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Interview with Sébastien Bazin, Accor Group President & CEO

12 min reading time

Published on 06/02/14 - Updated on 17/03/22

Sébastien Bazin, President & CEO of the Accor Group
Should your position at the head of the Accor group be seen as a takeover by a reference shareholder who wants to strengthen his financial strategy, or as a real change in direction on your behalf?

My rise to the head of the group is the result of a convergence between the Board of Directors' desire to have a vision for the group that everyone could agree upon and the implementation of that vision by a man in whom the board has absolute confidence. The board sought out in a very professional manner the person who could lead this project, but this search was not reassuring enough and so I offered my candidature. I have a very trusting relationship with the Board and a transparent dialogue. This is absolutely necessary, even if it is not enough on its own, because now it is about steering a long term project, for the group, the collaborators, the shareholders and the customers.Is it possible to speak of a rupture with respect to a former vision or style of operations?I wouldn't say rupture. My position has always been to achieve better valorization of the group's assets. Hoteliers, including Accor, did not capture the essence of their real estate properties. The value of this real estate was not reflected in the share value.This extraction can only be done once, depleting the vein, if it is not reconstituted. Have you changed outlook since then?Even when I was on the Board, it was never a question of extracting the most important added value from the existing assets as long as there was a leasing contract. The priority was to guarantee that the group, in the long term, had the means to guarantee good management and pay its rent. Once that has been said, the calendar announced, the amount expected from sales and the number of hotels to be sold forced the group to let go of its assets in less than advantageous conditions... We had become a bad seller. And yet, even if market conditions were to change, the project and organization that I presented are positioned in a long-term perspective. The group's two businesses, that are now clearly identified, will lead the strategy in the long term.You nonetheless seem to have taken a position opposing the financial markets' expectations...The financial markets were, in fact, expecting an announcement different from the one I made. Since then, they have better understood the reason behind this strategy and we have reached a higher valorization than that which preceded my announcement. The process is underway, validated by the board, accepted by the shareholders and the employees, and is being deployed. We are sticking to the calendar.You were expected to rapidly complete your executive committee with a Marketing & Distribution head and a new HotelInvest head. Where are you with these recruits?The first has been identified. Vivek Badrinath who is in charge of innovation, marketing and technology at Orange will join us on March 1st. His perfect knowledge of the challenges of digital technology and the international dimension of his experience will inject new energy into Accor's teams and be sources of innovation and creativity. The second remains to be selected from a small group of candidates. I hope this will happen soon. Does this slow down the deployment of the strategy? We are moving ahead quickly. An internal note was sent at the end of December to present the executive committee, the regional heads and division heads. The head of global marketing was in place, as were the others, including the head of distribution and sales. Moreover, for HotelInvest, each regional head was identified and is already reporting to me during the interim phase.In terms of the group's organization, which has changed several times in the course of its history, does your choice resolutely prefer the territorial dimension?Indeed it is a response to a need for coherence, simplicity and readability. The organization was made to provide this coherence, first through clear identification of our two trades: hotel operator and real estate manager. Moreover, this choice leads to the rationalization of an organization that was different depending on the continents, which made relations between operational staff and headquarters extremely complex. Now the heads of our main activity areas, who are in daily contact with the field, are members of the Group's Executive Committee. At the same time, the work done in Europe for two years, to give a transversal vision of brands, brought solutions and knowledge about reciprocal performances of brands and their competition that will be very useful to us. These acquired benchmarks are thus preserved.You will not revert to a new responsibility mix...My position is clear and it was heard by the teams: this organization is not optional. It applies to everyone from now. A country manager has operational authority over all the brands through deputies representing the three identified segments: Luxury, Midscale and Economy. They can now rely on differentiating skills for each of the segments. And if there is need for arbitration in terms of operations or development...Major arbitration will happen within the executive committee, largely favored by the presence of five operational managers who are familiar with the challenges regarding the questions that will arise. Moreover, I take full responsibility for my functions