Accor Chairman and CEO Sébastien Bazin did not disappoint on March 24 at Skift Forum Europe 2022 in London, speaking with much candor in a lively conversation with Skift founder and CEO Rafat Ali. You can watch a full video of their discussion above, as well as read a transcript of it, below.
Bazin defended with nuance his company’s decision not to fully pull out of Russia. He said the U.S. market is “almost on fire,” with average room rates up 18-25 percent. He also admitted to having had some “failures” over the years.
Bazin argued that changed traveler behavior because of the surge in distributed working will vindicate his multi-year efforts to integrate Accor hotels more closely with their local communities and to embrace vacation rentals, co-working spaces, and other emerging forms of blended hospitality.
Rafat Ali: Thank you, Sèbastien, for being here. You came just for this. Thank you for taking that time. I know you have a seven o’clock train, so we have to get you out of here by 5:30.
Sebastien Bazin: But I came because I guess if the chairman of a travel company, hospitality doesn’t dare to travel, who would? I think lead it by example.
Ali: Thank you. And speaking of that, you kept going to office the whole… Was that true?
Bazin: Yeah. Because I’m bored at home. No, it’s not. It’s been two years of hell, but it’s been very comforting for me to actually have the ability to go to the office. I was not alone. We were probably 12 of us, depending on the day, which is less than 2000 people.
Ali: In your giant headquarters there?
Bazin: Yeah, usually it’s 2,500 people, so 12 and it’s no, it was important for me, one to be at the office. Two, I thought it was important because I was doing video all the time to address the 300,000 employees. And I felt it was reassuring for them to see somebody who was at the helm and I was at the office. And it worked well. It’s being, I say, hell, because it’s been tough, but I know and I said that already and I don’t have to be careful. I know already that those two years were not only not wasted, but super important for me personally, professionally and for Accor.
We’ve been able to rethink, we’ve been able to act, we’ve being able to care. We’ve done so many things in two years. And I think I know Accor, probably three or four times better than pre pandemic. I’ve learned about the group. The one thing which is a blessing, when you have 120 countries and all the hotel being closed, you still have a lot of activities in terms of hospital and lockdown and nurses and doctors, and some of our places were utilized as quarantine. I discovered I would say 2000 people at Accor in different geographies who have been extraordinary in terms of accessibility, generosity, creative, present, innovative, working with government officials. I did not know those people before, and I probably would not have known them besides those last couple years. Humanly hats off.
Accor has an extraordinary organization and I’ll tell you something else because I was thinking on the train over. You probably don’t know, I think it was March of 2020, 23rd of March. I said it before, but I’ll say it very quickly. In the same day in the morning at noon, I’ve made a decision because I knew what was happening in Italy, in Spain, and then in England, likely all over that we’re all going to be hit by the pandemic. At noon, I sent an email and WhatsApp to those in charge and giving them very strict instruction to close all the hotels on the 1st of April. I gave-
Ali: This is worldwide?
Bazin: That was March 23rd, 2020. And that was 5,300 people. I was putting people out of a job within a seven-day’s notice. Of course, in many geography you have subsidies and governments being helping quite a bit, but in many geographies of Accor, be it Sri Lanka, being Algeria, being Peru, there is no subsidies. Long story short and I’ve made that decision because activity was basically stopped. And that was what I should have done as the CEO, but I measured by doing it. It was extremely unfair for those impacted, super unfair. And the same afternoon, which was a coincidence. The same afternoon I had the board directors of Accor and we were meant to distribute 300 million of dividend for the year 2019. And I told my board members of what I’ve done at noon. And I said, I cannot recommend to you that we’re going to be voting for that dividend after my decisions of today, it’s impossible.
Long story short, we’ve done something which I’m proud, but not me personally is we created at the time ALL Heartist Fund. And we said that I guess 25% of the dividend not paid should go to those impacted. And I was thinking on the train over that as of this minute, it’s 130,000 people who ask in between $300 to $1,500. Accor spent 35 million on behalf of those 130,000. And in the train I was visualizing, I said, this is two football stadium and you have two packed football stadium gathered all over. It’s actually mostly in Asia Pacific. And I was saying, well, it’s actually pretty good to have been able to give all those two football stadiums individuals 300 to 1000. And now that I guess we are back, that ALL Heartist have solidified even further the sense of belongings to Accor. It’s not wasted. It’s been tough. I don’t know whether we’re going to be talking about Ukraine and Russia. We clearly did not need that tragedy, but this is life and let’s move on.
