Case Study Analysis: Accors Issue With Growth Strategy

The assignment revolves around Accor Group that has created strategies that has helped them to grow in the existing market and this assignment is divided in various sections to assist in understanding Accor as a company, issues they are facing and the solution to those issues. The assignment includes a Background, Issue Statement, Data Analysis, Presentation of Alternatives, Recommendations, and Action and Implementation Plan.

The Background will give an overview of the Accor Group in relation to the number of hotels, various brands and the sectors they focus on. The Issue Statement section has one major task which is to identify the issues that Accor are facing according to the case where as Data Analysis is a more elaborate version as in this section all the information related to the issue Accor is facing will be identified and will thus help to identify alternatives which is the next section of Presentation of Alternatives and this section will have all the solutions that could be considered by Accor to solve this issue, in addition giving options for future development.

The next section is the Recommendation in which the writer has identified only one alternative out of many that will be perfect for Accor at that point of time and considering the data that was analyzed by the writer and then the last section which is the Implementation Plan section will give an overall strategy as to the needed requirements that need to be performed for the recommendation to be a success and will also offer a figure that will help understand the plan better. As a whole the assignment tries to solve the problems of Accor with many alternatives but considering the fact that not all the alternatives would be successful as Accor has a very different structure and growth strategy that does not help some of the alternatives mentioned in the assignment but could be key strategy for the future development.

Table of Contents

List of Table and Figures

Background

The Accor Hotel Group (Accor) is a leading European multinational hotel and is considered to be the third largest hotel group in the world, they in 2006 had over 4,094 hotels with approximately 480,036 rooms in 92 different countries (Patel, 2007). A major part of the sales came from the European sector which counted for 33% excluding France as this country was their main source of revenue wit 32%, the other major sectors consisted of North America, Latin America and Other countries which counted for 23%, 3% and 9% respectively but this was due to the fact that a lot of Accor hotels were based in the European countries mainly France which counted for 1,347 hotels and 25% of the rooms and second largest was the North America which had 1,264 hotels and counted for 28% of the rooms (Accor Group , 2006).

Table : Balanced Geographic Diversification

Regions

Number of Hotels

% of Hotels

Europe (excluding France)

903

26

France

1347

25

North America

1264

28

Latin America

161

5

Africa and Middle-East

143

5

Asia Pacific

268

11

Source: http://www.accor.com/gb/groupe/activites/hotellerie/chiffres/chiffres_hotellerie.asp#

Accor’s portfolio by type of Management were mainly Managed as this tallied to 35% of the total hotels where as the others were Leased, Franchised or Owned and this counted for 28%, 24% and 13% (Patel, 2007). To grow faster Accor mainly focused all their resources on mergers and acquisition, product enhancements, product consolidation through sell-off, etc. and this was extremely successful for them as the it was ranked 4th among other hotels top hotel brands. Accor brands could be divided into three major sectors these are Upscale, Midscale and Economy but they mainly focused on the Economy sector and this consisted 56% of their total hotels (Patel, 2007). The upscale sector had only one brand which was the Sofitel Hotels whereas for midscale this sector included brands like Novotel, All Seasons and Mercure Hotels and as for Economy this included Ibis, Formule 1, Red Roof Inn, Motel 6, Etap and Studio 6, by the end of 2010 Accor is hoping to add or convert some of the existing brands to Brand Z, the purpose of this is to cater to a much wider audience and to reposition their existing brands (Accor Group, 2007).

Figure : Hotel Portfolio by type of Management

Source: www.accor.com

Issue Statement

Accor has had a goal to expand itself to some of the newer markets mainly BRIC (Brazil, Russia, India and China), Mexico and Turkey as these countries according to the Pricewaterhouse Cooper’s Macroeconomics forecast will go beyond the G7 countries namely United States, Japan, Germany, UK, France, Italy and Canada in terms of GDP and PPP, but the major issue is the fact that at the end of 2006 Accor had almost no presence in these upcoming countries and this was a major cause of concern considering that IHG and Marriott already had a large number of hotels in these reasons and IHG pretty much winning the race in the Asia Pacific as only in China they had 12,874 rooms (Patel, 2007). Thus the issue was to redefine their identity of it brands and promote them to enhance its visibility and satisfying their customer’s needs by improving their knowledge of them and finally what would it take for Accor to achieve its growth objectives (Patel, 2007).

Data Analysis

Accor has always tried to develop itself so as to try to satisfy the customer’s needs and have believed in offering good service at a cheap price, this is a reason they have focused of the more Economy sector and Midscale sector (Patel, 2007). To achieve their goals Accor has used all their resources and diverted towards acquiring local well known brands around the world like in 1990 Accor acquired Motel 6 and Red Roof in the US which had 550 and 639 properties and counted for an increase in 17% and 225 respectively in revenue generation (Patel, 2007). Accor also acquired hotels owned by Thakral Holdings in Australia, Century and Zenith in Asia and 28.9% stake in Club Mediterranee (Patel, 2007).

As mentioned before Accor brands could be divided in three sectors Upscale, Midscale and Economy Brands and this was called the Multi-Brand strategy which meant that they offered several brands for the same sector like Novotel, Mercure and Red Roof were mainly midscale brands and Formule 1, Motel 6 and Etap were their budget or economy brands and this is a key strategy that helped Accor built their brand as they focused not on building newer brands like some of the other Chain Hotels but instead took over some of the already existing local brands that helped then not only to increase the number of hotels but also gave them a solid knowledge about the various markets and assisted in the development of these brand the existing country (Patel, 2007). The other key success factor was their focus on the economy and budget sector as the demand for low priced rooms with good service was increasing and considering the fact that Accor was already an established brand in Europe added to its success in other continents. Accor believed in managing, franchising or leasing their brand and tried not to own many hotels thus they only owned 13% of their total number of hotels (Patel, 2007).

