Strategic, PESTEL and Financial Analysis of Accor Hotels
1.1 COMPANY BACKGROUND:
Accor of France claims to be the leading Hotel operator in Europe and third largest Hotel group in the world.
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For more than forty years, Accor has constantly reinvented its core competences to keep pace with the around it, with the goal of providing innovative, high quality products to Hospitality and Service customers. With their highly respected brands, interpersonal relationship and their unique skills to develop and deliver solutions that create wellness. Accor ,the European leader in hospitality and tourism and the global leader in corporate service, operates in nearly 100 countries with 150,000 employees. It offers to its clients nearly 45 years of expertise in two core business:
Hotels, with the Sofitel, Pullman, Novoter, Mercure, Suitehotel, All seasons, Ibis, Etap hotel, Adagio, Formule 1, and Motel 6 brands over 4,100 hotels and nearly 500,000 rooms in 90 countries, as well as strategically related activities, such as Thalassa sea &spa, Lenotre, CWL.
Services to corporate clients and public institution with 33 million people in 40 countries benefit from Accor Services products-meal and food vouchers, people care, rewards and incentives, loyalty programs and expense management.
Accor operates includes about 15 complementary brands- from luxury to budget, that are recognized and appreciated around the world for their service and quality. Accor operates under six brands in UK-the upscale Sofitel, mid-scale Novotel and Mercure, budget Etap, Formula 1,Motel 6.In USA it operates two budget brands Motel6 and Red Roof Inns. Accor sustainable development also made two more new brand Pullman and All Seasons. These two new brands acquisition is remarkable. The new brand has potentially represent a total of 10,000 rooms by 2010, through franchise contracts. Motel 6, Formula 1,Etap Hotel, Suitehotel, Mercure, and Novotol is running with modern innovation and following corporate strategy. Some development plan is organizing by the operational based. Accor always has taken those steps to target future progress under corporate umbrella.
The world leader Accor services constantly creates new high- value added, increasingly personalized services in such areas as a gifts and rewards for employees and government social benefit programme. they involves with wide range of marketing, social and community responsibility in advance. A great innovation part of the organization made life with comfort. that’s why they are increasing and diversifying the services they deliver to companies and public institutions-from food and meal-vouchers to a full range of solutions in such areas as employee incentive, customer loyalty, domestic services, culture and recreation health care and transportation. From highly secure paper vouchers, to electronic payment cards and internet and mobile phone also involves in new technologies, as evidenced by promising future for prepaid electronic services. the world leader in the service voucher market, Accor Services deploys a full range of products and services in 38 countries.
All prepaid Accor services products have now been brought under the same ”Ticket” umbrella brand with its universally recognized ”red ball” symbol. Accor services provides tangible responses to changing lifestyles while helping to improve employee well-being and motivation. Accor services uncontested market leadership is based on the two original flagship products-Ticket Restaurant and Ticket Alimentation and its constantly expanding product portfolio is shaped by the growing trend toward urbanization and the resulting need for services and assistance. Each time, the goal is the same: listen to people’s concerns and provide the solution best suited to each situation, in both mature and emerging markets. This objective requires a constantly renewed capacity for innovation and in-depth knowledge of each market. Source: Accor2009 corporate brochure.
1.2.Strategic partnership:(A group to group partnership strategy):
Since 1998, Accor has been developing partnerships with major firms. These alliances manifest a strategic determination to adopt an overall group to group approach that is advantageous for both customers and partners. Naturally, this type of cooperation is concerned with business segments that offer a potential for synergies or that target the same customer base known for its mobility: transport, leisure activities, information and travel-related services. The business net-work is growing up more and more.
Accor is a best business infrastructure contains historical milestones. Since the opening of the first Novotel in Lille in French, team members have been driven by a pioneering, winning sprit. A key factor in Accor’s success, this mindset is also shaped by a constant concern for people and a commitment to the highest performance standards.
40 years of Innovation:
1967:opening of the first Novetel in life (Franch)
2008: creation of MGallery and launch of the A|club world wide loyalty program.
