Accor

Accor Group in Travel and Tourism – World February 2011 Scope of the Report Travel and Tourism: Accor Group © Euromonitor International Scope • This global company briefing forms part of the wider travel and tourism research that covers the following categories: TRAVEL AND TOURISM Tourism flows and spending Travel accommodation Transportation Car rental Travel retail Tourist attractions Health and wellness tourism

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Disclaimer Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies’ opinions, reader discretion is advised Learn More To find out more about Euromonitor International’s complete range of business intelligence on industries, countries and consumers please visit www. uromonitor. com or contact your local Euromonitor International office: London +44 (0)20 7251 8024 Dubai +971 4 372 4363 Chicago +1 312 922 1115 Cape Town +27 21 552 0037 Singapore +65 6429 0590 Santiago +56 2 915 7200 Shanghai +86 21 6372 6288 Sydney +61 2 9275 8869 Vilnius +370 5 243 1577 Tokyo +81 3-5403-4790 2 Travel and Tourism: Accor Group © Euromonitor International Strategic Evaluation Competitive Positioning Category and Geographic Opportunities Brand Strategy Operations Recommendations 3 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International

Key company facts Accor Group Headquarters: Regional Involvement: Strong portfolio • Accor Group is a major global group in hotels, providing France Global Category Involvement: World hotel value share (2010): World hotel value growth (2010): Hotels, travel retail services for leisure and business travellers. • The French company is one of the leading hotel chains in Europe. Accor has a diverse portfolio of brands from luxury to budget. Main brands are – Sofitel, Pullman, MGallery, Novotel, Mercure, Suitehotel, Ibis, All Seasons, Etap Hotel, Formule 1, hotelF1 and Motel 6.

As at June 2010, Accor had over 4,100 hotels in 90 countries, with nearly 500,000 rooms. Western Europe, the world’s largest region for hotels, is its core region. 2. 9% 3. 8% Aspirations to become a leader in Europe • The demerger of its vouchers business in 2010 strengthened the company? s focus on the hospitality sector. • Accor is emphasising the asset-light operating structures within its luxury and mid-scale hotels. The company expects 450 hotel assets to be restructured between 2010 and 2013 and achieve 40,000 annual new room openings. Accor aims to record EUR1. billion cash proceeds from the restructuring of the properties through which it plans to adjust its current debt. Accor also introduced an annual EUR200 million investment plan to support selective regional developments. Interest in emerging markets • Aggressive development plans were launched by Accor in Brazil, China, India and UK throughout 2010. 4 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International Brand portfolio • Over the years, Accor has managed to develop distinctive brands, which are differentiated from each other and from those of its competitors.

The company is present in 90 countries around the world. Main brands are – Sofitel, Pullman, MGallery, Novotel, Adagio, Mercure, Suitehotel, Ibis, All Seasons, Etap Hotel, Formule 1, hotelF1 and Motel 6. • Accor has a department which is entirely dedicated to making its brands more easily identifiable and increasing their visibility. It does so by improving customer knowledge and strengthening loyalty programmes. • Mid-range and budget accommodation offer attractive options for the company, as it targets leisure tourism from different destinations.

The changing marketplace from 5-star dominated demand to a wider market creates scope for mid-range hotels. Accor Group Brand Portfolio 2010 Price platform Luxury Brand Sofitel Upscale Mid-scale Economy Budget Pullman, MGallery Mercure, Novotel, Suithotel, Adagio All Seasons, Ibis Etap, Formule 1, hotelF1, Motel 6, Studio 6 5 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International Financial assessment • The results for year ended 31 December 2010 for Accor showed signs of a recovery with hotel revenues registering EUR5,693 million, up 10% from the same period the year before.

