Accor aims to regain power from OTAs
03 NOVEMBER 2014 6:56 AM
Accor brought together 100 analysts, hoteliers, consultants and journalists in London to explain how it now has the operational strength and size to regain bookings ground from OTAs.
LONDON—Last March at the International Hotel Investment Forum in Berlin, Accor’s CEO Sébastien Bazin threw down the gauntlet in the struggle of hotel versus online travel agency, saying his company was in a position to regain ground from such disruptive booking initiatives.
His comment then was that “reclaiming that space is about measurement, risk and pricing. … OTAs are a great innovation, but if you are big enough, and Accor is, you have to control your destinations.”
Jump forward to 30 October, when Accor’s top brass came together in its Sofitel St. James property in London to explain what corner of the boxing ring it has decided to prepare in, with Bazin bouncing onto the stage shoeless and wearing a black T-shirt and jeans.
“I’ve heard this is how tech people give presentations,” he joked.
Alongside him was Deputy CEO Vivek Badrinath, appointed in January from telecommunications company Orange. (Bazin also did not come to the top of Accor through a traditional hotelier route but from private equity company Colony Capital in August 2013.)
Bazin and Badrinath said Accor’s new digital strategy will change mindsets to create a culture of learning, risk-taking and innovation to allow the company to optimize, improve technology platforms and better partnerships with franchises.
Central to that is Accor’s plan to spend €225 million ($284 million) in a four-year digital plan that will enable it to take back bookings share via innovations in loyalty and customer experience and “being outstanding players at every stage of the customer journey,” according to literature given at the London event.
Bazin also announced the purchase of French app-maker Wipolo to help overhaul its app, mobile, website and employee platforms. No purchase price was disclosed.
Bazin said Accor has set the stage for this moment for many years.
“We have already spent €0.5 billion ($0.63 billion) on this in the last 20 years, so we did not have to reinvent the wheel,” he said.
“In this industry, those who master digital will win. We see digital not as a threat but as a massive opportunity,” Bazin said.
“In the 14 months I have been (at Accor), we have split the company into its HotelServices and HotelInvest divisions, underlined our key performance indicators, expanded our brands (this week Accor bought 35% of French design chain Mama Shelter), involved employees and created cash flows,” Bazin added.
Analyst reaction was to note that while €225 million ($284 million) is a lot of money, OTAs such as Booking.com spend far much more than that every year.
Citi’s James Ainley asked how Accor could fight OTAs when so much hotel money is paid to them in commissions.
On Friday, Expedia, for example, announced third-quarter 2014 profits of $257.1 million, a jump of more than 50% from the same period in 2013.
“Absolutely I still believe OTAs eat too much,” Bazin answered, “but Accor is growing and is in a position to recalculate the value we can provide against that of the OTAs. The investment money will come from HotelServices but mainly benefit franchisees and HotelInvest.”
Bazin was quick to underline that Accor received more plusses from its relationship with the OTAs than negatives, but the percentage of direct bookings needs to upped to what he considers a sensible level.
“Via acquisitions, partnerships and initiatives, we’re making sure we’re at every step of our guests’ booking journeys. We’re investing this money, but in 18 months’ time it all might be adjusted because we are more awake to the threats that will constantly change,” Bazin added.
“These are no longer individual initiatives within silos but companywide,” Bazin said, “but the plan will have challenges, so we need to find the right tempo. This is all about building Accor’s future growth.”
Bazin said he wants Accor to reverse the direct-versus-indirect booking percentage from the current 60/40 figure favoring OTAs.
Locate the threats
Another threat Bazin is aware of is from sharing-economy platforms such as Airbnb.
“Hotels have a solid base from which to adapt, but we had better watch out for these (consumer-to-consumer) models as they will fight back against us. They have affected our margins, but only marginally,” he said.
“For 60 years hotels have only thought in terms of product plus brand, but the Airbnbs think in a completely opposite way. They think customers,” Bazin said.
He said smaller chains and independents have had to fire their commercial directors and stop printing brochures because earnings have dwindled due to OTA commissions and money lost to other disruptive technologies—in his opinion a downward spiral only chains and brands can fight.
“Brands are critical and indispensable. A little while ago brands were 90% of the mindset, but that is not enough today, and if you think you can hide behind government legislation, you are dead,” he said, adding that Accor executives feel no shame in creating yet more brands.
Loyalty far from dead
Bazin underlined that loyalty schemes remain at the heart of the struggle.
“Loyalty is still massively important,” he said, adding that within it is opportunity to increase the percentage (currently 24%) of loyalty program guests booking direct.
Badrinath said Accor’s distribution system sees one reservation every 1.2 seconds, but the company needs better to “stitch our offering across our 40 million database with information that is not shared as much as it should be.”
“Of our initial investment, 40% will be offensive, 60% defensive,” Badrinath said, adding that 55% would be capital expenditure, and 45% operational expenditure.