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AccorHotels: transforming procurement for a unique guest experience

AccorHotels: transforming procurement for a unique guest experience

AccorHotels: transforming procurement for a unique guest experience

Sebastien Brunel, Senior Vice President of Procurement at AccorHotels, discusses the travel & lifestyle group’s procurement journey in driving growth and bringing a unique guest experience with locally sourced produce

With 4,600 hotels around the globe operating across 100 countries, AccorHotels is one of just a handful of hotel operators in the world with more than 500,000 rooms to its name. As a market leader in many regions around the world, AccorHotels is now making strides across North America as well, a continent which represents significant opportunities for growth and revenue. Investment in the region is revving up with acquisitions including the purchase of the Fairmont, Raffles and Swissôtel brands; an 85% stake in US-based 21c Museum Hotels, an award-winning hospitality management company which combines a multi-venue contemporary art museum and boutique hotels; and a 50% stake in independent luxury lifestyle operator sbe Entertainment Group.

Boasting over two decades of industry experience, Senior Vice President of Procurement Sebastien Brunel is keenly aware of how the hotel industry has changed during this time, and how the evolving needs of consumers have particularly impacted procurement. “Lifestyle is something which is very new to the hospitality business,” he outlines. “People, especially the younger generation, are looking for different experiences. They don’t want the traditional hotel or a standardized room – they want to have fun, new experiences and make connections.”

While AccorHotels currently has fewer than 100 hotels in North America, the region still reflects a notable proportion of its business and is home to some of the company’s largest properties, which average around 500 rooms and several restaurants apiece, meaning total spend is significant for Brunel and his team. Iconic hotels with global notoriety present in the region include, among others, the original Fairmont – Fairmont San Francisco; The Plaza, A Fairmont Managed Hotel in New York City; Fairmont Le Chateau Frontenac in Quebec City; and Fairmont Banff Springs.

“Today, we’re coming back from global sourcing to more national or even local sourcing. We have a strong desire to buy local, and work with local producers” - Sebastien Brunel, Senior Vice President of Procurement

AccorHotels initiated investments in its procurement function 25 years ago when volume in key regions was becoming significant. Today, the company’s procurement function is organized regionally and globally, with over 20 procurement organizations and more than 180 people around the world. The entire function reports to Paris-based global Chief Procurement Officer (CPO), Caroline Tissot, while all procurement leaders in the regions have dotted lines to regional executives.

In North America, procurement also reports to Chief Operating Officer, Kevin Frid. “Procurement is greatly positioned in the organization and part of the leadership committee, making our function a key component for North and Central America,” Brunel explains.

In terms of the evolution of procurement at AccorHotels, the way services are offered has evolved thanks to consumer feedback. The dynamic of buying and category management is impacted by market trends and traditional in house services are handled today more by external providers. Laundry is a good example of a category which was historically managed in-house but is moving more toward external providers. “We have a big evolution in the way hotels are spending their money,” Brunel concludes.

In addition, since AccorHotels now manages and franchises its hotels instead of owning the premises outright, the procurement function has had to adapt. “We came from an asset heavy model to an asset light model – in the past, we owned our hotels but now we have management and franchise contracts,” says Brunel. “As procurement professionals, we therefore have two customers: the teams in the hotel with different needs and expectations between the managers, chefs, executive housekeepers… but also the owners of the hotels, because it is in their best interest to maximize their benefits through a strong procurement organization.”

As a management company, procurement within AccorHotels is very much a service offered to its owners and franchisees. “We have become a strong intermediate between suppliers and partners, and both owners and franchisees are extremely organized, business driven and cost driven,” Brunel explains. “Unless we demonstrate savings and value creation, they will not use our services. We have to monitor the competitiveness of our contracts compared to market prices, and offer tracking, distribution, a loyalty program and procurement program – procurement is one of the key departments to attract new ownership groups and franchisees.”

As the business has transformed, its supply chain has diversified and evolved, and so too has the role of procurement. “20 years ago, 90% of our function was based on food management – then we started to manage non-food operations in the early 2000s,” says Brunel. He adds that suppliers and other organizations had not previously understood hotels as a category to focus on. “I would say it took between five and 10 years to get a strong offer of procurement solutions for hotels for food, non-food and beverage.”

Brunel notes since then, suppliers have begun to see opportunities in the ever-growing hospitality sector. “In terms of some suppliers, a lot of businesses didn’t have a hospitality division 10-15 years ago – they did not know how to attend to the hospitality businesses. But now, there are people dedicated to hospitality. We work together on value creation. Competitive pricing is an important element, but having sustainable programs, product development and innovation take up an important share of the day-to-day role of a procurement specialist – both on the team but also at the supplier.”

AccorHotels: transforming procurement for a unique guest experience
AccorHotels: transforming procurement for a unique guest experience
AccorHotels: transforming procurement for a unique guest experience
AccorHotels: transforming procurement for a unique guest experience
AccorHotels: transforming procurement for a unique guest experience
AccorHotels: transforming procurement for a unique guest experience

Of course, process and digitization has been key to AccorHotels’ procurement journey. “Digital is playing a very strong role, not so much in finding new procurement solutions but in giving better access to our procurement-selected products and services for our customers. How can we make the process easier to access? How can we offer a procurement marketplace to make sure people can go to an online catalogue?”

