AccorHotels eyes 25% growth in 4-5 years riding on an asset-light model

French hospitality major eyes 25 per cent growth in the next four-five years riding on an asset-light model

After completing a decade in India last year, AccorHotels is looking to grow its footprint in the country rapidly. It will launch new properties in known cities and enter new territories as well. It will follow an asset-light model and bring new sub-brands to India to expand its network by 25 per cent in four-five years.

The first step would be to roll out newer brands in a city — which it calls a densification strategy — where it already has a presence and anticipates more demand. Newer locations will be picked based on their economic or regional significance. To stay light, Accor plans to assume management contract of a property rather than own and develop one. An example of this asset-light model is Novotel Kolkata which opened in 2014 with Salarpuria Sattva Group as the realtor and developer.  

“In the asset-light model, there are some critical elements that pave the way for success — these include finding the right partners, choosing the ideal location for hotels and ensuring that your hotels and services are impeccable,” says Jean-Michel Cassé, chief operating officer, India and South Asia, AccorHotels. AccorHotels’ asset-light strategy allows it to stay nimble and agile, underlines Cassé. “It enables us to take advantage of merger and acquisition opportunities. As an organisation, we are more entrepreneurial and less risk averse,” he says.

As of today, the French hospitality brand runs 50 hotels in India. It has more than 8,900 rooms across the country. To expand operations, AccorHotels is working closely with its joint venture partner InterGlobe Enterprises. Together, their ‘managed’ model spans a portfolio of luxury and premium, midscale and economy brands.

The company sees tremendous opportunity in India as both business and leisure travel continue to grow. According to statista.com, a global online portal that tracks various industries, the Indian hotel market is projected to grow to $13 billion by 2020 from $4 billion in 2010. Interestingly, estimates by the India Brand Equity Foundation indicate that international hotel chains are increasing their presence in the country. They are expected to account for around 50 per cent share in the tourism and hospitality sector of India by 2022.

Way to go 

Globally, hotel brand owners have followed different business models. The most popular among them is the managed model

Franchised: Franchisees can own and operate a hotel business without having to create a new brand from scratch. Franchisees can brand their hotel with well-known and popular brands, and benefit from a powerful loyalty programme and strong reservation system. Here, the established hotel brand will provide a comprehensive set of tools like revenue management and marketing programmes to drive business and new demand for the franchisee. 

Largely, franchise fee growth is driven by three levers — room growth, revenue per available room and royalty fees, which can vary by brand and country.

Leased: Leased hotels are also privately owned, but the physical hotel building belongs to someone else. The lessor will stipulate a minimum rent for the premises, and may also link it with total revenue.  

Managed model: Hotels quite frequently take the managed route. This is where an existing privately-owned hotel partners with a recognised brand name or smaller, more experienced hotel. The hotel continues to be privately owned, but the managing hotel takes over the day-to-day operations of the business and quite frequently lends its brand name as well. The managing hotel charges royalties based on total revenues.

Privately owned and operated: The owner drives the growth of its brands and expand brand presence in key markets. The hotel owner is free to make all decisions on staff, operational structure and growth, but does not have the benefit of a brand behind him. All marketing research and efforts must be built from the ground up.

Source: ihgplc.com, bizfluent.com

As part of the densification strategy, AccorHotels will pick locations based on their economic or regional significance. One such example is the hospitality brand’s debut in Vijayawada with Novotel Vijayawada Varun which opened late last year. The reason for picking up Vijayawada and establishing its sub-brand Novotel there emanates from the fact that the city is set to become a model smart city.

Chennai is another city where the company’s densification strategy is clearly at play. AccorHotels has seven properties across three brands in the city, making it one of the largest room inventory holders with close to 1,200 rooms. Novotel, Mercure and Ibis are three of its sub-brands in operation in the city. Just last year, AccorHotels launched two more properties — Novotel Chennai Chamiers Road and introduced the Mercure brand to Chennai with Mercure Chennai Sriperumbudur. With these properties, the hotel chain now caters to a range of travellers with varying budgets.

Finding the right partners, choosing the ideal location
and ensuring impeccable services are
key to success: Jean-Michel Cassé
COO India & South Asia AccorHotels

In the pipeline are 25 hotels and more than 5,000 keys. It has hotels under development in Udaipur, Mumbai and Goa among other cities. It is also evaluating setting up resorts in Rajasthan, Kerala and Coorg.

The hospitality chain has one of the most diverse portfolios in the industry with private rentals, dining, concierge, events, digital platforms, co-working spaces. Together, Novotel (20) and Ibis (19) hotels garner the most stays and hence revenue in India.

AccorHotels foresees strong growth from existing brands such as Fairmont, Sofitel, Pullman and Swissôtel . “Since 60 per cent of the branded space is reigned by the luxury segment, it proves that the travellers are looking for more choices from the industry. We are the second largest luxury operator in the world and we look forward to strengthening our luxury and premium network in India,” points out Cassé.

The hospitality chain owns luxury and premium brands such as Raffles, Orient Express, Fairmont, Sofitel, Swissôtel, Mövenpick, SLS, Delano, Mondrian, Pullman among others.

The brand is evaluating opportunities to introduce two of its global brands, Raffles and Banyan Tree, in the country. Discussions are underway with its business partner to bring Mövenpick and Ansagna to India.