Major factors affecting these results were the expansion development projects which boosted revenues by EUR75 million, the strategy of asset-light approach of the hotel operator which decreased corporate debt significantly and its focus on the budget and mid-priced customer base. • The upscale and mid-scale segments were major performance winners for Accor, contributing to the financial improvement particularly in European markets such as France, Germany and the UK. In those destinations, occupancy rates increased, which also led to improved average room rates. The French market performed particularly strong, due to an increase in inbound tourism flows and business travel to the country. Hotel value sales are expected to remain dynamic over the forecast period, growing at a CAGR of 3. 6% over 2010-2015 as both business and leisure travel recover from the crisis. • The cost-saving plan introduced in 2009 and the strong growth in economy hotels outside the US further contributed to these operational results. Accor Group Key Financial Indicators 2009/2010 EUR million Revenue Operating margin (%) Net margin (%) 2009 5,490 2. 1 -2. 25 2010 5,948 -2. 48 -5. 37 Source: Company reports Note: Revenue consolidated and restated to account for demerger and disposals “Our common goal will be to increase the value and visibility of our brands, speed our development, and continue to diversify our operating structures through franchising and management contracts. ” Denis Hennequin, Chairman and CEO 6 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International RevPar performance for upscale and mid-scale brands Accor Group Hotels Performance

Upscale and mid-scale hotels (local currency) France Germany Netherlands Belgium Spain Italy UK Source: Company reports Notes: Includes VAT, as at 31 December 2010 RevPAR subsidiaries 75 58 64 74 45 60 71 Occupancy (%) subsidiaries 64. 5 64. 9 67. 2 73. 1 57. 8 60. 9 77. 4 ADR subsidiaries 116 89 95 102 79 99 92 7 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International RevPar performance for economy brands Accor Hotels Performance Economy hotels (local currency) France Germany Netherlands Belgium Spain Italy UK RevPAR subsidiaries 38 40 56 50 29 42 39 Occupancy (%) subsidiaries 69. 68. 5 73. 2 72. 6 54. 6 65. 0 72. 3 ADR subsidiaries 54 58 77 69 53 65 54 US Source: Company reports Notes: Includes VAT, as at 31 December 2010 25 61. 1 42 8 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International SWOT – Accor Group Balanced hotel portfolio • Accor features a diverse Pipeline projects • Strong pipeline Big exposure in the US and Europe • Mature markets with Business travel demand • Reliance on business brand portfolio operating in different market segments. This provides competitive advantage to attract a wide customer base and diversify its offerings. evelopment strategy, which capitalises on growth opportunities in Asia Pacific and Middle East, contributing to Accor? s high-profile presence in emerging regions. overleveraged financial systems will see slower growth than emerging markets, which were relatively untouched by the economic crisis. Accor? s exposure in the US and Europe makes it more vulnerable to economic turbulences. travellers can negatively impact Accor. If consumers remain cautious and businesses continue to curtail travel this could have a negative impact on the company? s performance. Strengths Weaknesses Opportunities Threats

Asia Pacific • With 70 new development Largest franchisor • Focusing solely on Credit availability • New build hotels are Oil price fluctuations • Rising oil prices will put contracts in Asia Pacific in 2010, adding 16,000 hotel rooms to its portfolio, Accor has strong competitive advantage to continue growing in the region. tourism following the demerger of its voucher business, there are opportunities for Accor to become Europe’s largest franchisor through further expansion. expected to struggle in the short term, mainly due to the strong dependence on credit availability and an investor? willingness to enter into credit agreements. upward pressure on global inflation, which in turn could damage the speed of the economic recovery – especially consumer spending. This can impact the demand for Accor? s hotel offerings. 9 Strategic Evaluation Travel and Tourism: Accor Group © Euromonitor International Key strategic objectives and challenges • The strategy adopted by Accor, which embraces a focus of a stand-alone hotel business, brings major challenges • • • • which can be currency risk in markets where the company is highly exposed.

Latin America is a case in point, where currently, Accor generates more than 40% of its operating profit. Hotels expansion has remained slow due to high real estate prices. Hence, franchising became the main way for chained hotels to develop quickly and with reduced investments. Accor is following its development plan through franchises, with a strong focus on the budget market. It aims to become a leading hotel group by number of rooms and Europe’s largest franchisor. Occupancy rates have been the major concern for hotels in 2010. They have used different strategies to maintain the occupancy rate at the highest possible level.

