Asian growth lures Accor’s Issenberg

A report in the Australian by Martin Kelly says that Australia’s most powerful hotelier, Accor Asia Pacific boss Michael Issenberg, is packing up and moving the company’s regional headquarters to Singapore, with the siren call of China and India , where Accor is now developing 100 hotels with plans for many more, proving impossible to resist.

“It was inevitable and could not be put off any longer,” Issenberg says.

“The weight of development is now in Asia – we now have more than 330 hotels through the Asia-Pacific region, with more on the way.”

Issenberg sees the biggest opportunities in China thanks to a bigger economy and better infrastructure.

“China is unbelievable – what a future it has,” Issenberg says.

“I know my own industry is booming but that is only one small part of a very large picture – I can’t even imagine what is happening elsewhere.”

Issenberg recalls seeing vacant blocks of land in economic development zones when he first visited five years ago.

He had been shown grandiose plans on an improbable scale, then return only a year of so later to see it all done.

More than anything else, Issenberg says it’s the speed of change that is most confronting.

He cites an Accor development near Hainan Island in which a 440-room “absolutely deluxe five-star hotel”, a 1500-seat convention centre, a road and bridge were built in just 11 months.

“In other places you are shown master plans and it may or may not happen, but in China it always does,” he says.

Accor is putting its own money into the country and wants to own 200,000 rooms in China by 2010.

It’s already well on the way, with 60 Ibis budget properties under construction in high-growth areas.

Local brands such as Home Inn, Jing Jiang Inn and Motel 168 brands are also cashing in – developing new properties at a helter-skelter rate to keep up with demand from China’s growing army of business travellers.

Cheaper land, construction and labour costs in China mean that operators can still make a healthy profit with rates at just $30 a night.

India is also on the rise. Once again, budget business travellers are the focus for Accor through the development of 40 Ibis and Formula 1 hotels, either alone or with local partners.

In Australia, Accor is looking more upmarket, launching its “edgy” new five-star Pullman brand in Sydney. The $50 million hotel at Olympic Park will be owned by Tourism Asset Holdings Limited (TAHL) and completed by the middle of next year.

Issenberg says Pullman will play an important global role in the Accor brand portfolio, allowing the company to re-brand numerous Sofitel properties that don’t fit that brand’s new “luxury” positioning.

“Sofitel had up to 200 properties around the world and the quality was becoming stretched,” he says.

Enter Pullman, which is aimed at the wired business traveller.

The first Pullman opened recently in Bangkok and Accor wants to have 250 properties under the brand by 2015.

At the same time, a lot of money is being invested in Sofitel – Issenberg estimates that $100million has been spent improving its Sydney, Brisbane, Melbourne and Gold Cost properties over the past few years.

Meanwhile, Accor has also announced the development of a new Ibis at King Street Wharf, Sydney.

It’s the first new Sydney city hotel in many years – thanks to prohibitively high development costs – and financially feasible only because Accor can fit 91 rooms into the tiny site.

After a tumultuous two decades, Australian accommodation market conditions are the best they have been since Issenberg first arrived here in the 1980s.

Demand is strong in all key markets and the French hotel giant is forecasting annual room rate rises of 10 per cent for at least the next couple of years. Issenberg says the best equivalent period he can recall occurred in 1989 – right before the pilots’ strike.

“It’s a cyclical industry,” he says without irony.

Yet despite the peaks and troughs, Accor has done very well in Australia and now dominates the local industry with 130 properties under management and 20per cent of TAHL, the country’s biggest hotel owner.

Issenberg is quietly confident the good times will continue to roll and has picked a good time to depart – some 22 years after arriving as a relatively fresh-faced American. But he will be carrying some extra baggage: a wife, two children and Australian citizenship. Still, the future was too hard to ignore.

A Report by The Mole from The Australian

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