Accor S.A. Business Information, Profile, and History

Company Perspectives:

With 158,000 people in 140 countries, Accor is the European leader and a global operator in its two core businesses, Hotels and Services. It also operates in travel agencies, casinos, restaurants, and onboard train services.

History of Accor S.A.

Paris-based Accor S.A. is Europe's leading hospitality group with almost 4,000 hotels in 85 countries around the world. Accor provides hotels in every range, from the five-star Sofitel chain to budget-priced Formule 1, Etap, and Ibis in Europe, Motel 6 and Red Roof Inns in the United States, and midrange Novotel and Mercure in Europe and the Asia/Pacific Rim region. In addition to its hotel properties, Accor is active in travel and leisure through its half-interest in Carlson Wagonlit Travel, offering package tours and resorts in 33 countries. Accor also provides its worldwide customer base with foodservices (restaurants and employee vouchers), casinos, and onboard railway services (sleeping berths and dining).

Early History: The 1960s and 1970s

In 1967 Gérard Pelisson and Paul Dubrule opened their first Novotel hotel on a roadside near Lille in northern France. Travel was booming in France in the 1960s and the hotel industry had not yet expanded to meet the demand. French hotels, in general, were either rural inns or luxury hotels in city centers. Dubrule decided to build American-style highway hotels in the medium price range and collaborated with Pelisson, a former head of market research at IBM-Europe. Through Pelisson's connections the partners were able to secure a bank loan, and the Novotel firm was launched. The company's ensuing success was in large part due to its being first to break into the unexploited European market for highway lodging. Each Novotel provided standardized rooms, ample parking facilities, and restaurants featuring local cuisine. Soon Novotels also were established at airports and popular vacation sites, such as the seaside and mountain areas.

Pelisson and Dubrule developed their expanding company with a philosophy of decentralized management and a unique dual chairmanship. Although to comply with French law the partners took turns holding the official position of chairman, they made all decisions jointly and shared responsibilities, immersing themselves in all aspects of the business. The company's specialty became variety, providing hotel chains to fit every need. In 1973 Sphere S.A. was created as a holding company for a new chain of two-star, no-frills hotels, called Ibis; the first Ibis was opened the following year. During this time, the company also acquired Courte Paille, a chain of roadside steakhouses founded in 1961, which reflected many of the same priorities as Novotel: practicality, easy parking, consistent quality, and quick service.

The acquisition of the Mercure hotel chain in 1975 pushed the company into metropolitan areas and the business traveler market, and these hotels varied according to regional demands in style, character, and restaurant offerings. By the end of the 1970s Novotel had become the premier hotel chain in Europe with 240 establishments in Europe, Africa, South America, and the Far East.

New Ventures in the Early 1980s

In 1980 Novotel invested in Jacques Borel International, which owned restaurants and the luxury Sofitel hotel chain. Jacques Borel had begun his career with the establishment of one restaurant in 1957 and by 1975, when he took over Belgium's Sofitel chain, he was Europe's top restaurateur. After losses in the hotel business forced Borel to sell the Sofitel chain to Pelisson and Dubrule in 1982, Novotel and its holdings were incorporated under the name Accor and became one of the top ten hotel operators in the world, an elite group typically dominated by American firms. The merger doubled the partners' holdings and infused new talent into the senior management, as Bernard Westercamp became Accor's vice-president and general manager. Sofitel's luxury services, aimed at business and holiday travelers and located in the center of international cities, near airports, and in prestigious tourist areas, introduced Accor to the higher-priced end of the hospitality industry.

Accor's initial expansion into the American market, which began in 1979 with the opening of a hotel in Minneapolis, was not as successful as its ventures in Europe due to a saturated U.S. market and Accor's slow development. The company brought Novotel, Ibis, and Sofitel hotels to the United States, as well as a chain of eateries in California called Seafood Broiler, but all operated at a loss. Nonetheless, Pelisson and Dubrule made American-style service culture fundamental to their business in Europe. After visiting training schools at McDonald's Corporation and Disneyland, they opened Accor Academy at the company headquarters in Évry in 1985. The academy offered seminars ranging from phone etiquette to team-building skills and the exploration of new technologies. Accor spent a reported 2 percent of its annual payroll on training.