One of the measures adopted, was the lowering of price per room. Accor has invested heavily in economy travel accommodation. In Russia, Accor has experienced difficulties in developing its brand, due to a difficult operating environment; thus, the destination remains a challenge for the company. Corruption and excessive bureaucracy deter many foreign investors from operating in the country. Improved 2010 • Strong pipeline development. • Investment in economy brands. • Room for growth, key area for chain Double dip? • Rising fuel prices impacting industry. • Reliant on business recovery to maintain xpansion. • Social media boosting customer contact, loyalty and feedback. premium travel and higher revenuegenerating sales. 10 Travel and Tourism: Accor Group © Euromonitor International Strategic Evaluation Competitive Positioning Category and Geographic Opportunities Brand Strategy Operations Recommendations 11 Competitive Positioning Travel and Tourism: Accor Group © Euromonitor International Global competitive performance Recovery in Europe • With the economies of France, Germany and Britain gradually improving in 2010 and business travel and luxury emand increasing, the performance of Accor? s upscale and mid-scale hotel revenues stabilised as well. • This has led to Accor outperforming the global hotels industry in 2010. Low-cost brands • The economic slowdown did not impact the performance of economy brands Ibis and Formule 1 mainly because of their accessible prices. Budget hotels benefited from the economic downturn, as consumers traded down and avoided luxury hotels. Pure hospitality focus • Accor streamlined its business activity to a stand-alone hotel business in 2010 in pursuit of a steady growth strategy.

Demerger and divestment of assets helped the French operator to minimise its debt and generate cash reserves to withstand the impact of the economic crisis. Accor Value Sales Performance vs Global Hotels Industry 2006-2010 20 % y-o-y value growth 15 10 5 0 -5 -10 -15 2006 8. 2 10. 9 2007 12. 2 13. 1 2008 5. 3 13. 9 2009 -10. 7 -10. 9 2010 3. 5 3. 8 12 Global Hotel Industry Accor Competitive Positioning Travel and Tourism: Accor Group © Euromonitor International Global ranking Hotels Top 10 Global Companies by Value 2006-2010 5-year share trend ? ? ? ? ? % share 2010 5. 0 4. 0 3. 7 2. 9 2. 5 1. 9 2006 2007 Strong brand portfolio • The deteriorating economic Company name Marriott International Inc Hilton Worldwide InterContinental Hotels Group Plc Accor Group Starwood Hotels & Resorts Worldwide Inc Wyndham Worldwide Corp Choice Hotels International Inc Best Western International Inc Hyatt Hotels Corp Carlson Cos Inc 1 3 4 5 6 1 3 4 5 6 1 3 4 5 6 1 2 3 4 5 6 1 2 3 4 5 6 environment and escalating operational costs were the main factors influencing the introduction by Accor of a “asset light” strategy in 2010.

With the majority of its brands positioned as budget and mid-scale, the company has managed to minimise the impact of the downturn. • Strong occupancy rates and brand awareness particularly in Europe along with increasing demand helped maintain Accor? s good performance. 2008 2009 2010 Global pipeline • Accor? s expansion in 2010 has ? ? ? ? 8 7 10 7 8 10 7 8 10 7 8 9 10 7 8 9 10 1. 5 1. 5 0. 8 0. 7 boosted sales growth. Aggressive pipeline development particularly in Brazil, China, India is expected to increase Accor? s market positions in those destinations. For the year ended 31 December 2010, Accor opened 214 hotels and 24,800 rooms, through management and franchise contracts. Russia/CIS and Morocco are considered important emerging markets targeted by Accor. 13 Competitive Positioning Travel and Tourism: Accor Group © Euromonitor International Regional performance • Western Europe remained a core market for Accor in 2010, where it generates the bulk of its hotel revenues. Nevertheless, strong value growth is likely to derive mainly from Asia Pacific and Latin America, as Accor increases its hotel penetration in these regions. Increasing consumer spending, an emerging middle class and investment will drive the economy of Latin America. Brazil is the rising star, as its economy proved resilient to the global economic recession thanks to great financial flexibility and improvements in commodity prices, which left travel and tourism unscathed. Accor Group Hotels Presence and Growth Prospects by Region 2010-2015 16 14 % CAGR 2010-2015 12 10 8 6 4 2 0 -20,000 0 North America Asia Pacific Middle East and Africa Latin America Eastern Europe Western Europe Australasia 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000

