HNN’s Stephanie Ricca spoke with AccorHotels CEO Sébastien Bazin at the South America Hotel Investment Conference in Buenos Aires in September. The interview is transcribed in full below.
BUENOS AIRES, Argentina—AccorHotels CEO Sébastien Bazin gave a keynote address at the 2017 SAHIC conference here in September. A full transcript of the address, done as an on-stage interview with HNN Editor-in-Chief Stephanie Ricca, follows here.
Hotel News Now: The last few years for AccorHotels have been a whirlwind. We’ve seen new strategies for the ownership and management sides of the company. We’ve seen you acquire all or shares of several companies and brands, notably in the lifestyle, home-sharing and upscale and luxury space. We’ve seen you launch a new brand, Jo&Joe. If you could boil the past two years down in one or two words, how would you describe it?
Sébastien Bazin: “Easy. And I’ll go back and tell you why we’ve been doing all this. Simple phrase: I believe in today’s world either you change or you will be changed. So either you act and then you make some hard decisions and take some risk, and standing still is not an option. So if you don’t act, somebody is going to be acting for you. That somebody’s called Booking, Expedia, Airbnb, Google, Amazon, Facebook. The world has changed so much, you better change. I’m not doing it because I love doing it. I’m doing it because I want Accor to be ahead of the game. I want Accor to be different. I want Accor to listen to the outside environment, and I want Accor to be a first mover in many directions. And it’s going to pay off in three years, four years, five years. It does not matter, at least we dared doing something. So again, standing still is not an option.”
Hotel News Now: And change requires fast pace.
Bazin: “Well, fast is a difficult combination because I’ve been a fast-actor for 25 years. And I love anything when you have speed. Speed, scale, brain and a lot of, actually, humanity. My speed is probably too fast if you ask the majority of Accor employees. Do I believe I am going fast enough? No. So I have to adapt my pace with the capacity to execute all of those initiatives. That’s difficult because you’re dealing with big companies, which means inertia, size, and a lot of people don’t understand what it is we’re doing. So, which is why I came here to see you. Probably half of my job now is to explain to people why 25hours, why Jo&Joe, why private rental, why John Paul. Because nothing comes by accident. Nothing.”
Hotel News Now: And when people ask you that question, what is your response?
Bazin: “Well, the response – usually you get part of your answers by looking in the mirror. What is it that we have missed the last fifteen years? And I think it is absolutely evident for me, I hope it is evident for others – Stephanie, let’s go back 40,000 feet altitude and think, all of us, we have a small room so we can do it together and we’re going to have time for Q&A. If you look 40,000 feet, macroeconomic, why are we all still here at SAHIC? Why does this conference exist? Because we’re all acting in a blessed industry. There’s probably no better industry in the world, which is today the tourism and travel industry. Why? Because that industry’s been growing at 4% or 5% per annum in the last 20 years. That industry will continue to grow 4% or 5% per annum in the next 20 years. That industry presents in the world one out of 10 jobs. So that industry is growing, has scale, size, and grows in each continent.
“So that’s the good news. No one of us probably is going to die sooner because we have a good tailwind.
“The problem is because that industry has gross capacity, size, scale and opportunities, it means it’s one of the first industries where you’ve been facing so much mutation over the last 15 years because people have been seeing what I’m seeing, and that’s called the online travel agencies. It’s called Airbnb, and it’s called Google Home, and it’s going to be called artificial intelligence, and it will be mobile payment. All of a sudden people are not attacking Marriott, Hilton and Accor. They’re just invading a growing industry in which they feel comfortable. And it’s a very easy industry to read because everybody understands hospitality. Go into the oil and gas industry, pharmaceutical industry, it’s a much more opaque industry; if you’re an amateur you may die. This industry is fairly easy to grasp. So, that is the first item.
“Second item, that industry is growing but is also changing on the consumer side. The behavior of our client today is vastly different than the behaviors of the same client 20 years ago. So not only do you have to listen to who are the new actors but who are you serving. Accor is serving two clients: my owner, owners of real estate, we still have a lot of real estate, but you want somebody to pay for the risk because he’s taking the risk, he’s investing a lot of millions, and you want to have a return. And I have another client, who wants something very different, which is people staying in the hotel. And they also want something very different. They want to be surprised, they want emotion, they want to be a person and not a number.