During the mid-1980s Accor developed investments in restaurant and travel businesses. The company opened Pizza del Arte, a chain of Italian restaurants, in 1983 in commercial and city centers and entered a partnership with the bakery and catering company Lenôtre two years later. Accor also entered the travel industry during this time, buying into Africatours, the largest tour operator to Africa, which became the third of its major investments, along with hotels and restaurants. The company expanded its tour operations to North and South America, Asia, and the South Pacific through the purchases of Americatours, Asiatours, and Ted Cook's Islands in the Sun. In an effort to attract weekend clientele in Europe, Accor developed Épisodes, an agency specializing in weekend rates for rooms usually occupied by business travelers during the week.

In 1985 Hotec, a subsidiary of Accor, brought forth a completely new idea in the hotel industry with the creation of Formule 1, a one-star budget hotel chain with no reception staff, no restaurant, and no private bathrooms. Travelers simply inserted a credit card at the entrance to gain access to the rooms, which were plain yet practical and cost $15 a night. Formule 1 hotels appealed to vacationing young people and families with limited financial resources. Costs were kept to a minimum by the use of prefabricated construction and staffs of only two to run each 60-room hotel. Occupancy rates were high and ten Formule 1s were in operation by early 1987 with another 30 under construction across Europe.

Continued Expansion in the Late 1980s

By 1986 Accor's revenues had reached around $2 billion, with net profits of $32 million. Novotel, with hotels in 31 countries, remained the most profitable while Sofitel faced stiff competition in the luxury hotel market, particularly from American properties. Nevertheless, Accor expanded at a far swifter rate than its international rivals, becoming the largest operator in Europe. It led the market in France and West Germany, and expanded in the medium and economy range in Spain, Italy, and Britain with its $75 million investment budget. The company's European base provided three-quarters of its revenue, with more than half coming from hotels and the rest from its foodservices.

In 1985 Accor took control of Britain's Luncheon Voucher, the company that invented meal tickets, which companies distributed to their employees as a benefit. Accor overhauled the company's communications and management systems and restored its market presence through a new sales drive. By 1987 Accor was the world leader in restaurant vouchers for employees and was exploring similar voucher programs for child care and groceries.

In 1987 Accor exploited another growing market: homes for the elderly. The company's Hotelia homes provided 24-hour medical and nursing care, as well as more traditional hotel services. In addition, Accor created the successful Parthénon chain of residential hotels in Brazil, and initiated a large-scale reorganization to better cope with its diversification of products and growth. Accor was restructured according to product, so each chain had its own general management, though the company was still committed to decentralization and expected management to act autonomously. Pelisson and Dubrule maintained a flexible, dynamic structure and remained accessible to their expanding management teams.

The following year, in 1988, Accor invested in France Quick, ranked second in the French fast-food market, and launched the Free Time fast-food chain. With several partners Accor then invested in Cipal-Parc Astérix, a theme park north of Paris, based on a Gallic cartoon character, and expressed interest in providing catering and lodging for the then-projected EuroDisney amusement park. Accor's rapid growth was not without its setbacks, however, as it made a failed bid for the Hilton Hotels empire and an unsuccessful merger with Club Méditerranée.

As the restructuring took hold, Accor revenues improved with 1989 profits up 30 percent from 1988, on sales of $3.6 billion. Accor enjoyed 12 percent earnings-per-share increases annually from 1983 to 1989. Steady growth allowed the company to sell equity, including a $340 million issue in January 1990.

Acquisitions in the Early 1990s

Accor made a major move into the U.S. market when it purchased the Dallas, Texas-based budget hotel chain Motel 6 in 1990 for more than $1.3 billion. The deal made Accor the second largest hotel company in the world in terms of rooms (157,000) and represented an attempt by Pelisson and Dubrule to build an American hotel empire to match their successful European operations. Accor paid a hefty price to enter the crowded U.S. market and took on an additional $1 billion debt from the sale. The partners, however, were committed to expanding in the United States with the same cost-cutting measures that had worked so well for Formule 1, including credit card payment and limited maintenance staff.