Regional Market size US$ million 2010 Bubble size shows company share of region in 2010 14 Competitive Positioning Travel and Tourism: Accor Group © Euromonitor International Upscale and mid-scale hotel global footprint Accor Hotel Rooms 2010 Upscale and mid-scale hotels France Germany Netherlands Belgium Spain Italy UK TOTAL Source: Company website Note: As of December 2010 Number of rooms 27,898 19,078 3,528 1,802 2,649 3,988 5,541 64,484 % share of rooms 43. 3 29. 6 5. 5 2. 8 4. 1 6. 2 8. 6 100. 0 15 Competitive Positioning Travel and Tourism: Accor Group © Euromonitor International Economy hotel global footprint

Accor Hotel Rooms 2010 Economy brands France Germany Netherlands Belgium Spain Italy UK US TOTAL Source: Company website Note: As of December 2010 Number of Rooms 39,934 15,160 2,414 2,639 4,898 1,552 9,013 73,403 149,013 % share of rooms 26. 8 10. 2 1. 6 1. 8 3. 3 1. 0 6. 0 49. 3 100. 0 16 Competitive Positioning Travel and Tourism: Accor Group © Euromonitor International Hotel openings in 2010 Europe North America 56 hotels 42 hotels Middle East and Africa Asia Pacific Latin America 7 hotels 27 hotels 10 hotels Source: Company website Note: January- November 2010 17 Travel and Tourism: Accor Group Euromonitor International Strategic Evaluation Competitive Positioning Category and Geographic Opportunities Brand Strategy Operations Recommendations 18 Category and Geographic Opportunities Travel and Tourism: Accor Group © Euromonitor International Asia Pacific – a priority China and India • Accor added 25 new contracts in the luxury to mid-scale segments in China during 2010 under some of its brands – Sofitel, Pullman, Novotel and Mercure, in cities such as Guiyang, Changsha, Zhuhai and Huizhou. • The company? s presence in the country is quite strong, with 100 hotels and 26,500 rooms in 42 cities.

Its portfolio of brands comprises 23 luxury hotels, 15 upscale hotels, 18 mid-scale hotels and 44 economy hotels. • Accor, however, is keen to enhance its presence in China and in particular second- and third-tier cities. India • In India, the French company is planning to invest US$130 million to reach 50 hotels by 2012. Three major brands are operating in the country under the umbrella of Accor – Novotel, Ibis and Mercure. • Early in 2010, the company outlined its aim to launch 90 hotels by 2015 in India. By December 2010, already 60 hotels were under contract to be built.

The company intends to introduce other brands in the market, such as Sofitel, Pullman and Formule 1, by 2011. • India was relatively untouched by the economic crisis. Being a large, dynamic economy with an expanding middle class and rising income levels, the country continues to represent huge opportunities for businesses, which Accor aims to take advantage of. Other Asia Pacific • Major hotel chain, Accor, is expected to open eight new hotels across Indonesia before the end of 2012. The new hotels will be opened in Padang, Surabaya, Manado, Balikpapan, Kuta, Denpasar, Jakarta and Bangka. • This major expansion will be expected to ncrease its value share and surpass some of its main rivals in the hospitality industry. • The company also announced that it will develop 12 more hotels, with 2,000 rooms, in Vietnam, by 2013. 19 Category and Geographic Opportunities Travel and Tourism: Accor Group © Euromonitor International Middle East – ripe for opportunity • Accor plans to open five Ibis hotels across the Middle East, to reach 54 hotels with 12,497 rooms by 2014. The company has nine hotels opened in the region already. Currently, four hotels are expected to be opened by 2012, and Ibis Aleppo Taj Halab in Syria is to be launched in 2014.

Other pipeline projects include Bahrain (2 hotels) and Saudi Arabia (2 hotels) and Syria (3 hotels) creating 1,500 new jobs. Expansion through local franchise partnerships are planned in Jeddah, Damman and Makkah. • Saudi Arabia is of great interest to the company, as it is a market which helps Accor to diversify away from the United Arab Emirates. Another key trend, which is significant for attracting hotel chains such as Accor, is the fast growing business environment in the Kingdom fuelled by the new economic cities to be built.

