Accor Hospitality: The New Business Model Optimizing operating ...

The Right
Brands
Chapter III
Optimizing operating performance
Accor Hospitality: The New Business Model
The Right
Network
The Right Approach
The Right
Operating
Performance
The Right
Asset
Management
Policy
The Right
Service
Provider
Culture
1

Battle of revenue
Yann Caillère
COO Hotels France, Southern Europe, Middle East & Africa and CEO Sofitel Worldwide

The Battle of Revenue : 360°
Loyalty Program
A’Miles
Marketplace
strategy
Marketing and
Communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
3
Reservation
(Accor Hub)
Sales and
Distribution

The Battle of Revenue : 360°
Loyalty Program
A’Miles
Marketplace
strategy
Marketing and
communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
4
Reservation
(Accor Hub)
Sales and
Distribution

Aligning marketing strategy with mature and emerging markets
Objectives Levers Impact
Accor will adapt its marketing
strategy depending on whether
it is market
leader
or
challenger
in order to maximize the
Marketing spend
ALIGNING MARKETING
STRATEGY WITH MARKET
PENETRATION
-------------------------------------------
When Accor is
market leader
Strengthen our positioning with
powerful advertising campaigns
When Accor is
market challenger
Become the leader and strengthen
the brand strategy
When Accor is
penetrating a market
Move up to the front ranks and
rapidly gain market share to boost
brand recognition
5
Worldwide
Marketing
Spending
Variation
06 vs 05
+35M€
Variation
07 vs 06
+30M€

When Accor is leader, poweful advertising to strengthen brand strategies
TV advertising in
France
Note: Marketing Plans - 2006 - 2007
Print advertising
campaign in France,
Germany
6
Print advertising campaign
in France, Germany, UK

The Battle of Revenue : 360°
Loyalty Program
A’Miles
Marketplace
strategy
Marketing and
communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
7
Reservation
(Accor Hub)
Sales and
Distribution

Reservation – Accor Hub
Objectives Levers Impact
Get connected to every
booking channel and
source
Make the booking
process as simple as
possible for the customer
Use all the channels to
maximize conversion
Connectivity and
innovation: unique TARS
reservation system
Availability and userfriendliness
8
30% of room nights
generated through central
systems
50% of conversion rate for
call centers
Up to 50% in ARR vs.
direct hotel with TARS
reservation system (upscale
& luxury segments)
100 millions of visitors in
Accor websites

TARS, a HUB linking hotels to distribution
Travel Agencies
Brand web sites Accorhotels.com
OPEN
CLOSE
Rates
Voice Booking TARS
Commissions management
Intra-hotel &
inter-hotel
Room
types
Electronic Distribution
9
Infos,
photos
Sales
Conditions
On Line hotels
Call Centers
Sales Forces
Tour Operators B to B Web Sites
B to C Web Sites
Web SearchEngines

TARS room nights
CAGR
CAGR
19% in 4 years (2006 to 2010)
26% in 10 years (1996 to 2006)
2006
>31% through central system
2 million
20 million
1996 2006 2010
Room nights per year
10
40 million
2010
>40% through central system

Expedia : A worldwide agreement
Roomnights
200 000
50 000
0
+30%
New
Contract
Direct
connect
+335%
YTD July 2005 YTD July 2006 YTD July 2007
11
North America
55%
A specific channel in order to target additional clientele
• Driving an increase in total of room nights
• 75% of customers are from the US and UK
Origins
United Kingdom
20%
France
13%
Rest of the World
12%

The Battle of Revenue : 360°
Loyalty Program
A’Miles
Marketplace
strategy
Marketing and
Communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
12
Reservation
(Accor Hub)
Sales and
Distribution

Sales and Distribution
Objectives Levers Impact
More revenue:
Capture the demand from
all the existing channels
Better revenue:
Set the right price for the
right channel, enhance
business visibility
Optimized
distribution costs:
Maximize cost-revenue
ratio: lower costs, higher
impact
Effective sales force to
capture potential
wherever it is:
- Hotel sales force
- Global multi-brand sales force
- Dedicated sales force for luxury
segment
Appropriate offers for
every channels:
- Corporate/Leisure/MICE/Airlines
- Distribution
- Online / Offline
13
Access to more than
65,000 large accounts
worldwide
Up to 80% of revenue
generated through sales
and distribution
processes (upscale and
luxury segments)
+50% of increase in
sales by 2010 (2005 to
2010)

