Conquering India – Manav Thadani with Sébastien Bazin & Rahul Bhatia on Accor-InterGlobe Partnership

Was they talking about me?

No, no, no, no, no. Let's, let's make sure, I guess. I said, why don't you accept the French guys? A French guy will never succeed in India unless being guided by local partners Indian knowledge. So there was the end of a sentence alone. I'm nobody here.

Um, if I want to be honest. Yeah. Honest and provocative. It has not changed. It has not changed. No. Anything we do at hospitality players is minimum seven-year bet and likely 10 to 20 year bet. What matters is not geopolitics. It is of course macroeconomy but not that much. It only matters on three very simple engines. Do we have a higher demography in the world growing? Answer is yes. And that's going to be the case until probably the next 12 years. Do we have an emerging middle class rising income globally? Answer is yes. Do you have an increased level of infrastructure be train, airline, roads? Answer is yes. As long as you have those three engines on, of course, you're going to be navigating with from probably fragile economies and that will have impact on GDP and you need to avoid those storms if you could. But if you look at the globality of travel and tourism, I have no doubt that I guess for the next decade from what I said last year, it hasn't changed, right? Because you're going to go into likely four to six percent demand growth in travel per year for the next 10 to 15 years and you're going to have a supply which is going to grow max one and a half to two percent in the world and if you have a lot of hiccup in terms of GDP inflation interest rate, well that supply maybe less than one and a half could be half a percent. So you're going to have a demand which is going to be exceeding supply by probably three times over the next 10 years.

Question is, it's not and I've been saying it so straightforwardly, it's not why should you play, you have to play if you're interested into the second largest industry vertical in the world which is travel tourism. It's where do you play and how do you play which is what I said last year and we decided our core a long time ago we want to play. We decided not to be depending only on Europe. So we've been diminishing Europe from 85% of our core to today 45%. And we decided voluntarily to go fast in the Middle East, fast in Southeast Asia, fast in Australia, fast in South America, and decided this morning to go even faster in India. So it's just, I by saying it I just want to be sure I'm not blind. I know exactly what's happening between M Trump, Mutin, M Chi Ping and Mongala Merkel. All of that I know, we know what's happening. You still have on the line now. It just be aware of it. Understand you're going to have an impact. It could reduce consumer spending. People going to have anxiety. They may travel a bit less but at scale. Don't change your mind all the time. Right.

No, I don't think so because it's a the American hotel companies are basically enjoying an 85% domestic American market. And I've been saying for many many years, I wish AO would have a greater presence in America. This is the best hospitality market in terms of fee stream, in terms of profit margin, in terms of franchise business. So, and I said this morning, don't ever bet against America, right?

No, the future of Accor is first it's very solid. It took me and the group 10 years to transform this company into a sleeping echo meatscale giant European. I said three years more than expected myself. So I have to be humble in terms of transformation but it's behind us. I see our core growing faster. We said in 2023 we're the first company to be super loud on saying I'm going to project myself in front of the public market for 5 years projection 23, 24, 25, 26, 27 and we said we're going to grow 3 to 5% REF power. We're going to grow 6 to 8% revenue. We're going to grow 9 to 12% EBITDA. We've made 23. We've made 24. We're going to make 25. And let's make sure we make 26 and 27. And by meeting it, I need buffers because I'm going to go into some fragile RefPar environment. Of course, I know this, right? But we have a lot of things we haven't done over the last few years, which is technology, which is software, Adobe, Salesforce, ID, Amadeus. Those technology enhancers is going to provide me the buffer I need if I don't have the topline. So we it's one of those moments where I think we master will the present and the future right and I see an increased focus because I've been coming here for 10 years at least that I've been around. You've started focusing on NS more, I think you've made a few announcement even for this market in the last few months. Is that a major focus for Accor and increasingly?

Yeah, in more ismo is a pure beauty. It's in the hands of one of the top five leaders when it comes to hospitality which is Gorav Buchanan and Shahan Parisha. They put together 17 brands, almost 12 different acquisitions, 10 different jurisdictions between Germany, Turkey, France, America. It's autonomous since I'm powered. They have their own social media, they have their own app. They get what they need from me but we don't impose anything on them. They grow at a 35% EBITDA. They go at a 15 to 17% net growth. They are two three years ahead of anybody else in the market, right? Because we've been putting all this together through COVID when people were in fear. You know, this is one of those moments you really make money when you have trouble water. That's what I've learned in private equity. So, accept the thing you don't control, but take advantage of it. And in this small is a pure buildup of brands we acquired fairly reasonably in between 2024 up until 2014 and 2024. So they're ahead and the reason why they ahead is because they were the first and we talked about it here with you guys to say if you want to cater for better growth, think first about the local inhabitants. Right. The entire in small, Morgans, Hawkton, Mama Shelter, Delano, SLS, they being built program design for the bars, for the restaurants, for the public spaces, for people to go in enjoy three or four hours but then probably don't sleep there and I don't care because if you have succeeded seducing the locals, the travelers will pick your place which is why they also full in terms of room revenues but 50% of the revenues are coming from local community. It's a wonderful recipe, tough to replicate.

No, it's it depends. I'll tell you in terms of operating expertise, in terms of brand promise, brand fulfillment, operational metrics, much simpler for the owners because they have experts within Lux lifestyle and they have also different expertise for premium midscale economy brands. I was wrong in asking one guy in Europe to be in front of the Raffles owners, Fairmont owners, Ibis owners. He was probably a good Novotel expert but he knew nothing about Raffles. So putting that in two different division was absolutely valid and owners are very happy because they know that the person they talk to is as expert that they are. There's one thing where it hasn't helped is development. A lot of owners are multibrands, multi-segments and they do like having one liaison officer that they talk to across the 47 portfolio of brands. So we need to be careful on not imposing on an owner different developers depending on his wishes. That's the only thing where we probably need to get better. For the rest, I would never ever go back. Right.

