Accor Group of Hotels:

Analysis of Operating Environment

And CSR Initiatives

Contents

Introduction. 3

Analysis of Accor’s Operating Environment 4

Industry Analysis using Porter’s five forces. 4

Opportunities and Challenges. 4

Implications on Accor’s Operations. 5

Accor’s CSR Initiatives. 6

Environmental Footprint Assessment 6

Plant for the Planet Initiative. 6

Planet 21 Initiative. 6

Conclusion. 8

Recommendations. 8

References. 9

Introduction

The report “Accor Group of Hotels: Analysis of Operating Environment and CSR Initiatives” aims at understanding the current trends, opportunities and challenges in the hospitality industry of Australia where Accor Group of Hotels operates and also looking at some of the CSR initiatives taken up by the company for sustainable development in harmony with nature and society.

Tourism and Hospitality industry is a rapidly growing industry in Australia. New Zealand, Asian countries followed by European countries form the major chunk of consumers of this industry. Australia is home to world-class hotels, resorts and casinos. Some of the major hotel chains operating in Australia include Toga Group, Metro Hotels and Accor Group of Hotels. Accor Group operates through its various kinds of hotels ranging from luxurious to budget types. Some of the major brands of Accor Group are Sofitel, Mercure, All Seasons, Novotel, and Ibis (Accor Hotels Company Website). A European company in its origin, Accor is present in 90 countries with more than 4400 hotels (Accor Hotels Company Website). Accor entered Australia in 1991 and set up its first Novotel hotel in Sydney. Apart from the core hotel business, Accor has alliances with a range of tourist companies like Blue Line cruises, Accor premier Vacation Club etc. Accor

The external environment in which the Accor group operates is dynamic, competitive and sometimes unpredictable. With increasing players in the hospitality industry, competition is very high. Natural calamities like floods affect the hotels adversely. Soaring prices of raw materials coupled with bargaining power in the hands of buyers makes the hotel business a tough business to handle.The report examines the various external forces that affect the industry in which Accor Group operates. The trends in the hospitality industry, along with implications on Accor’s operations are discussed as well.

The second point of focus for the report is the CSR practices of Accor Group. As the hospitality industry is a large-scale user and exploiter of natural resources like land, trees and water, it is expected to take responsibility for the impact of its operations on society. Corporate Social Responsibility is a requirement for companies of today’s business world as they are expected to operate in harmony with society and environment without compromising the future generations’ opportunities (D’Amato et al. 2009). Accor Group is significantly well-versed in this department with many CSR initiatives in its portfolio. Some of these initiatives have been discussed in detail in the report.

The report concludes with some recommendations for the Group and the management to efficiently handle the threats and challenges posed by the external environment and harness the opportunities.

Analysis of Accor’s Operating Environment

Accor operates in the extremely dynamic and competitive tourism and hospitality industry. An analysis of the operating environment can be best done by using Porter’s five forces (Porter, 1990).

Industry Analysis using Porter’s five forces

Entry Barriers: Hotel industry requires a large initial investment. This creates an entry barrier for newcomers. Moreover, obtaining land for hotels and resorts in key areas is becoming increasingly difficult. Availability of project financing has reduced entry barriers of hotel industry to a small extent. An important entry barrier is positioning and differentiation. Hotels like Sofitel, Le Meredien have been able to be winners in this industry because of their exceptional services.

Rivalry among Existing Competitors: There are too many players in the industry. Fierce competition between existing hotels has become a part of this industry.Price wars, promotional wars, advertisement wars etc. are common now. The stiff competition in the industry calls for differentiation in the services for a hotel to stay ahead of the herd.

Bargaining Power of Buyers: With the arrival of computer-savvy generation who can do everything on the net from booking their trips to finding the best-price hotel deals, the balance of power has tilted in favor of customers. Increase in the number of players has suited the buyers extremely well. Availability of customer reviews online has upped the ante for the hotel industry players.

Bargaining Power of Suppliers: Although not a substantial threat, the major challenge for the hotel industry in the supplier side is the labor market. Attrition rates are very high in this industry, and it is difficult to find well-qualified staff.