Accor used a radio ad campaign and transatlantic marketing to lure Europeans to Motel 6. Although Accor agreed not to overhaul the management of Motel 6's parent company, Motel 6 G.P. Inc., it did sell a 60 percent stake in the budget chain to French investors. In 1991 Accor bought 53 Regal Inns and Affordable Inns from RHC Holding Corporation to make Motel 6 the preeminent budget hotel company in the world. Motel 6's success in the early 1990s was due in part to Accor's financial backing and ability to pay cash, as well as its decision to purchase company-owned properties outright rather than franchising them.

In 1990 Accor and Société Générale de Belgique bought a 26.7 percent stake in Wagons-Lits, a Belgian company that dominated the European railroad sleeping car business and was the second largest hotel chain in continental Europe, owning about 300 hotels in Europe, Thailand, and Indonesia. In 1992 the European Community approved Accor's nearly $1 billion bid for a 69.5 percent controlling interest in Wagons-Lits. At the end of the year, Accor became the world leader in its industry with 2,100 hotels, 6,000 restaurants, and 1,000 travel agencies.

With the privatization of industry in Hungary, Accor entered a partnership in 1993 to buy 51 percent of the hotel company Pannonia from the Hungarian government. Pannonia owned medium-priced hotels in Hungary, Germany, and Austria and gained exclusive rights to develop under Accor in Bulgaria, Albania, Romania, Slovakia, Hungary, and the former Soviet Union and Yugoslavia, as well as to develop the Mercure chain in Austria. Accor also launched the Coralia label in 1993 to distinguish holiday hotels from business hotels. Around 30 Accor hotels in the Mediterranean and Indian Ocean regions added the Coralia label by 1994 and more were planned in the Caribbean, Central America, and Venezuela.

In the early 1990s Accor's Atria subsidiary was developing economic centers in cities and towns composed of conference centers, offices, and hotels, particularly Novotels and Mercures, in conjunction with local chambers of commerce. The company also had investments in Thalassa International spas and luxury hotels and casinos in France. Accor began a hotel-rebranding strategy in June 1993 to eliminate the Pullman Hotels International chain, acquired in 1991, while expanding its Sofitel and Mercure brands. Through renovations, the company transformed 27 Pullman hotels into Sofitels, while another 25 Pullman hotels became Mercure hotels.

Accor similarly expanded its restaurant business in the early 1990s with L'Arche cafeterias, L'Écluse winebars, Boeuf Jardinier steakhouses, Café Route highway cafés, Actair airport restaurants, Terminal train station buffets, and Meda's Grills in Spain. The company increased its partnership in France Quick and began building independent "villas" for Pizza del Arte. In 1994 Lenôtre, the bakery and catering chain Accor had developed in six countries, merged with Rosell, a chain specializing in organization, expansion, and management of catering services, for mutual advantages.

With the Dutch Wagons-Lits, Accor continued its expansion in restaurants and sleeping compartments on trains. In the car rental business, the company shared control of Europcar Interrent International with Volkswagen AG in 89 countries in Europe, Africa, and the Middle East. In March 1994 Accor agreed to merge its travel agency business with Carlson Travel Network, a subsidiary of Carlson Companies, to form a network of 4,000 agencies in 125 countries worth $10.8 billion. The new enterprise, named Carlson Wagonlit Travel, would be jointly owned (half-interest each) by Carlson and Accor. The integration of the two businesses occurred gradually over the next several years.

Divesting Assets in the Middle and Late 1990s

Accor's rapid expansion lost some momentum in the mid-1990s as its debt accumulated and a recession hit the travel industry. One of the first signs its steamrolling expansion would not continue was the loss of Accor's 1994 bid for a majority stake in the four-star Meridien hotel chain. Although Accor found funding through the Saudi hotel financier Prince Al Waleed, the company's bid still fell short.