Internet Distribution
Eric Lepleux
Chief Marketing Officer

Accorhotels.com and brands.com: a major online player
15
KEY FIGURES
2007
300 000 visits per day
100 million visitors per year
11 millions room nights
7 languages
30 000 room nights per day
1 room night every 3
seconds

2007: changing the business and running the business
Rebuild all brands websites in line with the new portfolio strategy
Support the arrival of All Seasons and Pullman
Improve content and functionalities
(ie new hotel presentation, Google search engine, interactive city guides …)
Develop Chinese platforms for our future sites
Increase by 31% our volume of room nights
16

Rebuilding all brands websites
17

Rebuilding all brands websites
18

Rebuilding all brands websites
19

Rebuilding all brands websites
20

Rebuilding all brands websites
21

Our portal strategy
Portal
Strategy
Generic content
Brand
Strategy
Customized content
Mutli brand
customization
22
2010
Brand
customization

A strong opportunity to drive direct bookings
25%
20%
15%
10%
5%
0%
12%
23%
Forrester 2006 – In % of revenue
19%
WorldWide
USA
14%
23
19%
KEY
INITIATIVES
to increase our
internet penetration
Price transparency
Interconnectivity
Brand loyalty
Booking experience
and simplicity

Penetration ratio by brand
10%
4%
6%
14%
4%
9%
11%
4%
7%
Indirect from third party
Direct on our site
27%
7%
20%
16%
3%
13%
15%
15%
24
17%
17%
PERSPECTIVES
2007 - 2010
31% overall growth in
2007
Double digit target growth
until 2010
14% overall penetration
in 2007
Penetration ratio target
25% by 2010

Third parties: a continued focus on other major online players
7,8 millions
room nights
Accor Web
sites
76%
Third Party
Web site
24%
3,2 millions
room nights
Ctrip.com
3%
Wotif.com
10%
Hotel.de
10%
25
Laterooms
2%
HRS
14%
Expedia
16%
Other third
parties
31%
Bookings
17%

Accorhotels.com and Brand.com: better conversion ratios than the
competition
5,80%
Accorhotels.com
& brands.com
4,70%
Competitors
Bookings/Visits Competition Forrester 2006
Range of offer: full coverage of the market
High operational performance
Clear privacy and security policies
Logical flow and navigation
Graphics and maps adding value to the
booking experience
Home page provides clear answer to user
26
OUR STRENGTHS
Forrester Web Site Review

Improving our internet reach
Capture additional traffic
- Travel Search Engines (Kayak, Kelkoo...)
- Parternships (Europcar, Club Med Air France)
- New 2.0 players (Tripadvisor, myspace.com)
Retain our customers
- Develop loyalty and customer knowledge (launch of loyalty program, pre arrival mail,
conversional agent, e-mail campaigns)
- Offer a wide range of products and brands (Accor Brands and partners brands)
Develop direct connectivity
- Existing interfaces GDS/Pegasus (Orbitz, Lastminute, Travelocity)
- Direct Tars (Expedia, Booking, HRS, Hetel.de)
Enhance our BtoB solutions
- Specific portal and home page
- New functionalities for different segments (MICE, Travel Agents, Corporate)
27

A Sales organisation aligned with our Brands needs
Brand Promotion
Sales and Distribution efforts
« Push » Sales approach
+ Distribution
28
Dedicated Sales and
Distribution teams

The Battle of Revenue : 360°
Loyalty Program
A’Miles
Marketplace
strategy
Marketing and
Communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
29
Reservation
(Accor Hub)
Sales and
Distribution

Revenue Management and Pricing
Revenue
Management
optimizes what
to open for sale
and
“when for when”
OPEN
Pricing
Is to optimize
to always target
“the right price
for the
right moment”
CLOSE
Hotel Level OPEN for sale
Room type OPEN for sale
Rate OPEN for sale
+
Rate is PRICED (€)
For the room type,
the date of stay
and number of persons
30
Booking is possible only if

Implementation of a new tool: Revenue Management System
REVPAR growth INDEX =1 in 2004
114 hotels
31
Trainings
for all
255 hotels
+ 8 pts

