Accor has named Orange executive Vivek Badrinath as its deputy CEO, effective as of 1 March.
Badrinath’s appointment illustrates the importance of distribution and technology to the group as it reinvents itself under its new CEO alongside its previously-stated strategy of increasing its online sales to 50% of total revenue by 2016.
Badrinath leaves Orange as deputy CEO in charge of innovation, marketing and technologies. He joined the company in 1996 and has worked for them since then, with the exception of four years as CEO of Thomson India. In his new role he will be responsible for marketing, digital solutions, distribution and information systems.
Sébastien Bazin, chairman and CEO of Accor, said: “He will be responsible for areas that are key to the group’s success and the development of its brands. I am convinced that his perfect knowledge of digital issues and his international experience will give new impulse to Accor’s teams and be sources of innovation and creativity.
“He brings 20 years of experience in an industry that has been through several technological revolutions and this will enable us to handle the major challenges facing the hotel sector and be ahead of the curve.”
Bazin’s predecessor, Dennis Hennequin, announced last year that the company would invest EUR30m annually taking on the online travel agents by leveraging its “unique relationship” with its customers. Accor said that its investment in the strategy would gradually ramp up to reach a total of EUR120m by 2016, with 50% capital expenditure and 50% operating expenditure.
Accor saw its Ebitda margins diluted in 2011 as a result of its use of OTAs, with Hennequin commenting, “the increased weight of OTAs in 2011 is linked to an increase [in use], not unfavourable negotiations of the terms of working with them. When economic times get tough the temptation is to open the channels more widely with the OTAs”.
He added: “OTAs accounted for close to EUR1bn in accommodation revenue in our hotels, so we’re constantly revisiting our relationship with them. During the next four years this EUR120m investment will rest on two pillars – customer relations and our visibility on the web”.
Looking at customer relations, Hennequin commented: “It’s a key aspect of distribution and in this field we possess an advantage that the intermediaries won’t have – we’re the only ones to have direct access to our customers while they’re in our hotels we must therefore take advantage of that to build a unique relationship and gain a more detailed understanding of customers through our CRM base.”
Accor now has to fulfill these intentions and has launched a number of initiatives and products aimed at setting itself apart from its competitors as technologically-savvy. To do this, the company has made its presence on the internet and in the new media the spearhead of its distribution strategy with a focus on its website Accorhotels.com, its mobile applications and its growing influence on the social networks.
It has relaunched its loyalty scheme, added a paid-for loyalty card for its Ibis brand, an iPad app for business travellers to allow them to book and plan trips and a Pinterest page on roles in the group.
Badrinath is not the only hire the group has made in the technology and distribution area – last year it appointed former managing director of the Voyage Privé Group, Romain Roulleau, as SVP e-commerce, in charge of the group’s web sales. Roulleau, unlike Badrinath, was a familiar face at Accor, having spent three years in charge of web sales development, and in particular of the Accorhotels.com site, where he contributed, the company said, to a “significant increase” in the group’s web sales.
Meanwhile, earlier in January, Accor said that it expected to see full-year operating profit of EUR530m for 2013, the high end of its previous forecast and up on the prior year’s EUR526m.
The company, which has recently announced a split of its owning and operating businesses, said that it had seen growth in Europe and the emerging markets, as well as “significant” cost savings.
In a call to analysts, CFO Sophie Stabile said: “We are quite confident for 2014 … we think we have a positive trend for southern Europe, but remain cautious”. She added that the group had seen “lower business” in China as a result of the country’s economy and what she described as “political constraints”.
Among the emerging markets, demand remained very strong in Latin America and the Africa-Middle East region. Performance in the Asia-Pacific region was satisfactory overall, despite China, although Australia remained under pressure in the economy segment.
Stabile said that the company expected to see the growth of Ibis help the group move towards its goal of limiting the influence of the online travel agents, adding that, at the end of the year, the contribution of OTAs to Accor’s online business was 45% “and Accor 55%”.
