
At the helm of the number-one European hotel group, and the number-one group worldwide in terms of turnover and number of rooms under direct management, Denis Hennequin defined his territory with a long-term project based on the group’s major axes: its brands, its operating mode and its development. Rather than change the itinerary he validated as administrator, he does not hesitate to suggest a break with several points, a “gentle break” intended to revive the meaning of the corporate project, even if it means crossing out whatever is not working right.
We cannot do everything at once. The absolute priority is to reinforce ourselves where we are leaders. This is not the case on the American market. There we have an American model that does not work. We must accept this fact. It does not mean we will not go back there. That, too, is the point of “New frontiers”. For now it is necessary to accelerate the shift to franchise and keep an eye out for proposals.I’m not just rearranging the jars, I’m changing the jam recipe. I am part of a new chapter in Accor’s historic career. I like to understand the past in order to draw a better path for the future. After the pioneering phase of the birth of the hotel enterprise, there was an opportunistic development phase in other activities, followed by a new phase recentering on the hotel business. This is where I come in: to close the circle since my predecessors, and I owe them gratitude for it, began this recentering of the hotel business. But the question arises “to do what?” My primary intention is to give meaning back to the story, to recreate an ambition that is not just financial. We are a publicly owned hotel group, and my priority is to first take care of the hotel division that through its results will take care of its shares. Accor’s new signature: “Open New Frontiers in Hospitality” expresses this new dynamic that will happen thanks to the will to bring the brand Accor into the streets so that it becomes a reference name. I strongly believe in the power of words. This phrase must guide us every day, the same way other signatures brought a real rupture at Apple or Nike. Thanks to the Accor’s brand awareness, it will be possible to measure all the means provided by the name and we will find this binder, this link that was missing between all our brands.And yet, in the past there was a will to use Accor as the signature of each brand…Yes, but Accor was presented as an umbrella brand. For me, the word “umbrella” harbors an “umbra”... and I do not want it to cast a shadow over our brands, but instead to reinforce them as an endorsement brand that is reassuring for customers, who will travel within our hotel offer, knowing with whom they are traveling. It must not be forgotten either that in order to invest in distribution, the web and elsewhere, as intensively as possible, it is better to do so with a brand. Accorhotels.com or Le Club Accorhotels say a lot.Your intensive work on brands focuses first on the economy hotel segment …Yes, just because it represents 50% of our gross margin and is a real challenge for development on emerging markets. We are forced to reach critical size everywhere we operate with a quest for universality. On the other categories, segmentation is justified and all groups are generally taking advantage of niches. Moreover, the time is right since we are deploying a new room concept at Etap Hotel and All Seasons is in a development phase. But it is not simply an association with the Ibis brand: by renaming Etap Hotels “Ibis Budget” and All Seasons hotels “Ibis Styles”, with an s, I am changing the jam recipe. I call that creating a revolution "peel the orange skin inside out". The transformations that take place within the hotel must be visible from the outside. The new brands are active in this turning point in the brand’s history and, very directly in the improvement of the RevPAR.Doesn’t this sub-brand risk weakening the classic Ibis, pulling it down?On the contrary, these new brands are intended to enrich Ibis, as long as the original brand does not stagnate. When you are in the same universe, the temptation is to create a new brand rather than questionning the principal brand. Today, it is necessary to take a close look at Ibis, especially since it is a leading brand on its niche, and give it a new head start. With Ibis Styles and Ibis Budget, we will feed the parent brand while preserving these new brands’ specific marketing mixes, codes and price ranges to avoid cannibalization. This work was highly negotiated and elaborated internally with franchisees. We watch very carefully so that this “mega brand” does not become a wash boiler where everything gets mixed up.Don’t you risk following the same path that upset Mercure which was overstretched between the Relais Mercure and the Grand Mercure brands?Of course this came to mind during our repositioning. Mercure’s mistake was that it tried to juggle several contradictory positions leading to its identity loss due to its being stretched across several segments at once. In retrospect, it is easier to analyze the reasons for the failure and learn from it. But that is not a reason to stand still.Will you take on the challenge of Mercure’s positioning the same way?Mercure is, in fact, an interesting challenge because today we have an answer. Mercure, in the midscale, is kind of like Forrest Gump’s box of chocolates: they are all different, but they are all good. The strength of Mercure lies in its diversity and its regional anchoring, in the broader sense of the word. We will launch Grand Mercure in China because it corresponds to expectations of the Chinese in China. We were missing a room renovation system in a practical sense; we needed one that would be flexible enough to respect diversity and industrialized enough to maintain a certain level of homogeneity while lowering costs. The platform Dédicace was implemented prior to my arrival to guarantee homogeneity without standardization, while achieving 40% economy over a classic renovation. Considerations are ongoing for the F&B offer. The wine menu was a formidable starting point for this regional anchoring. But we can look at other possibilities.Can the work carried out with the Next Up project at Novotel also be adapted?It is true that the new room is a real innovation, but it does not work everywhere. One problem remains that we will have to treat and not simply sweep under the carpet: it is that of a two-speed network. It is necessary to get out of this duality between historic hotels built outside the city at a time when people were escaping the urban arena, and the new generation of hotels that, instead, respond to a new return to city centers. Considerations are underway regarding the supply that needs to be maintained in these historic hotels. Novotel’s codes need to be intelligently renewed with a certain amount of flexibility. In the same way, we have major work to do to re-conquer our rightful position on the MICE market.And you are counting on Pullman to succeed…I believe that in the end Pullman’s potential can easily reach 400 to 600 properties worldwide. The brand needs to be installed with several flagships in all gateway cities. We already have a pipeline of 60 properties under management contracts, with a strong presence in emerging countries that want a 5* hotel to affirm their status. This is particularly true in China. It is also part of the “Open new frontiers” guidelines that show confidence in the local approach, in Chinese management. This is why