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French giant Accor aims to be Europe's largest hotel franchisor

10 September 2010 by

Accor might arguably not have quite the same public profile as Hilton, Holiday Inn or Marriott - no doubt in part because you won't find the name above any hotel door - but, chances are, you'll have stayed at one of its hotels.

The French company is, after all, a global big hitter, with more than 4,000 hotels and nearly 500,000 bedrooms, and a spread of 11 brands in Europe, ranging from budget (Ibis, All Seasons) to luxurious (MGallery, Sofitel).

Following a June demerger, which saw its successful voucher business (now known as Edenred) hived off, the refocused hotel company has set its sights on expansion and the not inconsiderable aim of becoming Europe's largest franchisor. It is currently second-largest, behind the Best Western consortium.

After reporting a 5.1% rise in revenue to £2.2b for the first half of 2010, Accor this week revealed three franchise deals for hotels in London, all due to open later this year. The Mercure London Bloomsbury (with Fairview) and its second and third All Seasons budget hotels (with Euro Hotels) are very much a sign of things to come. Both brands are what it classes as "non-standard", which in effect means they are perfect for conversions of independent properties, as they don't demand a specific shape or room size.

Jean-Jacques Dessors (pictured), chief operating officer at Accor UK and Ireland, said: "Accor's current focus is to substantially expand our business in the UK. We are confident that through our expertise as a franchisor and hotel operator we will be able to take advantage of the significant opportunity for mid-scale and budget hotels in this country."

However, in real terms, Accor's franchising operations are yet to get going in the UK, with just eight of the company's 144 hotels here qualifying as such. But its aim is to have 300 hotels in the UK by 2015, with about 90 of those franchised.

All Seasons and Mercure will be the driving brands for this, but Dessors added that discussions were under way for Etap and Ibis as well, although tie-ups for the company's luxury brands, such as Arora Hotels' Sofitel London Heathrow, are unlikely for now.

Accor plans to add 800 franchised hotels in the Europe, Middle East and Africa (EMEA) region by 2015, relying on strong brand recognition to attract independent hotel owners.

That would also garner the required fee volumes to make the enterprise profitable. And having not yet divested itself of its property assets - the group expects to exceed its target of £384m of property disposals this year alone - the cash to invest in vital sales and marketing support for its respective brands is available.

Accor also has the cyclical nature of the industry and continuing economic depression on its side. As Yann Caillère, deputy chief executive of Accor for EMEA, told Caterer: "We have seen that, given the current tough situation, independents are coming to us."

As about 70% of bookings in the UK come directly via Accor's network, it's easy to see why independents are attracted.

Caillère added: "We think we can cover all areas of the market with our range of brands, and in Europe those brands are very well-known. Also, the density of our network is very good, which is important for awareness] when franchising."

Elbowing into a crowded market

Even if it wins hearts and minds, perhaps the biggest challenge the French company faces is that it's coming late to an increasingly crowded market. Rivals such as InterContinental Hotels Group (IHG) have put an "asset-light" approach at the core of their operations. At IHG this was prompted by the arrival as chief executive of Andrew Cosslett from Cadbury in 2005.

Now 85% of its nearly £250m annual profit comes from franchise or management contracts, with the revitalised Holiday Inn brand its flagship franchising offer.

Hilton has also been making the most of the depressed business landscape, attracting struggling independents. Simon Vincent, the company's president for Europe, told guests at Arena's last Christmas lunch that further consolidation across Europe was inevitable. "I believe many independents will look to the solace of Hilton and its brands," he added.

US hotel giant Marriott is also extremely active, with a number of management-contract deals announced in the EMEA region, and the launch of the Autograph Collection in December 2009. Although confined to North America presently, Autograph operates on a franchise basis, allowing independent hotels to buy into Marriott's global marketing and sales support without surrendering their individuality.

It all adds up to fierce competition for franchisors in an increasingly heavily branded hotel market, and no time to waste for Accor as it chases an "asset-light" future.

Accor signs three new franchises, including All Seasons >>

Accor reports 5.1% rise in revenue >>

<span class=""noindex"">By Chris Druce

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