The company said that, in the economy segment, “the opportunistic and mastered management of distribution channels implemented in the second half of the year had direct impact on both volumes and prices and therefore played a key role in driving the segment’s revenue up”, with Stabile confirming that the group had been able to push both occupancy and rate. Accor announced last year that it would to spend about EUR30m a year between now and the end of 2016 to increase online bookings to 50% of total bookings.
Stabile warned analysts that she would not answer questions about strategy, with the group’s new CEO, Sébastien Bazin, not fielding queries on the call. In a prepared statement, Bazin said: “This performance reflects the group’s strengths, including its recognised brands covering every segment of the hospitality market, a global footprint with leadership positions in the most promising growth regions and enthusiastic teams dedicated to driving the group's development.
“Accor’s ambitious new vision is leveraging these strengths. It clearly redefines our business model around two core competencies: HotelServices, a hotel operator and brand franchisor, and HotelInvest, a hotel owner and investor supported by a more agile, locally focused organisation.”
Revenue in the fourth quarter fell 3.1% from a year earlier to EUR1.40bn as a result of the company’s asset disposal programme and negative currency effect. Like-for-like revenue growth was up 1.5% for owned and leased hotels, while fee revenues were up by 14.7%. Stabile said that trading had been robust in Europe, particularly in France, Germany and the UK.
All market segments saw growth, with upscale and midscale hotels seeing a 2.9% rise in revenues, to EUR3.44bn, which the group attributed to the ramp-up of the MGallery brand and the re-opening of newly renovated Pullman flagships. Revenue from economy hotels climbed 2.4% to EUR1.97m.
The group added 22,637 rooms over the year, 85% under asset-light managed and franchised contracts, with 59% in emerging markets. The company currently has a pipeline of 114,000 rooms.
Last week saw the company celebrate the opening of its 1,000th hotel under the Ibis brand, two years after overhauling its three economic brands within one single Ibis family. The company now has 1,700 hotels under the assorted Ibis brands.
Commenting on the milestone, Bazin said: “Accor’s new strategy … will enable Ibis, Ibis Styles and Ibis budget to strengthen both their innovation capacities and their leadership: in Europe, including through an acceleration of investments in owned properties; and by capturing new opportunities mainly through management and franchise in emerging countries.”
In 2013, 52% of the group’s openings were made under the Ibis family umbrella versus 39% in 2012.
The group forecast that, within four years, Accor’s economic brands would have “substantially” strengthened their leadership position worldwide, with the Ibis family representing close to half of the group’s global pipeline, over 62,000 rooms in the pipeline of which 38% in Asia Pacific, 30% in Latin America and 27% in Europe.
HA Perspective: [by Katherine Doggrell] Hennequin was ousted amid criticisms that he was not going far enough fast enough. Bazin, however, has a reputation for getting things done and with this appointment he has made it clear that the company’s distribution and technology issues are front and centre for him, by making Badrinath deputy CEO, rather than being sidelined into a CTO-type role.
The company has appeared to accept that to stay ahead of technologocal developments – and not just stay ahead of what other operators are doing – it needs to hire from the technology sector, not just promote from within or hire from OTAs. Badrinath is thought to have been quite the rising star at Orange, having been appointed CEO of Orange Business Services in 2010, and it is likely that the deputy CEO title was as much about luring him as making a statement about the group’s intentions.
In 2012 Orange reported revenue of EUR43.5bn, against Accor’s EUR5.65bn, so one can assume that Badrinath, who is in his mid-40s, has a taste for a challenge as well as a taste for a title. The hotel sector lags the retail sector and has allowed itself to be taken advantage of by others it should be working with – the OTAs – for too long, offering piecemeal solutions such as planning apps for businessmen who already have PAs.
The sector has worked on what it thought customers wanted, in the form of elaborate loyalty programmes (programmes as much about the branded operators selling themselves to owners). What the customer really wants, and why it goes to OTAs, is a good deal. And if loyalty programmes were as simple as the 10-stamp cards customers have from their local coffee houses, that would be a bonus.
Accor has shown itself to be innovative in this area, with twice a year “Super Sales” and private sales offering discounts to members of its email lists, as well as the Ibis paid-for loyalty scheme. The hotel sector is supposed to revolve around service – it must now look to provide want the customer wants.