Accor SA

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Accor SA

2 Rue de la Mare-Neuve
91021 Évry Cedex
France
(33) 1 60 87 43 20
Fax: (33) 1 60 77 04 58

Public Company
Incorporated: 1983
Employees: 135,000
Sales: FFr82 billion (US$14.04 billion)
Stock Exchanges: Paris
SICs: 7011 Hotels & Motels; 5812 Eating Places; 4724 Travel Agencies; 7514 Passenger Car Rental

Accor SA, a Paris-based conglomerate comprised of hotels, restaurants, travel agencies, car rental companies, and restaurant voucher firms, has a history of remarkably rapid expansion, having grown 20 percent annually since 1967. By the mid-1990s, Accor was the largest hotel company in Europe and ranked second worldwide after Holiday Inn. The company maintains a strong presence in all sectors of the hotel market from luxury Sofitels to budget Formule Is; similarly, its restaurant holdings range from wine bars and steakhouses to fast food. The company’s success has been attributed to its decentralized management style, imaginative co-chairmen, and timely moves into new market niches ahead of the competition.

In 1967, Gérard Pelisson and Paul Dubrule opened 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, as 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 Pelisson’s connections, the partners were able to secure a bank loan, and their Novotel company was launched. The company’s ensuing success was facilitated largely by its being first to break into the unexploited European market for highway lodging. Each Novotel provided standardized rooms, ample parking facilities, and restaurants featuring local cuisine. Soon Novotels were also established at airports as well as popular vacation sites such as the seaside and mountain areas.

Pelisson and Dubrule developed their expanding company with a philosophy of decentralized management and a unique dual chairmanship. Although to comply with French law the partners took turns holding the official position of chairperson, they made all decisions jointly and generally shared responsibilities, immersing themselves in all aspects of the business. The company’s specialty became variety, providing hotel chains to fit every need. In 1973, Sphere SA was created 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, constant quality, and quick service. The purchase of the Mercure hotel chain in 1975 pushed the company into metropolitan areas and the business traveler market, and again, as with Novotel, these hotels varied according to regional demands in style, character, and restaurant offerings. By the end of the 1970s, Novotel had become the premier hotel chain in Europe with 240 establishments in Europe, Africa, South America, and the Far East.

In 1980, Novotel invested in Jacques Borel International, which owned restaurants and luxury Sofitel hotels. Jacques Borel had begun his career with the establishment of one restaurant in 1957, and, by 1975, when he took over Belgium’s Sofitel chain, he was Europe’s top restauranteur. After losses in the hotel business forced Borel to sell the Sofitel chain to Pelisson and Dubrule in 1982, Novotel and its holdings were incorporated under the name Accor and became one of the top ten hotel operations in the world, an elite group typically dominated by American firms. The merger doubled the partners’ holdings and infused new talent into the senior management, as Bernard Westercamp became vice-president and general manager of Accor. Sofitel’s luxury services, which were aimed at business and holiday travelers and located in the center of international cities, near airports, and in prestigious tourist areas, introduced Accor to the higher-priced end of the hotel industry.

Accor’s initial expansion into the American market, which began in 1979 with the opening of a hotel in Minneapolis, was not as successful as its ventures in Europe, due to a saturated market in the United States and Accor’s slow development. The company brought Novotel, Ibis, and Sofitel hotels to the United States, as well as a chain of eateries in California called Seafood Broiler, but all operated at a loss. Nonetheless, Pelisson and Dubrule made American-style service culture fundamental to their business in Europe. After visiting training schools at McDonald’s Corp. and Disneyland, they opened Accor Academy at the company headquarters in Évry in 1985. The academy offered seminars in topics ranging from phone etiquette to team-building skills and the exploration of new technologies. Accor spent a reported two percent of its annual payroll on training.

