Travelling companion

Rafał Ostrowski, ‘Eurobuild CEE’: Last year AccorHotels sold 38 hotels to Orbis. It also handed over all of its hotel brands in the CEE region at that time to the exclusive management of Orbis. Why did AccorHotels decide to give away its entire CEE business to Orbis?

Laurent Picheral, CEO, HotelServices in Central and Eastern Europe, Accorhotels: This was not really a case of giving away AccorHotels’ business to Orbis. We know Orbis very well; AccorHotels, as the majority shareholder in Orbis, has total trust in this company. I myself used to be one of the former CEOs of Orbis a few years ago and I personally know Gilles Clavie, its current CEO. AccorHotels completely trusts the highly recognised know-how of these people. This is for us an absolute win-win situation. We have a very reliable partner to manage our operations and to bolster development. It is much better to have a very reliable local partner who knows the local market very well than to have somebody managing the company from Paris. So now we have a very productive, complementary arrangement between us and Orbis – on the one hand, we have a company that knows all the habits and customs of each Eastern European country perfectly well; and on the other, we have AccorHotels providing backup for further expansion, including highly complex and expensive technical developments, such as the digitalisation process currently underway at AccorHotels.

Orbis is obviously very happy with these recent developments. The company is now enjoying double digit growth…

The purchase of 38 hotels by Orbis was a very logical second step in its growth. Orbis has extensively renovated its hotels and we all saw it was time for the company to grow even more. It also has a highly talented management board doing an excellent job that possesses a very deep knowledge of the local market. This makes it much easier to grow and we are now seeing impressive growth outside the borders of Poland and the Baltic region, which used to be Orbis’ traditional limit.

But has this also benefited AccorHotels itself?

For me as a representative of AccorHotels, it is most satisfying to see that the value of our stake in Orbis has doubled in under two years. You don’t find many investments today with such high rates of return. And, as an operational manager we are also very happy with improvements in the capex and in the profitability of all the hotels, which is clearly apparent and was quickly achieved. This is basically what has convinced us that it was a very good decision that was taken two years ago.

Does this also mean that AccorHotels is not going to undertake any activities of its own in the Central and Eastern European region?

Orbis has exclusive rights to all the AccorHotels brands, except for those recently acquired by us in the Fairmont Raffles Hotels International (FRHI) deal. We believe, however, that Orbis has already demonstrated its valuable operational capabilities in the budget and midscale segments. Furthermore, the Sofitel, Pullman and MGallery brands under its management are showing really satisfactory results. In the case of the very high-end luxury segment, like the Raffles or the Fairmont brands, the support of AccorHotels’ dedicated luxury department that we acquired through the takeover of FRHI could, however, still result in optimised added value.

So will, for example, the Raffles hotel in Warsaw be managed by Orbis or directly by Accorhotels?

We have been absolutely astounded by all the work done by Orbis in terms of its highly efficient operational management in each segment of all sectors. I am talking about human resource management, marketing, about the company’s visibility and its image; I am talking about the food and beverages margin and its contribution to our global results. I think Orbis has proved to be in a position to generate very, very positive results. However, there are as well some high-level luxury brands that certainly require a very specific kind of management. As you know perfectly well, we at AccorHotels have a luxury brands section, which is there to ensure that all the know-how is at the highest level for the luxury segment – as needs to be the case in the example of the Raffles hotel in Warsaw.

Where geographically are you going to focus your expansion now?

Worldwide expansion is still important to us. We’re not about to abandon an entire global region just in favour of another. We may eventually, on a temporary basis, increase our activity in one particular place; indeed, we should focus on where we can get a good return on investment and where the market is clearly growing. However, we should certainly be focusing on certain parts of the world – like Asia, which really is a growing market, but also on Europe. All of Eastern Europe is booming.

Do you have any goals when it comes to how many hotels will be added to your network in the next year or so?

We have no such goal; however, we are planning to continually grow. Remember that AccorHotels opens two hotels across the world every three days. Of course we want to accelerate this pace.

Which model will you mostly rely on – franchising or on your own development?

We are doing both through the growth generated by HotelInvest and HotelServices, the two departments of AccorHotels. We want to grow sustainably, and in order to achieve this you cannot say you are going to focus either on purely organic development or on acquisitions. In July 2016 AccorHotels launched a project to turn HotelInvest into a subsidiary to accelerate its transformation and growth. The project should enable HotelInvest to begin a new phase of dynamic growth, by consolidating its existing asset portfolio through renovations, extensions and repositioning, expanding its network through acquisitions and hotel construction, and implementing an assertive asset turnover strategy.

What is your ‘asset light’ strategy?

