In Los Angeles during the Americas Lodging Investment Summit, HOTELS sat down with Accor Chairman and CEO Sébastien Bazin to find out how he is adjusting to life as a hotelier compared to his previous career in the private equity world.
In the 18 months or so since he took over Accor, Bazin has among other things split the company into separate operating and property groups, made big investments in technology, acquired a hip brand in Mama Shelter, aligned with a Chinese lodging company to set up the development of the group’s brands in China, and has delivered good quarterly numbers.
HOTELS: How do you like life as an hotelier?
Sébastien Bazin: I’m really enjoying every minute of my new life. It’s really delightful. I am an operator and I am responsible for many, many souls (170,000). It’s a lot of weight on my shoulders, and what is truly relevant when you are in my position are those five minutes of shaking hands with someone in the middle of Indonesia or in Warsaw or in Madrid. Those minutes matter immensely to the other person because you are the guy on the other side. You are the orchestrator. Don’t miss those five minutes, which repeat themselves 20 times a day.
H: So how do you feel 12 months after the strategic move to split into investment and operating arms?
SB: I’m glad I was cautious enough to say it is a three-year process. But I think we’re probably a bit ahead of what I’ve expected – not in terms of pace, but how people have endorsed it, understand it, and want to achieve on it. Now I’m confident that two years is enough to reinvent ourselves to make sure that we’re going to be best in class operators and investors.
And now I am smiling because for the last six or nine months you’ve been hearing Starwood buying back assets, Marriott actually investing into assets of different brand. We spent a billion Euros buying back assets last year and we are probably going to spend hundreds of millions this year. So we’re not finished.
H: Accor has been subdued with the media for many years. Why so?
SB: I think it probably has to do with being a French-driven company with French executives who are humble and not outspoken because they have not been willing to go live in English. Now we are shifting because at least a third of the new executive committee is not French. Everything has been done in English ever since my first day. It’s going to take four or five years to change the culture.
H: What have been the biggest surprises during your first 18 months?
SB: A positive is the talent pool. I don’t need to find any talent elsewhere. The reservoir is big, much bigger than expected. That’s the biggest surprise, which is of great value.
The biggest disappointment? Probably inertia. Accor is an army. It executes, it understands, but it’s an aircraft carrier. Accor is the biggest hotel operator in the world because we operate ourselves 2,700 hotels. At least 75% of the Accor network is managed or owned and leased, which can be a great advantage in a digital mutation because all the new digital devices, services, technology could be implemented in a heart beat in this system because we control the system, where otherwise you have to convince a franchisee why they have to pay for it and why it’s good for them.
H: But it is also expensive if you’re going to implement technology over 75% of your system.
SB: Sure, which is why we’ve announced purposely this 225 million Euro investment at our Digital Day because I wanted investors to understand this is on top of what we already do, and even that might not be enough. My luck was that 100% of my investor base looked at it as being an investment, not a cost.
I said probably half of the investment is defensive, but half of it can be value creation on providing better margins or better services. And again it’s one of those dicey exercises when I’m getting into a game where I have to predict the unpredictable. I don’t know what’s going to be the next Airbnb service provider.
H: How much do all the disruptors like Airbnb, Google, TripAdvisor worry you?
SB: Plenty. It worries me. The one thing I am sure about is that none of those guys – Amazon, Google and those guys – want to enter into the hospitality field because they’re never going to enter into people management and building innovations. So my fear is not my business being dematerialized because it won’t be.
My fear is I may end up on the wrong end of the stick by having the guest without the margin. And they’re going to make sure I’m going to stay alive because all of those new services only exist if their clients stay someplace. So they may allow me to have water up to here but I’ll be alive. So it worries because it’s what I call the value chain for position. Where am I in that value chain? How should I be preserving my margin and who’s going to be attacking me and what is it I should be doing to be able to be able to be a participant?
So what I’ve been saying for the last 18 months, and I’m adamant, is that Accor is likely to become a participant in the digital services we do not offer today – either through acquisitions or partnerships or alliances or innovations. There is no reason in the world why we should be leaving Trivago, Kayak, TripAdvisor, Airbnb to be the only guys inventing new services, new product. Our hotel company has the ability to do it, but there has to be a dedicated team, dedicated talent, a dedicated initiative. We’re going to get in there.
I have told all the investment bankers in the world whatever opportunity you have in the travel and leisure industry which happens to be service oriented or product oriented, I need to get a phone call. They said, “Oh, we never thought to do it that way.” I said, “Well, you’re going to think of me now.”
H: Will you do this organically? It’s going to be expensive.
SB: It doesn’t matter. We have all the money in the world to do it. We just want to make sure it is explainable, it is accretive and it is smart. And we’ve put aside within Accor a dedicated team only doing this… All of us, we waited too long.
I said on the panel this morning the biggest reason why we don’t, which is true for any traditional industry for the last 15 years, is because we have a very heavy backpack that we carry, which is our DNA and our existence. That means the guy who carries the backpack should not be the guy that comes to this deal.
H: How far along are you in this process?
SB: Long enough to have made the priority to have a team, to have a tutor. He hired a head of digital IT distribution self-marketing. He was the number three executive at French Telecom and he joined us six months ago.
The only thing that you have to keep in mind is that you’re going to be wrong three times out of ten. That’s not a lot. There are two times you’re going to be right and those times are going to be worth it.
H: What do you love about being an hotelier?
SB: It’s being an entrepreneur with a sizable balance sheet. Usually you don’t have those. And I have something which is very, very fortunate, and I don’t know how long it’s going to last. I have support from my board, my main shareholders, the employees, the unions. They have shown positive vibes about our course since I came in and I need to take advantage of this because it never lasts that long.
H: Why did you buy a 36% stake in Mama Shelter?
SB: Many people were telling me, I was showing weaknesses and that I should have been able to invent a brand like this. I said, “Hell, no. If that was the truth Accor would have invented 20 of them the last 10 years. They did not.”
We have the ability to acquire and we must do it quickly. We gave the Trigano family the autonomy. We didn’t buy a majority, but we made sure we have the call options for majority when we want. In the meantime, give them the financial parity and development capacity. It’s going to pay.
I was in Dubai a couple months ago with my 250 Accor developers. I asked the Mama Shelter CEO to come and explain the concept at a party. It was unbelievable. I probably got 30 to 40 very rich, powerful rulers of the Middle East knocking on my door, asking to develop a Mama Shelter in their territory.
H: That story is one you wouldn’t have expected from Accor.
SB: I was a Mama Shelter fan for a long time. The one thing, which was for me was unforeseen, is the pride it gave to the Accor employees. They were so happy. It took them by surprise. They said, “Did we really invest into somebody else’s brand to help it grow? We’ve been so dogmatic for the last 25 years. It was only brands created by the founders.” I said, “Oh, that’s over.”