I recruited a Chinese CEO for the area, and he immediately saw why Ibis was not becoming established as quickly as we had hoped. It is because there is no established reference on the economy segment and we are ranked among those lower-priced, miscellaneous establishments that do not offer “full service”.To close with a rapid brand overview, is Accor still legitimate in the luxury universe?That’s a question I am no longer asked because we have demonstrated it. The Sofitel business unit contributes positively to Accor’s results and our RevPAR indexes are practically the best in the cities where the brand was repositioned. Sofitel is a major asset for enriching the loyalty program. Moreover, I take my inspiration for other brands from the business unit model. The brand is a constant source of lessons and giving it up is out of the question when it has its place in Accor’s hotel supply, particularly to promote our entry into emerging countries. Before developing other brands, owners in these countries hope to develop a luxury hotel because of the image and prestige it confers, and even use it to demonstrate the better profitability of economy brands. Moreover, the transformation of the Sofitel model is not yet complete, and will involve further asset disposal in particular. The sale of Sofitel is no longer a subject during the road-show I’ve undertaken on the financial market places.If we look at the operating modes that Accor’s hotel operations subtend, are you in favor of all-franchise growth?There was some confusion when I arrived at the head of the group as a “franchise expert”… it was too quickly forgotten that McDonald’s is also the number-one real estate owner worldwide because the McDonald’s franchise is through lease management; also, it should be remembered that McDonald’s manages certain markets, such as Russia, directly. I’ve said it and I’m saying it again: Accor will never be a 100% franchisor. Accor’s quality is that it is an operator and it invested cleverly in the economy hotel segments on markets that support the model. It is because we have these undeniable skills and because we need franchisees to make the networks denser, particularly on markets where there are not many new constructions, that we are better positioned to develop the franchise than any other hotel group. We have a competitive difference that I fully intend to intensify by being even more of an operator or even more of an owner wherever one or the other makes sense. This combination is unique and creates value for franchisees by filling them with our expertise, rather than simply collecting fees.Did the “asset light” financial approach reinforce the idea that you would make the franchise a priority?This is another bit of confusion that needs to be eliminated. Asset light does not mean franchise. My non-capitalistic development in Asia is 80% through management contracts. In emerging countries, Latin America and even in Europe we plan to invest in the economy hotel segment. When the return on investment is 20%, this is a wise decision. Asset right means improving the profitability of the invested capital. This requires more careful analysis of the conditions of each market, without applying a unique model. This new model is simple and set: owner and franchisor on the economy segment, asset light and operator on the midscale and upscale segments; this model is modulated depending on the geographic location. When being an owner is not possible, a franchise model is adopted, which is what happens in the United States and, today, in China. The choice must be motivated by what is most beneficial for the hotel, its profitability, its stability. The real estate aspect must not become more important than the hotel aspect.Your multi-faceted experience with franchisees was certainly an asset when you were called in…Of course that is a part of my array of skills. I fundamentally believe that franchisees are not an essential evil. “Open new frontiers” addresses them like partners that will challenge the system. In my presentation to them, even before the financial analysts, I encouraged them to undertake constructive criticism. We are an operator that is generally dominant on certain markets through our subsidiaries, and the worst would be to develop the arrogance of certainty. It is another rupture that I would like to carry out gently within the corporate culture. In my experience, I have observed that in countries where hotels are mostly subsidiaries, there was a lack of innovation due to a lack of self examination. Under their critical gaze, we must be exemplary in the subsidiaries and more reactive with respect to franchisees that don’t keep in step. They are the first to ask for this.In terms of development, is the priority still on the BRIC, at a time when mature markets have generally better resisted the crisis?Currently the majority of our revenue comes from Europe and like any major global group, we must distribute the risk. But there is no question of slowing down in Europe, on the contrary. Where we are leaders, we must strengthen our position, and gain the lead when it is possible. On these markets where new offers are not created often, independent hotels have a major axis that implicates having strong and flexible brands to feed the discourse with franchised candidates. When I changed the recipe in the jam jars, it is first and foremost for Europe. I do not want to be threatened by players that reinvent themselves, American groups with explicit desires to expand. The entry ticket on these markets must be prohibitive. Aside from this European strategy, the BRIC countries are a priority, but they cannot all be lumped together. It is necessary to understand the specificities of these “new frontiers” and do so with locals. Latin America, with Brazil in first place, provides our playing field. We must double our number of hotels there in order to get even further ahead and look at opportunities for external growth. India is interesting because it has an under-equipped market with a major handicap being administrative delays. Despite that, we have excellent results regarding the small number of hotels in operation and a prudent goal of 90 hotels in 2015. We are also looking at opportunities for acquisition there to feed the pipeline, because as the leading international group we are at an advantage. We are lucky enough to have a very good partnership with Interglobe that we reinforce with Host. In China, the problematic is different. Everyone announces extraordinary pipelines. But the average rate at a Sofitel in Shanghai is 140 euros. For the time being nobody is making money. It is necessary to remain prudent because the supply is overcrowded on the Economy segment, which is contolled by local operators, with heterogeneous products. If we want to impose Ibis and its differentiated supply, then it must reach critical size by first achieving regional coverage, and then trying to establish a national network and play the franchise card in a country where the tourism flow changes very quickly. 200 hotels in 2015 is a reasonable goal. On the upscale, French luxury is highly appreciated. Proof: our 22 Sofitel properties in China, and I am counting a lot on Pullman, which is a product that responds very well to prestigious new constructions. When I announced growth from 35,000 to 40,000 new rooms a year, I suggested that 5,000 rooms would result from non-organic growth because we have the means for external growth.Has the bell tolled on, Accor’s “American dream”?