As the effects of COVID-19 spread across the entire world, the primary focus for governments and businesses is the safety of their people. According to Deloitte, hospitality players, being the first ones that experienced extreme bad-weather conditions, are moving quickly and remain focused to understand and quantify the operational and financial impact for their business.
In an honest, heart-to-heart April announcement from Accor, the group has revealed that more than half Accor-branded hotels worldwide had closed, a number that was likely to increase. The abrupt deterioration in the situation, the Group said, had prompted it to take drastic action across its global operations.
Accor deemed these actions indispensable, in order to limit the impact on earnings and cash, and necessary to prepare for the post-crisis recovery: highlighting that “in these unprecedented times, the Group stands more than ever by its employees, partners and communities, providing time, resources and access to its local and global network.
Measures were implemented as early as February. Given the situation, the Group has decided to take aggressive, incremental actions. Collectively, these included a travel ban, hiring freeze, reduced schedules and/or furloughing for 75% of global head office teams for Q2, resulting in a minimum €60m reduction in G&A for 2020. Accor also reviewed the recurring investment plan for 2020, resulting in a €60m reduction in capital expenditures, also further streamlining all other costs (sales, marketing, IT), in line with lower system-wide revenues.
Most importantly, after consulting with the Group’s main shareholders, Accor decided to allocate 25% of the planned dividend (€70m) to the launch of the “ALL Heartist Fund”, a COVID-19 special-purpose vehicle. The fund will typically assist the Group’s 300,000 employees, pledging to pay for their COVID-19 hospital expenses, for those who do not have social security or medical insurance, as well as, on a case by case basis, furloughed employees suffering great financial distress and individual partners facing financial difficulty.
This fund reflects the ambition of the Group and its shareholders to provide a meaningful and significant contribution to global solidarity initiatives to address the current health crisis while planning for future needs, it announced, adding that the decision received unanimous support from the Board members, who collectively decided to reduce their attendance fees by 20% to the benefit of the “ALL Heartist Fund”. Additionally, Sébastien Bazin, chairman and CEO of Accor, would forgo 25% of his compensation during the crisis, with the cash equivalent to be contributed to the fund.
“Welcoming, protecting and taking care of others is at the very heart of what we do. In light of the urgency and scale of the situation, we have decided to act in an immediate and meaningful way, in the spirit of our values and commitments. Through this impactful gesture, we wish to express our solidarity and gratitude to all those demonstrating courage and selflessness during this crisis. On behalf of the Board, I would like to thank the Group’s main shareholders. Without them, the ‘ALL Heartist Fund’ would not have been possible,” said Bazin.
“I also want to pay special tribute to the Accor teams around the world. They are facing the current crisis with admirable courage, dedication and professionalism. As our industry is going through tough times, we have to make tough decisions, but Accor has a strong balance sheet which will enable it to withstand this crisis and emerge with strength during the recovery period. I’m confident that Accor will soon rediscover the road to growth,” he added.
Thanks to its recent asset-light transformation and cash preservation strategy, the group says, Accor can today rely on a strong balance sheet, with more than €2.5bn in cash on hand and an undrawn revolving credit facility of €1.2bn. While much uncertainty remains on the duration of this crisis, it expects a severe impact on its 2020 performance, but remains bullish on the long-term perspective of the hospitality industry, for Accor, its employees, its owners and shareholders.
In this exclusive interview, Mark Willis, CEO Middle East & Africa at Accor, discusses the group’s current strategy, future plans, and life amid – and after – the pandemic.
Please tell us a bit more about Accor as a group, and some of its most important values.
Accor is a world-leading augmented hospitality group offering unique and meaningful experiences in almost 4,800 hotels, resorts, and residences across 100 countries. With an unrivalled portfolio of brands from luxury to economy, Accor has been providing hospitality savoir-faire for more than 50 years.
Beyond accommodations, Accor enables new ways to live, work, and play with Food & Beverage, nightlife, wellbeing, and co-working brands. To drive business performance, the group’s portfolio of business accelerators amplify hospitality distribution, operations, and experience. Guests have access to one of the world’s most attractive hotel loyalty programmes—ALL (Accor Live Limitless).
Accor is deeply committed to sustainable value creation, and plays an active role in giving back to the planet and community. Planet 21 – Acting Here endeavours to act for positive hospitality, while Accor Solidarity, the endowment fund, empowers disadvantaged groups through professional training and access to employment.
What’s the Group’s presence like in the ME&A region; how many properties do you currently operate and what’s in the pipeline?
We currently have a total of 300 properties (65,216 rooms) operating in the Middle East and Africa region, with a breakdown of 156 properties in Africa (24,914 rooms) and 134 properties in the Middle East (38,489 rooms).
Our largest countries of operation are: the UAE, with 62 hotels and 17,284 rooms, Morocco, with 44 hotels and 6,673 rooms, Saudi Arabia with 39 hotels and 14,262 rooms, and Egypt with 34 hotels and 9,453 rooms.
Our pipeline for the next five years is very strong, with 160 properties scheduled in the entire region (39,645 rooms), which will bring our presence in the region to over 450 hotels and more than 100,000 rooms.
