Strategically Evaluate The Accor Expansion Plan Tourism Essay

Strategic eachy Evaluate The Accor Expansion Plan Tourism EssayThe author has to strategically evaluate Accors blowup plan of wreaking 10,000 rooms per annum in ingrained during two years (2007-2008) in both established commercialise chosen as unite States of the States and uphill market chosen as China. The author will too review the marketing, financial strategies that Accor has adopted in these markets till now and then suggest succeeding(a) strategies to expand in these markets. The author will also be suggesting about the brand that Accor should get wind forward to expand.Accoris a openhanded frenchmultinational grass direct in nearly 90 countries and Accor Hospitality, the Accor hotels branch, has more than 4,000 hotels worldwide. It starts from the most luxurious hotels to the most economic lodging solution. Under its belt there are brands the likes of sofitel, novotel, mercure, ibis, red roof inns, etap, motel 6, studio 6 and formule 1. The group is looking to exp and its hotel line of credit in an established (USA) and establishing (China) market by adding 20,000 rooms over the completion of two years. The author has to strategically evaluate and make suggestions to the group.With a corporate representation throughout the world, Accor Hotels have become one of the largest players in the intentness. It is an intricate makeup with multiple brands and qualifications of hotels, as well as supplementary products and function. Accor finds it important to incorporate the small and medium-sized hotels in managing customers needs and requests as they are the direct link to the customers.Accoris a largeFrenchmultinational corporation operating in nearly 90 countries. Accor is the European leader in hotels (Accor Hospitality) and a global leader in corporate services (Accor Services). Accor Hospitality, the Accor hotels branch, has more than 4,000 hotels worldwide. It starts from the most luxurious hotels to the most economic lodging solution.(Ref erence http//www.fundinguniverse.com)Aims Objectives This report aims to develop international expanding upon plans for Accor in established and emerge market in the given span of time during the year 2007-2008. The objective is to provide rationale for the selection of markets, and propose branding, finance, and marketing strategy to the Board of ACCOR to add an additional 10,000 rooms per annum across both established markets (Europe, including France and North America) and other areas of the world (Latin America, Africa, Middle East and Asia/Pacific).Research Methodology This report is based on the case study for the ACCOR group of hotels which is from the module study guide and is a piece of search by the The Centre for Hospitality Research at Cornell University. The some(prenominal)(a) secondary sources accessed have been as following internet, journals, professional reports, government reports and others to produce data for the targeted markets.In 1967 Grard Pelisson and Paul Dubrule undetermined 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 Pelissons connections the partners were able to secure a bank loan, and the Novotel firm was launched. The companys 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 looseningaurants featuring local cuisine. presently Novotels also were established at airports and popular vacation sites, such as the seaside and mountain areas.The acquisition of the Mercure hotel chain in 1975 pushed the company into metropolitan areas and the business enterprise traveler market, and these hotels varied according to regional demands in style, character, and restaurant offerings. By the last of the 1970s Novotel had become the premier hotel chain in Europe with 240 establishments in Europe, Africa, southeast America, and the Far East.Accors brand worldwideFormule1Lowest rates on the market.Functional room for one,Two or ternary nation.All-you-can-eat breakfast buffet.Round-the-clock check-in.Etap good-natured convenient room for one, two or three people.Budget price.All-you-can-eat breakfast buffet.Round-the-clock check-in.Motel 6The lowest price of any national chain.Red chapiter InnRenovated product.Low rates.Comfortable beds.RediCard PreferredMember loyalty program.IbisSimple, reliable pricing policy.Always very well situated, in city centres, close to airports or near major tourist or business areas.Service quality (ISO 9001 certification and 15-minute satis occurrenceion pledge).Environmentally fri closingly waste, water and energy management formations.Teams on duty more or less the clock.Breakfast served from 400 a.m. to noon.Hot snacks available at any time.MercureShared values, such as a strong regional charge, a unique personality and an exceptional wine list.For business and leisure stays, in city centres, at the seaside or in the mountains.NovotelOpen spaces featuring contemporary design, for rest and relaxation.Bright, spacious, pleasant rooms where guests can work or unwind in a comfortable setting.Customers can eat whatever, whenever and wherever they want.Offers adapted to the needs of all travellers.Suite HotelInnovative, modern concept.30-square-meter modular suites.With Boutique Gourmand, food can be purchased around the clock in the hotel lobby.Free relaxing massage every thorium evening.The longer the stay, the lower the price.Smart cars made available free-of-charge to medium-stay customers.SofitelPrime locations in leading busin ess