AccorHotels and the Digital Transformation hiccups
AccorHotels has made some bold moves in the last years to compete with innovators that have disrupted the Hospitality market and taken away its market shares: purchasing the concierge service John Paul, a Travel and Hotel accommodation service and many tactical projects to leverage the ideas born out of the startups that are reshaping the meaning of hospitality. Vivek Badrinath, the former Deputy CEO of AccorHotels who now back in the TMT industry, set up the vision under the initiative of Sébastien Bazin and the new Chief Digital Officer, Maud Bailly, is in charge of implementing it.
What we know:
Vivek Badrinath defined the new scope of work for AccorHotels in October 2014: (1) Mobile first (2) Customer Centric (3) Seamless Journey (4) Mice & B2B (5) Employee Friendly (6) Owner and Franchise Centric (7) Infrastructure Transformation (8) Business Intelligence and Analytics. The vision has been sharpened since then with 3 pillars: hotel reservation, à la carte services, including “travel agency” capabilities and conciergerie, and local services, as Maud Bailly details in her interview at the Viva Tech conference. Improving the yield management capabilities of AccorHotels are indeed critical to increase the occupancy rate, and the “side kick” services are critical for this since they are the enablers of a modular customer experience. And this is the main target of the company to compete with companies like Airbnb that are already focused on providing an experience that differs enough from the standard hotel accommodation to acquire more and more market shares.
What is critical:
To successfully run such a change, the main road blocker would be the traditional “that’s impossible to do in the short term” argument the seasoned executives, the franchisees, and the long time employees would throw at anyone willing to try and modify the old habits and way of thinking. Technologically speaking, moving from the current AccorHotels IT setup to a one that is able to leverage the business intelligence and the data marketing for a better occupancy ratio and operational ROI on accommodation isn’t a real issue. It would take time and require highly qualified people in change management AND data management and they would be looking at a €20 to €40 millions budget for 4 to 5 years. The backbone would be done by 2020, meaning this effort would start impacting the top line by 2019 and the bottom line by 2021. Meanwhile, what is to consider is how to deal with the 3 years lag. Acquiring startups and companies that are successful in the “side kick” services is an option, though risky because of the post-merger integration challenge of connecting small EBIDTA companies to such a large corporate group like AccorHotels. And that is to me the real challenge.
What to do:
To address this challenge, AccorHotels needs to become more that a Hospitality company. It needs to also become a technology company for the sole purpose of enabling a fast and efficient assembly of services and space rental. Why? You can try integrating startups into an existing distribution channel but the components would not accept it if this means they need to add more workload to potentially generate more revenues at a later time. It is some basics of time value of money: people would prefer short-term benefits instead of mid or long term increased benefits. Hence, a tech platform that enables a fast connection between core business makers and “add-ons” to provide an almost instant benefit is required. That would be the true meaning of the digital transformation in our digital age: leveraging technologies to solve the post-merger integration challenge.