Accor is the world’s largest hotel operators across the globe.
Accor Hotels’ (AH) business model focuses on welcoming: Welcoming guests, partner hotels under Accor Brand, and welcoming independent hotels under their web portable. The firm has remarkably shifted its focus and aligned business and operating models. Accor brings brand, customer experience, and hospitality features (rooms, food & beverage, customer fidelity) to the world across the 3700+ establishments it manages through franchise, ownership, management contracts.
AH is definitely a winner. The Business model has indeed shifted the operating model, from Hotel owning to brand operating.
The operating and business models are currently aligning, supporting each other: resources made from leaning real estate are reinvested in web presence, geographic expansion and brand building, which in turns fuels better real estate portfolio and ability to generate higher returns. The core of the operating model is its ability to expand through different channels rapidly – the internet is becoming a source of income as a platform versus a brand vector only- and allowed AH to reduce its dependence on Online Travel Agencies. Under Sebastien Bazin’s leadership, AH has rebalanced its focus on hospitality operations, heavily investing in online presence to dispute online travel agencies (“OTA”s such as expedia, booking.com…) costly channel and margin intermediation, after having freed resources.
AH has significantly decreased its capital intensity in recent years, to lighten its structure and free up resources (see Graphs).
AH current operating model and business strategy lie in two axes:
1- Separate management business & asset businesses: AH has split its investment business and would potentially list it, acknowledging its focus on hotel management. Bazin however admitted that selling assets hasn’t always been a good deal for AH. AH is hence taking the opportunity of this asset split to divest from low to average performing hotels, while keeping strategic high performing hotels under ownership, generating more resources to in-turn invest in significant opportunities. This skimming translated into higher operating performance.
Bazin comments on these results, summarizing the alignement strategy
Finally, AH will use its improved investment capacity to further expand, more specifically in North America. It has named a new US CEO, Christophe Alaux, and has an active pipeline of investments to boost hotels under management in the US.
UPDATE 12/09/15: Accor Just announced its acquiring of FAIRMONT RAFFLES HOTELS, Confirming our note on its wish to expand in North America.
Personal phone and email exchanges with Christophe Alaux, CEO, Accor North America, Member of Accor Executive Committee
Morgan Stanley brokers’ note, August 4, 2015, “Accor, Buy On Weakness”
Exane BNP Paribas brokers’ note, February 26, 2015 : “What’s behind the walls”