Ali: Thank you for that story by the way. You are the preeminent hospitality company in Europe. You bear a responsibility of sort of being the flag carrier in many ways, even though you’re not in airline, but in that metaphorical sense. You’re the company most exposed in Russia and obviously part of Ukraine as well. Why haven’t the hotel companies pulled out of Russia?
Bazin: I’ll answer for Accor because I’m never going to be answering on behalf of my peers. It’s an addition of many different reasons. And many of us could debate as I’m debating with myself every single day, whether those reasons are valid. I’m not giving any lesson to anybody because it’s a very tragic situation. First reason, which is not a good one, but it happens to be true, and I want make sure I am coherent with the history of this company. Accor has been existing for 50 years now. And we’ve being in countries of war, probably 30, 40 times of the last 50 years on different continent. And Accor never, ever pulled out of any hotel activities. At the time employees needed Accor the most. And we’ve been very proud of always resisting. Even today in Myanmar, we still open and many other countries and we are doing it. This one is okay, but that’s not a good enough reason because every conflict has something very particular.
The second reason is people don’t realize it. But when you say it, they finally understand it. If you want each of us to witness what’s happening in the country, you need somebody to shelter and host those people. All of our hotels in many different countries are full of media, NGOs, Western diplomats. They need to be hosted otherwise they cannot go. And otherwise you won’t have any Bloomberg or CNN or any people basically on the news. And what you don’t know, not only they go and stay with us, but what they need the most is not a bed. They need a place they can trust to leave behind during the day. They’re basically their camera and all the technologies they embark because they don’t want to be seized when they’re going to be on the street. They also believe that brand will be care taking of their own belongings, which is very important for them to communicate.
The third reason is, and I believe that one is. I’m trying to not disassociate too much. The people working in Russia, which I’m on the phone with them every two days via zoom, whether they are in Russia, whether they are in Lviv or whether they’re in Kyiv. Our hotel are still open in Ukraine as well. This is not their decision. I’m making a very distinct decision between Kremlin and Mr. Putin and the population of Russia. And I can tell you being on the phone with them, they are in tears those employees in Russia. They don’t understand what’s going on. The last thing I want is to impair those for something they have nothing to do for.
But of course we made some other decision which are obvious one, anybody on the sanction list, we closed the hotels and we had five out of 56. Those are done. We’ve suspended and closed all new openings, suspended any new development, suspended our quality of limitless loyalty program with any companies in Russia. We’ve done many things and we are watching every day, whether we can do something extra. And if I need to say it, is probably occupancy in Russia is between 35 and 40%.
Accor does not make a dime in Russia. And even if we were to make 1 million, I can tell you that million will be reinvested very quickly in Ukraine. And by the same token, we have 90 hotels in Poland. Accor is the biggest in Romania, Hungarian, Slovakia, Poland. We’ve already done 150,000 room nights to welcome the refugees of Ukraine. We spend enormous amount of time, but this is where Accor is at its best I can tell you. You don’t know how many Ukrainians work at Accor hotel outside of Ukraine. We’ve been finding their families and siblings and basically get them back with their brothers and sisters away from Ukraine.
Ali: Multilayered reasons of where you’re just describing their multilayered answers.
Bazin: It is multilayered and it’s not an easy decision and we’re just caretakers. We caretakers for the NGOs. We caretakers for [inaudible 00:11:42] person. We caretakers for the media and we caretakers for the employees. And that’s a good enough reason-
Ali: Let me ask this one question, though. Are you getting any pushback from the Accor employees about your decision?
Bazin: No, we don’t get pushback, but I guess I can tell you it depends… I’ll say something and I’ll go very lightly. When you talk to people in Ukraine and it’s a very bizarre sentiment I can tell you. When you are comfortably sitting in Paris and here you are on Zoom every three days with the head of a hotel in Kyiv and in Lviv. And the guy is smiling at you. He’s full of energy. His hotel is full of people, probably not paying and sheltering.
And you’re asking where do you get your energy from? And the guy is saying, “Not only is my duty, but I get it from the group. I get it from the people around me. I know I’m useful.” And those people we’ve been questioning them about hotel in Russia. They don’t want us to close the hotel in Russia. The people in Poland feel differently. We have more problem with the employee of Accor in Poland because they see the 3 million refugees coming in and they’re questioning more whether we should be remaining up in Russia, but not in Ukrainians. And again, there is no good answer or bad answer. People could have their own feelings, which I respect.
Ali: In terms of recovery in Europe, let’s go a little higher in terms of the discussion. Did you see a stoppage in the recovery in Europe, outside of the Eastern Europe region? Or are you seeing any changes there?