This was stimulated by the thriving banking sector with an increasing number of investment banks opening in the Kingdom and servicing high net worth individuals and corporations in the region. This means that there will be more demand for corporate outlets. • In Saudi Arabia, Accor operates nine hotels and has long-term plans to add 15 new properties over the next five years. In 2010, the French company opened Sofitel Al Khobar The Corniche, Mercure Al Khobar and Novotel Damman Business Park. • One of the major challenges faced by Accor in Saudi Arabia is the stringent visa regulations.

Saudisation became compulsory for all major companies in the country, whereby these are compelled to have a large proportion of Saudi employees. The domination of expatriate workers in the workplace became an issue and hence since 2006, companies have been employing more Saudis who often require more training. 20 Category and Geographic Opportunities Travel and Tourism: Accor Group © Euromonitor International UK and Latin America The UK shows promise • In the UK, Accor introduced an aggressive expansion strategy to increase its network to 300 hotels by 2015. The

UK, and London in particular, are of great interest to the company, also due to the Olympic Games in 2012, which is likely to strengthen the UK? s hotels industry. London continues to be one of the most desirable cities for hotel development and is key for hotel operators looking to expand their networks internationally. Ibis in Latin America • Accor? s economy brand, Ibis, is boosting its expansion in new countries in Latin America. In 2010, eight new properties were opened in the region in particular Colombia (Bogota and Santiago), Chile (Antofagasta) and Paraguay (Asuncion). The brand? major goal is to tap into all the capitals in this part of the world, as well as major cities, which are experiencing business growth. By the end of 2011, Ibis is expected to have another 10 properties in Brazil (Curitiba, Santos, Sao Luis, Belo Horizonte and Recife), one hotel in Chile (Concepcion) and one property in Peru (Lima). By 2015, 57 Ibis hotels will be opened, with 51 in Brazil, 4 in Chile, 1 in Colombia and 1 in Peru. 21 Category and Geographic Opportunities Travel and Tourism: Accor Group © Euromonitor International New category focus Sustainable development and sustainable tourism The rising demand for authentic experiences, as well as greener lifestyle are expected to create opportunities for sustainable and eco-tourism. Accor is renowned for its sustainable initiatives such as the Green Key Eco-Rating programme. • Initially launched as a pilot scheme in 20 locations in the US, the Green Key Eco-Rating Program (Green Key) will be rolled out to all Motel 6 and Studio 6 properties. It is expected that by the end of 2011, these two brands will be certified. Green Key programme certifies and inspect hotels and resorts based on their commitment to sustainable “green” practices. Much attention is expected in sustainable tourism in the coming years. Hotels, which are able to maintain operational costs (energy, water and waste) at a lower level and enhance services through the offer of healthier environments and more comfort to tourists, are likely to strengthen their competitive advantage in the short term. 22 Travel and Tourism: Accor Group © Euromonitor International Strategic Evaluation Competitive Positioning Category and Geographic Opportunities Brand Strategy Operations Recommendations 23 Brand Strategy Travel and Tourism: Accor Group Euromonitor International Brand strategy at a glance (1) Brand Global Strategy Luxury brand with 116 hotels (as of 06/30/2010) which works with designers (Jean Nouvel, Sybille de Margerie, Jean-Paul Viguier, Jacques Grange) to achieve a high level of luxury. Action By 2012, Sofitel will launch hotels in Vienna, Mauritius and a second establishment in Amsterdam. Impact 2009 Impact 2010 Sofitel Pullman Upscale brand, mainly targeted at business travellers. By the end of 2010, 60 hotels were in Europe, Africa, Middle East, Asia Pacific and Latin America. MGallery

Upscale hotel brand characterised with distinctive settings reflecting the individualism of 40 new properties will be added to the company? s the particular destination. portfolio by the end of 2011. Brand repositioned at the top of the mid-scale segment. Mainly located in major international cities and tourist destinations, targeting business and leisure travellers. Mercure brand features contemporary style at low prices appealing to both leisure and business travellers. In 2010, the brand launched novotelstore. com responding to demand from customers for products specific to the Novotel brand.

