvention in recent years has been a top-to-bottom redo of the company that entailed shedding real estate to move to an asset-light model. After four notable corporate reorganizations in the last 10 years, Accor now rivals Madonna and Lady Gaga in terms of how many times one can reinvent oneself.
But back to hotels: Owners of underperforming Accor hotels faced an ultimatum of refresh or leave the system. There was also a concerted push into lifestyle brands with a new joint venture with Ennismore, of which Accor is now a majority owner. Don’t forget the company’s glow-up into ultra-luxury brands like Orient Express and Raffles and ongoing refreshes at legacy luxury offerings like Sofitel and Fairmont.
Accor CEO Sébastien Bazin has overseen the entire reordering of the deck chairs at the company and, during a recent press roundtable in New York City, pointed to why it’s better than ever to be in the hotel business — despite gloomy headwinds like geopolitical tension and global trade volatility.
“It was eight years of hard work, and now we’re in a very comfortable zone where we reap the benefits,” Bazin said of moving beyond the years of expansion and restructuring at Accor. “We know what's done is working, and the next three years will be [to] enjoy the ride.”
Bazin noted the global hotel industry’s demand grew between 3 percent and 5 percent on average each year for the last 30 years. Meanwhile, new hotel supply only grew by around 1.5 percent to 2 percent each year — accounting for many years of profitability for this industry (the pandemic excluded, of course). Given the rise of the middle class across the world along with enhanced air and road connectivity, Bazin forecasts global hotel demand to swell to between 4 percent and 6 percent annually in the years ahead while supply growth remains capped at 2 percent.
“You just dream to have this in front of your eyes,” he added.
But if there’s such a supply-demand imbalance, why is it still so thorny to get financing for a new hotel project? Even luxury hotels — increasingly seen as recession-proof — face a tough time getting greenlit in Europe and the U.S. these days without a residential component attached to provide more durable, immediate financial returns.
Bazin doesn’t necessarily agree with that logic.
“It’s a question of risk appetite, and it’s a question of geographies,” he said. “You're talking about American owners when they want those return and downside protections. That's super American and super European. In many cases you can't have both. So, we decided to go where those owners are only looking at the return value and capital gain.”
Bazin pointed to three sources of a “real depth of money” to invest in hospitality: the U.S., the Middle East and Singapore. The American market — despite brand awareness of Fairmont, Sofitel and now Raffles thanks to its new Boston outpost — remains a tough one for Accor to crack. Therefore, Accor generally turns to capital sources elsewhere.
The geographic differences in hospitality investment expectations might account for why larger hotels aren’t getting built as much in the western hemisphere. Bazin noted his competitors at Hilton and Marriott have flagged the extremely limited supply growth of new hotels with more than 500 rooms in the U.S. in recent years.
“It's unbelievable. I never realized this,” he added. “I can tell you, we are building one in Kuala Lumpur, [one] in Singapore and one in Dubai.”
An Accor-Led American Hotel Revolution
It’s easy to write off Accor’s American growth trajectory, as this reporter has in the past. But don’t just take my word for it.
“Accor is always late,” Bazin joked this week. “We're late on going asset-light. We're late on technology. We're being late on [the] loyalty system. So, all the benefit you see today, we're only catching up with the best expertise of the American fellows.”
But that was then, and this is now. There are areas where Accor is ahead of the curve. The company’s push into lifestyle hotels entailed a majority takeover of Ennismore, the owner of brands like The Hoxton, and spinning it out into a creative, brand-led organization that houses a chic mix of offerings like SLS and Delano to SO/ and Mondrian.
When you see companies like Hyatt suddenly parking their own lifestyle brands in the hands of industry experts like The Standard team, one can’t help but note Accor being first to this type of structure.
Additionally, the company is making inroads in ultra-luxury with brands like Raffles and partnering with LVMH on the upcoming Orient Express overnight train offering in Italy, where the brand will also be debuting its first hotels.
Luxury and lifestyle hotels are where Accor performs best, so why isn’t the company doing more in this space here?
“The prophecy for a long, long time has been Europeans, when they go to America, we fly Concorde and we come back on charter,” Bazin said with a smile. “It's true for 90 per cent of European companies who try to make a mark in America. It is difficult, because you are confronted with very solid, good experts in America.”
But Bazin can’t ignore the strength and brand awareness some of his company’s offerings have in the U.S. Raffles Boston is widely seen as a success: Its residential units are selling at a significantly faster pace than those at a new St. Regis residential project elsewhere in the city, and its bars and restaurants are just as hard to score a reservation as a hotel room.
Further, several of the company’s lifestyle offerings like SLS, Mondrian and Delano have U.S. roots.
“Before we go, let’s make sure we fly back on the Concorde,” Bazin joked before adding, “If we were to do something scalable in lifestyle in America, we will do it with an American partner.”
A Commitment to Diversity
One area where Accor appears to be breaking from several American companies is unwavering commitment to diversity, equity and inclusion. While some U.S. companies like Google and Amazon have backed off DEI initiatives due to political pressures, Accor remains committed.
One can argue DEI is a core tenet of hospitality, as companies operating in this industry do business across many countries, cultures and languages. Accor hires more than 100,000 new employees each year, and 70% of those new hires never attended university.
From there, the company strives to provide upward mobility, Bazin said.
“We're doing that in 120 different countries with so many different dialects, languages, cultures, colors of skin, and it works all the time,” he said. “There's no fear. It's just who we are as a very human, driven organization. I know we are in America, and we have to be careful on DEI. Well, we're not moving away from it. Accor is super inclusive. Accor loves differences and diversity.”