2009: an alliance between Accor services and Master card Europe to create prepay solutions.(source: www.corporatebrochure 2009.com)
The short listed history focused on major successes and core brands. Each stage of the success is bearing so many historical activities. Today’s brilliant progress is supported by historical business performances.
3. Accor and Global Competitor:
Accor are highly successful over the long-term effectively acquire, develop and manage resources and capabilities that provide competitive advantages. Their competitors are very smart and world wide famous business organizations. The organizations are Starwood, Marriott, Hilton, Intercontinental, Hyatt and Wyndham. All are established with strong business performance background and capability.
4. Accor Operations and Strategy:
4.1:centers of Expertise(operations wheel):
Accor group the largest international hotel chain, confirmed its confidence in the world market as the major tourism market to which the group pays special interest to implement and continue its strategic plan to promote its growth in corporate service. The centers of expertise model show the best organization infrastructure:
Centers of Expertise, Figure-
“Accor has leveraged its more than forty years of experience to develop very high level skills platforms. These interconnected units extend across all businesses and countries to create a system that is truly unique. By sharing best practices and pooling costs, they enhance the performance of Accor’s brands, support hotel owners and employees in their day to day operations and guarantee that customers always receive the very best service.”-Accor corporate2009.
Working with frontline teams and backed by a network of 200 buyers around the world, Accor has developed purchasing procedures and high performance tools that have made it an expert in the optimization of food, equipment and service costs. Recognized by franchisees, this expertise supports negotiations at regional, national, and global level with some 2,800 approved suppliers around the world.
Construction and Maintenance:
A traditional area of expertise and constant source of innovation, Accor’s construction and maintains platform naturally brings together teams from development, operations, finance, legal affairs, marketing and hotel systems. Experts manage several hundred projects a year, overseeing construction, renovation and maintenance while monitoring environmental impact ever more closely.
Distribution and Hotel website:
Web teams enhance hotel visibility and make booking easier via the accorhotels.com or individual brand sites. In addition ,they support the brand’s online development through partner websites. Each year, more than 90 million people visit Accor websites around the world. In 2010,some 12.7 million hotel nights were booked online, of which 80% on own sites.
Technological support teams install wireless systems in hotels, help migrate services to electronic media and manage booking and distribution systems,with the goal of providing frontline teams with easier access to information and customers with the full range of Accor products at the lowest possible price.
4.2: Great Innovation by Accor:
A responsible, community- minded enterprise:
It was launched in 2006 to federate their sustainable development initiatives, the Earth Guest program provides a tangible response to growing environmental concerns and major health hazards. In 2010 the organization has taken more steps. Its set a number of far-reaching goals. They are involving in local development, children protection, lead the fight against epidemics and promote balanced nutrition, for the benefit of Accor’s employees, customers and host communities, it also providing training in AIDS and malaria prevention to all employees. Other programs also provided to eliminate sexual tourism involving children, reducing Hotel water and energy consumption by 10%, equipping 200 hotels with solar panels and introducing waste-sorting programs in all European hotels. source:www.accor.com
A social responsibility is a part of any leadership, as Accor. In 2010, Accor’s corporate sponsorship priorities focused on their four commitment are local, health, culture and heritage, humanitarian aid. Corporate sponsorship is defined as “the provision of material support to a cause or person for an activity serving the general interest, with nothing received in return”. Every day, Accor employees support various initiatives through a very active corporate sponsorship program.
4.3. Dynamic Strategic Plan:
Continuing expansions of the Hotels and Services business: more than 35,000 new rooms development program between now and 2015.
Further divestments of non-strategic businesses: Through non-strategic assets disposal policy, the Group announced the sale of Red Roof Inns to a consortium comprised of Global Special Situations Group and Westbridge Hospitality Fund, L.P.for $1.32 billion. Another sale the Italian institutional catering business to Barclays private Equity for ?135 million.
Ongoing program of property disposals: In first-half 2007, Accor pursued its assets-right strategy adapted to risk-reward profile of each market segment and region. The end of 2010,it realized more than ?450 million through the disposals of its property assets(450 hotels) of which more than 50% had already been secured by the end of April,2010 and another ?1.6 billion is expected to be generated in the period from 2010 to 2013.Over the 2009-2010 period, the Group is planning to change the operating structures of an additional 500 hotels. In all, more than 1,600 hotels will have been restructured by the end of 2011.