During the mid-1980s, Accor developed investments in the restaurant and travel businesses. The company opened Pizza del Arte, a chain of Italian restaurants, in 1983, installing them in commercial and city centers, and entered into a partnership with the bakery and catering company, Lenôtre, two years later. Accor also entered the travel industry during this time, buying into Africatours, the largest tour operator to Africa, which became the third of its major investments, along with hotels and restaurants. The company expanded to North and South America, Asia, and the South Pacific through the purchases of Americatours, Asietours, and Ted Cook’s Islands in the Sun. In an effort to attract weekend clientele in Europe, Accor developed Episodes, an agency specializing in short trips offering weekend rooms in hotels usually filled by business travelers.

In 1985, Hotec, a subsidiary of Accor, brought forth a completely new idea in the hotel industry with the creation of Formule 1, a one-star budget hotel chain that offered no reception staff, no restaurant, and no private bathrooms. Travelers simply inserted a credit card at the entrance to gain access to the rooms, which were plain yet practical and cost $15 a night. Formule 1 hotels appealed to vacationing young people and families of limited financial resources. Costs were kept to a minimum by the use of pre-fabricated construction and staffs of only two to run each 60-room hotel. Occupancy rates were high, and ten Formule Is were in operation by early 1987, while another 30 were under construction across Europe.

From 1981 to 1986, Accor’s revenues doubled to around $2 billion, with net profits of $32 million. Novotel, with hotels in 31 countries, remained the most profitable of Accor’s holdings, while Sofitel faced stiff competition in the luxury hotel market, particularly from American firms. Nevertheless, Accor expanded a far swifter rate than its international rivals. The company was the largest operator in Europe. It led the market in France, West Germany, and the Benelux and was expanding in the medium and economy range in Spain, Italy, and Britain with its $75 million investment budget. The company’s European base provided three-quarters of its revenue, with more than half coming from hotels and the rest from restaurants, catering, and lunch tickets.

In 1985, Accor took control of Britain’s Luncheon Voucher, the company that invented meal tickets, which companies distributed their employees as a benefit. Accor overhauled the company’s communications and management systems and restored its market presence through a new sales drive. By 1987, Accor was the world leader in restaurant vouchers for employees, and was exploring similar voucher programs for child care in the United States and groceries in Latin America.

In 1987, Accor exploited another growing market: homes for the elderly. The company’s Hotelia homes provided 24-hour medical and nursing care, as well as more traditional hotel services. Also that year, Accor created the successful Parthenon chain of residential hotels in Brazil. In 1988, the company invested in France Quick, ranked second in the French fast-food market, and launched the Free Time fast-food chain. With several partners, Accor then invested in Cipal-Parc Astérix, a theme park north of Paris, based on a Gallic cartoon character, and expressed interest in becoming involved with catering and lodging for the then-projected EuroDisney amusement park. Accor’s rapid growth was not without its setbacks, however, as made an unsuccessful bid for the Hilton International Co. and tried unsuccessfully to merge with Club Méditerranée.

In early 1987, the company underwent a large-scale reorganization in order to help it better cope with its diversification of products and its two decades of growth. The group was restructured according to product, so that each chain would have its own general management. Accor was still committed to decentralization and expected the management of each chain to act autonomously as directors of small- or medium-sized companies. Pelisson and Dubrule maintained a flexible, dynamic structure and were committed to remaining accessible. During this reorganization, the company’s business continually improved, with 1989 profits up 30 percent from 1988, on sales of $3.6 billion. Accor enjoyed yearly 12 percent earnings-per-share increases from 1983 to 1989. Steady growth allowed the company to sell equity, including a $340 million issue in January 1990.

Accor made a major move into the U.S. market when it purchased the Dallas-based budget hotel chain Motel 6 in 1990 for $1.3 billion. The deal made Accor the second largest hotel company in the world in terms of rooms, 157,000, and represented an attempt by Pelisson and Dubrule to build an American hotel empire to match their extremely successful operation in Europe, where 85 percent of their hotels were located. Accor paid a hefty price to enter the crowded U.S. market and took on an additional $1 billion debt from the seller Kohlberg Kravis Roberts & Co. However, Pelisson and Dubrule were committed to expanding in America, planning to implement the same cost-cutting measures which had worked so well for Formule 1, including credit card payment and limited maintenance staff. The company used a radio ad campaign and trans-Atlantic marketing to lure Europeans to Motel 6. While Accor agreed not to overhaul the management of Motel 6’s parent company, Motel 6 G.P. Inc., it did sell a 60 percent stake of Motel 6 to French institutional investors. In 1991, Accor bought 53 Regal Inns and Affordable Inns from RHC Holding Corp. in order to expand Motel 6 into the preeminent budget hotel company in the world. Motel 6’s success in the early 1990s was due in part to Accor’s financial backing and ability to pay cash, as well as its decision to purchase company-owned properties outright rather than franchising them.

