Accor's global ambitions uncovered

Accor president and chief operating officer Yann Caillère reveals his priorities for the year ahead and tells Louise Oakley why the company’s brand diversification strategy stands it ahead of the competition

An interview with Accor president and COO Yann Caillère is a little like a geography lesson. Settled in one of the chill-out rooms on the meetings floor of Pullman Dubai Mall of the Emirates, I make the mistake of asking Caillère to reflect on the performance of each key region in which Accor operates in 2011.

Before I know it, he is working his way through the market details and trends of 90 countries — from Australia and Indonesia, Canada and the US, through to Morocco and Algeria, London and of course, Accor’s homeland, Paris.

Generally speaking, Caillère says Accor has been “number one” in every key market except the US during 2011. Highest RevPAR increases have been witnessed in Asia-Pacific and some European markets, except southern Europe, where the company has struggled in “Spain, Portugal, Italy and Greece”.

Challenges have been faced in parts of Africa, namely Ivory Coast, Egypt and Morocco, although conversely, hotels in Algeria have been “outperforming”.

Overall, Caillère is positive about what has been a strong year down to several company “specifics”. Firstly, the group’s impressive global spread is enabled by the fact it operates in different segmentations.

It has 13 core brands ranging from the luxury and upscale segments, namely Sofitel and Pullman, through to the Novotel and Mercure brands in the midscale arena, and the Ibis megabrand, now including Ibis Budget and Ibis Styles, at the economy end of the scale.

Secondly, Caillère is proud of the fact that Accor runs most of its 520,000 rooms worldwide through management contracts as opposed to franchise agreements.

“We are the number one hotel operator; this is important because when our competition are claiming they are the number one hotel operator, this is not exactly the truth, they do a lot of franchise,” Caillère claims.

“We do franchise but we don’t do much [when you take into account] the whole network. We have 520,000 rooms and among these we operate 400,000 rooms, meaning they are our own hotel or we operate under a management agreement.”

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Brand diversification
Accor’s brand segmentation is significant to the group’s Middle East growth strategy. Initially driven by the luxury brand Sofitel, the region is also strong for Accor’s other brands lower down the hotel scale — indeed, the launch of the Ibis and Novotel cluster at Dubai World Trade Centre set Accor apart as a pioneer in this sector, with the establishment of international midscale and economy brands in the Middle East emulated by other global chains soon after.

Since Sofitel first launched, the brand has undergone a complete repositioning worldwide and Accor — traditionally known as a company specialising in the economy and midscale sectors — has “now gained some legitimacy in the luxury and upper segment,” explains Caillère.

In addition, the upgrading of Sofitel, now competing with true luxury brands such as Ritz-Carlton and Four Seasons, left a gap for a new brand, hence the introduction of Pullman — one of Caillère’s priorities for 2012.

“Basically we have created a segment for us, a segment that Hilton or Sheraton is operating today, and this is why we have launched Pullman,” says Caillère. “Pullman is one of our biggest potentials of growth. So far we have almost 50-plus hotels in the world; by the end of 2011 we should be around 52 or 53 hotels.”

The brand is quite strong in Asia, with Europe, Middle East and Africa identified as the next stages of development. Some Pullmans have been converted from Sofitels, the company is rebranding a Hilton and a Le Méridien in Paris as Pullmans, and others will be new builds.

Caillère explains the process behind introducing the new brand: “When I joined the company, we had 206 Sofitels but it was a mixed bag between three-plus star hotels to luxury hotels. So I said at that time, ‘when you are in the luxury segment you have to be very consistent and we can’t do it with that’, so we basically cut the network of Sofitel by half.

“We took out 110 hotels and we have added new hotels and in Dubai this is the case, we have two to come in the next few years — one on Palm Island and the other one off Sheikh Zayed Road. Step by step we have picked the best of the network or renovated them or signed new deals.

Sofitel now is recognised as a luxury brand, if you look at the last J.D. Power Survey, we were rated in the luxury segment, no longer upper upscale, and they put us above Hyatt, Westin and InterContinental. That was great news,” reveals Caillère.

“And then, when we have taken out these 100 hotels, some of them were meant to be big convention hotels, airport hotels; that was Pullman and so we started with that.” Sounds simple really, but why would a company with so many brands already need to add another?

Caillère says there are two reasons for offering such a diverse portfolio but again it comes back to consistency — for the owner and for the guest. He uses examples of Novotel and Mercure — both midscale, typically four-star hotels — to explain.

“What we discovered is some guests are looking for reassurance, they want to make sure when they go to a brand there is no surprise. Years ago, a surprise in the hotel business meant a bad surprise.

“So this is why Novotel was so successful because every Novotel environment is exactly the same,” he says. Mercure was created to meet the needs of guests at the opposite end of the spectrum: “Some guests don’t want to always be in the same hotel and there is a real need for that”.

“So we created a brand at this segment; it is almost the same price, but we have to give some [consistency in the] level of service but we don’t want the guest to have the same room wherever they go,” says Caillère.

