Accor Armed Globally

By BTN / January 14, 2001

Accor Armed Globally

Sven Boinet, the management board member in charge of Accor's 3,400 worldwide hotels, recently spoke with BTN hotel editor Bruce Serlen about the challenges travel managers face in developing a global hotel program.

BTN: How would you describe Accor's strategy on multi-branding in regard to the corporate market?

Sven Boinet: Having a portfolio of brands at different price points to cover all of a company's travel has been at the core of this strategy. Accor's founders started with the Novotel brand in France and quickly added the upscale Sofitel brand and the lower brands, precisely to be able to answer the needs of any large corporation anywhere.

BTN: Rapid expansion also must have been a part of the expansion.

Boinet: Definitely. We've had a target for the past three years of increasing the portfolio by about 10 percent each year worldwide, spread out between different regions and different brands. When you look at what we've done in 1999 and 2000, that means we've added about 350 hotels per year. In addition, we added another 300 hotels in 1999 with the Red Roof Inns acquisition. If we were only in one country or had only one brand, we could never have achieved such growth.

BTN: How much of this expansion has been in the economy segment?

Boinet: The potential in terms of opening hotels worldwide is in the economy brands--such as Motel 6, Mercure, Formule and Ibis--as opposed to upscale brands, given the investment, length of construction, etc. In Spain or Germany, for example, the potential for economy hotels is probably 300 to 500 hotels. But when you talk about upscale brands in these countries, you're talking about 10 to 15.

BTN: With new Sofitel properties in New York and Philadelphia, you seem to be stressing the upscale brand, at least in the U.S. market.

Boinet: We had decided in the mid-'90s that the number of upscale hotels--and their positioning--was not sufficient if we wanted to compete effectively with the other international hotel companies. So we decided to renovate existing properties and restart development of the brand by filling the main holes in the network that we already had. In addition to the two Sofitels you mentioned, we'll be opening in Washington, D.C., this year, Chicago in 2002 and probably Dallas in 2003. Beyond that, we're targeting other destinations that we view as gateway cities, where you need a presence if you want to be a global player. It's difficult to develop hotels in many of these cities, of course, precisely because of the high barriers to entry. Partially for this reason, not all these projects are new builds. The property in Washington, for example, is an historic building. Indeed, opening in an existing building is a way around land acquisition problems.

BTN: Given that about 60 percent of your revenues worldwide come from business travel, what's your approach to negotiating corporate agreements?

Boinet: We certainly negotiate these agreements with large accounts that include all the different brands. We have about 200 large international accounts around the world. Aside from that, within each country we have corporate negotiations with large domestic accounts that have more limited needs in terms of destinations. We have local accounts we negotiate with as well. The beauty of our situation is that we are present almost anywhere in the world and we have a large range of brand offerings. In Paris, for example, we have about 300 hotels in and around the city.

BTN: And the level of rate discounts?

Boinet: The level depends on the brand. The lower down you go on the scale of brands, the smaller the discount. Toward the bottom of the scale, we're providing more of a guarantee of availability than a rate discount. This would be the case, for instance, if a corporation wanted to use Ibis, which is a popular brand in Europe. By contrast, there would be margin for negotiation on price at Sofitel, but less so at Novotel and even less as you go down the ladder.

BTN: How closely do you monitor the accounts' volume commitments?

Boinet: Negotiations based on volume tend to be based on progress each year. Right now, we are in the midst of closely assessing some of the large international accounts on their volume commitments. Not only is it a question of us giving a volume discount, it's a question of the company being able to impose its travel policy at the same time. The three-year test started in 1999. We're measuring the volume projections against the actual numbers in the different segments in different countries. So, we'll have some objective data on volume in those segments and markets.

BTN: How is the test proceeding?

Boinet: It's not an easy issue. Both sides have difficulty tracking the information accurately and then gathering the data. We won't have such difficulty in the future, because the hotels all will be linked within the same system. At many hotel companies, each hotel has its own PMS, but that's not the case for us. We have three PMSs worldwide--in North America, Asia and Europe--but they're all linked within the same information network, so we'll have the data we need. Most of the time, large corporate accounts have the same problem because they don't have access to the data on a global basis.