Franchise agreement with Focus Hotels, adding 10 hotels to its UK network in Q1 2011. 24 Novotel Mercure Brand Strategy Travel and Tourism: Accor Group © Euromonitor International Brand strategy at a glance (2) Brand Adagio City Aparthotel Global Strategy Action Launch of the first Adagio City Aparthotel in Abu Dhabi in late 2011 or early 2012; 80 Aparthotels (opened and planned) in Europe by 2013. In 2011, new openings are expected in Luxemburg, Austria and the Netherlands. Expansion plans for the brand to reach 1,500 hotels globally by 2015. Strong pipeline projects for Asia Pacific and Latin America.

Impact 2009 Impact 2010 Apartment hotels mainly located in Europe and targeted at business and leisure travellers. All Seasons Non-standardised brand located in city centres and major business areas for business travellers. Ibis Economy brand targeting both leisure and business travellers, which seek value for money, even among those with the highest income levels. Awarded “Best Economic Hotel Brand” in China. Etap Hotel /Formule 1 In 2010, 22 new Budget travel accommodation in large metropolitan areas. Outside Europe, the brand is establishments were opened in Western Europe. known as Formule 1. otelF1 Low-cost hotel brand featuring modern interior design and a strong focus on sustainable development. Its primary brand location is in France, with 261 hotels in the country. 25 Brand Strategy Travel and Tourism: Accor Group © Euromonitor International Brand strategy at a glance (3) Brand Global Strategy Action Impact 2009 Impact 2010 Motel 6 Low-cost travel accommodation brand, with 1,090 locations mainly in the US and Canada. The brand opened 55 hotels in 2010. Studio 6 Low-cost extended stay brand mainly located in the US and Canada. The brand opened three hotels in 2010. 6 Brand Strategy Travel and Tourism: Accor Group © Euromonitor International The new Suite Novotel by Accor • Accor re-branded its Suitehotel brand as Suite Novotel on 1 July 2010. The new • • • • brand aims to capitalise on the brand power of Novotel for international expansion. With 26 hotels located mainly in Europe, Accor intends to grow the new Suite Novotel brand internationally and further enhance its competitive positioning in the “all suite” segment in Europe. The re-branding gives Novotel a suite version, and helps it boost its presence in the centre of major cities.

The new Accor brand offers suites of 30 sq m, and innovative services in catering, relaxation and multimedia. It is an upper-mid-priced brand targeted at business travellers or families on city holidays. Following its debut in Luxembourg and five other countries, where Suitehotels were already present – France, Germany, Austria, Morocco and Dubai – new Suite Novotels opened in Malaga, Spain, in 2010. It is expected that Paris-Issyles-Moulineaux, France, will be opened by early 2011. Suite Novotel With its upper-mid-priced positioning, Suite Novotel targets business and leisure travellers with its all-suite concept.

