Accor has changed radically. And it's all Airbnb and booking websites that are to blame.

In the hospitality sector, there are two types of players: those who lament Airbnb's entry into the lodging market and constantly reminisce about the golden age of the past, and those who have transformed their businesses in the face of threats posed by both Airbnb and booking platforms like Booking.com, Expedia, and others. Accor, a giant with 4,800 hotels worldwide and revenues of €3.6 billion in 2018, belongs to the second group.

Over the past four years, the hotel chain, owner of brands such as Ibis, Sofitel, Grand Mercure, Pullman and a dozen other designer labels, has reinvented itself. “Accor is becoming almost a customer management company that focuses on clients who will use our services. The goal is to increase points of contact with clients, whether it's for accommodation, renting an apartment, dining at a restaurant, or attending a business meeting,” says Patrick Mendes, CEO of Accor in South America.

In this exclusive interview with NeoFeed , Mendes discussed plans to bring the Wojo coworking brand to Brazil, how he has encouraged innovation within the company, the impact of startups on business, the use of artificial intelligence and robots in the hotel industry, and also revealed plans to open 150 new hotels across the continent by 2022. "It's a total investment of R$ 10 billion, together with partners, banks, and foreign investment funds," says Mendes. Read on:

What is Accor's current situation in the region?
This is the first time in three or four years that all the planets are aligned. After these years of severe crisis, especially in Brazil, things are improving. Here, we managed to overcome the crisis because we are large, we had strength. We have 375 hotels in the region, 310 in Brazil, and 130 hotels under construction – 90 of which are in Brazil. We open a hotel every week. Our goal is to reach 650 hotels by 2022, with 500 in operation, 400 in Brazil, 100 in Hispanic countries, and another 150 under construction.

The investment should reach R$ 10 billion by 2022.

The supply will increase significantly...
Today we have 60,000 rooms and we will build another 40,000 rooms by 2022. This represents a total investment of R$ 10 billion, together with partners, banks, and foreign investment funds. In the last three or four years, we have invested R$ 10 billion and by 2022 we will invest another R$ 10 billion.

So the group opened more hotels during the crisis?
Last year alone, we opened 54 hotels. Brazil was the second country in the world where we opened the most hotels. It was only surpassed by China, where we opened 56 hotels.

But if the group was in crisis, why did it open more hotels?
We took advantage of the crisis to make acquisitions and conversions. First, we made an agreement with BHG and converted Royal Tulip and Golden Tulip hotels into Grand Mercure and NovoHotel. This is part of a global phenomenon happening in various industries: consolidation. Secondly, there are secondary areas that lack hotels. Brazil has an average of two or three hotel rooms per thousand inhabitants, in Europe it's 12 to 13 rooms per thousand inhabitants, and in the United States it's 16 rooms per thousand inhabitants. There is no demand because that demand hasn't been created. There are several destinations that we created by building hotels.

Which?
Não-Me-Toque (RS), Chapecó (SC), Paraopeba (MG), Piracicaba (SP), Igrejinha (RS). These are cities that did not have hotels with international standards.

"Brazil was the second country in the world where we opened the most hotels."

So, in the end, did the crisis help with expansion?
In the hotel industry, investment is for the long term. You invest for 50 years, and everything will happen during that period. New elections, new crises, new opportunities. We have an investment machine; some projects have been postponed six months, eight months, but not canceled. For example, in the Fairmont that will open in Copacabana, we invested R$ 280 million. It's a luxury hotel with 400 rooms. The hotel industry is a cash consumer, but it's also a cash producer. It's a factory. When you set up a 200-room hotel, for example, you need 150 employees.

Is there demand for all of this?
The crisis suppressed demand, and now it's returning. Our revenue grew by over 11% in the first quarter. But this trend is happening worldwide.

How?
You have a cycle of growing demand, with 70% or 80% occupancy, and all investors start opening hotels. Suddenly, there's too much supply, exceeding demand. Then the supply falls. We're in that cycle now; there are no more hotel real estate projects, and few are going to open. I said we're going to open 130 hotels, which represents 30% to 40% of what will be opened in Brazil. In other words, there will be a shortage, occupancy will return to the 70% range, and prices will rise. We're in that cycle now. And prices have to rise because many hotels closed because they were no longer profitable.

But will people pay more?
Consumers will have to accept that the equation of a reasonable price for a reasonable hotel needs to return. Today you pay R$ 250 per night for a decent hotel. That's totally abnormal. A hotel like Novotel shouldn't sell for less than R$ 400. The effect of the crisis was very strong. Occupancy dropped, prices dropped, there was a war of competition, and the smaller hotels either died or were bought out.

How many people stay at your hotels?
We have a 60% occupancy rate, and in our 60,000 rooms in South America, approximately 100,000 guests sleep in our hotels every day. In a year, we have 30 million guests. Worldwide, we have 700,000 rooms, and 300 million people sleep in our hotels annually. If we add those who pass through the hotels to go to the bar, the restaurant, or an event, that's 600 million people per year.

"Our investment in technology has become massive."

What was the impact of startups on Accor's business?
It had a significant impact, but a positive one. Again, that's the advantage of being large. Distributors like Expedia, Booking, and TripAdvisor, which are connectors between the end customer and the hotel, are partners, help us improve our occupancy, and bring us customers. These websites bring us 20% of our customers and have forced us to become much more digital.

How did they force them?
To capture the customer directly and ensure they have a fantastic digital experience, our investment in technology has become massive. As a result, we now have more bookings coming through our own website than through third-party platforms.

