Accor CEO and Chairman Sébastien Bazin admits that finding capital on Wall Street today is the hardest it has been for a decade.
His conclusion is the hotel industry will slow down but that hotel assets will retain their value as the industry has the advantage of being able to reprice its offerings every night.
“Financing will be expensive, and loan to value likely will go down, so if you add all these, [the industry] will likely slow down. One thing that worries me is that pricing is going up,” he said at Alvarez & Marsal’s European Hospitality Investment Conference.
Economic headwinds are not the same everywhere, though, he said.
“In Singapore, I have never seen so much wealth. Hong Kong family offices are moving to Singapore. There is money in Saudi, while in Europe we are almost expecting doom and gloom, so I would say, move your [backside]. The recession is not the same everywhere. It depends on where the money is coming from,” he said.
Bazin added the France-based Accor intends to show more muscle in the Americas.
“The Americans have missed the boat on lifestyle, and China does not know how to create it,” he said.
Bazin said his expectations are that overall corporate travel will fall 1% or 2% in 2023, but that it will rise 5% or 6% for those companies with 3,000 or fewer employees, companies in which employees must travel.
He said leisure travel is unlikely to be as strong as last quarter's results showed, as pent-up demand and consumer savings will not exist to the same extent.
Where he does see renewed strength is domestic corporate travel.
“[It] is super strong, a lot of groups of 10 to 20 people multiplied by many companies getting people together every other month for trips of less than four hours by train. We have seen this back already in the last four months," Bazin said. “As far as international corporate travel, I have said this over the last couple of years, 25% has gone forever."
Changed Mindset
The Accor CEO said hoteliers have been adjusting to new demand generators, and more work must be done.
“I have never seen so many people spending time in a hotel on a Sunday night, working remotely on Fridays and Mondays, and that is big business now," Bazin said.
Guest mix also continues to evolve.
“[Guests] are not intimidated and go to places they have not been to before, such as in rural locations. We must shift our mindset completely not to build hotels only for travelers, but also for locals, as when it is busy with locals, travelers will want to stay there. It is reassuring, and there are added benefits such as producing less carbon emissions,” he said.
Bazin said the hotels in Accor’s luxury and boutique Ennismore division are quite popular with locals.
“Sixty percent of [Ennismore’s] revenue is [food and beverage], much of it from locals,” he said.
He added that the independent “mom and pop” hotels will suffer in the next few years, which is tragic as they are the epitome of local.
Bazin said group strength will come from reshuffling its brands into two divisions, essentially legacy brands and boutique ones, and allowing management and staff to share responsibility and empowerment.
“Nine years ago, we had 10, almost all European. I reshuffled something super-complex to manage. It might be a stronger company, but it is complex, and you must share responsibility, empower staff," Bazin said.
“The management of [individual] brands was fine, but when we put them together, it is three times as better. Yes, there will be mistakes, but that is fine. They will be the same mistakes I would have made."
Today, Accor has 47 brands. Bazin said that takes focused management.
“Understand that the CEO of North Europe, for example, had all these brands to manage, from Ireland to Moscow, and all at the same time he or she has to address the feasibility of Ibis and meet with the Qatari guys at the Savoy. Asking the same person to do all that is unfair and not sensible,” he said.
Bazin said creating the two divisions, which was finalized on Oct. 1 and goes live on Jan. 1, 2023, had nothing to do with future scale.
“I had that [idea] in my stomach for a year and a half. This transformation was my baby, but the new CEOs took ownership of it in six weeks. They need their own challenges and autonomies. This industry is made up of people who want their own adventure and purpose in life. It is difficult for me, as I am dispossessed, but it is certainly for the better,” he said.
Decade of Reflections
Next August marks Bazin's 10th year with Accor.
Starting in 2013 and leaving the world of stockbroking and private equity was not a decision he has regretted in any way, he said.
“I left [his previous career] because I became arrogant. I could not see any longer who is smart and who is not, so I moved to an industry where you need people. It is [a] nicer industry. Accor might not be the smartest operator, but, my goodness, we’re the nicest,” he said.
More importantly, Bazin said he believes in the mission of the hotel business.
“We should be showing that hospitality is acting for the good, and we need to do more. No other industry can show that like we can,” he said.
Bazin said Accor, and its peers, are hiring huge numbers of staff per year, many coming into the industry with no hotel experience.
“When they do leave, they have more self-esteem, which is a wonderful feeling,” he said.
Labor issues, as with some economic challenges, do not exist in every market, notably Southeast Asia, Latin America and the Middle East, Bazin said.
As for markets that do have labor constraints, there are challenges around pay, unhappiness with roles and that potential and current employees have had much time to reflect during COVID-19.
“They could measure the sacrifices, which they could not do before as they were too busy at work. But we did so, too,” he said.
Bazin added that initiatives around hybrid work is one direction Accor has considered.
“An employee might work three days at Accor, two at Google. Yes, you’d need more hires and training, and there might be some nightmares legislatively, say for social security coverage, but hospitality is a great interest, one in which you learn a lot about yourself,” he said.
One area in which little or nothing will be learned about Bazin himself is on his social media.
“I do not like the world today depending on social media. I hate that. I am on no social networks. Zero. What a waste of time. I do not want people to intrude in my life, and I do not want to intrude in theirs,” he said.
“What we all need is a personal library, which you can draw from and that will help you in the long term,” he added.