“You know, I’m traveling 250 days a year, and I’ve been traveling for the last ten days in different hotels. Some have been Accor, some have been non-Accor. I can tell you for the last ten days I am still absolutely stunned. Three or four times when I check at the counter, the people in front of me at the reception don’t even ask me, ‘How are you, sir?’ They are going by the norm. ‘What’s your credit card? Have you pre-reserved?’ Hello, anybody home? Can you please ask me who I am?
“So the industry may be dying because we only look at ourselves. We forget looking at the guy across the counter. Adapt to your environment. Adapt to your client. They have a lot of information they didn’t have before. Do they still like branded product? It’s a big question, we may have different answers in this room. I think brands are immensely important, as long as within the brand you can still be trendy, funky, different. I am against all the norms, all the standards, all the standard rules. People are just sick of it. If you happen to be in Buenos Aires, you want to have some local flavor. Our industry better wake up; some of us are still sleeping. I don’t want Accor to be in the sleeping category.”
Hotel News Now: I imagine one of the biggest challenges is being nimble and adapting to those changes while dealing with a huge customer base. You need to be able to move a lot of parts in order to effect change.
Bazin: “Yes, but that’s good news because people of our size. We have 250 million clients every year and almost like 800,000 sleeping every night in an Accor hotel room. So if you can record the data of your client, store it someplace, make sure it’s being shared and used, because recording your data is actually good if you don’t share it. If you happen to be in Buenos Aires, tomorrow you’re going to be in New York or you’re going to be in Bangkok, I better know that you want green tea and you want to be on the upper floor. But if you really understand how to use the data I will know you better, and what I know about you the world of tomorrow.
“Price is an element less than before. What people want when they travel today, they want to be – a difficult definition – they want to be transformed. I.e., they want to remember something happening to them when they are getting into a new culture, new country, new geography. They want to remember something. Either they remember a person, a smile, or they remember a sight, or they remember that they’ve learned something because that souvenir will be shared on the social network. Half of Facebook content is travel-related, half of it. And how much of the half is price? Less than 5%. What they want to share with people is the fact that they are coming back different from when they left because they’ve learned something.”
Hotel News Now: What were some memorable moments from hotels that you’ve stayed at over the last ten nights? Did you share them to social networks?
Bazin: “I was in New York, I was in Boston, I was in Lima. I’m here. Do I remember where I wake up? Many times when I wake up at 4 a.m. in bed, I have no idea where I am. You know, my biggest thing, I spend so much time in hotels, so much time in different conferences, meeting owners, investment bankers and lawyers, my life is very boring. I don’t have time really to go and visit the sites. Yesterday we took some time in Lima visiting former pyramids. It was extraordinary, but what I remember the most is one girl in the suites hotel who was actually looking after me, and actually she knew who I was. She had been serving me some great red wine, and when I left last night I kissed her (goodbye). I didn’t know whether I should be able to … kiss somebody? And I wanted to kiss her because it was my way of just saying thank you. She was warm, she was emotional, she was kind. So, for me, yeah probably two-thirds of what I do is, the thing Accor is probably very good at, is that moment of truth between two people. If you make it work, you will always remember it. So for me, I go back to hotels for the person I met before. I don’t come back for the room.”
Hotel News Now: And that’s authentic hospitality. Can you share some personal and professional highlights from your four years at Accor?
Bazin: “The first is, financially, size, pipeline, brands, we have made enormous progress. I think Accor has never been stronger than today, never, ever for the last 50 years. We have great people, a great balance sheet, great brands, and great market share. So that was kind of the easy part because that’s quantitative.
“What is the biggest stumbling block and probably still a weakness of Accor is culture. And I’m not talking culture of interfacing with the client, I think we are very good at this. Culture meaning I have 260,000 employees. We hire every year another 80,000 people. We lose 50,000 people. Most of them are people we have trained in Asia/Pacific, in Middle East, in Africa. After three or four years they gain what they want from Accor and then go for somebody locally or they go for another industry.
“I talk about culture for one reason. I spend a lot of time trying to compare Accor to TripAdvisor, to Trivago, to Booking, to Facebook. And I’ve been saying it a lot in Europe and in Asia, and I’ve said it here in your continent. And I’m going to try to be very simple here. If you compare an old industry like ours, Accor, and it’s true for IBM or GE or any General Motors of the world, and if you compare this old industry to the new economy, what is absolutely evident is they have four things that we don’t have.