In 1994 Accor sought to reduce its debt and free up funds for further expansion by selling some of its real estate and noncore businesses. Its principal strategy was to sell its expensive hotel real estate, but to continue managing the properties through leases. The same year Accor sold several Dutch Wagons-Lits enterprises and in 1995 sold its catering operations. Despite its divestments, Accor's nonhotel businesses were taking an increasingly prominent position in the conglomerate. The Carlson and Wagonlit Travel partnership was thriving, with sales rising from FRF 19.4 billion in 1993 to FRF 21 billion in 1995. Europcar, Accor's joint venture with Volkswagen, had become Europe's largest car rental company; in addition to its car rental fleet, by 1995 the company had 3.2 million leased vehicles. Net overall income for Accor had been rising since its 1993 low of FRF 423 million, to reach FRF 923 million in 1995.

Accor's hotel operations, however, remained the company's mainstay. By 1997 Accor operated 2,605 hotels with 289,200 rooms around the world. Sales from its hotel operations rose 16.6 percent in 1997 to FRF 18.6 billion. The company had placed its hotels in two groups: the business and leisure group, which consisted of Mercure (with 43,000 rooms), Novotel (with more than 50,000 rooms), Coralia (with 23,500 rooms), and Sofitel (with 20,500 rooms); and the economy group, which consisted of Motel 6 (84,500 rooms), Ibis (45,000 rooms), Formule 1 (22,000 rooms), and Etap Hotel (13,000 rooms). Accor continued to open new hotels, especially internationally. Its Asia-Pacific subsidiary, which the company had launched in 1993, controlled 144 hotels in 18 countries by 1996. With 56 more projects in the works, Accor Asia-Pacific had become that region's leading hotel group; its Africa/Middle East group operated 99 hotels by 1997, and its Latin America group, 89 units.

In 1997 the company's founders, Dubrule and Pelisson, reorganized the management of the company to reduce their involvement in the day-to-day decision making. The two chaired the new supervisory board but ceded the management board to Jean-Marc Espalioux. The same year, the merger of the travel agency businesses of Accor and Carlson was completed, making Carlson Wagonlit Travel one of the largest travel agencies in the world. Accor unveiled a restructuring plan in 1998 to substantially reduce its debt load through workforce reductions, selling numerous hotel properties in the United States and Europe (in favor of leasing them), and selling its Spanish concession restaurant subsidiary, General de Restaurantes S.A. Proceeds from these measures fueled expansion in the Asia/Pacific region and the 1998 acquisition of Postiljon, a Dutch hotel group the company planned to incorporate into its Mercure chain.

As the century drew to a close Accor made another pivotal move into the U.S. hospitality industry, buying Red Roof Inns for $1.1 billion. Red Roof, considered a step or so above Motel 6, brought in revenues of more than $375 million in 1998 and net income of more than $34 million. Accor had raised the majority of the funds by selling hundreds of its Motel 6 properties in lease-back deals to generate cash for the Red Roof Inn purchase and other hotel properties in Western Europe and Australia. Accor also entered a joint venture with the Moroccan and Tunisian governments to build and manage resorts and spas in those countries, with an investment of at least $250 million in 1999.

The New Millennium: The Early 2000s

In the first year of the new millennium, Accor was determined to lure Americans to its popular Sofitel luxury hotel brand. Five-star Sofitels were built in major metropolitan areas such as Chicago, Dallas, Houston, Los Angeles, Miami, New York City, San Francisco, and Washington, D.C., along with several European cities. Accor opened a total of 254 new hotels during 2000, of which 12 were Sofitels. The company also launched its first web site, Accorhotels.com, offering information and online booking services that received some 12 million hits during the year. In addition, Accor sold its half-ownership of Europcar, its car rental agency, to partner Volkswagen; opened a Novotel and an Ibis in the Sydney, Australia Olympic Village; and expanded into Israel through a stake in Clal Tourism. Accor finished 2000 with revenues of EUR 7.01 billion, with hotels bringing in EUR 4.74 billion, services EUR 437 million, and its travel agencies, casinos, restaurants, and onboard rail services the remaining EUR 1.83 billion.