Optimized balance sheet: Debt refinanced with new ?2 billion syndicated of credit and new share buyback program.
5. Marketing & Sales:
Brands within the hotel industry are aimed at different customer segments and 2009 saw several companies launch new brands. International Hotels are opened a new brand in early 2009 to target the generation X customers while still being acceptable to older generations(Freed,2009).During the same year, Accor launched a project to reposition the brands. By rethinking strategies, reinventing products, redesigning graphic identities and reworking advertising campaigns, the teams have made the brands even more powerful, in local markets and around the world.
“The Battle of Revenue”-Targeting highest revenue the Accor Marketing & Sales.
6.Training &Human Resource:
In hospitality industry HRM takes an important role which is to forecast the demand for employees and also reducing undesired turnover, lavor cost, improving employee productivity and improving goods and services provided are goals of the HRM function(Demir,2004).Its other important components are developing succession plan, layoff, promotion policies, ensuring compliance with local labour laws(Demir,2004).Accor’s human resource policy focuses on career advancement through training, work, job assessment and motivation. They have always been committed to respecting, training, rewarding and supporting their employees. The goal is to help employees develop not only a skill set but also a mindset. Diversity and equal opportunity are also an integral part of this policy.
Source of Accor:
80% of our employees are in day to day contact with customers
171,000 employees received training in 2010
90% managers were promoted from within the organization
6.1 Career Advancement:
Accor developing all talents:
Nearly 90% of managers got their job through internal promotions
Every year Accor welcomes several thousand interns and apprentices. Depending on job vacancies, work study contracts are transformed into permanent work contracts in one of the many Accor brands.
Accor strongly encourage:
An assessment interview with manager on a regular basis to take stock of career evolution.
People can easily have a position through job application.
6.2 New talents & perspective:
“Academie Accor Worldwide” network, whose ambition is to:
Help employees climb the corporate ladder, by developing qualification training programs for future.
Offer every year employee one training session a year, by reinforcing training in the workplace to improve quality.
“In 2010,171,000 employees took part in one more training courses, including over 142,000 non managerial staff. The training budget totalled 2.2% of payroll.”(www.accor.com)
Accor employees receive an incentive bonus and could be obtained company share.
Every employee receives a Bienvenue Card offering special advantages at all Group brands in every country where Accor is present.
A good management support has been providing to employee to feel free and enjoy the work.
Accor doors are always open for those who like to promote them.
7. Management& Finance:
The end of December 2010, Accor reported that hotel revenue amounted to ? 5,693 million, up 98% to increase this revenue ?75 million possible only for the efforts of approximately 145,000 employees(datamonitor 2010).That revenue held steady during the difficult economic condition in 2009,at ?236 million but in full-year it should come to around ?440 million versus the ?400-?420 million target announced in late October. At constant scope of consolidation and exchange rates, the like-for-like increase 8.7%,confirming the favourable trend enjoyed by the Services and Hotels businesses since the beginning of the year.
The expansion strategy accounted for 9.4% revenue growth of the year. Disposal carried out under the ongoing asset-right strategy in the Hotel business and divestment of non-strategic assets including Go Voyages, which was sold in April –reduced revenue by 4.4%.
Currency effect was negative 2.6% for the year. Press Release, Paris February 23,2011.In the midest of the recession, Accor is one of the multitudes companies facing this problem and came out through this situation because of their strong strategy of business. Accor business success is remarkable. The financial records show the strong earning growth and dynamic implementation of the strategic plan. The whole businesses are benefiting from a favourable business environment, with the Services business enjoying structural growth in demand and the Hotel business lifted by an upturn in the European hospitality industry cycle.
The recent 23 February 2011,press Release disclosed the current strong position of the company. The Q2 financial report take the place to focus on the current situation.