“The first thing is—which is a fact and don’t be scared about it—90% or 80% of all those new companies existing today for the last 15 or 20 years have been invented by a founder who is, who was at the time below 35 years old. Second category: 90% of all those new economies started on the blank sheet of paper—new project, new team, no inertia, no legacy, no habits, no norms, no standards. 90% of those companies have been based on the new, more efficient, leaner, faster technology. It’s extremely technology-based. Fourth, which is the only thing we have in common, is that each of them said from the very first day, their audience is the world, not the city or country in which they’re based.
“When you look at those four things, 90% of companies like mine are today in the hands of people over 50 years old. 90% of us, we have 40, 50, 100 years of legacy. 90% of us, we forgot to invest in technology. The only thing we have in common is scale. And when you look at those four things, one of the consequences of being different is culture and organization. 90% of the old economy has a vertical, pyramidal organization. I decide and you have to be in the company for at least 25 years to speak up, because it takes time to go up the ladder. And if you’re very good, you’re going to have a corner office with two or three windows. And 90% of all the new economies have a horizontal organization, not vertical. I.e., people at 25 years old, 30, have an equivalent say as someone who has 25 years’ experience, because they listen to each other. So, if I want Accor to be able to move and act, I need to shift the entire vertical organization to a horizontal organization, which means I’m killing privileges. And people hate when you tell them what you’ve been having I’m going to be taking away from you because if I don’t we’re going to die.”
Hotel News Now: Give us examples of how you do that.
Bazin: “Well, Stephanie, let’s not kid ourselves. Buying another operator, launching Jo&Joe, it’s an easy task because it takes money and guts and a little brains.
“Channeling a culture’s going to take five to seven years at a minimum. And it’s because you’re dealing with three different buckets. Probably a third of my workforce today—and it’s probably, let’s be careful here—5,500 people in different headquarters out of the 260,000 base. So what I’m talking about is much more outside of the hotels. In the hotels, it still exists, but it has to be kept a bit vertical because you need somebody in charge because you have an unforeseen event every day in a hotel so you better be able to respond to it. But outside of the hotel in my headquarters, you have a third of my people, they understand the new economy, they want to embrace it, they’re very good at it, and they’re going to be locomotive. So those guys are in front in the war with me. You have a second category, which is people who understand the need to change. They want to change, but they don’t know how to act. So they want to be trained, and I’m very happy to train them for them to basically listen and understand the world we live in. But I have a third bucket, which is people who don’t really see the need for change. They don’t understand the environment within, they are very pleased to act and keep the privilege that they had and clearly they don’t want to be trained. And I don’t want to leave those people aside. I need to go back and back to them and say, ‘Guys, I know you don’t want to change. It’s not me forcing it on you. It’s just that my clients want something different and we have to adapt.’
“So that is probably the biggest job for me to keep the workforce and having to understand somebody in yield management probably shouldn’t be going to, should probably go into the database because it’s probably more key for me. It’s probably a third of what we do today would be better off in the hands of a partner that has better technology, because we have one software engineer. Ctrip in China has seven software engineers. So can I keep up with technology when somebody – Booking is spending 4 billion a year in buying keywords, technology and marketing. I’m spending 400 million a year. It’s a 1 to 10 ratio. That game is too late. So there’s a lot of decisions I have to make to stop doing things, doing other things and trying to embrace what somebody else is doing in some fashion. Because don’t compete with somebody better than you.
“And again we talk about Booking. I like Booking, I like Expedia, even Airbnb. I’ve never been against Airbnb. Because Airbnb exists because you, your children, your grandfather, my children, you go to Airbnb because it’s a third cheaper, it’s 50% more spacious and because it’s believed to be more fun. Can I cut my pricing by a third? No. Can I enlarge my room by 50%? No. Can I make my hotel more fun? Yes. So, and Booking, it costs me more than a travel agency, but Booking has access to millions of clients, much more traffic than I had with my local travel agencies. It costs me more but they give me more. The one thing I don’t want is I don’t want to be depending on someone.”
Hotel News Now: You mentioned Airbnb. Instead of shunning those platforms, you have embraced them. How have you made that mindset change?
Bazin: “Well, they aren’t enemies because you have to understand why they exist. They’ve been smart to create something we should have thought of before. Which is why I’m telling you—we missed the OTAs, we missed the sharing economy, I’m not going to be missing the next wave.