centres and resorts.Each hotel is unique in its design, architecture and culture.Sofitels exclusive MyBed concept, the guarantee of a good nights sleep.Restaurants offering innovative, contemporary cuisine that surprises diners, awakening their senses and stirring their emotions.Hotel Distribution WorldwideAccor has its 4,000 hotels in 90 countries. It has its presence all seven continents and in all mojor cities. (Reference www.accorhotels.com)EuropeAfricaAsiaAustraliaNorth AmericaAndorraAlgeriaCambodiaAustraliaCanadaAustriaBeninChinaFiji IslandsMexicoBelgiumBurkina FasoIndiaFrench PolynesiaUSABulgariaBurundiIndonesiaNew ZealandCyprusCamerounJapanNorfolk IslandCzech RepublicChadLaosFranceEgyptMalaysiaGermanyEquatorial GuineaPhilippinesGreeceGaboncapital of SingaporeHungaryGhanaSouth KoreaIrelandGuineaThailandItalyIvory CoastVietnamLithuaniaMauritaniaLuxembourgMauritiusMonacoMoroccoNetherlandsNigeriaPolandReunionPortugalRwandaRomaniaSenegalRussiaSouth AfricaSpainTunisiaDevelopme nt strategyAccors hotel business has continued its sustained pace of culture. almost importantly, they devised a new, more efficient business model based on two foundationsStronger brands those are now more visible, more attr ready and more strategically aligned.An asset right real terra firma of the realm strategy, which consists of adapting operating structures to the profile of each country and market segment.Pelisson and Dubrule developed their expanding company with a 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 companys distinctive feature became variety, providing hotel chains to fit every need. In 1973 Sphere S.A. was taked 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.(Reference http//www.fundinguniverse.com)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 scrimping range in Spain, Italy, and Britain with its $75 cardinal investment budget. The companys European base provided three-quarters of its revenue, with more than half coming from hotels and the rest from its foodservices.(Reference http//www.fundinguniverse.com)In 1997, Dubrule and Pelisson decided to retire from active management and were succeeded by Jean-Marc Espalioux. Espaliouxs new management team focussed on relocating Accors cash. In an effort, to deleverage themselves and free resources to provide for expansion, Accor disposed of 3 billion of real estate assets as part of a sale and leaseback programme.(Reference http//www.fundinguniverse.com)Business MixAccor S.A. operates in hotels and services sector worldwide. It provides luxury and upscale, midscale, and providence hotel services. It also designs, develops, and manages prepaid solutions, including food vouchers, benefit and assistance programs, family assistance solutions, gift vouchers and cards, loyalty programs and incentive campaigns, and expense management services to corporate clients and public institutions. In addition, the company operates restaurants and casinos, as well as provides onboard train services to the railway sector. Accor was incorporated in 1960 and is headquartered in Evry, France.Financial PerformanceProfit before tax rose to 727 million in 2005, an all-time record, and the meetings balance sheet was more solid than ever. Based on these results, shareholders will be asked to approve an ordinary dividend of 1.45 per share, a 26.1% increase, plus an exceptional dividend of 1.50 per share, representing a total payout of 320 million. This dividend policy is accompanied by a share buyback program that has had a positive effect on earnings per share. (Reference www.accorhotels.com)Accors 2006 results were excellent, as can be seen in three key figures Revenue rose by 6.6%, the biggest increase since 1998. Profit before tax rose by 28% to 727 million, a record. EBITDAR margin, at 27.4%, was our highest ever.These figures prove that Accor is developing fast and enjoying very good financial health, as illustrated by their low level of debt. Another reason for satisfaction is that these repaird results furbish up both the Services and the Hotels businesses. For the year, revenue was up 15.5% in Services and 6.1% in Hotels. And, if 2006 was a very good year, the outlook for 2007 is also very encouraging. With the two businesses return potential, the economic turnaround (especially in Europe w ith the upturn in the hotel cycle) and the emerging markets of China and India, they have every reason to be optimistic. For 2007, Accor is on track to step up the pace of maturement, with the goal of adding 200,000 rooms by 2008. (Reference www.accorhotels.com)StrategyVery quickly too, it became apparent that there was a need for a clearer strategy that would enable the Group to more accurately identify its development priorities and, more importantly, focus its managerial and financial resources. In addition to this two-pronged strategic shift, senior management, under the leadership of Gilles Plisson, outlined a sustained expansion strategy combining acquisitions, notably in the Services business, and stepped up organic growth in the Hotels business with the enterprise of 200,000 new rooms between 2006 and 2010, especially in China, India and other fast-growing regions. Redefining the market positioning of the brands also made it necessary to reposition the Sofitel brand and cr eate a new non-standardized banner in the economy segment, All Seasons. The brand strategy has led to a shift away from the Accor corporate banner toward the operating brands.Accor focuses