Novotel Brand repositioned at the top of the mid-priced segment. Mainly located in major international cities and tourist destinations, it targets business and leisure travellers by offering a home-like experience. 27 Brand Strategy Travel and Tourism: Accor Group © Euromonitor International Ibis targets young travellers • Amidst the slowdown in business travel seen during the economic downturn, hotels revamped business strategies to compensate for the weak demand. In some instances, this resulted in the emergence of new hotel layouts and a more focused brand positioning. The Ibis brand from Accor, for example, introduced a brand new advertising campaign in July 2010 that moves away from the traditional sales focus on pricing and service. Instead, it focuses on a “rock „n? roll” image, repositioning the economy brand for the young summer leisure market in Europe. This strategic move, makes Ibis more appealing to young tourists. • The campaign? s main protagonist is the rock band, TENor15, which is influenced by Queen, the Village People and AC/DC. A 140-second video is to appear on YouTube, Facebook and MySpace Europe-wide. It features the hotel? various services, using a “day in the life of a rock band on the road” theme. • To attract younger guests, Ibis is also investing in high-tech services, offering free nights and supplementary services like the Web Corner. Planned to be installed in all Ibis hotels by 2011, Web Corner is a form of budget business centre, called “Self Service Business Centres” that augment the existing wi-fi with a 24-hour dedicated area offering net surfing, a webcam, Skype, e-mails, chat and sending Ibis e-cards. 28 Brand Strategy Travel and Tourism: Accor Group © Euromonitor International Social media TripAdvisor and Accor Accor has included the TripAdvisor link on the websites covering its 4,000 hotels, which aims to increase the transparency about its hotels and urge customers to provide their feedback on a hotel? s prices, services and facilities. TripAdvisor branded sites make up one of the most popular online travel communities, with more than 25 million unique monthly visitors. Customer feedback is seen as a tool which can boost guest service and generate first-hand insight to the service provided. Engaging with the customer • The French Group has launched a microsite called Snorchestra (www. snorchestra. co. k) in the UK where customers can upload clips of snorers or create “snorchestra”– snore sounds mixed with music. The concept introduced in one of Accor? s hotel brands, Etap, seeks to showcase that the hotel rooms provide a comfortable night? s sleep by having thicker insulation. The initiative is seen as a fun way to engage with customers using social media, but equally to raise the profile of the brand in an increasingly competitive environment. Accor uses social media as a promotional tool • In June 2010, Accor aimed to generate brand awareness in North America through an online game called “Around he World Photo Hunt”, where players had to spot the differences between two nearly identical photos from a selection of Accor properties worldwide. In 2010, Accor has put strong emphasis on technological tools by improving the accorhotels. com website in order to better answer clients’ demands. • Besides promoting the breadth and diversity of its hotel brands around the world for an entire month, Accor encouraged participants to share scores on Facebook and Twitter, and challenge friends to try to beat their score. The grand prize is a 12-night European holiday for two adults to Paris, Berlin and Barcelona. In order to adapt to technological innovation and to better respond to clients? online expectations, Accor has implemented online tools such as iPhone and iPad apps. • In 2010, Accor introduced a new version of the iPhone application, which delivers a better and more improved search function for booking its hotel rooms. Rates are provided in real time, facilitating the client? s choice depending on location and budget. The application is available in several languages, such as Portuguese, French, English, German, Spanish and Italian. 29 Travel and Tourism: Accor Group © Euromonitor International

Strategic Evaluation Competitive Positioning Category and Geographic Opportunities Brand Strategy Operations Recommendations 30 Operations Travel and Tourism: Accor Group © Euromonitor International Hotel-focused business Demergers and divestments • In June 2010, shareholders approved the Major Operational Changes at Accor in 2010 • • • • demerger of Accor? s two core businesses – Hotels and Prepaid Services. The decision creates two separately listed companies. As the Hotels and Prepaid Services businesses developed distinct business models, the idea of a potential demerger offered great opportunities for individual growth.

It is expected to speed up future growth within hotels through a more focused direction, management performance and optimised allocation of financial resources. As Accor prepares to turn into a major franchisor and hotel operator, it plans to sell 450 hotels or the equivalent of 25% of its properties in the next four years. Accor also sold its investment in Compagndes Wagons-Lits trains to Newrest in order to become a pure hospitality ie industry player. The French company aims also to sell a 49% stake in casino group Lucien Barriere to the financial holding company Fimalac, for EUR343 million. July 2010 • Stock market listing of Edenred following the demerger of the Services business. 7 July 2010 • Partial divestment of Compagnie des Wagons-Lits trains • Launch of Ariane 2015 corporate project. • Ongoing cost-reduction plan aiming to save EUR45 million in 2010. 21 July 2010 • Creation of new hotel investment fund in India. • Sale of 48 hotels in France, Belgium and Germany for EUR367 million. Source: Company reports 31 Operations Travel and Tourism: Accor Group © Euromonitor International New strategic approach Accor has the strategic ambition to become the leading operator in franchised hotels in Europe and one of the top three in franchised hotels worldwide by 2015. Its main competitive advantage is its offer of a wide variety of travel accommodation options to consumers. • In order to do so, Accor has continued to implement its “asset light” strategies in 2010. Aiming to reduce debt, Accor sold 48 hotels in Europe in 2010, representing EUR367 million. 31 of these hotels were sold in France, 10 in Belgium and 7 in Germany, operating under the Etap, Ibis, Novotel and Suite Novotel brands. Accor is following a development plan, with an objective of 35,000-40,000 new rooms per year. This plan will target openings in the economic and very economic market segment (50%) and in Europe (30%). • Corporate sources reveal also that 85% of the company? s new openings are done under renting contracts or franchises. Accor Asset-light Model of Operation Sofitel Pullman Novotel, Mercure Ibis, Etap, hotelF1, Formule 1 Management Management, franchise Variable leases, management, franchise, joint venture Selective investment All Seasons, Motel 6 Source: Company website Variable leases, franchise, management 2 Travel and Tourism: Accor Group © Euromonitor International Strategic Evaluation Competitive Positioning Category and Geographic Opportunities Brand Strategy Operations Recommendations 33 Recommendations Travel and Tourism: Accor Group © Euromonitor International More risk possible Risk of the mature markets • Given Accor? s objective to become a leading European More high-tech applications • More hotels utilise high-tech applications to capitalise on franchise player, it is pivotal for the company to continue diversifying its brand positioning, but also continuing its brand revitalisation. Although 2010 saw a slow recovery in the hotels industry, the threat of a double-dip recession is a risk to the future performance of Accor and increases its vulnerability to an unstable economic environment. the growing number of travellers staying connected while travelling, thus achieving greater operational efficiency. • Accor must continue to innovate in order to attract a diverse client base. • Capitalising on the power of social media to get guests to learn more about different brands, can enhance brand exposure and build brand loyalty.