“So, on the sharing economy we have missed the commodity product, which is this pretty affordable housing in which you pay less but you don’t have any attached service. But the one weakness—it’s not a weakness, it’s something they decided not to do for a lot of good, legitimate reasons—they don’t want to have local force, local payroll. I have so many people on the ground. I think the big companies like ours, it’s more and more costly, tougher on the acquisition of a new client because Booking and Expedia have a better reach to new clients. You accept to pay more because they give you a client you cannot have otherwise. However, the one thing we cannot afford to lose is retaining a client. So you may be paying once for Booking, which is OK. But whenever you seize that client with you, keep him. Giving him a loyalty card is not good enough. The one thing we have that Booking or Airbnb don’t have is I seize a client, those guys will never seize a client. They interface through a machine. For me, I have 24 hours, 36 hours, 48 hours with someone. So I can embrace that relationship, maybe that guy will remember who I am.
“But if you want to be in the retention game, my belief—and I may be right, I may be wrong—is many of you will continue, 90% in the next 10 years probably less than two nights on the business trips you will still go to a hotel room. You won’t be going to sharing economy because you’ll be staying less than two nights. You’re on business and you want to make sure everything functions, and you don’t want to spend the time on not finding the keys, not knowing where you are. But many of you, a third of you, a half of you, you go to Paris, you go to Bangkok, you go to New York with me, or Hilton or Marriott for two nights. The same person, if you were to come back to Boston, to New York, to Bangkok where you stay over three nights over three people, a third of you are not going to be staying with me. You’re going to go to sharing economy because it’s going to be cheaper, more space and maybe more fun. So why can’t I offer to you what you want, which is when you come back to Paris and you come back to New York and you come back to London, we now have through Accor 10,000 apartments, houses, townhouses, which are not mine. But I am the interface. You have been with me in my hotels, you’re very happy that Accor will provide you that service because you may want something extra when you’re in Paris or Bangkok. You want to have access to a spa, you want to have the linens, you want to have the amenities, you want to have the concierge, you want to have a car. I can provide that for you. Airbnb cannot, because they are depending on outside basically sub-suppliers. So, all the reassurance, all the interface. You’re still my client, you happen to be in a non-hotel room. I don’t care because at least I retained that relationship with you, and then I know you better and I can serve you better.”
Hotel News Now: And that’s building a brand. You mentioned the industry missed the boat on OTAs and shared accommodations … And you said you don’t want Accor to miss the boat on what’s next. Is customer retention what’s next?
Bazin: “It’s coming. It’s there already. I thought we were going from first wave, second wave, third, fourth. The third and the fourth are coming to parallel, greater force, as disruptive as the first two.
“One, indeed, is artificial intelligence. All those devices you will have at your home called Google Home and Amazon and Microsoft, and all those will do it. It exists. You have it at home. He will be basically recording absolutely everything about you and your family. It’s going to be understanding what mood you are in. He will be listening to you when you’re negotiating with your bankers because you can’t afford your interest payment. And that little device, because it’s going to get to know you better, will tell you, ‘Stephanie, you’re probably stressed, you’re tired, I have a great hotel at a 40% less cost. You should be going for the weekend, I’ve organized travel. Why don’t you take it up?’ That machine will have selected for you what you probably need to most, that rest at something you can afford. I better be close to that machine. That machine might disrupt Booking and Expedia vastly. In artificial intelligence we’re only seeing the beginning of it because that’s going to be extremely linked to Internet of Things, connected objects, which may change everything in a hotel room in terms of physical aspect.
“The second thing, which is coming as violently as the first, is payment online. My belief in five years is probably 90% of cash and credit cards will disappear in the hotel industry. You have Alipay, you have WeChat, it’s coming. And we also better react to it. It has a lot of impact on the way you manage cash, balance sheet. But it is going to be reinforcing your relationship with your client. But you have to be part of it.”
Hotel News Now: You’ve mentioned new projects AccorHotels is undertaking to develop services that provide hospitality to neighborhood residents around your hotels—people who may not stay in the hotel, but who could take advantage of it being open around the clock. Tell us about your thinking behind these projects.
Bazin: “OK, I’ll respond to you, but I’ll go one step behind. I told you the things we have in common, the things we don’t have in common between the old economy and the new economy. What’s striking is there’s two things we have and we really do not want to have. One is capital intensity. Accor manages 4,300 hotels on the planet. Behind those 4,300 hotels there is $120 billion of money being spent. And we open two new hotels every three days. That means every three days somebody’s giving Accor another $500 million of spend.
