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Hoteliers invest online as bookings increase
February 22 2013

There’s a reason Accor’s 2013 to-do list begins with significant reinvestment in its distribution systems.

Accor is undergoing a period of unprecedented change. In case you missed my overview that ran Wednesday, the Paris-based owner, operator and franchisor realized €2 billion ($2.7 billion) of adjusted net debt in asset disposition, overhauled its suite of budget brands and opened a record-setting 38,085 rooms—all within a single 12-month period.

And President Denis Hennequin, the former McDonald’s executive who is breathing new life in the company, is not content to rest on his laurels. During the company’s year-end investor event, he laid out a five-part plan for continued success in the years to come. It includes:

  1. A reinforced brand and distribution system
  2. An aggressive development plan
  3. An ambitious asset-management plan for owned and leased hotels
  4. An organization to be aligned on the new model
  5. Operational excellence to improve competitiveness

Notice the order of these goals. While expansion drives the lion’s share of revenue in today’s increasingly asset-light global hotel chains, Accor’s No. 1 priority is to reinforce its distribution system.

That’s not by accident. The company continues to see an evolution in booking behavior throughout its global portfolio, with more people booking online than ever before.

It’s not the first hotel company to recognize the importance of online booking channels. Accor, along with countless others, have observed similar trends in recent years.

The shift is backed by new data from TravelClick, which found that transient roomnights booked through online channels including brand.com and online travel agencies saw the most growth during the fourth quarter of 2012.

The OTA channel saw a 6.1% increase in demand year over year while brand.com increased bookings through its channels by 5.7%, according to the TravelClick North American Distribution Review. The hotel direct channel, consisting of phone calls direct to property and walk-ins, increased 5.5%. The global distribution system (used by travel agencies) and central reservation system (calls to a hotel's 800-number) channels also showed increases from a year ago—by 3.9% and 2.1%, respectively.

Here’s how the share of roomnights breaks down for the fourth quarter and the full year:

Hotel companies are responding by investing more in their digital platforms. Accor, for example, will invest about €30 million ($40 million) a year between now and the end of 2016 to increase online bookings to 50% of all bookings and to limit the influence of OTAs.

They’re playing offense and defense at the same time. By investing back into their systems, Accor executives ensure their online platform becomes more robust, personalized and user-friendly, which encourages more bookings. And at the same time, they begin to ward off some of that pressure from an expanding roster of OTAs.

Hennequin said the goal is to position Accor at the top of its competitive set in all aspects of its guest experience. I would imagine countless other CEOs are aiming for the same thing, which should ultimately benefit the consumer in the end.

Now on to the usual goodies …

Stat of the week
40% to 79%: The projected stock price premium Strategic Hotels & Resorts’ shareholders would receive if executives sold the company, according to shareholder Orange Capital LLC.

This was one of the more bizarre news items of the week. Orange said a sale would result in proceeds of between $11 and $14 per share. They went public with the proposal because executives said they did not receive “an adequate response” from Strategic’s board of directors. Orange owns 6.25 million shares, or approximately 3%, of Strategic common stock.

Strategic responded: “The Board of Directors of Strategic Hotels & Resorts acknowledges receipt of a letter dated February 1, 2013, from Orange Capital, a shareholder who only recently acquired shares in the Company. The Board carefully reviewed the letter in its entirety and strongly disagrees with certain assumptions and conclusions outlined in the communication.  While we are disappointed Orange Capital released its letter publicly to advance its short-term trading interest, we remain focused on maximizing the longer-term interests of our shareholders.”

Quote of the week I
“There are other opportunities, too, from a standpoint of nongaming opportunities, whether it be Vdara or Mandarin and other opportunities we'll look at.”
Jim Murren, chairman and CEO of MGM Resorts International, during an earnings call with analysts while discussing the possibility of selling non-gaming CityCenter assets to realize some returns from the group’s multibillion dollar JV with Dubai World.

The most likely candidate for sale at CityCenter, however, is the luxury retail center Crystals. It was initially designed to be sold, Murren said. “That's a high target opportunity for us,” he added.

Quote of the week II
“I’ll be very candid with you guys, that wasn’t my first choice.”
Ryman Hospitality Properties’ Colin V. Reed, discussing the decision by Gaylord Entertainment Company’s board to become a REIT.

This is the second week in a row Reed is the subject of my quote of the week. I found this one, which he shared at Ryman’s investor day last Friday, particularly fascinating. When Gaylord was investigating the best way to unlock value in the company, some outspoken shareholders—including TRT Holdings and Gabelli Funds—called for an outright sale. It appears Reed wasn’t as opposed to that idea as many of us thought.

“We had our bankers go out and talk to a handful of (private equity) companies that had come to talk to us in the past,” he said. In the end, Reed said Gaylord received two verbal offers for the company priced at between $32 a share and $37 a share. The company even put in a call to Robert B. Rowling, TRT’s co-founder, to gauge his interest in an acquisition. At the end of the day, however, no deal was ever struck.

My colleague Shawn A. Turner shares some other juicy tidbits in his blog, “Behind-the-scenes look at Gaylord evolution.”

Reader comment of the week
“The black cloud Arne sees is the shadow from my black swans circling overhead. Nice to see someone else recognizes the reality of the risks we face, the fiscal cliff being just one.”
Commenter and HotelNewsNow.com columnist Joel Ross lauding Marriott President and CEO Arne Sorenson for his recognition of headwinds still facing the hotel industry.

Email Patrick Mayock or find him on Twitter.

The opinions expressed in this blog do not necessarily reflect the opinions of HotelNewsNow.com or its parent company, STR and its affiliated companies. Bloggers published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

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