Bazin: No, again, we lead cycle recovery Accor is because we don’t have the benefit of the US sizable market and resilient market. Accor exposure to US is probably less than 15% and I wish it could be 70%, but it’s only 15%. Let’s go from the east to the west, Asia Pacific, very difficult.
Ali: I guess there was news to the Singapore’s opening.
Bazin: But Singapore is reopening. New Zealand is reopening. Australia will, Southeast Asia, too much surprise. Bangkok, Vietnam, Laos every week is picking up by five or seven point of occupancy, but it’s coming from 10%. There is good signs. China is closed and probably going to be closed for God knows another, at least nine months at the minimum. But it’s picking up a bit better than I expected. But Japan there’s nobody, Korea there’s nobody. Then if you go to Africa, very difficult. India, it’s a large domestic market and we never made any money in India, probably will never make any money in India. But we happen to be a large operator. Middle east on fire. Middle east all the activities be it in Doha, in Abu Dhabi, in Dubai, those pricing are through the roofs. Traffic is extraordinary. People are spending, enjoying food and beverage concept. Middle east is just very robust. You go to Eastern Europe, we just talked about it. Northern Europe, Baltic, Amsterdam, Germany, stuff, it’s not that many traffic. France is rebounding very quickly, more so than expected. England is actually very strong.
Ali: Well, England is completely post COVID.
Bazin: And then you go to America, which is almost on fire more than 2019 and Canada is picking back. Accor is in so many geographies. I guess there’s no good average, but that’s what it is.
Ali: Yeah. We’ve talked quite a bit on Skift on the uneven recovery and if anything exemplifies uneven recovery, I guess we just said talks about it. In US, you are though doubling down on lifestyle hotels. You own a majority and Ennismore and Gove and Sharan and are running it.
Bazin: This is Indian mafia.
Ali: Indian mafia, totally brown people go. And so you’re betting a lot on the lifestyle hotels. You were early on boutique hotels as well.
Bazin: I was early and I was late. I can tell you something. I miserably failed five years ago when I was trying to question myself on something which will become evident, was not at the time, which is probably why I failed. Five years ago I said, it’s so bizarre the hospitality players as good as we are, we only cater for the travelers, which is kind of normal because we offer a bathroom and the bed. Which means that I guess 1.5 billion international travelers, that is great. And they represent 95% of what we do. And they come in from a different town or from a different country. Perfect.
But we have 7.5 billion people on the planet, which means we are missing probably 6 billion. And I said, this is kind of foolish to have hotel CBD very expensive to run and to build and we’re losing 6 billion of the population. I started Accor Local. And I said, we need to re shift a and invite those people living next door, to come and enter the hotels of Accor. The hotels of me does not matter because we have empty square meters between nine o’clock in the morning and nine o’clock at night. It’s foolish and stupid. I started Accor Local with different manager of hotel. They could not give a damn. They said to me, of course, yes sir, it’s a great idea. But they did not mean it. And no traction whatsoever. The only who called me was Airbnb said, “Sebastian, your Accor Local, It’s a great idea. Can I use all your hotels for remitting the keys for my clients?” I told him, go and take a hike. It failed.
Ali: But you’ve been early in monitor-
Bazin: It failed. But then I said, okay, at least on food and beverage, there’s a reason why all the residents of hotel are empty because they’re boring because you have to go through the lobby and because the food is not good. Sorry. I shouldn’t say that on Skift. The food is extremely good. It’s well designed and but we had to reinvent ourselves on food and beverage, because we always thought it was necessary evil. No, it happens to be a real job with the real way to induce people.
We fixed a lot of the F&B venues to attract the local population. Which is why we went into the lifestyle concept because I said the one thing about lifestyle, which was five years ago with Hoxton was at the time Mama Shelter and 21C and SLS and Delano and Mondrian and now with Hoxton is because they have something magic, which is 55% of revenues do not come from somebody staying in a room. And because 80% of that, 55% is the local community. They understood what I tried to do five years ago with Accor Local, which is resilient, more fun. And plus on top of it, which is a miracle. People will choose your hotel because it is a trendier hotel in town because you have the local population. It does also improve the rates in your room.
Ali: Has that held up during the pandemic of locals coming?
Bazin: You have a 10% better by far for the last couple years when the hotel reopened for the lifestyle segment than non lifestyle because of the local content. No, it’s a good business now. And we may talk about it are probably going to be right, five years after I’ve been wrong in Accor Local because what we do on Zoom is all the customers were going to be losing because they no longer will be traveling. At least the guy from Seattle to Paris, Paris to Tokyo had been saying long time ago to last 20 months. I said, guys, let’s be very candid. We stand to lose 20% to 25% of the international business travelers forever. And we will because the CEO, the CFO will tell the guy, “Why not you start on Zoom. And then if you feel there’s something travel.”