Well, you see, of course AI is going to be it started a long time ago. All the software company that we talked about, the Amadeus and of course Adobe Salesforce have been AI based for seven, 10 years so there's nothing new there. When you talk to the AI people and they've been going into a big international AI summit in Paris a month and a half ago, I had the chance privilege to go and have a dinner with the top five AI guys. And we were like 25 people in a room. And of course, I know very little about it. And I'm asking one of the big AI CEO. And I said, 'Sir, just do me a favor. I work in the hotel industry. How could I judge what you're going to do in the travel hospitality sector?' And he posed a solid 90 seconds. And he knew he had like 20 CEO industry in the rooms and he said something which was so interesting. He said Sebastian, you must be the only lucky guy in the room. I said anybody which is automotive, which is pharmaceutical, industrial, AI will disrupt your operating model, your process for you. As hospitality, there's nothing we're going to be disrupting from you. We're going to give you a better tool before after the stay, seamless process, but no way on earth would AI interfere on that welcoming, caring human interaction, no intention to have robot. So take us as a partner, but we there's nothing. So he was actually engaging and which is what we've been telling you. We may not have the top line but each of you in the room we should welcome automation when it comes to that customer base, the knowledge, the process, the push, the app. All of that is going to be enhanced probably at a cheaper cost and those people no longer doing those tasks, revenue management, price sensitivity, don't lay off those people, get them back in front of the customers. This is what they better use. So I'm not at all afraid about AI, right?

Well, clearly some miracles do happen and are happening and you found time perhaps to sit with Mr. Bhatia, your Indian partner. Your announcement seems to be well thought out, strategic. Not just with you know, you've had a couple of announcements. Let's talk about the InterGlobe Hotels. Do you want to tell us a little bit about that and is that your vehicle to conquer India?

Yeah, it's just and last year at the same time we had Mr. Bhatia's father who were there and you've been very kind enough to honor him and I was very very glad actually to be next to him this year. It's something that I guess I have been imposing on Raul and there's nothing much you can do and impose on this gentleman and he was kind enough to come today and to be in the room. So, I'm going to invite Raul to join us, and I want all you to know he's only doing it as a favor because he hates it. But I really implore him to come only because I wanted to have these two voices. But as odd as it is, and maybe foolish as it was, I probably don't take any words away from what I said last year. It's just I felt we had the best partner ever, the best trust and friendship that I built with Rahul over years. I felt we had a great knowledge about India and of course he does. But I also felt that I guess it's kind of bizarre that we're not moving, we're not deploying, we don't have the speed, we don't have maybe the right organization, they don't have the right autonomy or they don't have the right resources. I was angry at myself. I was not angry at him. But because of this and probably thanks to you, Manav, exactly six weeks after I went to see him. I said how this is what I feel. Are you really happy what we built? He said Sebastian, I'm blessed to know you but I've been asking for you to come and see me for the last two years. He was probably asking much more of it that I was telling you last year and I simply did not listen to him. So we sat down. It took seven months and then we'll explain it to you one meeting after the other is we said okay, what do we do on hospitality, what do we do with the team, what do we do with focus, what do we do in governance, what do we do in technology, how could we associate better, loyalty program. And then it came up with three announcements made this morning. InterGlobe governance, one unique vehicle, then of course doing something with our friends from Treebo which they are absolutely extraordinary, and then convincing Peter Elbers from Indigo and can we just team up on loyalty? So this is the announcement today. It's not going to make us that different from many other players. But certainly you're going to see speed, scale and mega differences in the years to come and the pie is so large in India between all the beautiful players. There's plenty enough for all of us to play. But before I say too much because I want Raul seats out here, but I want Raul to come here. I would love Raul Bata to come.

I just did. So but any you'd like to add anything to that?

Yeah, the answer is yes and there's a but. We've done it in China. China is one vehicle, one common team and it's been working successfully ever since for the last 15 years. We're going to replicate a bit of the China success story in India. But there's a but for preserving the brand promise, the brand standards, the general managers of hotels. No question within that unique vehicle in which we put all the brands of Accor, all the operational expertise, all the distribution, all the capital. We're going to have two separate teams within that vehicle. One for the lux lifestyle and one for premium midscale economy. We need to make sure that we continue what works beautifully for the brand promise, for the experience and for the expertise. So, and that's okay. You can do it as long as you understand that again those two teams are going to have the right autonomy. All the rest the back of the house you can mutualize it. So, it's but we're going to be demultiplying resources, growing five times faster. We know we have the 300 benchmark in 2030. There's nothing to be proud about. I know people here in this room earlier today, huge respect for Radisson, huge respect for Indian hotels. They're going to go for 500. They're going to go to 700 and they will succeed. But you know what I told you last year? We have 2,000 hotels in France alone. So 300 is not the endgame. And I wish all of us will have 1,000, 2,000 hotel 20 years from today. We're just catching up. But we just I was sick and tired of being late all the time. So we don't need to be the top. We need to be a very credible. The one thing I hope we have the breadth diversity of the 47 brands of Accor in this planet and I said that because I'm French. It is far different and in many ways better than many other portfolio existing today under a single hat and you're going to see more. You're going to see Emblem, you're going to see so many. There's only 11 brands to devour in India, why that is we should have at least 30 here. So it's just turbocharging what we have done and doing it better. But I respect admiration for anybody in this industry. There's enough space for each of us to basically being a strong operator.