You said the investment in technology is huge. How much does it represent?
In 2017, US$225 million was announced for a three-year plan. Two years ago, our app was only for information; now it's for booking. You have your profile, your credit card, you book, you accumulate points. Currently, it represents 30% of our bookings. Today, we have our general managers encourage clients to download our app when they arrive at reception. Those who book through the app pay 5% to 10% less. With this, the app and website already capture more clients than third-party booking sites. What also helps is that you only earn loyalty points in our Le Club program when you book through the app.

And Airbnb, didn't it have an impact?
He became a disruptor for us. He forced us to rethink the customer experience in our hotels. Before, about 10 years ago, you would go to a Novotel or Sofitel and expect the same experience in all hotels, anywhere in the world. Standardization was the key word. Today, with the internet and the possibility of posting information, it has forced hotels to put standardization aside.

How do you do that?
It's tough, it's difficult. For 40 years, the industry worked with this type of standardization. Four years ago, when I took over here in the region, it was a shock, a trauma for the team and for the investors. In the company, some adapted and others didn't. We had to recruit new people and rethink some areas. Before, we didn't have a design team, but rather a construction area. We created a food and beverage department. People who think about each hotel and each location differently. Everything behind the operation is standardized, but what the customer sees, the experience, must be different. We launched 12 different bar and restaurant concepts.

And did your team buy into this project?
In general, it was a liberation. Brazilians have creativity and the capacity for innovation. The only thing they need is the freedom to do it. Often, standardization stifled employees.

How do you encourage creativity and innovation?
I organized an open forum with 20 different employees called "Connection with CEO." You register online and sign up. It's fantastic. There were people I'd never spoken to before, and they were very happy to be able to exchange ideas. One of the employees showed me a QR code used in Korea that does everything there. I'm against creating an innovation department. For me, these departments hinder innovation, concentrating it within the department. I prefer to encourage innovation and creativity in all departments so they can bring me ideas that can be implemented. We'll hold these meetings every two months to stimulate these innovative ideas.

You said that Airbnb forced the group to rethink the customer experience. Didn't that have a negative impact?
It had an impact at the beginning. Essentially in the budget segment, like the Ibis.

And it forced Accor to also enter the Airbnb segment...
Yes, we decided to enter the luxury Airbnb market. We acquired three companies: Travel Keys in the United States; Squarebreak in France; and Onefinestay in England. These three companies operate in the luxury house and apartment rental market. We bought all three companies and consolidated everything under the Onefinestay brand. Today, you can go to the Accor platform and find apartments and houses in the United States and Europe. The idea is to expand this to South America, Africa and the Middle East, Asia and the Pacific. Our platform acts as an intermediary between the owner of a luxury home and the client in a very high-end segment. I'm talking about people who will spend between US$400 and US$1,500 per day.

Does the company only act as an intermediary?
We also handle all the check-in and check-out services, breakfast, cleaning... It's a more elaborate service, but it's still someone's home.

Changing the subject slightly, how will technology be integrated into the day-to-day operations of the hotel industry?
We have three examples of innovation linked to artificial intelligence, digitization, and robotics. First, there's facial recognition, which we're testing at the Pullman Vila Olímpia and Belas Artes hotels. We're testing two cameras that automatically recognize you and identify you as a Le Club customer.

How does it work?
You enter the hotel, the camera recognizes you, and immediately your reservation information, preferences, and registered credit card arrive on our staff's iPads. You just sign the confirmation on the iPad. Just arrive and sign. We've been testing this since September of last year, and the technology works. The point now is to see if the customer feels comfortable with it, the issue of authorizations, privacy, and information security. We no longer have a technical obstacle; it's more a matter of compliance. And the consumer isn't ready for this yet.

When will the consumer be ready for this?
I was recently in China and they've already moved past this questioning phase. Everywhere you go, you're recognized by cameras. But is this how we want to live? Do people want this intrusion into their lives? I don't know if I'll do it. We're in this questioning phase.

And where will robotics fit in?
You have a robot that will improve the customer experience. But, for us, technology, innovation, and robotics will not replace human work. The human connection is very valuable, and that's the guarantee of a unique stay. We have a program called Heartist, a contraction of the words Heart and Artist, in which 250,000 employees have been trained. They are our artists of the heart. They have to have a stronger emotional link with the guests.

Phil the robot, who serves guests at the Pullman Hotel.

But what about the robot?
We partnered with the company Pluginbot, and they have a robot that greets you when you arrive at the hotel. It says good morning, your name, and tells you where the restaurant is, if there's a nearby pharmacy—it's like a concierge inside the hotel. This is already in pilot phase at some of our hotels here in Brazil. Innovation is something that really excites me.

What else is being done from a technological standpoint to improve customers' lives?
At Pullman, Vila Olímpia, we created a room called 360. It's two rooms that we combined and, with some partners, we put in the best technology available. Samsung, LG, Castor and several other suppliers helped us. It has a bed that rotates, a home cinema, a dry cleaning machine in the bathroom, and unique lighting.

Accor has a coworking brand in Europe. Do you plan to bring that model here?
Two years ago, we created the Nextdoor brand. Recently, we rebranded it as Wojo. We have over 4,000 hotels worldwide with unused spaces and underutilized corners. And we're going to take advantage of that.

Will it arrive in Brazil?
Here in Brazil, I created a department to develop this model, and we will announce within three months which model will be adopted in South America. Imagine you're stuck in traffic and you can work at one of the nearest locations. You arrive, show your card, and you can work. And all of this will be linked to our loyalty program. The idea isn't just to think about the customer who is sleeping in the hotel.

So, is Accor ceasing to be just a hotel company?
Accor is becoming almost a customer management company that will use our services. The goal is to increase the points of contact with our customers, whether it's for accommodation, renting an apartment, dining at a restaurant, or a business meeting. We want customers to use our platform a lot. Generally, an app like ours is used when the customer stays at the hotel. Our goal is for them to use the app every day.

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