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HAF "We strongly believe that budget hotels do not necessarily mean soulless hotels"

Fabrice Collet, CEO of B&B Hotels, shares during the Hospitality Asset Forum 2022 his vision of convenience hotels, a term he prefers to budget hotels, which according to him responds to a need that will always be present among travellers while evolving to propose a qualitative offer.

Vanguélis Panayotis asked me to talk to you today about the budget hotel industry and how it could evolve. The first thing I would like to share with you is that we in the budget hotel industry are not passionate about this term because it corresponds to a segmentation by price, whereas at B&B Hotels we are trying to think about a segmentation by use.

We talk more about convenience hotels, saying that there are basically two ways of consuming hotels today. The first is the hotel that makes you dream, where you spend a weekend with the person you love, where you spend an evening having fun with your friends. This is the dream hotel in the Bahamas.

And there is a second need, which is a more frequent need that is met by the hotel that you go to on the day you have an appointment somewhere. For example, tomorrow morning I have an appointment at 9am in Toulouse and I need to sleep somewhere tonight. All of life's events are convenience events and it is these that we try to serve at B&B Hotels by offering the right quality-price ratio, the right service, the right product and above all by being present everywhere.

All of this has consequences for our business, especially in times of crisis. Three years ago I had already spoken here with partners from Goldman Sachs with the message "Goldman Sachs believes in this business, it is unsinkable and we are going to invest in it". And six months later I wondered whether we were right because Covid put it all down. Despite all this, we discovered that even during the health crisis people continued to travel, that they resumed their travel habits fairly quickly and that they resumed them above all in this hotel of convenience, saying to themselves that they needed to travel again.

This need has picked up and this gives interesting figures as the budget and economy segments are recovering fastest. These figures also indicate that B& Hotels is recovering faster than the average as our product in terms of RevPAR is somewhere between budget and economy. Our business is recovering fast because it fills a critical need and that gives us confidence for the future.

Indeed, we heard that 2023 would be a complicated year in which we would be confronted with inflation and crisis issues. We look to the future with some confidence that our business will continue to grow.

It is also important to bear in mind that the economic industry we represent is a very cash-intensive industry. We are constantly opening new hotels. Our promise to our customers is to be everywhere they want to be, so that means we have to open hotels all the time. In 2022 alone, we opened 100 hotels, which implicitly means behind that we have raised 1 billion euros of capital to finance these hotels. This cash can only come if the confidence is there.

At the moment, there is a very interesting debate among financial analysts on mass consumption where they try to classify the world between what they call the "staple consumer", i.e. essential constrained expenditure, and the "discretionary consumer", i.e. things that we buy when we have money left to invest. We can ask ourselves today where the hotel industry fits into this? Our feeling is that the convenience hotel industry is an essential hotel industry that people will always need, even in times of crisis.

Today, we see consumers who one day buy a handbag at Louis Vuitton and the next day go shopping at Zara. We see the same thing in the hotel industry, one day I treat myself to a very nice hotel and the next day I try to save money. At B&B Hotels, some of our customers come to stay with us because they would find it difficult to buy a more expensive room and others because they would be wrong to pay more.

When we say budget hotels, we don't mean cheap and ugly. That's what the Americans do, in their market there is this idea that if it's not expensive it's not good and therefore it's for bad people. As a result, the budget hotel industry in the United States is totally devalued. Fortunately in Europe, all the actors cling to the idea that you have to deliver quality. What you have to keep in mind is that as we double in size every 4-5 years at B&B Hotels, 50% of our hotels are less than 5 years old, 75% are less than 10 years old and the average hotel in the chain doesn't look anything like the ones you saw more than 10 years ago. We're now allowing ourselves to go to places we didn't go before and we're trying to do that as best we can.

We deeply believe that budget hotels do not necessarily mean soulless hotels. We are therefore working hard on all ESG issues, which are based on three simple ideas. Firstly, you have to believe in it, put in the resources and have the right processes. At B&B Hotels, we have set up a certification system that is present in all our hotels in France and Germany where we call on an independent auditor to give us his opinion.

When French consumers are asked what they think of companies' environmental and social promises, 73% of them say that it is "bullshit". Based on this observation, we said to ourselves that we were not going to do that but on the contrary we are going to try to keep our promises and prove with external proof that we really keep them.

The budget hotel business is a social lift business, so on social issues how can we help people from diversity and minorities to integrate into French society. Obviously, we have to be on the front line, we hope to be already and we will continue to be.

This is a job where, by definition, we are thrifty with the planet's resources. I think we did it for the wrong reasons at the beginning. Our customers didn't want to pay a lot of money so we thought we'd make the rooms small, optimise the insulation in the rooms, not colour the shower too much so we'd save water, carbon and any other natural resources.

We're putting the emphasis on that now by intensifying our efforts to save money and to have a role to play in a world where we have to convince people. Travelling is not bad, it is not destroying the planet but on the contrary it is sharing, exchanging and that it can be done with a measured, controlled and limited impact on the planet.

We also focus on customer satisfaction. An anecdote that amuses me lately is the subject of technology and big data, which we talk about all the time but which we don't really understand and from which nothing concrete comes. At B&B Hotels, by analysing customer reviews, we are able to identify problems, which then allows us to make targeted flash renovations rather than major renovations. We can therefore deal with quality by being as impactful as possible, all thanks to the information we obtain via data.

A few years ago we showed you market shares and since then we have updated them with data from MKG Consulting. What we are trying to say through these figures is that in the budget hotel business, there is a fairly simple notion that "the winner takes it all". People make quick choices, they rush to the brand they have in mind and the brand with the highest awareness wins. Today, you all know the name of the winner which is ibis.

So how do we manage to create a place for ourselves in this market? Firstly by communicating and then by increasing our market share, i.e. by opening hotels. For the last ten years or so, depending on the country, we have represented between 20 and 50% of the increase in supply. Given that we have opened 100 hotels this year, I think the trend will improve further.

Behind all this, we have some ambitions, including having 3,000 hotels by the end of the decade. This will allow us to establish our brand as the leading brand in the sector. So we will have to expand our footprint into new territories, such as the UK, Brazil and perhaps the US.

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