Accor’s main sector of choice was Europe and mainly France but seeing the growth of some of the other countries namely BRIC they tried to focus their resources towards these sectors and it is expected that by 2010 they will open 200,000 rooms which will count for 33% in mature markets and 67% in the newer markets, these will mainly be economy and budget hotels of which 70% will be franchised or management owned and the rest would be either owned or leased (Patel, 2007). Accor is also expected to dispose some of the existing which by the end of 2008 should be a total of 535 hotels and will account of €3,225million out of which €1,625million will impact on cash and €1,600million will impact on reducing the off-balance sheet commitments and this would affect the holding structure in the mature markets as the percentages in various sectors for managed and franchised would increase thus reducing the owned and leased hotels drastically (Patel, 2007). The preferred operating structure would also change as the upscale brands would be management contracts, midscale would be on variable rents, management contract and franchise contract and the economy brands will become more of a variable rents, fixed rents and franchise contract, this was huge change on the mature markets and would thus impact Accor’s Brand Image.

Presentation of Alternatives

As mentioned before Accor’s main issue is to enter countries like BRIC, Mexico and Turkey as their growth plan depends on these countries but the fact that there are already existing competitors like Marriott and IHG in these markets makes it even more difficult for them to make their own identity in these countries thus some of the alternatives that could be considered are as follows.

Acquiring local brand Hotels in these countries by using the help of the government as some of the countries namely China the local hotels are controlled by the government.

Use franchise or management contracts to enter these markets but by using some well known real estate builders

Enter using franchising for standardized brands like Novotel, Formule 1, Motel 6, Etap, etc. or owning some customized brands like Sofitel, Mercure, etc.

Attracting the government by using Corporate Social Responsibility thus being accepted by the local community

Recommendations

Despite coming with four alternatives the writer would only recommend one alternative to Accor considering their present growth strategies and this would be to enter these countries using franchising and management contract for standardized brands like Novotel, Formule 1, Motel 6, Etap, etc. or owning and leasing some customized brands like Sofitel, Mercure, etc. by this the writer is try to explain that Accor has an advantage which is that they are a well known brand around the world but choosing the right market for their various brands is a totally different aspect. To enter the six countries that were mentioned before it would be wise for them to differentiate which brands they would like to have in the cities and the ones that would help them to control the rural community, e.g. the Customized brands like Sofitel and Mercure could be specific to the Cities and would thus be franchise or management contract based where as Novotel, Formule 1, Motel 6, Etap, Studio 6, Red Roof Inn, etc. can be located around the rural areas and could be more standardized to meet the local communities needs and would be better if it were owned or leased thus having more control brands image.

Action and Implementation Plan

Growth strategy is one of the most complicated and difficult strategies to construct but at the same time if done right can increase the revenue of an organization to a great extent. Accor to be successful should focus all their resources in building their brand image in the cities like opening franchise or management contracted hotels in some of the major cities in the 6 mentioned countries and these could be Shanghai, Beijing, Mumbai, Bangalore (Bengaluru), Mexico City, Sao Paulo, Rio de Janerio, Brasilia, Moscow, Saint Petersburg, Istanbul, Ankara, etc. and after doing so Accor can also consider using Corporate Social Responsibility to attract the local community to accept them and then this would open the market to them thus being able to own customized hotel brands around the various countries this will be explained in the figure below and thus identifying the core focus and the steps to follow later.

Figure : Action Plan for Accor

The figure below is a four year strategic plan that Accor should consider following so as to help them achieve sustainable growth so as not to built to many hotels or resorts and then at a future date being forced to sell it to rectify their balance sheet. First Accor should built no more than two customized hotel brands in the various cities which in total should not exceed the total of 20 to 25 hotels in BRIC, Mexico and Turkey, this should take place in a span of 2 years and then Accor should focus all their resources in trying to attract local communities with the use of CSR’s like opening schools and colleges, environment friendly awareness, feeding the poor, building houses for the needy, animal protection, etc. and this should start from the second year that the hotels opening in the mentioned countries and should continue to become a way of life for these hotels and at last Accor should use the local communities acceptance to open standardized brands of hotels in their locality so as to make them aware of the development, in addition to this at least 30% of the jobs should be offered to the local communities so as to keep them interested in the Accor Brand and this should be done by the beginning of the fourth year and keep on using this strategy for future developments.

Figure : Four Year Growth Strategy

Exhibits

Exhibit 1: Accor Brand Portfolio 2011

Source: http://www.accor.com/en/brands/brand-portfolio.html

Exhibit 2: Accor’s Portfolio Evolution

Source: http://www.accor.com/en/brands/key-figures.html

Exhibit 3: Accor’s Portfolio per Brand

Source: http://www.accor.com/en/brands/key-figures.html

Exhibit 4: Accor’s Portfolio per Operating Type

Source: http://www.accor.com/en/brands/key-figures.html

Exhibit 5: Type of Contract by Market Segment

Source: http://www.accor.com/en/finance/accors-strategic-vision.html

Exhibit 6: Accor’s Income Statement

Source: http://www.accor.com/en/finance/financial-library/key-indicators.html

Exhibit 7: Accor’s Cash Flow Statement

Source: http://www.accor.com/en/finance/financial-library/key-indicators.html

Exhibit 8: Accor’s Consolidated Balance Sheet

Source: http://www.accor.com/en/finance/financial-library/key-indicators.html

Exhibit 9: 2010 Revenue by Business

Source: http://www.accor.com/en/finance/financial-library/key-indicators.html

Exhibit 10: 2010 Revenue by Region

Source: http://www.accor.com/en/finance/financial-library/key-indicators.html