With an evolved investment strategy and three new brands, the French hotel giant is planning aggressive growth.
LONDON—AccorHotels Group’s $2.9-billion acquisition of FRHI Holdings Limited and repositioning of its HotelInvest ownership division to attract outside capital are efforts to propel the French hotel company to greater heights, according to sources.
Speaking to Hotel News Now at The Savoy, one of AccorHotels’ new flagship properties, two of the company’s top executives shared details about the company’s growth and investment strategies, and plans to incorporate its newly acquired brands into the fold.
Steven Daines, CEO, HotelServices, Northern Europe and Russia; and Thomas Dubaere, managing director, United Kingdom and Ireland, said reorganizing HotelInvest as a subsidiary was the second part of the plan put in place once CEO Sébastien Bazin took the reins of AccorHotels in 2013.
“The new plan allows for growth, to expand our partnership base, but while keeping HotelInvest part of AccorHotels,” Daines said.
“It comes at a time when we know Accor needs expansion. There is no plan to split the company, but it is a big difference between us and the asset-light U.S. companies. We can now attract large capital sources, institutional investors, pension funds, which will be looking for good returns,” Daines said.
He said that differentiation is important.
“We now have the chance to find means to expand, which the U.S. companies do not have,” Daines said.
Daines said Bazin proposed a 12-month timeline to HotelInvest’s reorganization at AccorHotels' annual general meeting on 12 July, which was the same day the FRHI deal closed and new directors were announced. AccorHotels’ next phase should take five years, he said.
“(Our CEO) thought that as owners we were not professional enough, as we were mingled,” Daines said.
According to the news release announcing HotelInvest’s new structure “between 2013 and 2015, (HotelInvest’s) gross asset value increased from €5.5 billion ($6.1 billon) to €7 billion ($7.8 billion), and the profitability of the portfolio improved significantly, with operating margin standing at 7.8% in 2015 (versus 4% in 2013).”
North America, U.K. priorities
The new organization will allow AccorHotels to pursue all opportunities, Daines said, but organic growth, not new brand development, will be the push in North America.
The company also plans to boost awareness in North America of the global AccorHotels family of brands.
AccorHotels had 3,900 hotels and more than 500,000 guestrooms in its portfolio of 15 brands at the end of the first quarter of 2016, operating 31% under franchise agreements and 69% under management contracts.
The FRHI deals brought the luxury brands Fairmont and Raffles, and the upper upscale Swissôtel to Accor. Those three brands have 115 hotels including 43,000 guestrooms.
“We will push more than ever (in North America),” Daines said. “But investment and growth will not be specific to (FRHI) brands. The new structure allows us to look at all possibilities.
“In the U.S., we will boost awareness of Accor through awareness of specific brands. It is important for (Americans) to get to know Accor as a company as it is the name of our distribution and loyalty platforms. Our investment on the distribution side has been hefty. Through our FRHI brands, Americans will see the wealth of brands in Europe.”
Daines said he believes some of AccorHotels' brands already have some recognition in North America, so they aren’t starting from scratch.
“Sofitel and Novotel are known in the U.S. and are great fits with our new FRHI brands,” Daines said. “There is no overlap. On the contrary, we want to develop Sofitel. It has an obvious French touch, which in the luxury market is a niche for growth. We are proud of what we have done with the global repositioning of Sofitel.”
Dubaere said his company is also planning to grow in the U.K. AccorHotels has approximately 300 hotels and 10,000 rooms in the U.K, 80% of which are franchised or in management agreements.
Brexit might also play into AccorHotels' hands, Daines said.
“The low pound sterling is good for buys and especially for the top line,” Daines said.
Dubaere said AccorHotels would stick to its ambitious development plan in the U.K., focusing on increasing organic growth in the economy and midscale segments.
“Franchise and management needs to grow there,” Dubaere said.
Daines said he was proud the AccorHotels portfolio in the U.K. contains many former Forte Group properties, a brand he grew up with.
No blur in portfolio
Daines and Dubaere said they believe the portfolio does not contain any blurred lines.
“There is no blur, and we are adamant and clear that we want to keep all our brands. There is customer demand for tailored brands, and we see our U.S. competitors making new brands, so for us there is absolutely no need to kill any of our own brands off,” Daines said.
The Swissôtel brand is one the company is interested in expanding. Daines said it was a brand FRHI had not especially developed, and that Asia would be a region of focus for its growth.
AccorHotels named former FRHI President and COO Chris Cahill to the newly created position of CEO of AccorHotels’ luxury brands. He will be based in Paris, while the former FRHI headquarters in Toronto will become a regional HQ.
The AccorHotels executives did admit that there is a gap in the company’s brand family in terms of economy and midscale product in North America.
“The U.S. is challenging (for AccorHotels in those segments), but we need to bring something to the party,” Daines said. “The North American market is very resilient, and we are not taking part in that.”
Daines said the latest twists in AccorHotels' story will not change the firm’s recent decision to open its distribution platform to selected independent properties.
“There is to be no change in this. We are convinced it will benefit everyone,” Daines said.
He said approximately 1,000 independent hotels are on its platform with another 500 signed up.
“Sixty percent of U.K. hotels are unbranded. Even if you take out one-third of those as being (bed and breakfast properties), there is still huge scope. The Mercure brand in the U.K. has gone up from 20 hotels five or six years ago to 80 now,” Dubaere said.
AccorHotels will release its first-half 2016 financial results on 28 July.