Revenue Management System supports Dynamic Pricing
A
No No control control
over over the the
final final result result
A new policy has been launched in 2005: Dynamic Pricing
A new policy has been launched in 2005: Dynamic Pricing
BEFORE
BEFORE
10 10
public public
rates
rates
without without
any any
logic
logic
For For
the the
customer
customer
32
AFTER
AFTER
3 3
public public
rates
rates
Fully Fully
flexible flexible
Rate
Rate
Restrictive Restrictive
Rate
Rate
Prepaid Prepaid
rate
rate
+ 30 pts
Easier Easier
to to manage manage
With With immediate immediate
results results

Example of results : 4 Sofitel in Germany
Jan-Jul 06
Public Public rates rates 2006 2006
Average Average = = 159€ 159€
33
Jan-Jul 07
Sofitel network worldwide impact: +3M€
gained with RA3 closed 15 days before
Public Public rates rates 2007 2007
Average Average = = 186 186 € €
Without
Without
any
any
lost
lost
room-nights
room-nights
No
No
increase
increase
of
of
the
the
full
full
rate
rate

Revenue Management Worldwide Map in 2006
Full Revenue Management System and Methods
Or Trained (REV chalenge and / or Revmaster)
200 200 hotels hotelsequiped equipedin in 2006 2006
(maximum
(maximum
target=1200)
target=1200)
34

Revenue Management Worldwide Map in 2009
Full Revenue Management System and Methods
Or Trained (REV chalenge and / or Revmaster)
800 800 hotels hotelswill willbe befully fully
equiped equipedin in 2009 2009
(maximum
(maximum
target=1200)
target=1200)
35

Revenue Management & Dynamic Pricing
Ex: Sofitel USA
Don Kelly
VP of Sales, Pricing, Distribution and Revenue Management for Sofitel Worldwide

Sofitel USA (comparable) vs. Competitive Sets
115%
110%
105%
100%
95%
90%
85%
80%
PENETRATION INDEXES
2001 2002 2003 2004 2005 2006 YTD
2007
37
--- ADR
--- REVPAR
--- OCC
Results were driven primarily through the management of our public pricing

115%
110%
105%
100%
95%
90%
85%
Sofitel Example: Sofitel New York vs. Competitive Set
PENETRATION INDEXES
2004 2005 2006 YTD 2007
38
--- REVPAR Index
--- ADR Index
--- OCC
Public Prices Definition:
- RA 1 - (best unrestricted)
- RA 2 - (72 hour cancellation)
- RA 3 - (pre-paid rate)
YTD Room nights (+24% in 2007)
YTD ADR (+11% in 2007)
- RA 1 - $527
- RA 2 - $395
- RA 3 - $367
YTD Room Revenue (+37% in 2007)
--- Competitive Set (Intercontinental, Loews, Parker Meridien, Omni, Royalton, Muse)

The Price Movement CRITERIA
Lead Time
RevPar Pace
Competitive Set
Booking Pace
39
3 Automatically Linked Criteria
Lead-time
Revpar pace at the specified lead
time
Booking pace of key sub-segments
at the specified lead time
1 Subjective Criteria
Competitive Sets Weighted Average
Rate is reviewed by the Revenue
Manager at the specified lead time
The combination of all four
create the probability rules or
“If” statements

Price Movements
40

360° EXECUTION
Performance
Measurement
System
Psychological Pricing
“Willingness to Pay”
Change of Mindset
“Revenue Quality”
Sofitel
Profitability
Account Behavioural
Model
41
Performance
Indexing
New Discounting
Goals

The Battle of Revenue : 360°
Loyalty Program
A’Miles
MarketPlace
strategy
Marketing and
Communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
42
Reservation
(Accor Hub)
Sales and
Distribution

Market Place Strategy
Salvatore Serio
Managing Director France Hotel Division

A Marketplace Strategy
Each hotel is a key-player of the global
marketplace strategy
44
A unique advantage
What is «La Place» ?
A consistent geographical market
impacted by the same environment,
business flows and events
A «battle field » where Accor can
leverage its broad, powerful offering
(multi-brands, multi-size, multisegmented)
to pump out extra value
from demand through coordination
and synergy from each Accor Hotel

A Marketplace Strategy
Objectives
Increase and maximize
Accor RevPar
Gain extra revenue
Gain profitable market
share without dilution
and cannibalization
Optimize each brand’s
value for money in each
segment
Levers
Global competitive market
tools
Accor integrated
reservations system
Coordinating Revenue and
Pricing Management
Rerouting inter-hotel
individual and group
demand
Synchronizing marketing
and sales initiatives
45
Financial Impact
Performances:
Tracked Key Metrics
(ARR, RevPar &
RGI) above « Offmarketplace
» hotels
13 marketplaces in
France will generate
8M€ incremental
revenue in 2008