Threat of Substitutes: A substitute for a hotel is another hotel. With large number of players in the industry, there is always a threat of being substituted by another competitor or newcomer.

Opportunities and Challenges

Opportunities:

• Development of leisure focused airlines for both domestic and international travellers is a plus point for the hotel industry.
• Increased promotion by Australian Tourism has resulted in large number of foreign tourists from Europe and Asia.
• Promotion of Australia as a place of business as well entertainment can result in greater demand for hotels having convention centers and conference halls.
• Promotion of nature-based tourism is creating a positive buzz among the travellers, and can be used to gain more customers.

Challenges:

• Natural Disasters like cyclones and floods can adversely affect the number of tourists.
• The leisure travellers are prone to economic cycles. Global Economic Crisis of 2008 saw a steep fall in the number of domestic and international tourists.
• Increasing crime is going to have a negative impact on the tourism and hospitality industry in the long run.
• Lack of well-trained labor is a major challenge faced by the hotel industry.
• Large-scale impact on environment is another major concern for this industry. Requirement of large lands, huge volume of water supply etc. create long-term sustainability challenges for the hotel industry.
• The dynamic and unpredictable external environment requires Accor to be ready for change. For example, the floods in Queensland showed how vulnerable the industry can be at the hands of nature. Disaster management and Change management are two important requirements for Accor’s success in the industry.
• Increasing competition requires differentiation on Accor’s part. Accor is relatively safe in this area because of its different kinds of hotels targeting different market segments, thereby protecting it from particular market-segment related risks.
• The arrival of e-business requires Accor to be up-to-date in the technology sector.
• Rise in ethical consumerism among consumers creates vast opportunities for Accor as it is way ahead of its competitors in corporate social responsibility.

Implications on Accor’s Operations

Accor’s CSR Initiatives

Environmental Footprint Assessment

Accor Group of Hotels carried out a research to assess their environmental impact over 15 years of operations in 2011 in partnership with PwC (Accor and PwC, 2011). Some of the main inferences from this environmental footprint assessment were:

• The hotels consume 75% of the total energy used by Accor Group (18 billion Kw/h of energy).
• A lot of waste is generated in the process of building and renovating hotels.
• Water consumption is very large in the food production process.

This footprint assessment was aimed at measuring environmental impact beyond greenhouse-gas emissions and water consumptions. This will help Accor quantify their impact and build strategy accordingly targeting their weak areas for sustainable development in the long run.

Plant for the Planet Initiative

Accor Group, in partnership with PurProjet has started ‘Plant for the Planet’ initiative in 2009 (Accor a). It is primarily a reforestation project where Accor has tried to minimize its laundry costs by giving the guests options of reusing their towels, and half of the savings on laundry bills is then used for tree planting projects.PurProjet is trying to integrate ‘Plant for the Planet’ with the Accor Group’s businesses, with an aim of having a project in all of the countries where Accor operates by 2015.

Planet 21 Initiative

Accor has launched ‘Planet 21’ in its endeavor to combine development that goes hand-in-hand with environmental protection and community growth (Accor b, 2012). Accor Group is planning to make sustainable hospitality the Group’s core strategy through Planet 21. Planet 21 strategy aims at involving the employees, customers as well as suppliers of the Group.

The Planet 21 Program is built on 7 pillars and aims at fulfilling 21 commitments over a targeted time-frame (Accor c). The 7 pillars of Planet 21 Program are: Health, Nature, Carbon, Innovation, Local, Employment and Dialogue. The program has set quantifiable objectives to be achieved in a fixed time-frame for all these pillars.

Some of the commitments of the Group in regards to health are: ensuring healthy interiors with 85% of hotels using eco-products by 2015; promoting responsible eating through balanced dishes; and organizing disease prevention workshops for employees with a target of incorporating 95% of hotels in this initiative by 2015.

On the ‘nature’ front, the Group has set up quantifiable objectives for reducing water and energy consumption and recycling the waste produced. It targets to reduce water consumption by 15% within 2015. 85% of hotels are targeted to get involved in recycling of waste. The Group also plans to involve 60% of hotels in ‘Plant for the Planet’ program by 2015.

