The hotel sector is one for a slide rule. You can slice and dice myriad numbers, all with the goal of working out what’s going on with a sector which can feel harder to pin down compared to, say, retail.
These numbers can be faddish. One is reminded of former IHG CEO Andy Cosslett, who joined the group from Cadbury Schweppes and was mystified by the fascination with revpar growth. He did not, he liked to point out, spend his days ramping up the price of chocolate bars in his previous job, he just tried to sell more chocolate bars.
The Accor earnings call saw chairman & CEO Sébastien Bazin taking against net unit growth, which, in the past few years of much boom, has risen in prominence.
Accor reported net unit growth of 3% last year and looked to 3.5% for 2022. This compared not overly well with Marriott, which was 3.9% for last year and 3.5% to 4% for this. The economy-focused brands saw higher growth still and there’s a not-so-subtle message there.
Bazin told analysts: “I am sick and tired of volume driven”. The proper view to take was, he said, “not NUG, it’s fees per room and how we transfer those to the bottom line”.
This is what you might expect to hear from a company which is in the process of steering the group away from its image as the king of economy and towards the premium and luxury end of things. The most recent move towards this was Accor becoming the majority shareholder in the new entity created with Ennismore, positioned in the lifestyle hotel segment, controlling it with a 66.67% stake.
Accor can now count 40% of its pipeline in luxury and upscale, anticipating an increase to 50%, and Bazin was eager to point out this was all good from a fee point of view and – paging Andy Cosslett – that luxury came with other ways to bring in cash than mere beds.
Bazin had a lovely graph which illustrated a 10-point delta between the revpar of Ennsimore and that of Accor, driven by “people coming to dine” – and not just people with suitcases upstairs. Eighty per cent of F&B clients were local people, meaning, said Bazin, “the resiliency of business is better because you have more reliance on local people”.
This played into a number of trends identified by the CEO. In the opening remarks he described “an enormous change of behaviour…a clear need for us to engage with local population, huge demand for F&B, we have to go deeper on augmented hospitality, on community, on wellness.
“There is a rise of premium leisure experiences, in people paying more for those experiences.”
Bazin repeated his comments that 20% to 25% of business travel would never come back, but it was the leisure market, people travelling up to four hours, these local diners who would, he said, “more than offset” the business lag by 2023.
The group would not, he said, “be shy of disruptive concepts” and was making small investments in a number of initiatives, such as ghost kitchens. Bazin acknowledged that the group had been “burned” by analysts lack of delight in the group’s new business investments, but he said he remained proud of them.
Accor has focused on its doorstep before with its Accor Local initiative, but now it’s doing it with luxury. Will the analysts be impressed with fees over flags? Bazin said that one of his priorities was improving the group’s share price and, for once, he said he was not looking at M&A.
Where Accor leads, the other operators do tend to follow. Eventually. Will quality over quantity convince the markets?
Still feeling confused about augmented hospitality? Regular viewers will have enjoyed our recent podcast with Tom Rimmer. Catch up with it here.