But for the same reason, which is Zoom and Teams, all of a sudden, you have a shift very quickly from working from office, then you were working from home through confinement, and now you have working from anywhere. And all of a sudden you have those hundreds of million that I was looking for to seduce, employees of small, medium, large corporation. They are extremely happy is they were to be welcome if we can actually give them a booking engine to use the premises of restaurant, gallery, gas stations, somebody else’s office and hotels. And that clientele will be additive to lifestyle and would be a new clientele for the legacy brands, and that is heaven. And plus it is planet friendly because a lot of those will come by bike, by foot 10 minutes away from their home. It has all the benefits. Finally, after five years, pandemic will have shown that reset of customer base is extremely interesting for hospitality sector. And clearly we are the best to welcome them because welcoming somebody from another town or somebody from the next street, it’s the same kind of expertise.
Ali: You’ve always been ahead on for instance, short-term rentals. You bet on short-term rentals before anybody else did. In fact, nobody else has really bet in the hospitality world, as much as you have. Did it fail?
Bazin: Half and half. Onefinestay is still one of the top three brands in short term rental, very high end luxury. The brand is still as pure as it was. We still have 5,000 homes. It’s still on average five nights and it’s probably like a $10,000 ticket for the week. It did not fail in terms of management, in terms of brand. Where it’d failed my fault is I really believed that the time we can connect 280 million clients of Accor, 78 million card holders to fuel the onefinestay system. And I think we probably represent less than 2% of onefinestay traffic where I would’ve made a bet that I guess we should be at 7%.
Ali: Why was that? Just because people didn’t-
Bazin: Same reason, the general managers were really pissed that I could derive some of the customer base from his hotel to onefinestay. The owner was not happy because they said there’re conflict of interest. The GM did not want to bother, but the main reason, because those two I could overcome, because those happens to be different clienteles. Well it’s anybody who is going to be coming for less than two nights will stay in a hotel. We see that with Airbnb. If you were coming for more than four nights of group of four, then you’re thinking of another type of accommodation, apartment or Airbnb or anything of that like.
Where I did not fail, but did not want it is all those new businesses, and we’ve bought 12 different new businesses because I wanted to be daring. I wanted to see and the young guy who was here, he already raised 25 million dollars, but it’s cybersecurity. Unfortunately, the technology embarked on a lot of startups is too weak for me to connect my 300 million because that gives some very easy entry doors for the hackers to hack my system. We did not connect the traffic of Accor until you bulletproof their own technology. That is an impasse. We fixed it by the way. We fixed it for John Paul. We fixed it now for onefinestay, but you need to fix it first.
Ali: Also continuing on that theme. You also bet I think the only hotel company that better on coworking. And Wojo which is quite big in France.
Bazin: Wojo is the second largest coworker in France. We have 70,000 square meter, like 800,000 square feet of dedicated-
Ali: And now post pandemic, how are you thinking about it now?
Bazin: More so than ever. We have four years of experience. We have a great team. We’re integrating Wojo with that ability to work remotely from a hotel. Booking engine is with Wojo. Now it’s embedded into the same exercise. Thank God we have four years in advance and we have already probably 10,000 customer base of companies working with Wojo. Now we offer them another destination. They can still use a dedicated Wojo building, but now we call it Wojo spot Wojo corner. They can use-
Ali: And the margins are?
Bazin: Margin you take a 6% or 7% cut on the place they use. It’s not a great margin business, but it’s a very good repeat business. And we are doing another thing, which I won’t bore you called WorkLib, which is AI booking smart assistant only for the remote workers.
Ali: And how’s the loyalty program rebrand that you did right before COVID, how’s that working? And how’s that fueled sort of the recovery? Yeah. Talk about that.
Bazin: Well, loyalty program of Accor, it’s called now ALL. Accor Live Limitless, before it was called Le Club AccorHotels. We started exactly 20 years late. It’s kind of not funny actually. Americans started loyalty program in 1985. We started in 2005. 20 years late. Our brand was a bit boring, not enough stickiness and no partnership. You value your membership card if you can use your points in another industry, whether it is the airline, car rentals or food or anything. First you need to build a more sexy brand, more visible, which is why we sign with the Paris Saint-Germain football team on the jersey for the last three years. And I can tell you in all the countries of Africa, all the countries of south-
Ali: I was in Senegal two months ago. And as you know, they won the Africa cup. Everybody was wearing a jersey.