By 2001 Accor took its Sofitel brand to Asia, opening luxe establishments in China and Vietnam, and bought a minority stake in Century International Hotels, based in Hong Kong. While its Asia/Pacific region experienced solid growth, Accor also expanded its reach in Latin America (opening its 100th hotel in Brazil), the Middle East (building new hotels in Dubai, Bahrain, and Yemen), and Australia (taking over a landmark hotel in Sydney). Revenues for 2001 reached EUR 7.29 billion with hotels, with the company's upscale and business establishments almost equal to the combined bookings of its economy accommodations in the United States and Europe: EUR 2.7 billion for the luxe rooms versus EUR 2.4 billion for the economies (EUR 1.02 billion in Europe, EUR 1.33 billion in the United States). Although all figures represented a relatively strong year, the last quarter of 2001 and first half of 2002 were greatly affected by the travel industry slump after the terrorist attacks in the United States on September 11.

For 2002 Accor continued its Asian expansion, buying the remaining interests in its Hong Kong partner, Century International, and China's Zenith International Hotels. The company also bought stakes in hotel chains in Poland (Orbis), Germany (Dorint AG), and Egypt (El-Gezira Hotels); opened 14 new Sofitel hotels in major metro areas; and its newest brand, Suitehotel (launched the previous year), designed for both the comfort and functionality of extended-stay customers, gained popularity in Europe. Revenues for 2002 rebounded nicely in the second half of the year to reach EUR 7.14 billion, with its U.S. holdings--Motel 6 and Red Roof Inn--down significantly from the previous year due to the terrorist attacks.

Accor continued its rapid expansion plans in the United States for its Motel 6, Red Roof Inn, and Sofitel brands, while concentrating on Novotel, Ibis, Sofitel, and Suitehotels in Europe and Asia. The company, which had seen its online reservations grow at breakneck speed, teamed with rivals Hilton International and Six Continents to launch a new reservations service called WorldRes.Europe. The new site, cleared by the European Commission in 2003, allowed travel agencies, hotel personnel, and travel sites to reserve and hold bookings for each hospitality giant in real-time. While hopes were high for the new web site, Accor and competitors were hurt by a sharp downturn in travel and tourism in Europe and Asia. In Asia the SARS outbreak shut down travel in and out of the region, while the war in Iraq and political woes affected travel in France and the United Kingdom. Despite the circumstances, Accor maintained its expansion, hoping to bring its total number of hotels worldwide to 4,000 by the end of 2003.

At the close of 2003 Accor had almost met its goal with 3,894 hotels and 453,403 individual rooms worldwide. Revenues for 2003 were EUR 6.83 billion, with the company's European properties still outpacing its American holdings. The U.S. hotel chains (Motel 6 and Red Roof Inns) were down more than 18 percent from 2002 to 2003, while Accor's upscale and economy chains in Europe posted slight gains of 1.3 and 2.3 percent, respectively. All other segments--restaurants, casinos, rail, and travel agencies--experienced declines as well, with foodservice and gambling in the double digits (15.6 and 16.2 percent, respectively). Accor's travel agency unit was poised for major growth after the merger of Carlson Wagonlit Travel and the Lyon, France-based Protravel S.A. Accor hoped the merger would unseat American Express as one of France's top travel agencies. Combined revenues for Carlson and Protravel for 2003 were EUR 2.3 billion ($2.75 billion).

Accor opened its fifth Sofitel in Bangkok, Thailand, in 2004, bringing its total properties in Asia to more than 200 hotels in 15 countries. Worldwide, Accor was ranked fourth largest behind Cendant, InterContinental, and Marriott International, though the company was the leading hospitality firm in Europe, ahead of InterContinental, Best Western, and Hilton International. What distinguished Accor from its rivals, however, was its broad coverage of the hospitality and leisure market with establishments for all budgets, from one- to five-star properties. Formule 1, Etap, Motel 6, and Red Roof were bargain priced with few amenities; Ibis and Suitehotel offered more services at a reasonable price; Mercure and Novotel offered travelers midscale accommodations with comfort and a measure of sophistication; and Sofitel served the luxury market with gourmet restaurants and upscale architecture in major international locations.

