Bazin’s zeal for returns drives Accor’s reorg
17 MARCH 2014 6:45 AM
As investor at Colony Capital, Sébastien Bazin kept Accor’s leadership on its toes. Now as Accor’s CEO he hopes to deliver results.
BERLIN—As a major investor, Sébastien Bazin didn’t need a magnifying glass to see Accor’s beauty and warts. As the chairman and CEO of the company since August, the 52-year-old France native is determined to eliminate the blemishes once and for all.
His first step was to split the company into two divisions—HotelServices and HotelInvest—to separate its operating and franchising business from its real-estate ownership activity. During an exclusive interview during the International Hotel Investment Forum earlier this month, Bazin said the need to dissect the company was clear.
“Since we’ve been doing the numbers … we are not only as good, we’re better than many of the U.S. peers, so nothing to be ashamed of,” Bazin said. “Unfortunately, I just cannot say the same thing about HotelInvest. We’re lagging. We’re not bad; we just have to fix it. It’s going to take the group two to three years to be at the level of the other hotel investors.”
The affable leader said he knows there are risks involved in making such a bold move—a move that clearly reversed a previous decision by Accor to de-emphasize real-estate ownership.
“If you go that way, you have to prove to the guys internally, prove to my investors, prove to my clients that the minute you endorse those two sets of competences, you make those very transparent,” Bazin said. “Whatever reporting numbers you’re going to be giving to people, people have to understand that HotelServices is a(n) InterContinental (Hotels Group), Marriott (International) lookalike, apple-to-apple, including margins—so operating numbers should be better or equal levels of the U.S. peers.”
He said the HotelInvest division is a return- and balance-sheet driven operation while HotelServices is profit-and-loss driven. “(We have to) make sure that HotelInvest is going to be reporting numbers in exactly the same (way as) Host (Hotels & Resorts), (Hospitality Properties Trust) any European (real estate investment trust). This is a cost to basically be efficient.”
The HotelServices division encompasses 3,576 hotels and 461,719 rooms operating under Accor’s 14 brands. The HotelInvest division comprises the 1,387 hotels that the company owns or manages via leases. The 278 hotels owned by Accor generated 54% of the company’s net operating income in 2014, according to the company.
Shout it from the rooftops
Explaining the company’s new structure is an important element for its future growth, Bazin said.
“Accor, as big as it is—and it’s a very big company—it’s misunderstood because we haven’t done enough pedagogy with telling people exactly what we do best and why we are different from the others because we are indeed very different from our U.S. peers,” he said.
Bazin described Accor as French, global (but not present in America) with 14 brands in 93 countries and a major investor in its own hotel brands.
“Let’s explain to people and the guest why we are different and why we should be remaining different,” Bazin said.
As the CEO, principal and managing director of Europe at Colony Capital, Bazin had long been a thorn in Accor’s side. Bloomberg in 2009 detailed a trail of hard knocks at Paris-based Accor—a trail blazed by Bazin. Colony Capital has interests in 29 hotel-related investments, including Accor.
With the move to the helm of Accor, Bazin has given employees three metrics to gauge its success for investors, guests and employees:
- Agility: “Agility means make things simple for you, understand what people want you to do, and basically have the agility to adapt, react, be proactive, don’t be a spectator,” Bazin said.
- Clarity: “Whenever you make a decision, make the decision on established facts,” he said. “Understand the environment in which you operate. You may be making the wrong bet, but at least you made the right bet on the existing facts.”
- Accountability: “When you are agile, when you have a clarified decision-making process, be accountable for your decision,” Bazin said. “I know whenever you do projections, it’s going to be varying. … But at least when you look back in the mirror, understand the mistake you’ve been making.”
Bazin said he visited hotels in 25 countries during the first three months on the job to get a feel for what employees experienced.
“I was stunned with the experience, the intelligence and the attachment to Accor,” he said. “I know today that with what we’re going to be conducting as our plan I can rely on that many individuals with only one objective, which is to get Accor stronger.”
Five priorities for a stronger Accor
Bazin said he has five priorities to make Accor stronger:
- Vision: “It’s easy—we’re talking about best performer in terms of hotel companies and the most valued one,” Bazin said. “I’m not talking about size purposely, even though we are the biggest on the international field.”
- Organization: “HotelServices, HotelInvest, re-segmented brand in terms of midscale, economy and upscale,” he said.
- Financial resources and human capital: “We have all the capacity we need on the balance sheet, we have virtually no debt, and we have all the talents needed,” Bazin said.
- Digital: “(Customer relationship marketing), loyalty, smart pricing, website friendly, applications on mobile and tablets,” Bazin said. “That is an undertaking, which is why we have the great fortune to have a new deputy CEO (Vivek Badrinath, head of marketing, digital solutions, distribution and IT). He is a tough guy. He is coming from the telecomm industry … Let’s give the guy the benefit of actually getting and diving in, and he’s going to give me his roadmap in the next few months.
- Brand territories: “The challenge for me is it’s not a matter of outside economic condition; we find Accor is very robust, very diversified,” Bazin said. “It’s how should you be tackling and be in front on what your client is asking you to do in terms of brand recognition.”
The executive said a lot of that strength will come from Accor’s extensive brand portfolio, which includes: Sofitel; Pullman; Mgallery; Grand Mercure; Novotel; Suite Novotel; Mercure; Adagio; Ibis; Ibis Styles; Ibis budge; and HotelF1. Sixty-two percent of its 2013 revenue (€5.5 billion, or $7.7 billion) came from its upscale and midscale properties and 36% came from its economy brands.
Distribution is the biggest challenge
Bazin said Accor’s biggest challenge is how to be an actor in the distribution channel digital revolution.
“It’s evolving quickly—our clients are changing their behaviors very quickly,” Bazin said. “They have access to new concepts, new experience, new emotions. They ask for more. They actually ask you to at least anticipate expectation, not respond to demand, which was 20 years ago.”
Accor’s answer to that ongoing change? “Be innovative, be a pioneer and be part of the club.”
Fifty-six percent of total room sales in 2013, representing €5.2 billion ($7.2 billion, up 20% from 2012), came through Accor’s central system—including its websites.
All of this adds up to a bright future for a company entrenched in an industry that is enjoying a good cycle, Bazin said.
“Things are good because (major hotel companies), they’re in the hands of capable guys,” he said. “I’m serious about that. I have a lot of admiration for my peers; I do. Those guys, they know exactly what they’re going at.”
Bazin said those leaders have robust balance sheets that carry great brands.
“We’re operating in a fortunate environment where we know the number of international travelers do increase by 3% or 5% per annum, while 3% or 5% is another 80 to 100 million travelers,” the CEO said. “We also know that for our guests, there hasn’t been a lot of new supply in many markets, so that demand is ours. We just basically have to trap it and fulfill what those clients need. So it’s a fortunate industry, but it’s an industry where it’s going to be more and more competitive.”