repeatedly on a specific vision for growth and believes in sustainable, profitable growth through three pillarsA geographically and structurally equilibrate portfolioA disciplined, and results-oriented management of resources and assetsA set of powerful, aligned brands(Ref case study)The office Approach became Accors strategic vision of its Hotels division focussed on making Accors Hotels business more profitable, less cyclical and well appreciated by its clientsTo achieve these goals, five levers drive the recompense ApproachAlign the brand portfolio with customer expectations (The Right Brands)Redefine the networks around this brand portfolio (The Right Network)Improve hotel operating performance in the reconfigured business base (The Right Operating Performance)Adapt hotel operating structur es to improve return on capital employed and reduce cash-flow volatility (The Right Asset Management) Shift the corporate culture to deliver the best value-added services to hotel owners (The Right Service Provider).Ownership StructureFor the lower and mid segment hotels Accor can consider giving franchises or entering in joint ventures. However, for the high end segment hotels like sofitel and novotel, Accor should maintain ownership approach as these properties have higher profit sensitivity. In 2003, Accor opened 10 new properties under these brands, and they owned or leased these new properties.Accor should have less capital-intensive operating structures, which is a key to their success, especially in economically sensitive countries. While Accor owns and leases some properties, they also look to management contracts and franchising.(Reference case study)Developed commercializeFor the developed market the author has chosen three developed markets from which one will be short listed after(prenominal) the analyses. The author has chosen UK, France and USA as its markets for analysis. Accor has great presence in all the three markets.Accor has 125 hotels in UK mainly in the mid-segment. The demand for mid-segment hotels in the UK is strong and most of the Accor hotels are doing well. However, UK is not a big market compared to the US for Accor. Accor already has a good presence in the European market and hence there is limited celestial orbit of expansion. Similarly, in France Accor have a staggering number of hotels and resorts in all segments. It also has a lot of services in France. It has its strongest presence in France considering the size of France to the UK and the US. Accor already has a very good presence in France in all the segments. Hence it has little scope for growth. In the USA, Accor has motel 6 and studio 6. It is also present in the upscale market. However, it still has a large scope for expansion in all the segments as the US market i s so vast and diverse. Therefore, in the developed markets, the author has shortlisted the US market for the addition of 10,000 rooms in the year 2007-08.Developing MarketLike the developed market the author will choose three developing markets and shortlist one of them for the analysis. The developing markets are India, China and South Korea. South Korea is relatively a small country and the economic growth is not impressive enough for Accor to add 10,000 rooms in this market. Accor entered the Indian market in the early 80s and failed miserably. Accor has few operational hotels in India mainly business hotels. However, the political system in India is somewhat chaotic as compared to China. The third market chosen is China. China is a huge country in terms of land and is the fastest growing economy in the world. It has a stable government and its inappropriate policies towards the hospitality industry are very friendly. Therefore, the author has shortlisted China as its developing market.ESTABLISHED MARKET (USA)_______________________________________________________RationaleThe United States of America (commonly referred to as the United States, the U.S., the USA, or America) is a federal constitutional republic comprising fifty states and a federal district. At 3.79 million square miles (9.83 million km) and with about 305 million people, the United States is the third largest country by total area and third largest by land area and by world. The United States is one of the worlds most ethnically diverse and multicultural nations, the product of large-scale immigration from many countries. The U.S. economy is the largest national economy in the world, with an estimated gross domestic product (GDP) of US$14.3 one thousand million (23% of the world total based on nominal GDP and almost 21% at purchasing power parity). (Reference http//www.wikipedia.com)Geographical LocationNorth Americais the northerncontinentof theAmericas,situated in theEarthsnorthern hem isphereand almost totally in thewestern hemisphere. It is bordered on the north by the caoutchouc maritime, on the east by the NorthAtlantic Ocean, on the southeast by theCaribbean Sea, and on the south and west by the NorthPacific OceanSouth Americalies to the southeast. North America covers anareaof about 24,709,000square kilometres(9,540,000square miles), about 4.8% of the planets surface or about 16.5% of its land area. As of July 2008, its tribewas estimated at nearly 529 million people. It is thethird-largestcontinent in area, followingAsiaandAfrica, and the fourth in population after Asia, Africa, andEurope. (Reference http//www.wikipedia.com)PESTLE AnalysisPoliticalA seldom-stated fact of life is