Bazin: You have Paris Saint-Germain jersey in probably 40 different, large countries of Accor. Perfect fit in terms of market base. Then we’ve signed enormous partnership with Accor branded credit card, we’ve never done before. And with a lot of entertainment company with Sony, with LG and so forth. It is great in terms of endeavor. It’s been tough in terms of activation because hotels being closed, people don’t earn, so they cannot actually burn. I need 12 months passing to see the materiality of what we have done. But not only to Accor Live Limitless in two years is far better than what’s being built 20 years before.
Ali: Interesting. Since we’re only three minutes away, I know you have to catch a train. I want to talk about labor. I was listening to podcast I think you were interviewed by one of your CEOs. And it was a podcast. Because you were in internal podcast, it was mainly talking about labor and how that’s the biggest, biggest, biggest challenge for you today. We’ve heard obviously from all the speakers today about hiring and labor and how hard it is. You are the front lines of the labor crisis.
Bazin: Well, Accor is opening roughly one hotel, new per day. Last year were 300 hotel. And this year we’re going to be more than 300 hotels, which is roughly 45,000 rooms. What people don’t realize is when you open more than 300 hotels every year, that means you have to hire 50,000 new people. Only for those hotels you open every year. And then Accor is having a 10% turnover. 300,000 people, you lose 30,000 a year. You add another 30,000 to hire on top of the 50,000. We hire 80,000 new people every year. It’s probably one of the largest new employer. We have a very large academy and so forth. And half of those people have no prior education and no prior job experience, zero and 95% of them are local people, which is why Accor is so much embedded in so many countries.
And we are probably the one caring and helping people, which is why you have the turnover of 10%. Because after five years, that person has a better self esteem of himself as he should. And then he can actually go and find for another job. The long story short to your question is, you probably have today 20% labor shortage in the world in hospitality. You don’t really see it in Europe in terms of impact because when you’re still running at 45% to 60% occupancy, the 80% remaining is good enough to run the hotel. The minute you’re going to be hitting 85% occupancy, all of a sudden you need everybody back. There’s one thing which is good news. You’ve seen America for the last 12 months. I think on average in America, they might have increased salary by 12% to 18%, but they’ve been able to increase pricing between 18% and 25%.
The customer and they’re paying fully for the labor uplift. How long that’s going to last those pricing advantage? Probably a year, maybe up years, but it’s not going to last five years. At some point you’re going to end up paying for that labor cost. But Rafat, I’m always super candid. It is us to blame. Those people who, who left the industry left for two or three reason. Number one, underpaid, constraint hours, no mobility and no recognition. Probably. No thank you. Not either. And number two decided that again, they’re going to be changing domicile, go to another place and they want to try something different because they had time to measure the prices of sacrifices. They never had that chance before. I respect those two very legitimate reactions, but the first is my fault.
We as large hospitality CEOs, we have been blind in not recognizing that sacrifices, they under pay, the challenges and the lack of mobility. It’s us to blame, not the employees. You’re going to get the labor back if you promise to them that what they would be accepting for a couple years, it’s only a couple years that you’re going to be paying them more. You’re going to be training them and they’re going to do a different job. There’s still a lot of people who are going to be willing to join hospitality, if they can feel they’re going to be evolving in their career path. It’s a question of more human resources, more attention, more granularity with individual people and then accept to pay more. But hospitality labor market is not that at all. It’s one of the very few industry in which every day you meet someone and you interface with someone. Human capital is extremely strong. No, I’m still actually very bullish on my industry, but we have to face it.
Ali: With that on this glaring call from you to the industry to treat their employees better, let’s end it here.
Bazin: And to just rough up, because I don’t want to give the sentiment that I get it’s Accor. There’s two topic on which we are thinking, brainstorming, acting, deploying together between Marriott, Accor, Hilton, you name it, all the six or seven large hospitality. One is labor. We are of course trying to share diagnostic because diagnostic is the same. Whether you are an America, in France, in UK, or in Singapore. We spend a lot of time trying to think, share good practices and act together as we should because it is 10% of the people on this planet works for the tourism industry. It’s by far the larger employer, so you know that. The second in which we also act and think together is anything which is ESG, planet friendly, carbon emission, food waste, biodiversity, we have scientist global sustainability alliance. I can tell you on those two topics, there’s no reason for any other to try to show somebody else that we are better. We’re going to be so much stronger, just acting together as we are, which is good.
Ali: With that, thank you very much. Thank you for coming.
Bazin: Thank you, Rafat.