Executive Summary
Accor Group is one of the leading companies in the tourism industry, which operates hotels, casinos, restaurants, and travel agencies in over 90 countries. The paper explains that, while striving for a favorable position in the market, the company used mergers and acquisitions, as well as organic growth, to increase its global outreach. The brand strategy of Accor is also considered in the paper. For example, Accor Group’s multi-brand strategy enables it to maintain a high market share while also retaining customer loyalty after mergers or acquisitions. Rebranding, on the other hand, was successfully used by Accor to make certain properties more appealing to new customers. Overall, the paper shows that Accor Group uses a variety of strategies for market penetration, which will all assist in its future development.
Introduction
Accor Group includes over 4000 hotels worldwide and provides for a variety of market segments, from economy to luxury travelers. To build such an extensive network, the company used an excellent growth and expansion strategy. Other appropriate strategies, including segmentation, multi-brand, re-brand, and asset management, also helped Accor Group to advance its position in the market. The present report will review Accor Group’s main strategies as presented in the case study and discuss the company’s position in the Ansoff Matrix.
Growth and Global Expansion Strategy
Accor Group has one of the most fast-growing hotel chains in the world. According to the official website, the Group opens one new hotel every 33 hours, creating a total of 52000 new rooms in 2017 (Accor Group 2018). The two key strategies used by Accor Group to achieve growth and expand globally are mergers and acquisitions. For instance, Accor Group acquired Red Roof Inns in 1999, which allowed it to expand in the United States (IBS Research Center 2009). In 2001, Accor merged with Zenith Hotel and Beijing Tourism Group in China as part of its geographical expansion efforts (IBS Research Center 2009). Mergers and acquisitions allowed the company to grow both nationally and internationally while also entering new markets. Today, Accor Group includes famous chains, such as Ibis, Novotel, Mercure, Sofitel, Fairmont, and Pullman (CB Insights 2018). By acquiring new companies, Accor Group was also able to boost its capacity for organic growth, which also assisted in its global expansion.
In addition to mergers and acquisitions, the company also increased its global coverage by opening new hotels. For example, to enter the emerging Russian tourism market in 1992, Accor opened a new Novotel hotel near Moscow, followed by a hotel in St. Petersburg (Panibratov 2017). Organic growth was also a useful strategy for the company’s expansion in Argentina, where it entered the market by opening a Sofitel hotel in Buenos Aires (Chon 2012). Overall, the company’s growth and expansion strategies include mergers, acquisitions, and organic growth.
Segmentation Strategy
Segmentation strategy is a critical factor impacting firm performance. As noted by Howells and Lowe (2018), segmentation in the hotel industry often includes a mixture of behavior and demographic segmentation. Whereas demographic segmentation focuses on age, gender, and income of target customers, behavior segmentation can also consider their buying behaviors, service expectations, and motivations for traveling. This approach to segmentation creates four main segments of the hotel market: economy, midscale, upscale, and luxury (Demirçiftçi & Kizilirmak 2016). Accor Group operates in all of these market segments, which means that it also uses a mixed segmentation strategy. For instance, Ibis hotels target the economy segment of the market, whereas the Sebel and Fairmont are luxury hotels serving a different range of customers.
Nevertheless, the case also suggests that in some of its initiatives, Accor Group also uses geographic segmentation. This segmentation strategy determines market segments based on their geographical area. For example, “in 2005, Accor, […] unveiled a new prototype for Accor’s Novotel brand aimed at the Canadian market, a new market” (IBS Research Center 2009, p. 7). Thus, Accor’s global growth was also caused by the practical use of mixed segmentation strategies, which enabled the company to target multiple market segments, increasing its market share.
Multi-Brand Strategy
A multi-brand strategy refers to the process of one company offering several similar products in the same market under different brand names. For instance, Novotel and Mercure are two different hotel chains aimed at the same market that are both owned by Accor Group. Multi-brand strategies are particularly common in companies that develop via mergers and acquisitions, as the companies retain their brand names (Rothermel & Bauer 2015). Accor Group also follows a multi-brand strategy, including brands such as Ibis, Novotel, Sofitel, Red Roof Inn, and more. Accor’s multi-brand strategy includes unique positioning, which is beneficial for market segmentation and helps to increase the profitability of individual brands.
There are several benefits of Accor’s multi-brand strategy. First of all, offering the same services under multiple brands allows companies to earn a greater market share (Dong & Wan 2015). Secondly, it enables merged or acquired companies to retain their brand names, thus appealing to their loyal customers. For instance, if a family prefers a certain hotel company over all others, and this company is acquired by Accor Group, changing the company’s name might affect the customers’ trust and loyalty. Lastly, by using a multi-brand strategy, Accor Group can cover all the various market segments. Sofitel is positioned as a luxury hotel, catering to the needs of customers from the upper class, whereas Motel 6 is a budget hotel company. By using several brands, Accor Group can maintain a strong presence in all market segments, thus retaining its competitive position in the hotel industry.
