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Summary

Accor SA – company outline review

The company

Accor is the world's 4th largest international hotel group by value share, behind Marriott, Hilton and Intercontinental (Euromonitor Global ranking 2019). After 2010, its
performance in this peer group was been poor, measured in terms of revenue growth, margin and stock performance. A change in management and strategy happened in
2013 with the appointment of Sebastian Bazin as Chairman and CEO, since then there has been a turnaround in revenue growth and profitability.

Strategy

Accor has mostly completed its Asset Light strategy implementation with the legal split of the hotel and property investment businesses in 2017. The sale of a large stake in
this latter element of the business has released further funds to allow pursuit of further expansion both organically, and through further M&A activity and sometime equity-
based partnerships.

M&A and partnerships are focused on hotel chains – recent acquisitions include Movenpick and sbe – as well as various software-based service companies – including
booking portals, procurement and other services for hospitality firms. These enable Accor to offer a wide range of services to its own hotels, its franchisees and third party
hoteliers and restaurateurs.

In terms of competitive strategy the firm appears to be moving towards a stronger customer intimacy approach – increasing the number of customer touchpoints and using
an increasing net of partnerships to take on more of an “integrator” role.

Key Controversies

1. Is the continued M&A activity becoming a distraction for the board as they move beyond the hotel and lodging sector into different adjacencies or is it necessary to bring
parts of the ecosystem in-house to exert more control?

2. Is Accor’s global expansion targeting the right international markets?

3. How prepared is Accor to take advantage of the opportunities and minimise the threats from technological changes in its external environment?

4. Should Accor retain its broad portfolio of hotel and lodging brands or would more of a focus on the mid-scale and luxury brands – like the leading hotels firms - improve
its returns?

5. Does Accor have the expertise to achieve its customer intimacy strategy across its portfolio?

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Competitive Positioning
Marriott look to have an
% Global Market Share by value Top 10 players in Hotel/Lodging Industry unassailable lead since
acquiring Starwood
Company Name 2013 2014 2015 2016 2017 2018
Marriott International Inc 3.8 4.2 4.6 7.0* 7.0 7.0
Hilton Inc - - - - 4.6 4.6
InterContinental Hotels Group Plc 2.7 2.9 3.2 3.1 3.0 2.9
Starwood Hotels & Resorts Worldwide Inc 2.8 2.8 3.0* - - -
AccorHotels Group - - 1.8 2.1 2.2 2.2
Wyndham Worldwide Corp 1.3 1.4 1.4 1.5 1.4 1.3
Choice Hotels International Inc 1.3 1.3 1.4 1.4 1.4 1.3
Hyatt Hotels Corp 0.9 1.0 1.1 1.1 1.2 1.1
Best Western International Inc 1.1 1.1 1.1 1.0 1.0 0.9
China Lodging Group Ltd 0.2 0.3 0.4 0.4 0.5 0.5
Shanghai Jinjiang Holdings Co Ltd 0.2 0.2 0.3 0.5 0.5 0.5
*Marriot acquisition of Starwood in 2015/6

Source: Euromonitor, 2019 Growth of domestic


competitors in
emerging markets – Source: Passport, 2019
especially China Relatively stable top 10 competitors
over the last 10 years

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Competitive Positioning

Marriott’s profile has moved


more strongly to the luxury end
of the market with the
acquisition of Starwood and
some boutique hotel chains. Is
this producing superior
performance?

Accor is the only one of the top 4 with a


substantial holding in the economy
segment of the market. Is this why they
are still 4th? Are the legacy brands such
as Formule 1 and Ibis producing returns
that justify them remaining in the
portfolio?

Source: Passport, 2019


Is it possible to use conventional generic
strategy frameworks to understand the
competitive positioning of hotel groups
or is it necessary to focus on individual
brands to understand their competitive
approach

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Market Prospects

Source: Accor, 2018 India and China appear to be the regions where the fastest
growth is anticipated, closely followed by the Middle East –
900,000.0 what other factors do we need to cover to evaluate?
800,000.0
700,000.0 Western Europe

600,000.0 North America

500,000.0 Middle East and Africa


400,000.0 Latin America
300,000.0 Eastern Europe
200,000.0 Australasia
100,000.0 Asia Pacific
Most analysts are predicting strong growth 0.0
Source: Marketline, 2018 $mn
globally over the next 4-5 years – though the 2018 2019 2020 2021 2022 2023 Hotel Retail Sales
value of the sector varies according to how it is Source: Euromonitor, 2019
defined – hotels, lodging, etc.
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Current and Future Megatrends and Uncertainties

OTAs consolidating – Expedia


now owns Orbitz, Travelocity
and Hotels.com. Priceline
owns Booking.com and
Kayak. Commission rates
now stand at between 15-
20% (First Research , 2018)

A complex web of relationships is


developing at the front end of the
hotel value chain – we can see
evidence here of co-opetition as
well as new and developing online
channels

Source: Accor Capital Market Day presentation, 2018

Will more of an ecosystem based model be better


to analyse the industry than traditional
frameworks?

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Potential to impact on OTAs and
Hotels – may produce big
winners and many losers if
choice is reduced as a result of
use of voice and virtual personal
assistants

Technology appears to be a key factor


in the future of the hospitality sector –
how will this fit into an assessment of
the level of fit Accor’s strategy has with
the macro-environment – could this be
one of the key discriminants used for
scenario planning?

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Is this part of what is driving Accor’s new
strategy of customer intimacy – and its
move to create stronger links with local
communities is this a combination of
“Curator” and “Neighbor” roles? Are the
various service and software acquisitions
about creating a stronger
“Choreographer” role?

Source: Doblin/Deloitte, 2017


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Strategy

Source: Accor Capital Market Day Presentation, 2018

What are the implications for the firm’s value


chain? Could they end up hollowing out their
operations or is this a shrewd strategic move to
enable greater focus by through outsourcing and
more agility by freeing up financial assets to
enable rapid exploitation of emerging markets?

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Does the organization Pipeline for Europe seems high considering
have the resources and the predicted growth for this region –
capabilities to sustain which sectors is this in and is it the best use
this level of growth? of capital compared with investing in higher
growth regions? How much of this is due to
historical connections and pressure from
Source: Accor, 2018 Third Quarter Results Presentation French/European stakeholders?

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What are the risks
associated with
continued M&A
activity? Examples
of good and bad
in the last year –
other targets e.g.
Orbis seem to be
more in line with
core business – is
the
AirFrance/KLM
deal a one-off
mistake or a sign
of hubris and
distraction to
come?

Source: FT.com, 2018 Page 10 of 10