The Pélisson Brief

7th July 2010 (Last Updated July 7th, 2010 18:30)

Accor, the world's fourth largest hotel group, was on the hospitality front line during the economic crisis. However, in April the company beat expectations by posting a 3.1% rise in first-quarter sales. Gilles Pélisson, who took over the group from his uncle and Accor co-founder Gerard Pélisson, tells Christopher Kanal about the changes he has implemented and the positive effects they are having on the hotel group

The Pélisson Brief

Accor posted a 3.1% rise in first-quarter sales. Do you see the economy stabilising across Europe?

I do believe that, as 2010 progresses, most countries are heading in the right direction. Some of the markets are dynamic, like the UK, where we have a lot of Novotel and ibis hotels. In the Netherlands, France and Germany, we are also seeing strong reverse in the trend we saw during the worse months of the recession.

From a business point of view, demand has returned. That’s how I see the market going, assuming that the world economy remains dynamic, we should see further improvement in the second half of the year. Of course, when you take Greece and Portugal into account, you realise that there is still some fragility out there.

How has Accor’s global strategy across its brands adapted during the downturn?

The impact of the recession and the crisis will have a lasting impact on consumer behaviour, whether it is in the economy or the luxury sector. We definitely have to address the fact that the world and the way people behave has changed for the foreseeable future.

Today’s reality is more about value for money and less about lavish additions. Certainly at the corporate level it is about being less ostentatious. Accor is well positioned to deliver even in tough times because the brand portfolio covers all market segments, from economy to luxury.

How do you keep abreast of guest expectations?

We tend to pay a lot more attention to service and personal attention than our competitors. We emphasise the things that are tangible and go beyond expectations. I was in Lyon recently at our Sofitel and it was amazing to see how much we look after pay to the guests.

Across all our brands, we pay special attention to training teams in the Accor spirit, culture and values.

How has the relationship with your developers changed during the downturn?

Certainly on the luxury side, we still view space as the ultimate luxury provider. However, the industry tends to focus on RevPAR and other average rates, which have decreased. It will take time for the average rates to go back to where they were in 2008 so caution must still be exercised.

In the midscale and budget segment, you are looking more at prices because it is a very competitive environment. Prices have been lowered and it is really the pressure you have on the market that will push occupancy rates back up. Beyond that it is about how quickly or slowly you will be able to raise rates. I do believe that, despite the last crisis, our new yield management techniques and tools will give us the ability to leverage any increase in demand and therefore take advantage by being smarter in our pricing policy. The key is being smart and giving the customer value for money, because that is what the customer will be looking at for the foreseeable future.

What markets excite you the most and where are the new opportunities?

“While travelling has become easier in some senses, the security environment has made things cumbersome. Our role is to make governments sensitive to these issues.”

I travel a lot so I get to see a lot of exciting places. Morocco has been a very good country for us, particularly because of the tourism trade. It was one of the few countries where the number of tourist arrivals in 2009 rose instead of decreasing. We have just opened a brand new Sofitel in Rabat and have several other openings planned. It is great to see how the country is evolving.

I was in China a few weeks ago and I had the opportunity to go to Shanghai and Beijing, just to see how strong the Chinese economy is. A lot of government money has been injected into the Chinese economy. For us it is a big challenge to be in China. We have 93 hotels in the country; ibis is very well developed and there are Sofitel, Novotel, and Mercure. We are well positioned and progressing fast. It’s all based on developing a relationship with Chinese owners and bringing something new and positive to the country.

We are also number one in Brazil. The country has a solid population and access to personal credit. It is becoming a mature economy. We have a full range of products over there including 50 ibis hotels, 70 Mercure Hotels and a Formule 1 hotel presence too. All of them are taking advantage of the resilience and growth of the Brazilian economy.

Then there is India, where we are seeing a lot of growth. I had the opportunity a couple of months ago to visit the new airport in Delhi, which will handle up to 70 million passengers.

We have three hotels under construction near the airport in Delhi and an ambitious development plan focused on the economy and midscale sectors with Etap hotels, ibis and Novotel. ibis hotels have opened in Pune, Mumbai and Delhi. This is where we see a lot of potential growth for Accor.

In October 2009, Accor was ranked number one for sustainability among the world’s ten largest hotel groups. What are your plans for the future across all your brands?

Accor’s CSR programme, Earth Guest, is based on two major pillars: social responsibility and environmental stewardship; the actions we take in favour of local development, health and the environment. For instance, since 2008, with our campaign ‘5 towels re-used = 1 tree planted’, our hotels have been encouraging guests to keep their bath towels for more than one night.

Accor has committed to investing half of the laundry savings made in seven reforestation projects in different parts of the world. These initiatives, run by partner NGOs with the help of Kinomé, a reforestation specialist, are designed to bring local populations benefits on the environmental and socio-economic planes.

With these NGOs, Accor has financed the planting of one million trees in seven forested regions of the world. I believe as a society we have not achieved the standards that are desired by everybody. Beyond that it’s about being what I would call a responsible leader. Being the number one hotel operator in the world, operating close to 400,000 rooms – owned, leased or under management agreements – gives us that credibility with owners to implement green initiatives from solar panels and photovoltaic techniques to new building materials. One of the issues we have is how fast we can bring those techniques to emerging countries. Maybe the good news for the future is that we are seeing a lot of interest in countries like Brazil and China where these issues are becoming more relevant.

Where is the budget sector heading? Does it have the most growth potential?

It’s a tough market. In the US it has been challenged and is still depressed. The performance of that sector generally has been lagging behind and still is. Of course, the internet has made some of our low-cost offers very accessible and easy to promote. We are trying to be cautious in the area of yield management with the economy and budget sectors because we do believe the price point is important to enable the customer to have some real benchmarks.

The leeway is more limited than for a brand like Sofitel. We are able to put forward new incentives such as our web-based ‘super sales’, which have proven very efficient and have seen a great response from consumers. Of course lower economic activity means lower building costs. Building companies are looking for projects, which for us has facilitated some projects in good locations.

What are the biggest challenges for the future?

“Assuming that the world economy remains dynamic, we should see further improvement in the second half of the year.”

The new challenge we are giving ourselves is to become the number one franchisor in Europe. We do believe that because of our strength in most of the countries in Europe where we already have subsidiaries, expanding into franchises will be easily facilitated.

Independent owners recognise the value that a brand will bring them. They are not so keen to pay the very high commission rates and do believe that joining a brand like ours will enable them to be distributed differently and do better business.

I think the franchisees have seen the commitment we have to our brand and are very happy with the way we run the franchise. In France the franchises are happy with the way Accor has over-performed in the market and many are waiting to join us. We are also seeing a strong level of interest from Italy and Germany. We are well equipped for this challenge and counting heavily on our economy and midscale brands for new franchises. There is a lot of enthusiasm out there for the franchise model, which is partially a consequence of the financial crisis.

In the wake of the bailout of many banks during the economic crisis, do you think hotel companies should have greater influence at senior government level?

You always have the feeling that you are not doing enough. In France we have a country that welcomes the most tourists when you take the global numbers into account, but we are not getting enough attention compared to other countries whose governments are doing more to promote the tourist industry. Our industry is very labour-intensive.

These jobs cannot be taken out and they will stay as long as there are customers to provide service. In that respect we have to continue to lobby. While travelling has become easier in some senses, the security environment has made things cumbersome. Our role is to make governments sensitive to these issues.