Re-Brand Strategy
A re-brand strategy is used when the company needs to attract new customers or improve its position in the market. Although some studies show that rebranding could have a negative influence on the company’s identity following a merger, Accor Group has been using this strategy effectively to increase market share in emerging markets (Liying, Xun & Yingkang 2013). For example, in 2001, Accor rebranded three major hotels in Hong Kong to promote them under the Novotel brand (IBS Research Center 2009). The rationale behind the rebranding was that it would appeal to customers who are familiar with Novotel, thus improving profitability. As explained by Collange (2015), a positive consumer reaction to rebranding in the service industry can be achieved if the new brand is more attractive to customers. Brands that are part of the Accor Group are famous for their quality of service and generally have high customer loyalty. As noted by Jauhari (2014), these hotels also have a reputation for sustainability, which adds to their positive image. Thus, the re-brand strategy of Accor Group is effective in attracting new customers and maintaining a competitive position.
Asset Management Strategy
Accor’s asset management strategy is based on the optimization of its hotel portfolio. The Group distinguishes between strategic hotels, which can contribute to its profits if managed under a long-term holding structure, and non-strategic hotels that can be sold to third parties. This asset management strategy enables the company to maximize its profits while also improving its financial performance. In 2005-2006, the company sold 261 hotels, thus acquiring €1.645 billion of profits (IBS Research Group 2009). Additionally, over 200 hotels were sold and leased back, thus allowing Accor to retain a part of their profits (IBS Research Group 2009). This strategy is useful, as it improves the company’s hotel portfolio while also contributing to its profitability. Effective asset management is also critical to the perceived value of the company. Fitzpatrick et al. (2013) state that hotel companies with an excellent portfolio are more likely to be trusted by clients and investors. Thus, Accor Group’s Asset Management strategy has a positive influence on the company’s growth and financial performance.
Position in the Ansoff Matrix
The Ansoff Matrix offers an overview of growth strategies that can be used by companies operating in various business sectors. It is a useful tool for strategy development, as it divides strategies by product and market types (Morrison 2013). Based on the information presented in the case, Accor Group follows a market penetration strategy, which focuses on enhancing products in order to attract customers from existing markets (Morrison 2013). This choice of strategy is based on the company’s portfolio, market coverage, and goals. Firstly, Accor Group already operates in all major market segments. Secondly, the company does not seek to introduce any new products at the moment, instead of focusing on expanding hotel capacity and opening new hotels under the established brand names. Finally, market penetration is the least risky out of the four strategies covered by the Ansoff Matrix and can be very helpful in increasing market share (Kokemuller 2018). Therefore, this strategy contributes to Accor’s goals for future development.
Conclusion
All in all, Accor Group uses a selection of useful strategies for increasing its market share and targeting various consumer segments. Its strategies for multi-branding, rebranding, and asset management assist the company in increasing profitability and remaining in a competitive position. The market penetration strategy chosen by Accor will also facilitate its future development and could help it to earn the leading position in the hotel industry.
Reference List
Accor Group 2018, Hotel development, Web.
CB Insights 2018, Reinventing the hotel: how one of the world’s largest hotel chains is meeting the Airbnb challenge head-on, Web.
Chon, KS 2012, The growth strategies of hotel chains: best business practices by leading companies, Routledge, Abingdon-on-Thames.
Collange, V 2015, ‘Consumer reaction to service rebranding’, Journal of Retailing and Consumer Services, vol. 22, no. 1, pp.178-186.
Demirçiftçi, T & Kızılırmak, I 2016, ‘Strategic branding in hospitality: case of Accor Hotels’, Journal of Tourismology, vol. 2, no. 1, pp. 50-64.
Dong, J & Wan, X 2015, ‘An economic analysis of internal mechanism of multi-brand strategy’, in Proceedings of 3rd international conference on logistics, informatics and service science, Heidelberg University, Heidelberg, pp. 553-558.
FitzPatrick, M, Davey, J, Muller, L & Davey, H 2013, ‘Value-creating assets in tourism management: applying marketing’s service-dominant logic in the hotel industry’, Tourism Management, vol. 36, no. 1, pp.86-98.
Howells, J & Lowe, M 2018, ‘Innovation, market segmentation and entrepreneurship in services: the case of the hotel industry’, in G Cook, J Johns, F McDonald, J Beaverstock & N Pandit (eds.), The Routledge companion to the geography of international business, Routledge, Abingdon-on-Thames, pp. 493-508.
IBS Research Center 2009, French Hotel Group Accor’s growth strategies, European Case Clearing House, Bedford.
Jauhari, V (ed.) 2014, Managing sustainability in the hospitality and tourism industry: paradigms and directions for the future, CRC Press, Boca Raton.
Kokemuller, N 2018, Market development vs. market penetration.
Liying, C, Xun, H & Yingkang, G 2013, ‘Rebranding strategies of international hotel groups following mergers and acquisitions: Accor and Hilton case studies’, Tourism Tribune, vol. 28, no. 10, pp. 52-63.
Morrison, AM 2013, Marketing and managing tourism destinations, Routledge, Abingdon-on-Thames.
Panibratov, A 2017, International strategy of emerging market firms: absorbing global knowledge and building competitive advantage, Routledge, Abingdon-on-Thames.
Rothermel, M & Bauer, F 2015, ‘Branding in mergers and acquisitions: current research and contingent research questions’, in A Risberg, DR King & O Meglio (eds.), The Routledge companion to mergers and acquisitions, Routledge, Abingdon-on-Thames, pp. 367-378.