Focus France
• Today in France :
13 marketplaces (incl Paris IdF: 6)
260 hotels (incl Paris IdF: 90)
36 000 rooms (incl Paris Idf : 20 000)
• Representing :
66% of revenue (40% for Paris IdF)
70% of GOP (43% for Paris IdF)
La Défense
46
Roissy
Paris Sud
Paris Centre
Orly
Paris Bercy
Bordeaux
Toulouse
Lille
Marseille
Lyon
Strasbourg
Nice Cannes

Optimization levers… some examples
Reservations
cross-selling &
rerouting
Price
Optimization (*)
(*) vs daily market demand by
category and segment
Marketing &
sales initiatives
Over 100 000 individual room nights cross-sold yearly in French
Places
Ex : Paris Sud
Over 10 000 groups room nights rerouted yearly
Over 10 000 individuals room nights cross-sold yearly
Example la Défense :
Ibis, Suitehotel rack rates adjustments: +400K€
Last room availability optimization: + 600K€
Calendar optimization (calendar, events, environment) for
2008 vs 2007 (+ 1,5M€)
Local special offers on needy periods
Sales blitz
47

2012 Vision: A worldwide strategy deployed in over 80 “Places”
Americas
5 « Places »
Europe
60 « Places »
48
Asia Pacific
15 « Places »

The Battle of Revenue : 360°
Loyalty Program
A’Miles
Marketplace
strategy
Marketing and
communication
New team spirit
New tools
New market share
Revenue
Management &
Dynamic Pricing
49
Reservation
(Accor Hub)
Sales and
Distribution

How the A’Miles loyalty program will work
Enroll for free
Earn A’Miles
for each €
spent
Miles
Convert
A’Miles into
• Hotel
checks
• Airline miles
50
1 Million members 2007
4 Million members 2012
Top members
get Gold and
Platinum
Status
Web based
program

A’Miles will catch up with our global competitors
Luxury
Upscale
Mid scale
Economy
Miles
Accor
A Miles
+ 2 000 hotels
InterContinental
Priority Club
+ 2 500 hotels
Starwood
S. Preferred Guest
51
700 hotels
Marriott
Marriot Rewards
+ 2500 hotels
.
Hilton
HHonors
+ 2 500 hotels

The battle of Revenue : 360° 360
Consequence on
RevPar Index France

14 0
13 0
12 0
110
10 0
90
110
100
90
France : The battle of the RevPar index (from 2004 to 2006)
Ibis and Etap Hotel
2004 2005 2006
Mer cur e et Novotel
2004 2005 2006
53
Ibis and Etap Hotel
Market leaders
+ 0,7 Pts increase
Mercure is strengthening its position
Novotel is maintaining its positioning
+ 2,5 Pts increase

Flow-Through Flow Through Battle
Yann Caillère
COO Hotels France, Southern Europe, Middle East & Africa and CEO Sofitel Worldwide

Productivity gains through changes in
management of operations

Novotel Café
56
Y. Lecret 56

Concept
• Bar more than a restaurant
• Trendy and high-quality products
• Simplified menu
• 5th products generation in partnership with Lenôtre
• Open 24/7

Key figures: 2004 2007
2004 2007
# of covers 1,350 M 1,430 M
Prime cost 73.1% 69.8%
% F&B costs 28.1% 27.5 %
Payroll 45,0% 42.3%
Other op. exp. 7.8% 6.6%
F&B margin 19.1% 23.6%
F&B margin : + 4.5 Pts in 4 years

59
Olivier Devys
Chief Executive Officer of SuiteHotel

Previous advertising: « Good Morning » by Suitehotel
60

3 kinds of bread,
freshly baked in the
hotel + mini
croissants.
2 kinds of organic
cereals.
3 fruit juices,
100% pure juice,
100% fruit taste.
4 kinds of Dammann-brand teas
20 original new recipes, especially created by a chef and a nutritionist,
presented in individual transparent glass casings.
Fresh milk
61
Seasonal fruit
selection
Selection of
on-demand ground
coffees such as
espresso and
cappuccino.
Creamy hot chocolate
and hot water for tea.
4 flavors of jam,
porcelain mugs,
glasses, cutlery,
sugar, etc.
Trays designed for
Suitehotel to meet
Good Morning
specifications