that without political stability it is impossible to have economic progress. Until a nation has a stable political system in place, it is impossible for people to plan their lives, conduct business successfully and go about their daily routines with any hope for the future. The Uni ted States has enjoyed 135 years of political stability since the end of the Civil War. The United States is the oldest democratic republic. This is an incredible accomplishment. It is amazing that no other country has been able to copy the American system of government successfully. It is as if that system is uniquely suited to that single country. (Reference http//www.wikipedia.com)With mass manufacturing long gone from America, hospiatality industry is one of the key generators of revenue. Hence the American government has given some concessions for the development and growth of the industryGrant of Infrastructure Status for hotelsConcession for Convention CentresContinuation of ConcessionsDepreciation rate for hotel buildingsConcession in Income Tax Act for the Hotel manufacturing(Reference http//www.capitalmarket.com)EconomicalFortunately for U.S. hotel owners and operators, actual RevPAR improvement through the first six months of 2004 has already reached 9.5 percent. Most en couraging was the 3.2 percent increase in ADR. Record-breaking growth rates for revenues and profits are certainly welcome news for U.S. hotel owners and operators. The industry leaders have forecasted growth in the coming years for hospitality industry in the USA. Also with backing of the US government the hospitality industry is believe to show good results in coming years.(Reference http//www.wikipedia.com)SocialThe American population is comparatively young compared to other developed nations like Japan and Germany and a lot of young immigrant work force is also available in the country. Therefore, it is twice beneficial for the hospitality industry, which is always on the lookout for young work force and customers. The American government safeguards the interests of its people through following agendasthe social inclusion actionCoordination of social security schemesAnti-discrimination and relations with civil societyEquality between women and menSocial Agenda 2005-10(Refere nce http//www.childstats.gov)TechnologicalThe effective use of hospitality technology is one of the key factors in providing stellar customer service, since the proper implementation of this technology helps to ensure that key aspects of service are not haply forgotten or avoided.The hospitality sector in the US spent a total of $917 million in 2006 on RD activities, compared to $784 million in 2005. As the President outlined in his State of the Union Address, the ACI commits $5.9 billion in FY 2007 and more than $136 billion over 10 years to increase investments in research and development (RD), strengthen education, and encourage entrepreneurship and innovation. (Reference http//www.capitalmarket.com)LegalThe lobour laws in America are very stringent. Therefore, the hotel has to abide by the rules to avoid fines and getting into legal disputes. Some of the laws for the hospitality industry are as followsCommon Law SystemRight To PrivacyAmerican with Disabilities ActSafety and Sec urityFood and Beverage employmentEmploymentWorkplaceContractsTravel and TourismThe international arrivals market for the United States has changed significantly since 2000. This goal of this analysis is to provide insights into changes affecting the choke inbound markets to the U.S. The U.S. welcomed 56 million international visitors from 213 countries during 2006, up 10 percent from 2005. Total arrivals were also up 9 percent from 2000, the former record year for total non-resident reverse to the country. Arrival records were set by 72 countries, nine of which were among the realize 20 inbound markets. Therefore, in 2007, the growth in arrivals was driven more from the emerging markets than the top arrival markets.Overseas arrivals (excluding Canada and Mexico) totalled 23.9 million during 2006, up 10 percent from 2005. Travel from foreign markets accounted for 43 percent of total arrivals to the U.S. and contributed significantly to the overall growth in international arrival s in 2007. Although overseas travel is rebounding from its low in 2003 it was down eight percent from its peak in 2000 (graph below). Fourteen of the top 20 overseas markets exceeded 2006 arrivals levels by double-digits Germany, France, Australia, Brazil, Italy, India, PRC/HK, Spain, the Netherlands, Ireland, Venezuela, Colombia, Sweden and Israel. (Reference http//www.travelstatistics.com)Economic GrowthIn real terms, Americas economy grew by 3.7 percent in 2006, faster than most other developed economies around the globe and faster than the historical U.S. growth rate, since 1970, of 3.2 percent.The overall level of GDP was $9.89 trillion (in 2000) when Bush was elected and $9.87 trillion in the third quarter of 2006. scarce three years later, GDP is $10.88 trillion, a 10 percent real increase. To put that in perspective, just the growth of the U.S. economy over the past three years is larger than half of the entire French economy. (Reference http//www.economicreform.com)Brand S electionHeadquartered in Dallas (Carrollton), Texas, Accor North America operates more than 900 upscale and economy properties including nationwide economy leaders Studio 6 and Motel 6 and the upscale Sofitel and mid-scale Novotel and