Reduction in energy consumption and reducing the carbon footprint of the company is one of the major initiatives of the Group. It plans to achieve this through use of renewable sources of energy, minimizing energy waste and reducing greenhouse-gas emissions. 4% of hotels are using renewable energy at present with a target to increase this number to 10% by 2015. Accor has developed a new method called ‘Boost’ which is helping it reduce its energy and water consumption through employee training programs.

On innovation front, the Group plans to encourage eco-design and promote sustainable building.

Apart from its commitment to protecting nature, Accor Group has also commitments to the local communities in which it operates. It plans to protect children from abuse, and has been pursuing this in association with ECPAT, by raising awareness among employees, customers and suppliers. The Group has a target of 100% of hotels ban endangered seafood species and protecting the eco system. The Group has put emphasis on employment and training and development of employees in their host countries.

All the initiatives discussed above involve the employees, customers and suppliers and partners of the Group.Accor Group is constantly trying to raise awareness among its guests and partners through campaigns, involvement programs, messages etc.

Conclusion

The Accor Group of hotels has the advantage over its competitors of being environmentally-aware and taking initiatives for corporate social responsibility. Planet 21 is going to add to the brand value of Accor Hotels, apart from bringing in more customers, reducing the operating costs through recycling and reuse of materials and protecting the eco-system. This is going to help it not only creating a sustainable business model, but also harnessing the opportunities from ethical consumerism. The fact that it operates in a dynamic and competitive industry requires it to be adept to manage change. The hotel industry is prone to external factors like natural disasters, economic crises, and crimes in the country. Accor hotels’ managers need to be equipped with disaster management and change management abilities to efficiently deal with the challenges.

Recommendations

The Group is doing well in its CSR department through the Planet 21 initiative and setting quantifiable goals. However, it can improve on its operations in some areas. Some recommendations are provided below:

• Customers love the power they have regarding planning trips and obtaining best deals. Accor needs to be visible in the internet medium through active promotion and marketing and providing quality deals.
• Involving Customers and Suppliers in its CSR initiatives is a good step and should be continued throughout.
• With unpredictable external environment, Accor needs to train its managers and staff about disaster management and change management.
• Customers should be made aware of environmental problems and their responsibilities as a responsible citizen through innovative ways like greetings cards, short and sweet messages that encourage the customers to contribute in the process without making them feel guilty, films etc.

References

Accor a, Plant for the Planet, Viewed on 15 May 2012, Available at http://www.accorplantsfortheplanet.com/en/index.html

Accor b, 2012, ‘To reinvent hotels sustainably, Accor is launching Planet 21’, Viewed on 15 May 2012, Available at http://www.accor.com/fileadmin/user_upload/Contenus_Accor/Presse/Pressreleases/2012/EN/pr_planet_21_en.pdf

Accor c, The Planet 21 Program, Viewed on 15 May 2012, Avaialble at http://www.accor.com/en/sustainable-development

Accor Hotels, Company website, www.accorhotels.com , viewed on 15 May 2012

Accor and PwC, ‘A hospitality industry first worldwide: Accor shares its environmental impact assessment findings’, Earth Guest Research, Viewed on 14 May 2012, Available at http://www.accor.com/fileadmin/user_upload/Contenus_Accor/Presse/Pressreleases/2011/EN/pr_accor_environmental_footprint_091211.pdf

D’Amato, A., Henderson, S., Florence, S. 2009, ‘Corporate Social Responsibility and Sustainable Business A Guide to Leadership Tasks and Functions’, Center for Creative Leadership, Viewed on 15 May 2012, Available at http://www.ccl.org/leadership/pdf/research/CorporateSocialResponsibility.pdf

Porter, M.E. 1990, Competitive Strategy, Free Press, New York.

Prahalad, C.K and Hamel, G. 1990, ‘The core competence of the organization’, Harvard Business Review, vol. 68, no. 3, pp. 79-91

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