“Good Morning” by Suitehotel
An innovative breakfast concept based on emerging customer expectations
A new breakfast concept introduced by Suitehotel in two test hotels in late 2006
and deployed across the network in 2007.
Innovative both in its design lay-out and in the quality of the products,
Responding to customer values: simplicity, independence, easy access,
generosity
Anticipating emerging customer expectations: broad offering, low-fat, healthy
products, unusual recipes, an unexpected experience, etc.
Considered by customers as good value for money (€12)
and highly profitable for Suitehotel (GOP: 45% of To)
► A high satisfaction rate and a 60% increase in breakfast revenue.
62

Organizational and skills management programs
63
Salvatore Serio
Managing Director France Hotel Division

FORECAST DEMAND
AVAILABLE PEOPLE
COMPLIANCE
COST MANAGEMENT
A team organization program
Organizes work schedules depending on the
hotel’s forecast demand
Organizes work schedules depending on the hotel’s
available human resources (quantity and skills)
Ensures compliance with each country’s labor
legislation
Reduces time spent on administrative tasks and
improves cost management.
The right person in the right place at the right time to improve
cost management and increase customer satisfaction
64

ASSESSING
TRAINING
ENCOURAGING MOBILITY
OFFERING A CAREER
A skills development program
65
An employee skills evaluation system
Training programs providing certification
in various fields of expertise
By developing identical skills recognized
across the global Ibis network
A career plan for each employee

• Identify skills
• Integrate employee desires
• Offer training
Acteurs
Employees
Acteurs
Employees
66
A holistic management process
• Anticipate demand
• identify skills + resources
• Build the hotel organization together
Compatibility
Guest satisfaction
Employee turnover (- 5%)
Labor costs
Equipe
Hotel
Equipe
Hotel

Procurement
Joël Vatan
Chief Procurement Officer

Procurement
A service that delivers value to our partners
2006 total Hospitality business volume = €10bn
Procurement volume = €3.4bn
Net rebates (% of revenue) 1.0%
Net savings (% of revenue 2.6%
Average 2006 Ebitdar rate 30.5%
(Accor Hospitality)
The Procurement process is is geared to to offer hotels
“solutions” that increase their productivity while preserving
their flexibility and ability to to meet customer needs
68

Procurement: an ongoing strategy to deliver value
to all our business partners
3 countries
Vol. nom. Purchases = €0.3bn
Net savings: 12%
Creation
1992 - 1997
20 countries
Vol. nom. Purchases = €1.5bn
Net savings: 10%
Extension
1998 - 2005
€ 100m in in savings in in 5 years (2006-2010)
Impact on on PBT: €65m
69
35 countries
Vol. nom. Purchases = €2.6bn 2.6bn
Net savings: 8.5%

5 drivers for €100m in savings in 5 years PBT impact: €65m
Openings
in new
countries
10 new countries
in 5 years
10 countries
in 5 years
Argentina
Italy
Middl
e East
South Africa
China
Indonesia
Expansion of
categories
managed by
the
Procurement
department
6 new
categories
in 5 years
2005
2010
Coverage
rate
Expansion
of
international
contracts
From 10%
to 20% of
our spend
70
International
sourcing
in low cost
countries
New sourcing
team
in Asia
Improvement
of the terms of the
existing contracts
Category
management
benchmarks
Category UK
Manager
USA
€15m €40m €10m €10m €25m
Germany

Performance Measure
Yann Caillère
COO Hotels France, Southern Europe, Middle East & Africa and CEO Sofitel Worldwide

France: Significant growth in results
Development / Network
rationalization
Topline
Maximization
2007 RevPar : 49.4 (+9% vs 06)
2007 Ebitdar Drop through : 57%
2007 PBT : 261 M€ (+28% vs 06)
72
Profitability
(drop through)

France: RevPar and Drop-Through Impact
41,2
43,1
REVPAR (in €)
45,3
49,4
2 004 2 005 2 006 2007 E
43,0%
Drop Through Percentages
20,3%
27,6%
57,0%
2 004 2 005 2 006 2007 E
73
+ 8,2 €
(07 est. vs 04)
+ 36,7 Pts
(07 est. vs 04)

France: Impact on Profit Before Tax
194
200
Profit Before Tax
204
74
261
2 004 2 005 2 006 2007 E
+ 66 M€
(07 est. vs 04)