Well, this is not the only way we are developing. But we have done this and it was one of the stages of AccorHotels’ development. Today, AccorHotels is absolutely ready to make acquisitions and we’ve proven this already. Of course, now we have something of an asset light strategy, because you need to develop with franchise and management contracts – especially on the hotel service side; but on the HotelInvest side, there are also some further property acquisitions that have made us one of the largest owners of real estate in the hospitality sector.

AccorHotels is also opening up its online booking platform to independent hotels. How is this process going and what do you aim to achieve by this?

The idea was to rapidly increase the number of people using our reservation platform – AccorHotels.com, to generate a snowball effect. We are sure that the higher the number of people who come to our reservation platform, the greater the chances will be of getting a booking. It works like a shopping centre attracting crowds for the benefit of all the individual stores. So this platform should also be helpful for AccorHotels’ subsidiary hotels as well as for our franchisees.

This tool has not yet been made available across all of your portfolio. When will this happen?

Not yet, because we only launched it last year. But I can tell you that in Germany we launched it in January this year and have already signed up around 70 hotels, while in Austria we’ve already signed up around ten hotels and I would say that the return for our franchisees is already there because the quality of the hotels on the platform is highly scrutinised. We don’t want to take any hotel; we only want to take very high quality hotels with the highest rankings on TripAdvisor that are checked on a regular basis. We will be carrying out systematic random hotel inspections without prior notice. So if you want to join us on our platform, we are going to monitor the quality of your hotel.

What about Poland and the CEE region – when will we have this platform?

You can be sure that within five years we will have already integrated the entire CEE region. For the moment we have many different systems and we need to harmonise them all. The time will come when we need to discuss this with Orbis.

Will this also mean you will be competing with online travel agents (OTAs)?

It is not our goal to compete with any OTA, but our main objective is to support direct bookings with our reservation tool. This tool is to be used to increase the traffic and conversation rate on AccorHotels’ platform and to propose an adapted and diversified offer to our clients in select destinations.

AccorHotels is expanding into the business of home and apartment rentals. In February 2016 it bought a 30 pct stake in US-based Oasis Collections and a 49 pct stake in French firm Squarebreak. In April it bought British company Onefinestay. What do these acquisitions mean for Accor’s strategy?

The traditional hotel business model still works, of course, but today it is already under pressure. So this classic business model needs to be continually modified and reinvented. We can never sleep. The idea is to become one of the biggest travel companions for each one of our customers, and in order to achieve this we need to not only provide rooms, food and beverages, but also to offer a much broader range of services. So if you take, for example, the deal we are currently negotiating with John Paul, which is a leader in concierge services, we are talking about the complementary services that we could offer to our guests. A total of 3 mln clients are managed by John Paul – mostly in the banking, car and luxury sectors. Eventually, when this deal is finalised, AccorHotels will as a result gain access to people who haven’t stayed with us before. In this way we will increase the numbers of our customers – and not only the traditional hotel customers who visit hotels, but we can also slowly bring people in with other services that are complementary to each other. And so we will be a global companion offering all types of services related to travel.

Is this going to affect our region as well – or has it no relevance for us?

Of course it will. Well, if you take Onefinestay, which is a British company but one that also operates worldwide, the idea is that with the backup of AccorHotels this company will grow even more. Because with Onefinestay we can not only offer very beautiful apartments and homes of a very high standard, but also maybe some related services, and these services could be physically located in our hotels, which might not be that far from those homes. Then you have the possibility of combining in a very complementary manner all these different types of services for the benefit of our customers. They are going to have a multi-faceted experience, which is not just a bed but much more besides.

When will we have the first Jo&Joe hotel open in Warsaw? Where will it be located? AccorHotels says that 50 locations will have opened by 2020. How many of them will be located in Poland or the CEE region?

Indeed, that’s a good question. Actually, the fact is that when AccorHotels doing its in-depth analysis, it became clear to us that for the millennial generation, as well as Bordeaux, Paris, Rio and São Paolo, Warsaw and Budapest are also regarded as highly attractive and trendy destinations. This is very positive news for Eastern Europe, but for sure it is too early to announce any detailed opening dates.

Two decades with Accor

Laurent Picheral is the CEO of Accorhotel’s HotelServices in Central and Eastern Europe and a member of the executive committee of AccorHotels. He joined AccorHotels’ financial department in 1997, where he held various positions in the internal audit department, including director of internal group audit from 2000. In 2003 he was appointed finance director of AccorHotels Deutschland and in 2006 he became the managing director in charge of finance, tax, legal affairs and IT for Germany. He was the CEO of Orbis SA between 2010 and June 2014. Laurent began his career in 1989 as an auditor with KPMG before moving to Salustro Reydel in 1995 as the senior operating director in charge of development. He is a graduate of the EDHEC Business School.