(in EUR millions) 2009 2010 % change% change
(9 months) (9 months) (reported) (like-for-like)
Hotels5,1865,693 +9.8% +7.4%
Upscale and 3,0263,332 +10.0%+9.0%
Economy 1,6261,806 +11.1% +6.8%
Economy US536555 +3.8%+0.7%
Services 543 624 +14.9% +12.0%
Other businesses 977 863 -16.0 +1.0%
Total5,490 5,948 +8.4%+7.1%
7.1 Financial Position and Result:
Change in consolidation Development:
In services, acquisitions accounted for 4.3% revenue growth for the first nine months, in line with the Group’s long term objectives.
The development plan for the Hotels business provides for 101,000 new rooms to be opened in the period to 2014.During the first nine months of 2010,18,000 rooms were opened, contributing partially to the 8.4% growth in revenue generated by development initiatives.
In 2010, Accor announced that it had completed the sale of Red Inn to Citi GSS Group and Westbridge, as part of its real estate strategy. The transaction added ?470 million to the Group’s cash position.
In this section, analysis the operating environment for Accor. The operating environment is internal to the organization and the environment most under the control of company. Many factors are affecting the operation of a hotel business because of growing number of competition in the hospitality industry and also economic downturn affect on external environment and internal environment is affected by its marketing strategy and its organizational structure.
Internal resources to any organization are its strength which provide an advantage. For Accor, the most valuable strength are likely to be intangible of reputation, corporate culture, superior customer service. The hotel group, Accor whose has a great interest cover different regions and categories stable cash flow prospects. According to Datamonitor(2010),one of Accor key strength is its high brand recall. It has demands for upscale, midscale and economy lodging, covering a wider market segment. It has Sofitel which is a prestige hotel brand in France and other cities in the world. The Novotel , designed for the mid-scale segment and Red Roof which are standardized hotels for the lower class segment. It is also engaged in many business that make more profit for company. Financial resource is also one of its strengths. Accor also allows its customers to get access on the information and able to have reservation through online.
In 2010, the weakness of Accor has its non-strategic business. By this non-strategic business they losing their brands. currently, the weakness of Accor can be seen from its being the operators may arise. Being hotel group it also a business with its fixed costs higher than other businesses. This may create problems when the demand in hotel decline. Improving the technological services is likely to be requirement to remain competitive but this is not a appear to be a weakness. Another future risk is to be maintain all brands by globally.
In Global business there are huge opportunities in spreading operations over different regions like Asia, so it is to Accor take the opportunity with its experience in international operations business sector. Accor has established a name in hotel operations so merger and acquisitions not only in hotel industry but also in other business like restaurants and travel which is easy for growth strategies. To be a Market leader Accor has been developing partnerships with major firms. Different business idea assent-right strategy will open more business way from external side. As a part of the international marketing strategies of its brands, Accor has developed sponsorship actions in the whole world their new brand invention opportunity to compete global market properly. Develop advertising and through the web site they increase their sales and also using new technology Accor able to renew their communication target to internal promotions on language and the users country. For need to create a system that is well integrated.
Accor hotel and services operations are spread in whole world so that they have to face to risks of foreign currency fluctuations because about two thirds of its revenue coming from international operations. In the past the company’s revenues were severely affected due to unfavourable foreign currency fluctuations. For example, during 2003, the weakening of Latin America and US currency reduced its revenues by 4.3% over 2002(datamonitor,2003). This risk will create a negative impact on its overall financial performance. In tourism and hospitality industry another threats is Geopolitical uncertainties and global and regional economic downturn such as terrorist attacks, the spread of epidemic, unfavourable political conditions, etc, have negative impact on the Industry. For example, in 2009,Accor was confronted with on exceptionally weak economic environment, which caused revenue to decline by 10.1%(datamonitor,2009). There are too many world-wide competitor in hotel industry such as Hilton Group plc, Marriot International, Hyatt corporation, who are also struggling to overcome the unfavourable market and economic condition are another threats and also be pricing pressures which will affect the company’s margins. The company’s ability to proactively expends presence in the under penetrated markets and to take over independent hotels will determine its market position and growth in future.