As Accor entered the mid-2000s the company had not only gained worldwide respect for its burgeoning empire, but was able to settle an old score when it bought a 30 percent stake in Club Méditerranée S.A. for EUR 252 million ($305 million). Back in the 1980s Accor had tried, without success, to merge with Club Med at the height of its popularity; by 2004 Club Med had been upstaged by such rivals as Sandals Inc. and had fallen on hard times. Accor intended to bolster its presence in the leisure market, while continuing its plans of opening a total of about 200 hotels annually for the next several years, especially in Asia. These plans were disrupted, however, when a tsunami in December 2004 devastated many countries in the Asia/Pacific Rim region and hit Accor's Sofitel hotel in northern Phuket, Thailand, killing hundreds of employees and guests. Two other establishments in the area sustained damage but had no casualties. Accor immediately sent representatives with food, clothing, and water to the region.

Principal Subsidiaries: Académie Accor; Accor Asia Pacific Corp.; Accor Hotels Belgium; Accor Casinos S.A. (50%); Accor GmbH (Austria); Accor Hotels Denmark; Accor Hoteles Espange (Spain); Accor Hôtellerie DTC (Germany); Accor Lodging North America; Accor Redevances; Accor Services Austria; Accor Services Chili (Chile); Accor Services Deutschland (Germany); Accor Services Empresariales (Mexico); Accor Services France; Accor Suisse (Switzerland); Accor TRB (Belgium); Accor UK; AS Australia; Carlson USA (50%); Carlson Canada (50%); ESA (Portugal); Frantour S.A.; Hotexco; Lenôtre; Luncheon Vouchers (U.K.); MMH Mercure (Netherlands); Nhere B.V. (Netherlands); Novotel Canada; Novotel Netherlands; Novotel USA; Pannonia (Hungary); Postiljon; Red Roof Inns; Rikskuponger (Sweden); SFPTH S.A.; SPHU (Hôtel Union, Senegal); Saudi Hotels Management; Scapa Italia (Italy); Servicios Ticket (Argentina); Sifalberghi (Italy); WLT Mexicana (Mexico); WLT Travel UK (50%).

Principal Competitors: Best Western Corporation; Cendant Corporation; Choice International; Hilton Hotels Corporation; InterContinental Hotels Group PLC; Marriott International Inc.; Starwood Hotels & Resorts Worldwide, Inc.

Chronology

• Key Dates:
• 1967: Gérard Pelisson and Paul Dubrule open the first Novotel hotel.
• 1973: Sphere S.A. is created as a holding company.
• 1974: The first Ibis hotel is opened.
• 1975: The Mercure hotel chain is acquired.
• 1979: Novotel opens its first U.S. hotel in Minneapolis.
• 1980: Novotel-SIEH acquires a stake in Jacques Borel International, owner of Sofitel hotels.
• 1982: Novotel-SIEH becomes the sole owner of the Sofitel chain.
• 1983: The Novotel, SIEH, and JBI holdings are incorporated as Accor S.A.
• 1985: Accor partners with Lenôtre, a baking and catering company.
• 1990: Motel 6 becomes part of the Accor family.
• 1992: Accor buys a majority stake in Belgium's Wagons-Lits.
• 1994: Accor's Wagonlit travel agency and Carlson Travel form a partnership.
• 1997: Carlson and Wagonlit merge with Accor's travel business; company retains a half-interest in the new firm, named Carlson Wagonlit Travel.
• 1999: Accor acquires the Red Roof Inn chain in the United States.
• 2000: Accor launches the Accorhotels.com web site.
• 2001: Accor partners with the Beijing Tourism Group and Zenith Hotel International for expansion in China.
• 2003: Carlson Wagonlit Travel and France's Protravel S.A. merge.
• 2005: Several Accor properties are damaged by a devastating tsunami in Southeast Asia.