Major Hotel CEO: Big Brands Must Share Resources to Save Mom ’n’ Pops
“It’s time to pivot,” he said of his time-tested hospitality business model. Among his strategies: offering rooms by the day for locals who can “work for anywhere” within biking distance; “replacing business travel” by “catering to locals”; and doubling down on the 12 economy and mid-scale brands that represent 90% of the company’s profits, despite the fact that they may not be the company’s crown jewels.
The numbers speak for themselves. In the first half of the year, Accor reported net losses of €1.5 billion ($1.75 billion), with the luxury hotels in its portfolio—a category led by Raffles and Orient Express—taking a disproportionate tumble. A month ago, he told Bloomberg the worst was behind the company, though, with a gradual recovery aided by a burst in domestic leisure tourism in markets around the world.
“The numbers shouldn’t be a surprise,” said Bazin. “My hotels were virtually closed for the months of May and June. There was nothing we could have done.” Business, he said, is now back on a “good trend,” albeit hardly one that makes for a rosy picture.
“By far, premium, accessible luxury, and ultra-luxury brands are most at-risk,” he said on Tuesday, noting that 70% of their demand stems from international travelers. “The figures this year will probably be comparable to those from the early 1990s.”
Despite that outlook, Bazin is extending a lifeline to others, rather than seeking one.
“If there’s anything the last seven months shows us,” he explained on Tuesday—“and I’m not glad about it at all: that probably 20% of the mom and pop hotels today are dying and need help urgently.”
His outlook was dire for independent businesses in every market Accor operates hotels—luxury or otherwise. “They got [help] for the first five months from local government, but local governments cannot afford to provide that oxygen for 12 months, let alone two years.”
Bazin believes the only way to ensure the survival of these small businesses is for large hotel companies such as his to step in where local government cannot.
One likely outcome, he said, is that these hotels will convert into branded properties, to leverage the “scale, resources, and loyalty programs” of large corporations. But corporations shouldn’t seek to swallow them up. “It is a time for the big boys—us and others—to help the small hotels, as well as small restaurants and small bars.”
“Let’s face it,” continued Bazin. “Anyone staying four days with me at a Novotel or to a Fairmont in Bangkok, it’s because they want to want to experience the Bangkok culture and explore the small restaurants or bars in that destination. This is what Bangkok is all about. Same in London, same in Paris, same in São Paulo. We need to help those people because they make that destination more valuable and more sexy.” That means putting aside goals to expand market share through acquisitions, and possibly taking a hit to business regarding on-site food and beverage sales.
This doesn’t mean cash infusions, Bazin was quick to clarify.
Speaking as much for his own company as for peers—the likes of which include Marriott, Hilton, and IHG—he elaborated: “We need to direct traffic to them, make sure they are known. Give them access to your procurement. Since you have the scale and are probably buying cheaper, why can’t they have access to the same procurement and best pricing?”
Sharing economies of scale, he said, is an easy way to leverage corporate buying power to drive down costs for independent hotels and restaurants. Equally simple for a large hotel is encouraging customers to patronize the independent businesses that are hanging by threads.
As for mom and pop hotels that may offer direct competition, Bazin suggested a potential for sharing loyalty program perks, or offering training support.
“None of us should be acting as a bank,” Bazin said. “But we can give them visibility. That’s what they really need: visibility and traffic. There are many ways we can support local communities to make sure they don’t disappear.”
©2020 Bloomberg L.P.