Accor S.A. - The New Millennium: The Early 2000s

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 on-board 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.