“The second thing we have that they don’t have is labor. So we have 260,000 people. So we have over $100 (billion) spent and a lot of people. For them, they want to be capital-light and labor-light. If you look at it in very simple terms. I mean, the math may be a bit incorrect, but I think all the big hotel companies in the world, we have the same market cap as Booking and Expedia together, $130 billion. They probably have together 80,000 to 90,000 employees. All together we have over 3 million employees. So it is a weakness. It appears to be a weakness, which is why they have so much value in the stock market because they have better agility, less volatility and better free cash flow.
“But since I have it and there’s nothing much I can do about it, it’s my legacy and this is one of the stumbling blocks of Accor. Why don’t I think about it differently and how can I transform a weakness into a force? So then you said to yourself, well, I have the 4,000 hotels. I have so many people on the ground. I have one thing that I have never really been using properly. It happens my assets are open 24 hours, seven days a week, which is the only industry where we never close. Never, ever. And many of my hotels are in the heart of many cities. Probably two-thirds or three-fourths of Accor’s network is in the primary cities. Then you go one step forward. You say it’s funny. I’m in a blessed industry, which is where we started. I have 1.3 billion people traveling today. I remember because I was not born in 1950. In 1950, there was only 25 million. In 1980 there was only 200 million. And 1980 is not a long time ago. And now it’s 1.3 billion and it will go to 2 billion for sure. But we have 7.5 billion people living on the planet, which means good news 1.3 billion travel. Bad news is that 6.2 billion do not travel. Good news, at least 1 billion in the 6 billion non-traveling live in big capital cities. Good news, that 1 billion will become 2 billion for sure in the next 25 years. Good news, millions of people have smartphones, and they are technology-geared. And they are using Amazon, Facebook, eBay, because it enhances their quality of life. And they like it. And they’re going to be using Google Home and devices.
“So why can’t we as a hospitality sector offer to the non-travelers, the local inhabitants, a way for them to access my asset, which is open 24 hours, seven days a week. They actually need it. It’s called Accor Local. We’re launching a big test. Actually, it’s been launched for the last four months in 90 hotels within France. We’re basically opening the gates. I know that guy will never use a room because he lives next door. He does not need the room. And when we launched it, Stephanie, I sat down with my—we first launched it in Paris, so we had like 10 general managers, many different brands—I sat down with ten GMs in front of me, male and female, they were very excited about this initiative. So I said, ‘How well do you know your neighborhood? How long have you been in your neighborhood?’ On average, three years. And each of them told me ‘No, no, we know very well the neighborhood in which the hotel is located.’ I said, ‘Well, that’s good, so let me test you. Give me please the first name, last name of the pharmacist, florist, butcher, those locals next to you.’ Only one of the ten knew the name of the florist or the butcher or the pharmacist. I bet you if you ask the local merchant if he knew the names of the locals, he would know their name inside out. I said, ‘Guys, you don’t know your neighborhood. And I don’t blame you. You don’t know it because you’ve been serving outsiders, people coming from a different town, different city, different country. So if you want Accor Local to work, the first thing you have to do, would you please be humble and introduce yourself to those local guys because they’re actually going to need you.’
“What the test shows us, which is normal common sense, is that when you go to the laundry and pressing shop next door, this is probably where you have the best loyalty between a customer and a service provider, because you want to do it 50 meters, 100 meters away from your home because you’re not going to be going in a taxi or a train for your laundry to be done. And many times you would have told that person that you need your dress on Thursday because you have a big dinner Thursday night, can she please make it and you only give her that dress on Tuesday. And she remembers Thursday night that she needs the dress to be made for you, but she closes at 6:30 and you’re not there at 6:30. So what does she do? She probably has to stay open, but she really doesn’t know whether you’ve been forgetting the dress is there and how long she has to stay open. But she doesn’t want you to miss your dinner. So now that service provider is sending an SMS to her client and saying, ‘Please, don’t leave your office, no stress, your dress is at the hotel reception desk 15 meters from here. Pick it up, they’re waiting for you.’ You’re happy, she’s happy, I’m happy because all of a sudden you’re going to be entering my hotel, which you’ve never done before. And maybe you’re going to say, ‘Wow, it’s nicer than I expected, maybe I’m going to have a coffee.’ Then I may have you as a customer of some sort. And you multiply that by a number of different services. It is concierge, because it is loyalty-driven, because it could be fee-driven, because it could probably be a third of Accor business 10 years from today. You basically give (the local drycleaner) the ability to expand her opening hours and to enrich her interaction with her guest at no expense.”