9.PEST –Analysis of Accor:
In globalized environment Accor the largest hospitality group in Europe now operates in 140 countries based in Every Cedex, France. Accor is highly influenced by the political and legislative conditions of these countries. In hotel industry, Accor French company still didn’t face any big threat because of their reduction in level of terrorism and also good relation with EEC country and others as well. Getting and giving favour through business channel they still do their business with whole world.
Accor is a more profitable organisation, between 2006 and 2012 in chain hotels is expected to rise by 5.7% a year, compared with an increase of 3.7% a year for the market as a whole. Economic factor are concern to Accor, because they are influenced on demand, cost, prices and profits. One of the most influence factors on the economy are acquisition, merger and demerger. In last year, Accor was increased its stake in Poland’s Orbis by 4.9%,from 40.58% to 45.48% at a cost of ?42 million. From there financial report their earning objective is so good around the year.
Current situation indicate that Accor provide good service for customer they using 7 language through the online and graphics and maps also adding value to booking experience, which is due to variety of social changes. Demographic changes such as the aging population and an increase the female worker because the company believes that men and women at the heart of its strategy. The company also focus on their employer and to make an increased efforts more and more training place and of social advancement. Accor also provide franchises with added value and HR services and helping earth people they are involve in the Earth Guest programme with ECO and EGO and also developed corporate sponsorship for child aid, local aid, health, and cultural. In future Accor will continue to respect generation, cultural and professional differences.
Technology is the major macro-environmental factors which has influenced the benefits of both customer and company. customer satisfaction rises because the world moves so fast, goods are readily available and services are more personalized. so that Accor utilise the following technology-
Websites and Hotel Booking
Up to date information systems
Electronic media card (pre paid card) becoming more demandable.
10 Accor Ambition:
“Accor Ambition is to become or remain the leader, on all continents, in service and in economy and midscale hotels, and major player in the upscale segment.”-Source: Accor 2009 corporate brochure.
10.1. Accor Spirit:
Since the opening of the first Novotel in Lille, team members have been driven by a pioneering, winning spirit. A key factor in Accor’s success, this mindset is also shaped by a constant concern for people and a commitment to the highest performance standards for it. For more than forty years, across all bands and regions, Accor’s five core values of innovation, spirit of conquest, performance, trust and respect have been shared by all employees now 145,000.
10.2. Competitive Market:
Companies should focus on porter’s five forces closely during the strategy planning process and continue monitoring throughout implementation. These five forces are-industry competitors, new entrants, buyers, substitutes and supplier’s(Pearce & Robinson,2004). Factor that indicate rivalries within the hotel industry include competitors that are roughly equal in power, numerous competitors, high fixed costs and high exit barrier’s (Pearce & Robinson,2004). Buyer’s power to use substitutions of porter’s forces that work together for Accor. Buyer increase in power when the products have little differentiation, does not save the money and when buyer’s has incentive to reduce purchasing costs (Pearce & Robinson,2004). During the recession buyers of temporary has been more price-sensitive and low switching costs and seek to substitutes.
Porter’s five forces analysis on Accor:
1.New Entrants Barrier’s-Low
Hotel operating license
Building distribution network
Human resource requirment
3. Power of Suppliers-Low
Readily available and attractive priced
11. Strategic Planning for future Market:
For multinational company Accor, strategy plays a key role to take a place its operation in the diverse environment. As a service industry, the ability to meet the customer needs on a global basis is of growing strategic importance (Nahapiet,1998). Accor’s always focus on what the customer wants and not what the hotel firm believes is one of their marketing strategies. As a part of their customer service they introduced the new concept at Sofitel to offer ultimate sleeping comfort,it also changes its corpora culture to the changing customers’ needs. Having a corporate governance system to decentralised organization as it takes international expansion, matching its organization’s capabilities and competencies to the competitive conditions of the external environment. For example, in China Accor management consists of Chinese people in order to understand the culture, taste and preference existing there.
11.1: Three pillars of Strategy:
Geographically and Structurally balanced business portfolio-Accor hotel is present geographically with its current and future customer, that why it comes up in host countries should limit their exposure to economic and geopolitical rick. This Strength makes a position in other attractive market places.
