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ACCOR HOTELS CASE STUDY Group 7

Section B
 ACCOR HOTELS
Accor managed 14 global brands covering all segments
Sofitel was the most luxurious of them all
Portfolio consists of 3717 hotels with 482000 rooms
Followed an asset light model using franchising and management contracts

Accor
Hotel Services division
accounted for €12 billion in
gross revenue and €1.2 billion Hotel Services
Hotel Invest
in net revenue It is an real estate It is an operating
investment business business managing
3717 properties
 MARKET ANALYSIS: ONLINE HOTEL BOOKING
Rivalry between Competitors: Threat of new entrant: Medium Threat of substitute: High
High Trend of consolidation Explosion of new hotel concepts like
Hand to hand combat Network Effects AIRBNB
Commoditizing of rooms Big powerhouses entering market
like Google, Amazon and Alibaba

Bargaining power of supplier: Low Bargaining power of buyer: High

Hotel.coms had low brand awareness 54% customers visited 3 or more websites
So they relied on OTAs for driving sales before making a purchase
Customers in Europe were 2.5 times more Customers were price sensitive
likely to buy from OTAs than hotel.com
EVOLUTION OF DIGITAL IN HOTEL BOOKINGS

1st wave: Online 2nd wave: Meta- 3rd wave:

Travel Agents search Engines Customer to
Customer Renting

Expedia.com,
Bookings.com Tripadvisor.com Airbnb.com
 ROOM KEY VALUE PROPOSITION
Direct Bookings Less Commissions Highly Qualified
Customers
For Accor • Bookings happens • 10-15% • Almost all customers
on the hotel.com commissions visiting were
looking to buy

Lowest Rates Loyalty Rewards Flexibility

For customers • Low cost of listing • Customers will be • Request for a certain
facilitated this awarded reward room or change a
points reservation
 ROOM KEY OPERATING MODEL
While exiting,
Customer visiting Lands on Explore similar
shown a pop-up EXIT
partners website roomkey website hotels
add

Gives Feedback Travelo Click on book

city.com

Make the Use loyalty Customize the Lands on a

purchase rewards if any product partners website EXIT
 PARTNERSHIP OPPORTUNITY WITH ROOMKEY
Revenue from OTAs 1400
OTA Roomkey Commercial Roomkey Equity
Commission(€ million) 350 210 140
Additional Cost(€ million) 0 0 10
Total Cost(€ million) 350 210 150
Roomkey
The above table shows that at current levels of indirect online bookings Roomkey
Equity is most favorable option assuming that we can replace 100% of OTAs Commercial Equity
contribution by Roomkey contribution which is highly unlikely Partnership Partnership
Traffic
Company ADR Upstream Downstream
Accor 97.24 - - 15% 10%
Choice 77.03 3.77 4.58 commission Commission
Hilton 140.52 22.17 21.88
Hyatt 180.4 19.59 17.27
Marriott 157.05 14.49 13.37
10 mn Euro
In terms of visitors the Hilton, Hyatt and Marriott are taking most of the benefit, so buy in
charging a same 10 million buy in amount when value derived is different seems to
be unfair pricing.
 MEASURING PERFORMANCE OF ROOMKEY
250

•The performance was stated based on number of 200

unique visitors
•But the data shows no correlation between number of 150

unique visits and gross bookings in revenues

100

•The only thing that seems to matter is the Brand 50

•The trust, awareness and past user experience

0
On this variable OTAs were very strong as they have Expedia Priceline Orbitz CTRIP
spent millions of dollars on building an online Brand Unique visitors (Million) Gross Bookings (Billion $)
 OTA & ACCOR
Total revenue generated through online was 35% of
total sales 21%

Direct Online was 21% and indirect online was 14% 14%

This 14% of total revenue was generated by OTAs

DIRECT ONLINE INDIRECT ONLINE

• Accor saw OTAs a necessary evil due to 25% commissions charged by them
• Accor wanted to use OTAs as a means for customer acquisition only
• Strategy was to motivate repurchase through its own website
 DISRUPTION TO ROOMKEY
Commissions Leaky loop Unfair Pricing Travelocity
Reduced
• The commissions • Roomkey was • Value derived • Around 12% of
charged made to retain from roomkey traffic was
reduced to as customers varied very diverted to
low as 15% exiting the much from hotel Travelocity
from 25% thus partners to hotel and thus which is against
taking away a websites but it fixed price the whole
value was unable to equity purpose of
proposition of form a closed partnership was setting up of
roomkey from loop as founders unfair roomkey
commercial still lost 24% of
partners customers in Jul
2012
INCREASING DIRECT ONLINE BOOKINGS
Only 4.3 million out of 18 million customers in Accor’s loyalty program made direct
purchase
 This indicate a problem with communicating the benefits of loyalty program to customers

Balance between quality and quantity of visitors

 Buying 12 million keywords leads to loose targeting

Untapped resource in form of consumer data

 As personalized offers in 570 million emails will be very effective