Accor must increase investment in new distribution platforms such as mobile and social media. New luxury destinations? • The demand for luxury worldwide has created a new niche for non-traditional luxury hotels such as Pullman which furthered its development in Latin America in 2009-2010. • The fact that Latin America is repositioning itself as a luxury destination presents enormous opportunities for growth not only for Pullman but for Accor? s other brands. 34 Report Definitions Travel and Tourism: Accor Group © Euromonitor International Definitions Hotels Hotel outlets that provide lodging include independent and chained operators as well as all company-owned, leased, managed and franchised outlets. Aparthotels are included. Residences or serviced apartments are the same as aparthotels with the rental of apartments offering the service of a hotel. The word “residence” is not used with this meaning in English-speaking countries. Hotels include French pensions, Spanish hostals and Italian pensione. Extended stay hotels are included. Villas attached to hotel resorts are also included in the hotels category. Occupancy rates This expresses the relationship between available capacity and the extent to which it is used. It may refer to either the use of rooms or of beds. Occupancy rates are based on the number of nights of both domestic and international tourists. Average Daily Room Rate (ADR) • ADR refers to the average daily room rate that a hotel charges a consumer for staying in a hotel room per day. ADR is part of the calculation along with % occupancy to generate revPAR (revenue per available room). ADR is based on the actual rate offered to the consumer taking into account discounts, not the rack rate advertised by the hotel.

RevPAR • This signifies revenue per available room. It is calculated by occupancy multiplied by the average daily room rate per company. RevPAR is based on rooms available for use by domestic and international visitors. Euromonitor International measures system-wide revPAR i. e. for company-owned, company-operated, licensed and franchised outlets. Smith Travel Research’s definition of market price segments: • Luxury – top 15% average room rates • Upscale – next 15% average room rates • Mid-Price – middle 30% average room rates • Economy – next 20% average room rates • Budget – lowest 20% average room rates 5 Travel and Tourism: Accor Group © Euromonitor International Experience more… This research from Euromonitor International is part of a global strategic intelligence system which offers a complete picture of the commercial environment . Also available from Euromonitor International: Global Briefings The state of the market globally and regionally, emerging trends and pressing industry issues: timely, relevant insight published every month. Global Company Profiles

The competitive positioning and strategic direction of the leading companies including uniquely sector-specific sales and share data. Country Market Insight Reports The key drivers influencing the industry in each country; comprehensive coverage of supply-side and demand trends and how they shape the future outlook. Interactive Statistical Database Market sizes, market shares, distribution channels and forecasts; the complete market analysed at levels of category detail beyond any other source.

Strategy Briefings Executive debate on the global trends changing the consumer markets of the future. Learn More To find out more about Euromonitor International’s complete range of business intelligence on industries, countries and consumers please visit www. euromonitor. com or contact your local Euromonitor International office: London + 44 (0)20 7251 8024 Chicago +1 312 922 1115 Singapore +65 6429 0590 Shanghai +86 21 63726288 Vilnius +370 5 243 1577 Cape Town + 27 21 552 0037 Dubai +971 4 372 4363 36

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