Fairmont selected Birchstreet over 10 years ago, which provides procure-to-pay solutions with the aim of improving business processes through efficiency and cost reduction. “Birchstreet brings structure to our process. We have PO approval process, PO management, inventory management, product management and interaction between hotels and suppliers. This is essential for AccorHotels, especially in North America.”

The businesses have worked together for many years, and AccorHotels favors the platform as it works well especially for its larger properties. “They’ve been able to invest in internal workflow – hotels with over 1,500 employees need a procurement process and workflow to ensure consistency.” Birchstreet has developed this from a back-office perspective, and the solution is effective for AccorHotels’ finance department. Brunel adds that, as the partnership continues, he hopes to develop a system with even more benefits for front-end buyers, which he is confident can be achieved. “So far we have partnered with them for 10 years, they’ve always supported us in everything we’ve done and the platform brings efficiency, good savings and automatic updates to inventory – we probably do around US$150mn of annual spend through the Birchstreet platform.”

The vast array of products AccorHotels buys, and indeed the array of suppliers it works with, presents challenges for eprocurement. “Eprocurement works very well with products but it’s not as simple for utility developments, such as service companies – you can easily buy a kilo of coffee, but one kilowatt of energy isn’t the same, so it’s not ideal for non-tangible contracts.”

While prioritizing the luxury experience over recent years, AccorHotels has developed a strong commitment to local sourcing and as such, its supplier mix has changed. “Our supplier base is very diverse due to the products we buy – we go from big global companies like LG or Samsung, to large national companies, to smaller regional suppliers of fruits and vegetables or fish, with five employees,” explains Brunel. “In North America, I would say 30% of our spend consists of global providers, 40% national and 30% regional.”

“Today, we’re coming back from global sourcing to more national or even local sourcing. We have a strong desire to buy local, and work with local producers – such as sourcing fish from the coast of Canada, rather than importing it from Scotland or elsewhere. This is the way, especially in the luxury hospitality business, to provide local experiences.” 20 years ago, AccorHotels had a larger range of suppliers, which through globalization was reduced – now, it is increasing again due to the Group’s local sourcing commitment. “We went from a vision of needing to reduce the supplier base, to a vision that we still need a concentrated supplier base but with a lot of choice.” As a result, a limited number of global providers consolidate more spend but there is a strong need to develop diversified local solutions and reduced logistics.

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Catering for the unique demands of various owners and franchisees, especially since the Group’s latest brand acquisitions, is vital in avoiding a cookie-cutter outcome, especially for the luxury businesses which account for about 50% of AccorHotels’ global operations, and are particularly prevalent in North America. “We invest a lot in the lifestyle element and the uniqueness of our brands, we need more products and more solutions – we don’t want the same headboards, lighting and food all over the world and we’re not acquiring new companies to change them into a standardized hotel.”

Brunel explains each of the company’s 4,600 hotels across the world is treated as a unique point of production. “It’s not like the manufacturing industry where everything can be produced and distributed from a unique point. Hospitality business and decentralization of ordering points makes our supply chain very complex and diverse in terms of suppliers and products. We buy food, beverages, technology, intellectual services, financial services… the quantity, too, is diverse, as a small hotel might cumulate an annual spend of $400,000 while a large hotel can spend more than $20mn.”

Despite the challenges and variations facing the procurement function at AccorHotels, this essential element of the business is key to the significant growth Brunel looks forward to. He cites the company’s latest acquisitions and the new openings it has celebrated as a result: the 1,048-room Fairmont Austin which debuted earlier this year as the brand’s largest hotel in the US, as well as the planned openings of Fairmont Century Plaza, Los Angeles; Sofitel Mexico Reforma in Mexico City and SO/ Paseo del Prado in Havana, all in 2019. AccorHotels will also open the first Raffles Hotel & Residences in North America in Boston as well as Fairmont Costa Canuva in Mexico’s Riviera Nayarit and Fairmont Saint Lucia in the coming years. 

AccorHotels is therefore particularly committed to North America as a region of growth, where it works with over 20,000 suppliers and spends $600mn each year, from small fruit and vegetable suppliers with orders of less than $500 to larger companies receiving millions in investment. On its North American journey, Brunel says the company is keen to partner with suppliers desiring to grow outside of North America, such as audio-visual provider PSAV. “It’s a great example: the legacy contract is coming from North America and can be extended to other places in the world.”

However, as AccorHotels grows in size and spend in North America, the value offering of procurement will need to be even further solidified, says Brunel. “We have to work hard to show the importance of procurement with our customers and increase our ability to offer more contracted solutions. Another challenge is to maintain a good level of compliance at a national level, while remaining competitive against regional offers. The third challenge is to find a way to leverage volume while also keeping the uniqueness of the product. And the fourth challenge, of course, is people – the development and training of our procurement talent. In the UK, they have CIPS (Chartered Institute of Procurement and Supply) qualifications, but I haven’t seen many global equivalents so we must find trained procurement professionals with a balanced commercial background.”

“We want to play a major role in North America as well as globally,” says Brunel. “We’ve started to reinvest here as we cannot be a true global hospitality player without having business activities in this region. From a customer perspective and supplier perspective, having a strong procurement organization in North America is key,” he concludes. 

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AccorHotels: transforming procurement for a unique guest experience

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