BTN: How is it for the regional and local corporate accounts?

Boinet: Most of the time when you're not talking about global accounts, you're talking about targeted accounts or targeted agreements. In these cases, you make a list of your customer's top 50 or 100 destinations and from those destinations you negotiate special agreements on specific hotels. This way, it's more manageable for both parties. In terms of numbers, these types of agreements are our most common.

BTN: What kind of salesforce do you maintain to manage these different kinds of corporate accounts?

Boinet: We have 20 international sales offices worldwide, as well as national salesforces within each country. Large accounts, meanwhile, are coordinated near the headquarters of each corporation. The coordinator for Siemens, for example, would be in Germany, the coordinator for Alcatel in France. But the situation can change. The coordinator for IBM worldwide is now in the United States, whereas the coordinator for IBM Europe used to be in France. It's complicated. Each company has its own structure and culture.

BTN: You mentioned "guarantee of availability" in relation to the economy brands. Is availability of rooms overall an issue for you today?

Boinet: In markets where availability is a concern, particularly on midweek nights, we're developing a system to alleviate the problem in cities where we have sufficient inventory. Basically, if the hotel is full, the traveler will be directed to another of our hotels in that destination where there is a comparable room available. In other words, each hotel will be able to have access to the live total inventory of that destination. The system is being planned for London, Paris, Brussels and Strasbourg, as well as some other cities in France.

BTN: How will the system work?

Boinet: Let's say you are trying to reserve a room at the Sofitel Paris Arch de Triomphe, for example, and it is full. The reservation people will be able to sell the traveler a room across the street at another of our hotels. They will know the live inventory at that other hotel. As far as our yield management efforts are concerned, it is bound to help and it will assist the travel manager as well. After all, if you represent a corporation and you want a certain inventory in Paris on a certain night at a certain price, we will be able to deliver those rooms. We may not be able to give you 20 rooms at X hotel at that price, but we may have 20 rooms at that price in a hotel nearby. Think of it as yield management, where each floor of a hotel represents a different hotel.

BTN: In a market such as Paris, it becomes a form of competitive advantage.

Boinet: Frankly at many of our competitors, you can never find a room in Paris because they may only have two hotels there. Clearly, there are a lot of these companies' customers who have business in Paris, but they just can't accommodate the demand.

BTN: In recent months, Accor has signed Web-based marketing agreements with Hilton International and Forte to work together in Europe, and with Hilton, Forte and Starwood Hotels & Resorts to work together in Asia. What is the strategy behind these moves?

Boinet: They're based on a simple principle: Hilton corporate customers, for example, will have two choices when they want to come to Paris. Their first choice will be to go through Hilton's own Web site or they can go through our joint platform, where they're likely to find a greater amount of availability, again because of the significant inventory we have in that market. Likewise in London, Hilton and Forte each have considerable inventory, while we're much less strong.

At some point down the road, business travelers will be able to book their negotiated rate. In the future, you'll see more hotel companies cooperating like this. The beauty of Europe and Asia, after all, is that even if we are somehow competing, we are complementary as well. In fact, as we move forward, we expect we will be adding other partners to these agreements, partners whose portfolios complement ours. There might be German and Spanish companies, for example, for those respective markets. There always will be loyalty to the brand, but our intention is to create loyalty also to the service by always providing a solution for the customer.

BTN: Do you see business travel patterns--and consequently hotel development--shifting away from the established markets in North America and Europe?

Boinet: Eastern Europe is a good example of this. Right now, Europe and the United States represent about 80 percent of our total revenue. By Europe, I mostly mean Western Europe, but the business is shifting east as countries are opening. In fact, Hungary is already a good market. Similarly, we are developing Poland very quickly because we believe it will be strong in the future. Yet, you need to proceed cautiously with development. You have a market for midprice hotels in Eastern Europe because they don't yet exist there. You have a market for economy hotels, but not for very low budget hotels because you don't have the travelers. It's not a question of price or strategy. You just don't have a market large enough to sustain the activity. It will happen one day, but not now.

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