In 1990, with Société Générate de Belgique, Accor bought a 26.7 percent stake in Wagons-Lits, a Belgian company that dominated the European railroad sleeping car business and was the second-largest hotel chain in continental Europe, owning about 300 hotels in Europe, Thailand, and Indonesia. In 1992, the European Community approved Accor’s nearly $1 billion bid for a 69.5 percent controlling interest in Wagons-Lits. At the end of the year, Accor became the world leader in its industry with 2,100 hotels, 6,000 restaurants, and 1,000 travel agencies.

With the privatization of industry in Hungary, Accor entered into a partnership in 1993 to buy 51 percent of the hotel company Pannonia from the Hungarian government. Pannonia owned medium-priced hotels in Hungary, Germany, and Austria and gained exclusive rights to develop under Accor in Bulgaria, Albania, Romania, Slovakia, Hungary, and the former Soviet Union and Yugoslavia, as well as to develop the Mercure chain in Austria. Accor also launched the Coralia label in 1993 to distinguish holiday hotels from business hotels. Around 30 Accor hotels in the Mediterranean and Indian Ocean regions added the Coralia label by 1994 and more were planned in the Caribbean, Central America, and Venezuela.

In the early 1990s, Accor subsidiary Atria was developing economic centers in cities and towns, composed of conference centers, offices, and hotels, particularly Novotels and Mercures, in conjunction with local chambers of commerce. The company also had investments in Thalassa International spas and luxury hotels and casinos in France. Accor began a hotel-rebranding strategy in June 1993 to eliminate the Pullman Hotels International chain, which it had acquired in 1991, while expanding its Sofitel International and Mercure brands. Through renovations, the company transformed 27 Pullman hotels into its four-star Sofitel hotels, while another 25 Pullman hotels became Mercure hotels.

Similarly, Accor continued to expand its restaurant business in the early 1990s, with L’Arche cafeterias, L’Écluse winebars, Boeuf Jardinier steakhouses, Cafe Route highway cafes, Actair airport restaurants, Terminal train station buffets, and Meda’s Grills in Spain. The company increased its partnership in France Quick and began building independent “villas” for Pizza del Arte. In 1994, Lenotre, the bakery and catering chain which Accor had developed in six countries, merged with Rosell, a chain specializing in organization, expansion, and management of catering services, for mutual advantages.

With Wagons-Lits, Accor continued its expansion in restaurants and sleeping compartments aboard trains. In the car-rental business, the company shared control of Europcar Interrent International with Volkswagen in 89 countries in Europe, Africa, and the Middle East. In March 1994, Accor merged with Carlson Companies, a leading travel company, to form a network of 4,000 agencies, in 125 countries, worth $10.8 billion. Such mergers and expansions in the mid-1990s were characteristic of Accor’s investment strategy, which it planned to continue throughout the 1990s, remaining committed to moving into new markets before the competition and enlarging its empire of hotels, restaurants, travel agencies, and vouchers, while retaining a decentralized and personal management style that extended all the way up to its two chairpersons, Dubrule and Pelisson.

Principal Subsidiaries:

Sofitel; Novotel; Mercure; Ibis; Hotelia; Parthénon (Brazil); Lenôtre (93.06%); Formule 1 (70%); Carlson Wagonlit Travel (50%); Europcar Interrent International (50%); Atria (50%); IBL (39.5%); Holpa (Luxemburg; 36.4%); Pare Astérix (14.92%).