There are benefits to the owner too; a Novotel building is standardised, there is more flexibility with a Mercure making it ideal for conversions.

“It’s much easier as there are no real fixed standards; it’s more on the soft side,” says Caillère.

But what if Pullman, Novotel or Mercure don’t quite fit a desired target market, such as the Chinese population? Well, if the market is big enough,which China is, Accor is prepared to be even more flexible.

“We thought we had enough brands, but in fact what we have discovered is the Chinese, the real Chinese living in China, want something better than the Mercure but very Chinese — a product between Pullman and Mercure,” observes Caillère.

“So what we’re going to do is to launch a Grand Mercure because they want something grand, but like Mercure in other ways, but with everything Chinese and Chinese food — this is a way for us to enter deeper into Chinese market.

“This is not something for us to do everywhere but where we see a big market, China, is contemplating a specific need we think we have to do it. The team is there and since we launched it, we are signing Grand Mercure quite fast,” he reveals.

Accor has also recently regrouped its budget brands under the Ibis name, the “Rolls Royce of economy brands,” says Caillère. Ibis still exists, but is being extended with all Accor’s former Etap hotels being rebranded as Ibis Budget — priced roughly 30-40% below the normal Ibis — and the All Seasons brand being converted to Ibis Styles, which meets the needs of economy travellers looking for design concepts.

“What we found is the brand awareness of Ibis is so strong we thought in terms of guest perspective and owner perspective, if you want to give more strength to your brand and development, it was easier for us to put Ibis as the mega brand and to rebrand Etap to be Ibis Budget,” Caillère explains.

“It’s not just a matter of changing the signage, it’s to revisit the concept and to give more freshness, revisit the product itself, the level of service, and to work much more on the bedding side,” he adds.

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Projects and priorities
With this comment, Caillere addresses what we all know is the core priority of a hotel — to provide guests with a fantastic night’s sleep. Caillere is convinced that this is one factor of a hotel stay that should be consistent among all hotel brands, from Motel 6 to Sofitel and as a result, a review of Accor’s beds will form a major project for 2012.

“Sofitel is known to have one of the best beds with Mybed by Sofitel, so we want to be known even in the economy brands to have the best bed.”

Growth is also on the agenda for 2012. Development is speeding up in markets such as Russia and Turkey, while growth in Africa will be driven through a joint venture.

“We’ll have two companies, one will be a holding company, this company will own the hotels, and we’ll be one of the major shareholders, and another company that will manage the hotels. This is one way we use to expand in regions where we find partners,” says Caillère.

In the future, he says Iran and Iraq will have a high potential, and although he acknowledges that Japan is a difficult market to enter, Caillère thinks Accor will have the opportunity to establish itself there.

“The aim of Accor today is around growth, we want to grow everywhere, this is why the work that has been done over the last year was to revisit our brands to rebound faster regarding the efficiency of our brands.

“Second it’s to speed up as well in terms of growth; we’re going to move on the franchise model faster than we used to do,” says Caillère.

Ultimately though, the vision going forward comes back to brand diversification and strengthening each product. As well as rolling out Pullman, Caillère is focused on the MGallery brand, also created after the Sofitel relaunch and designed to be a collection of historic or otherwise distinct hotels that tell a story.

The Sofitel brand itself is diversifying with the expansion of the premium Softiel Legend hotels — of which there will only be 10 worldwide, several of which are in Egypt — and boutique So by Sofitel labels.

The Adagio and Suite Novotel extended stay brands will also be developed, with these expected to be popular in the Middle East where business travellers often require accommodation for one to three months, or more.

Furthermore, keeping the economy brands strong is vital he says, as the success of these in some ways protects Accor from downward cycles in the hotel business.

“When you are in the upper segment RevPAR can go from plus 15 to minus 15, when you are in the economy segment, it’s plus 4 to minus 4 [points], so it’s much more stable and the highest return on investment is in the economy segment too.

“When in a crisis, we need guests, but what happens; the guy will go from Sofitel to Pullman, from Pullman to Novotel, from Novotel to Mercure, Mercure to Ibis, but he will remain in the Accor network and this is why we have launched our loyalty programme,” says Caillère.

“Four years ago, we didn’t have a loyalty programme, so we launched the Accor ‘A|Club’ and we have 7.6 million members, we should be 8 million by the end of 2012, and we are targeting 15 million members. Tomorrow the big battle in the hotel business will be distribution so we have to be prepared — the loyalty programme is a good tool for that.”

ACCOR’S FOCUS POINTS IN 2012
• The expansion and establishment of the Pullman brand.
• Conversion of Etap hotels to Ibis Budget and All Seasons hotels to Ibis Styles, under the new Ibis megabrand.
• The roll out of the Grand Mercure brand, specifically developed for the Chinese market living in China.
• A review of the beds and bedding used in each segment, as Caillère aims to establish Accor as having the best beds in the business.
• The expansion of the MGallery collection of hotels.
• Growth in Africa through a new joint venture.