Hotel News Now: So maybe AccorHotels will take the “hotels” out of its name?
Bazin: “I’m just saying the one thing we have different from others, and again, I’m not critiquing anyone because for a lot of good reasons some models are better than other models depending where you are. Accor has one thing that is particular and it’s that 75% of Accor’s network is managed, operated by Accor. Only 25% is franchised. You take all the big U.S. corporations, it’s exactly the reverse. It’s mostly franchise. And less operated. So the Accor Local initiatives, it’s far easier for me to develop all over the world because it is basically me deciding on embracing my employees, and we deliver. I don’t have to sit with different franchises and ask them what they think of it because that’s going to take ten years.”
Hotel News Now: So that structure of Accor has changed over the past few years. Tell us where AccorInvest stands right now.
Bazin: “It was a hard decision. My family’s been in real estate for three generations, so I’m real estate-passionate. I understand the risk, I understand the return. It’s one of those classes I said in which people are still going to be putting in more and more money because it’s inflation-proof. There’s a lot of good reason to hold real estate. Lots still, and will be for the next decades, in Argentina as well. However, I’m a listed company. So I’m here responding to my owners, my clients and my investors. And every year passing, each of the companies have been divesting the real estate because the real estate is capital-intensive, because it increases volatility, because you have to maintain it, and because investors believe it should be done by somebody who is a real estate expert, not a hotel expert. Granted, it’s a different business. It could be done under the same brand as we do, but it’s different teams and different expertise. One is a balance sheet real estate business; one is a P&L business, loyalty, tech-driven, operator business. And I’ve been doing this for the last four years—separating the expertise and it works very nicely. On the real estate, we went from 3.5 billion to 7.5 billion of value euros, so that’s a lot of money.
“But my stock price does not compare well to Hilton, to Marriott, to InterContinental. And it upsets me. Because if I don’t do it somebody’s going to be buying Accor and selling the real estate at my expense. So we decided to separate the two companies one step further, which is to invite investors to buy some of the real estate in Accor in one single company called AccorInvest based in Luxemburg, which has hotels in 27 countries, which is the largest portfolio in Europe by far. That’s 6.5 billion, so we’re going in that direction. I’m not giving the real estate to my shareholders. I am inviting long-term insurance government funds to invest in that company, and Accor will use the proceeds to do some other things.”
Hotel News Now: Talk a bit about your projections for growth in the next few years.
Bazin: “If you want to simplify things, Accor is by far the largest hotel company in the world if you exclude two countries, which by the way is bad because those happen to be the two largest countries--United States of America and China. But if you exclude U.S. and China, Accor is the biggest in Europe, the biggest in South America, the biggest in Middle East, the biggest in Asia/Pacific, and we’ll remain the biggest because we have the biggest pipeline. So 99% of Accor pipeline—we have 900 hotels to be opened, signed— of those 900 hotels are in non-U.S. countries. My competitors, 75% of their pipeline is still U.S. domestic. So every year passing, Accor is increasing further our dominance in many markets, and I want it that way, and I’m going to be accelerating that pace.
“What’s interesting is 85% of the development of Accor is outside of Europe. Not because I don’t like Europe, but because we’re so large in Europe that the emerging countries, developing countries have better gross capacity and better pace. So the three regions in which Accor is growing fast: Asia/Pacific, including China, which is half of Accor network is going very fast in Asia/Pacific. Two is India/Sub-Sahara Africa because of the enormous capacity and lack of infrastructure. And three is Latin America. And in Latin America we have 320 hotels today already, and we signed another 170 thanks to all those people here in front of me. And they want to go faster, so we’ll have 500 hotels by 2020. And that’s not good enough for me. But Stephanie, let’s be very careful. Anybody who is driven by size makes a mistake because that means you’re driven by your ego. And that makes no sense. I am driven by local market share. So being the first, second leader in the world doesn’t mean much if you happen to be known in 20 countries. What means the most is, do you have market leadership in Brazil, do you have it in Paris, do you have it Bangkok? Because if you do then you change your relationship with the online travel agency because they need you to access Bangkok and Paris. Because I control the supply inventory so you can fix your terms. If you go too broadly, too thinly in too many countries, then you depend on them because you don’t control your market share. So yes, size matters, but it matters locally, not globally.”