How has the global COVID-19 pandemic disrupted the flow of operations at Accor?
As the effects from COVID-19 are ongoing and not yet fully known, it’s impossible to provide an update on the overall business impact at this time. To date, the Group has enacted several cost-saving measures to help protect its financial well-being.
For example, all business travel, unless specifically approved by the Group’s COMEX, has been postponed or cancelled, internal conferences have been cancelled and video conferencing is being used for global meetings.
Moreover, a company-wide hiring freeze has been implemented and any vacant positions will not be filled, and Marketing expenses have been reduced, prioritised and/or postponed.
What was the group’s emergency response, and how did the decision-making process unfold from that point up until now?
A global crisis unit has been put into place with regional relays. All hotels in impacted countries have introduced added safety and security procedures in accordance with local health authorities and the Group’s existing operating protocols.
Cleaning measures and protocols have been strengthened and implemented in our hotels worldwide. Procurement departments have been consulted to ensure our hotels have the needed products such as hydro alcoholic gel, masks and personal protective equipment (PPE).
Employees who have travelled recently, for business or pleasure, are to inform their direct manager and will be asked to self-isolate if required.
Please tell us more about the ALL Heartist Fund, and what it means for Accor employees?
The most impactful measure Accor has implemented to assist during these unprecedented times is the launch of our ALL Heartist Fund, which is aimed at supporting our employees and partners directly.
A total of EUR 70M has been placed in this fund to be distributed among those team members and individual partners which have been directly financially affected by this crisis, as well as to cover healthcare costs for those employees who don’t have social security or medical insurance.
The “ALL Heartist Fund” complements some of the initiatives spearheaded by a number of hotels throughout the Middle East & Africa, including a collaboration with partner RISMA in Morocco resulting in over 500 rooms provided to frontline medical professionals.
Moreover, following a training by the government in sanitation processes, the Mövenpick Aswan team in Egypt assists in sanitising schools, nurseries, mosques, churches and more than 700 houses within their community. At the Sofitel Luxor Winter Palace, the team prepares and distributes meals daily to medical teams assisting quarantined patients. Lastly, reinforcing proper hygiene and sanitation during this time, bars of soaps and recycled soaps are widely distributed by Pullman Dakar and Mövenpick Nairobi to various community groups.
What further announcements can we expect from Accor in the coming months (with what we know up until now about COVID-19)?
Our priority remains to support our existing partners in order to assist them to continue to operate our current portfolio, working with our teams on our pipeline openings, as well as looking for new opportunities to expand our portfolio in the region.
Emphasis will, of course, be placed on our commercial activities and business development, based on the new requirements the market shows, as we maintain our focus on our team’s and guests safety.
What would you advise in face of such challenges?
I’m a firm believer in balancing work life with personal life; I think times like these really highlight how important that balance is. My main advice is to take it day by day, with the situation changing so rapidly and news developing at such a fast pace, it’s important that we take care of ourselves and our families first, business will come after.
The team around me are working tirelessly to ensure our employees and guests are safe and taken care of. At the same time, we’re all working towards the common goal of opening all our properties as soon as possible in order to be able to welcome our guests back as quickly as we can in a safe manner.
Our focus at the moment also remains in looking at the different ways in which we believe our industry will change once business levels come back and how we will ensure to match such business requirements whether with operational and/or commercial changes.
How do you see the future, and how quickly do you expect the industry to recover?
We’re all hoping for a quick recovery, however, we need to make sure that it’s done in a responsible way in order to ensure the safety of our guests and team members.
Our main focus is working on new ways in which to service our guests to fulfil their new travel requirements “post” COVID-19. We’re very aware that we will need to be even more forthcoming with communicating all the activities we’re undertaking in our properties in regards to cleanliness and new ways of operating so our guests are fully aware of all programmes, to give them peace of mind when booking their next trip.
What has the pandemic taught the industry globally, and regionally?
I believe we’re still learning on a daily basis as it’s an ongoing situation. However, from a Regional Office perspective, I believe a key learning point has been that working from home can reduce travel requirements, as we have seen that moving meetings and calls online has enabled us to continue conducting business “as normal”. This will definitely impact travel budgets and reduce costs in the long run.
In regards to travellers choosing to travel for pleasure, I do see it taking some time until the concept “normalises” again, but once a working vaccine is developed and tested, I believe people will want to return to some sense of normality and therefore will start to travel again.
How do you see the hospitality and F&B landscapes evolving over the coming months, and years?
The industry will need to mould itself based on the new requirements of our guests. These will definitely revolve around cleanliness and “contactless” services that can give them peace of mind when dining out, travelling and staying in hotels.
We do anticipate an uplift in F&B revenues once quarantine restrictions are lifted, as customers will want to go out again for a meal, but we do foresee a lower spend per person due to possibly having less expendable budget.
We can also assume that our restaurants, bars and also meeting venues may generate less revenue per SQM due to new distancing rules which will decrease the number of seat capacity in venues, as well as a reduction in meeting room capacities.