Ibis hotel locations in the U.S., Canada and Mexico. Its flagship chain, Motel 6, caters primarily to vacationing families in the US and Canada with a limited menu of amenities.Accors plan for the U.S. should focus on Motel 6, Studio 6, Sofitel and Novotel brands. The company should plan to grow Motel 6 and Studio 6 aggressively. Were working on new prototypes for both brands, Le Mener said. We intend to be very aggressive with a goal to develop 70 to 75 properties a year, Mener added. Novotel should follow the growth plan of Sofitel, which is to have properties only in the top 20 to 25 markets in the U.S. We see Novotel as an international network, he said.Business travellers and families on a vacation are looking for budget hotels as they want the ch eapest mode of appointment. Accor has a great presence in the low budget segment and therefore, it should continue to grow its hold in this segment. However, it should also look at growing in other segments of the market. This will help Accor in creating brand awareness and also increase its market share in the US.Accor in USABrand Hotels Rooms Managed/FranchisedMotel 6 815 85,421 127Red Roof Inns 360 39,622 101Studio 6 37 4,714 2Sofitel 8 2,633 1Novotel 6 1,835 3Total 1,226 134,225 234(Reference http//www.accor.com)Financial StrategyAccor USA was struggling with manual account reconciliation that postponed month-end accounting for its growing number of properties. Department inefficiencies and error-prone manual processes caused delays with the recognition of exceptions like missing and late deposits. High turnover at properties and reporting delays exposed the company to expensive losses with annual write-offs averaging $1.5 million. Accor USA had no process for escheatment and a 2004 audit resulted in $3 million dollars in penalties for unclaimed property that had not been filed with the appropriate states. (Reference http//www.accor.com)Accor USA faces a lot of financial problems that cannot be sorted out in a matter of time. It has very less cash left to fund its operation in the USA. Although, the funds from operations increase 7% to $906 million in 2005, it still struggles to keep up. Capital expenditure for renovation and maintenance rose by nearly 15% to$326 million during the year, and represented 4.5% of revenues, versus 4.2% in 2005. Free cash flow amounted to $580 million. (Reference http//www.accor.com)As seen above, Accor USAs debt is decreasing and cash flows are change magnitude, therefore it should concentrate on the expansion programme as the cash flows increase. However, it should focus on economy hotels like Motel 6 and Studio 6 as they require less gold. To fund these projects Accor can raise cash money from equity market and some fr om its operations.With its more substantial financial resources, Accor should step up the pace of growth and enjoy greater financial flexibility. The initial three-year (2005-2007) expansion budget has been increased by 39%, to EUR 1.7 billion from EUR 1.2 billion, to fund the development of various hotel projects in the U.S. (Reference http//www.accor.com)To improve its financial flexibility, Accor should undertake an innovative real estate management strategy designed to meet two main objectivesReduce capital intensity in upscale hotels.Variable holding costs in the midscale segment.In the upscale segment (Sofitel), Accor wants to sell the hotel properties while retaining the management contract, sometimes with a minority stake, in order to reduce earnings volatility in a segment that is more sensitive to business cycles. The objective is for 75% of all Sofitel units to be under management contract in 2006, versus 62% in 2004 and 52% in 2000. (Reference http//www.accor.com)In mids cale hotels, fixed leases are going to be transformed into variable leases based on a percentage of revenues with no tokenish guaranteed. One of the objectives is to variable a proportion of the hotels fixed costs.Marketing StrategyAccors big-spender approach has made it the arch-collector of brands, and some observers wonder whether the group can continue being all things to all people without diluting its focus. Nevertheless, its an approach that has established the French company as the worlds third-largest hotel operator, and its coverage of multiple market sectors allows it to spread the risks of a downturn in any one part of its business.Accor group should be focussing on marketing its hotels through advertisements in magazines, television and Accors other services operational in the U.S. It has joined hands with various magazines and is actively participating in television adverts, which will help in marketing its product.Many customers locate and book their Accor hotel acco mmodation through www.accorhotels.com and associated brand-specific web sites, where they are offered the opportunity to opt-in to an online communications programme.Accors online relationship marketing strategy should aim to convert prospects into customers and build customer value through increasing the depth of relationship and growing revenues from repeat bookings, cross-sales, up-sales and referrals.Customer relationship and marketing director of Accor Hotels, Mathieu Staat, said, Online relationship marketing is an important, but complex activity for us. Accor have several hotel brands and offer online communications in up to five languages to subscribers across 15 target zones. They also run six different loyalty and subscription cards.