Audience question: What are the growth opportunities for Accor in Argentina?
Bazin: “On Accor Local and Airbnb, we could do wonders in between Accor and Airbnb and help them grow. Do I really want Airbnb to grow faster and bigger? No. I like them, but I like them at the size they have. Argentina is an enormous paradox. It is heartbreaking and I’m going to be very cautious here. Argentina and South America is one of those destinations that is virtually unknown, extraordinary in terms of size, culture, architecture. You have everything here. Absolutely everything to make a destination so powerful. The one thing that makes it very difficult for us is anything that has to do with the macroeconomics and geopolitical race. You have a great three years in Argentina, and you have seven bad years that kills the three good years. So it depends when you enter the cycle. You have government today, clearly (Argentine President Mauricio Macri) is making some hard decisions and everybody in this room should wish he’s going to work. Because it doesn’t matter who is your president, make sure he works for your economy. The problem for us, and it’s true for many countries in the world by the way, certain in Argentina but it’s true in Peru—the cost of land is still expensive, the cost of construction. The employee cost is more than someplace else in the world. And the price point for me in selling a room is lower than someplace else in the world. So economically I cannot get the price I need for me to take the risk on enhancing my market share here. It’s an impossible economic equilibrium. Even though I feel there is growth opportunity, there should be tourism coming in, (but) you need an open sky. You need more flights coming to Argentina. You need low-cost airliners. Why is India growing so fast? Because IndiGo did not exist 20 years ago and now has 300 aircrafts. And they’re up in 70 cities. So in a 20-, 30-year bet, of course you need to be in Argentina and you need to be bigger. But everything we do here, frankly we don’t make any money. My owners don’t make any money either.”
Audience: But don’t you think the moment is now to get into Argentina?
Bazin: “Yeah, the moment is now. We have 12 hotels in Argentina. We probably should have 100 hotels here, except you don’t have that many cities in which people want to go to. But again, the owners don’t want to take that risk because that risk is not met with the price of operating. I’m trying to find the best economical (reasons)—I think it works for the lower economy segment and midscale, upscale does not work. We’re suffering. We’re suffering in one of the best cities in the world, which happens to be Buenos Aires. So yes we should be functioning, we just need the right model.”
Audience: How do you handle staff training?
Bazin: “We train 100,000 people a year. We have training academies in Asia/Pacific and Europe. We do a lot of it today through the web, which is obviously faster and better. The problem is, it has nothing to do with the training capacity, we train and we train well. But because we train well and they get a lot of expertise within two years, three years, we lose 50,000 people a year. Because they are being trained by Accor and then they go to a local operator and then they go to different industries. So training is not really the difficulty because we’ve been doing it for the last 50 years and because I have so many people on the ground. And half the training is done by the GM or the head. We changed human resources to ‘talent and culture,’ which is a new name for human resources. So I think we are very good at it.
“My big wish is not training better; it’s keeping those who have trained longer because there’s an enormous cost in losing 50,000 people a year. That’s probably the price you pay when you happen to be good. The one thing the industry has not done well and back to your question, sir. I wish it could be my legacy—owners have been too focused over the last 20 years on increasing lobby size, bar, restaurants, rooms at the expense of the back of the house. When you see today the space allocated to all those you have, we’ve been totally misleading them as an individual. They work hard. It’s painful and they have no place to hide and no place to rest. I need to probably double the space to those people because of how they appear at work, the better they are at interacting with the client. And that’s something we have missed probably the last ten years.”
Hotel News Now: We have some students in the audience today. What is one piece of advice you would give them?
Bazin: “Well I’ll tell you something and it’s not going to serve me well. The piece of advice is, don’t stay 20 years in the same group, in the same brand. And I really mean it. Anybody who is between 20 years old and 40 years old—and I say this to my kids—should change jobs, change company, change geography at least three or four times. Because every time you change someplace else it means you’re coming into the unknown, means you’re taking a risk. And if you can adapt to the unknown, you’re going to be stronger. Anybody that wants to stay in a company for the next 20 years, that was true in 1980, it cannot be true today. So that’s my advice.”