as president of the two entities: HotelServices and HotelInvest, both to directly take the pulse of the two activities and to guarantee their success, and to facilitate arbitration and final decision making.Has your vision for the group been modified by your world tour to properties? The most pleasant surprise was to simultaneously observe the very strong motivation and the experience of the group's collaborators in action. They are very confident about themselves and their capacities. They very rightly rely on an exceptional skill in their trade. Their ambition is declared, active, and waiting for answers, and the group knows it can rely on this ambition on all territories, in Eastern Europe as in Asia, in France and in the Middle East. Even more, I have discovered an incredible attachment to the group's values, especially as a hotel operator, with this capacity to defend and develop the brand dynamics on their territory.Was your arrival experienced as a salutary shock or a new episode for the group?It is difficult for me to answer this question, but in the many acquaintances I have made, I have observed a real team need for direction to erase the doubt that reigned for a long time under this roof. This perception probably comes from the addition of a misunderstanding of the Asset Light policy, which tends to be endured rather than accepted, and from the enormous complexity between brand structures and the territorial structures, which made it difficult to know who was capable of decision making.Has the group shifted from its position as historic pioneer culture that valorized internal promotions and "ancestral" values, to a more aggressive willfulness?I do not think this is related to the group's history or to a widespread backward-looking approach. We experienced a violent shock in terms of customer behavior, with a demand that is extremely strong and increasingly diverse in its expectations. To adapt or respond to it, or to anticipate, it is necessary to reorganize. It is not dependent on our past but on an enormous volume of information to be collected, to be treated both in terms of Accor products and the competitors, regarding the digital world and the new distribution channels that make everything faster, more accessible and also more complex. And yet, I absolutely want to preserve the pioneering spirit that gave birth to the group and that most collaborators are very attached to. They must have the feeling that this group continues to advance in terms of its brands and development. This move demands greater rigor, a sense of responsibility for decisions in the noble sense, and a heightened awareness of the environment. I insisted on the three notions with my plan: clarity, agility, and responsibility, meaning be clear-sighted about one's mission and responsibility, quickly reactive, considerate of the consequences of one's acts.Is the group opening up more to skills that have not been learned or generated internally?Personally, I think this is indispensable. Anyone who comes from outside brings a new gaze and new ideas and these are necessary to develop the capacity to go faster and further. But the process was already underway and the group has introduced new skills since the digital revolution with revenue management, smart pricing... Is it fortunate to be present throughout the broad array of the hotel industry? Oh yes, absolutely! We benefit from a very strong experience curve on many territories and with different customer categories, and especially in emerging countries such as in Latin America. We were the first to introduce a broader range of hotel offerings, accessible to the middle classes. Now this asset must be maintained. The major works undertaken for ibis must be continued on the other segments in order to achieve greater coherence for each brand. The work carried out for ibis is a remarkable success to the credit of Denis Hennequin.What is your vision for the midscale segment that includes Novotel and Mercure?It is too soon to answer that question. I set five priorities for myself when I took the helm at the group: the first is to set our sights, the second to define a new organization, the third to assure myself that we have the means to complete these missions. The fourth is to efficiently respond to the digital challenge by capitalizing on a more solid experience to become the most advanced group in this area; and the fifth priority touches on the perimeter and coherence of brands. This goal will be handled by the end of this year. And yet it is not as if everything were on hold. This consideration existed before I came in, and it continues within the marketing teams. I believe that a brand needs visibility, credibility and coherence. It is my conviction that we cannot have all the brands present on all territories. That just isn't possible. It would be lying to oneself, one's clients and one's partners. That means it is necessary to provide the means, in terms of both human and financial resources. It is thus necessary to line up priorities for development and presence. This phase is very important, we need to take time.Does the group have too many or not enough brands?I don't think there are too many brands, contrary to what I sometimes hear around me. Instead, I see that our American counterparts keep creating new ones. The question is not so much knowing if there are too many, but knowing how to prioritize.Do you pay attention to what is happening outside the hotel sphere, in terms of design and creativity?I am lucky that in my experience at Colony