A disciplined, results oriented management-the company is committed to respect, give train, reward thus supports their employees. Their important asset is the quality services provide to their people’s professional skills, it is a main part of them to implement customer’s satisfaction and service quality.
A set of powerful, aligned brand-its company aiming to become leader in all continents, Accor position them as umbrella brand to provide its operating brands. In order to support their ambitions its visual identify enhances. Expending the brand portfolio it offers non- standard and slandered products for more demands.
11.2: Accor Strategic Vision:
In 2010, Accor become a pure-player in the hotel business. Having demerged from its service business, Accor intends to its strengths to step up the implementation of its strategy and provide its growth: comprehensive brand portfolio suited to needs, unique know how as the world largest hotel operator, a leadership position in four continents and a business model with sound fundamental that withstood the economical crisis.
12.: Result and Research questions:
Finding 1.What type of generic strategy does an Accor hotel employAccor focus on their strategy that is geared toward identifying market and meeting the needs of the customers in these target groups. It use the guidelines in most of its acquisitions and merger to be the major stakeholder but also have a partner who can help the company with challenging in local market. In that case, they have local partner in France and in US it hold 44 per cent of economic hotels. So the company targets its market and also focuses on offering innovative services and competitive price in order to compete effectively. Again, the company’s success is a result of a carefully crafted generic strategy.
Finding2.In competitiveness of the environment, how much opportunity exists of Accor in the international hotel business marketFrom the case data, the opportunities in tourist market are extremely great. One reason is because the market is going to continue growing. The number of hotels in Europe, the US, Japan will increase sharply. Asia, for example, will be an important market because of its large population and the most tourist places. By focusing on these more affluent markets and competitive prices, Accor has a very good chance of outdistancing the competition.
Finding3. What basis would a firm like Accor evaluate performanceThere are a number of bases that Accor uses in evaluate performance. One is market share. In evaluating its performance in Europe the company has been keeping track of its success among new subscribers and second way in terms of market capitalization. From the case data that after acquiring communications this value stood ?5,693 million.
13. Goals and Implementation:
Every marketing plan must include a control component that compares actual performance with the planned performance. Through collecting performance data the gaps between the objectives and the performance will be evaluated regularly to pursuer required corrective action. Creating implementation plans and strategies is the necessary to the day to day actions of making the dream a reality. In that case Accor faces in product development, marketing, accounting and human resources management as they strive to meet the company’s long term strategic goals. With a focus on growth, Accor should emphasize product development in order to meet the needs of a larger segment of the market. According to research some perceptible improvement are follows-
To improve how work together and how develop their people so that a high performance organisations.
To deliver an outstanding experience for all customers.
To improve the financial performance of the company and deliver for their shareholders.
To maintain and improve their performance quality of processes.
13.1. Conclusions and Recommendation:
Based on analysis, the following conclusions can be drawn about the nature, extent, and future of Accor Hotel Group. In hotel industry Accor faces some problem because there is shortage of employees 145000, this staff failures have the biggest negative impact on gust loyalty. Their poor services experience explains why 68% of customers shift brands. They should focus on there core/signature services and also service recovery and also target those guest segments who are still most likely to travel and pay a premium for luxury experience. In addition, that can be used as more focused marketing, utilize that premium experience with special offers and bundled packaging. Accor must be careful about their pricing system and advertising. Slashing prices as a reaction to the recession is never good for business in long term but also impact on brand image.
Through business strategy Accor shows the best success when received the highest revenue 8.7%. The first half 2007,Accor pursued its asset-right strategy adapted to the risk-rewarded profile of each market segment and region. The organisation already presented their new business model to support and achieve organisation objective. Between 2006 and 2013, the number of overnight stays in chain hotels is expecting to rise by 5.7% a year compared with an increase of 3.7% a year for the market as whole. The supply and the demand chain will have better way to success in future. the business expansion will make the organisation stronger.
Accor will be a best global leader in near future. It makes a constant focus on the long term sometimes taking bold action but never excessive risk.
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