Capital I was in contact with many designers and new concepts seeking financing. I pay careful attention to what is developing in the accommodations sector in a broader sense. In the last six months I took advantage of each of my trips to visit new concepts created by the competition, which is why among the three words constituting my plan there is agility: today we see small and independent groups that are able to quickly answer an identified need, to create a timely concept more quickly than large groups that are in some way losing their agility. This innovativeness needs to be cultivated at big groups; it is necessary to stimulate the creation of new concepts and our strength lies in being able to "industrialize" them.Will you implement a specific scouting unit?Once again, Accor has this innovation platform, but it is spread out in several departments with very competent people. This is why at the end of last year I implemented an "Entrepreneur Middleman" in direct communication with the executive committee to present innovations observed outside the group and those developed by our collaborators. The idea is to reach outside the industry while keeping a notion of accommodations and catering. Accor, for example, could be present at an exhibition such as the Consumer Electronic Show in Las Vegas with home automation of tomorrow, and why not as an exhibitor one day to present our own creations. But once again, while I am very careful not to miss these evolutions and to explore sectors where Accor's presence is limited, I am disciplined when it comes to following priorities. For now, the most important is to prepare the organization around the two activities and give them the means to fully express themselves, and make the organization within the territories coherent and readable. If we do that we will have significantly accelerated the group's transformation, while taking a very pioneering approach to digital distribution.You clearly identified a second trade: hotel investment. What dimension do you plan to give it?Hotel investment and real estate management is a fine business. It is part of the group's DNA. I did it for many years and I believe I can bring a real skill. Some of these investments respond to economic profit in perfect keeping with our shareholders' expectations. Why leave others to profit from it? We can succeed with method and discipline, particularly in Europe for the economy and midscale brands. Accor will further affirm itself, because it is already the European leader in terms of hotel ownership. We will preserve and develop this position.When we compare results generated by owned and leased hotels, where the group owns the business, against those generated by hotels where the group is just a franchiser or manager, it seems evident that "all asset light" would lead to a weakening of the group?Yes and no. Of course a drop in turnover is inevitable when only management and franchise contracts are developed and subsidiaries are sold off. And yet this is what some of our competitors did to multiply their stock market valuation with clear and responsible choices. The turnover decreased, but with strongly reinforced profitability. This is not dangerous when a sufficient critical size is reached and the transformation is successful. And yet, within our market share, Accor now has the capacity to generate results well beyond market expectations. We have all it takes: experience, brands, ability. The time has come to intensively work on revising assets. That is my mission. It is a business I know. We will carefully examine the portfolio, reduce weaknesses, arbitrate between properties according to demanding profitability criteria and resume being an investor to acquire assets that needs to be in our portfolio.Will the 300 million in development currently budgeted be able to regain the volume that was nearly triple ten years ago?There is no set budget target. That's not the approach. If there are opportunities with the expected profitability on identified territories then we will invest. It depends on the market opportunities. The group is almost out of debt and has close to 2 billion euros in "cash" available, the question arises regularly, how will you use it? Yes, it is true that on the bottom line were are well out of debt, but not completely if we include off balance sheet commitments and leases to be paid in the years to come. This is the analysis made by the financial market and rating agencies that we cannot ignore. I mentioned my third priority: that the group should have the means to turn decisions into action. The answer is clear today: with our large financial capabilities Accor is not dependent on a third party to guarantee its growth. External growth opportunities exist. They are not so numerous, but we will watch them as we did in Australia with Mirvac, or Latin America with Posadas. Accor Group has a strong commitment to sustainable and responsible development through Planet 21. Will this remain a powerful axis for the group when profitability appears to be your priority?There is no thought to challenge this commitment for several important reasons. The economic dimension is very important considering the savings that are possible within the current context of rising energy costs. Also there is a real demand for it from our clients including business clientele. Finally, it is a formidable tool for internal mobilization within all teams on the field that are strongly invested in Planet 21 initiatives.

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