Accor Hotels says managed isolation operations preserving jobs not making big profits

Accor Hotels’ regional boss says being part of the managed isolation facilities (MIF) and quarantineprogramme has allowed the company to keep people in work and it is on track to emerge strongly from the pandemic.

Some of its Australian hotels were enjoying 175 per cent growth on pre-Covid bookings and high pent-up demand could result in strong bookings in New Zealand too.

Pacific region chief executive Simon McGrath also says that in spite of some well-publicised Covid-related problems at some of the firm’s 11 properties in the MIF scheme, the brands’ strength meant they wouldn’t need changing.

“I think the public are smart enough to understand, post-Covid, these hotels are as vibrant and as strong as ever,” said Sydney-based McGrath, who was in New Zealand this week enjoying quarantine-free transtasman travel for the first time in over a year.

The Pullman and Grand Mercure in Auckland have been the sites of Covid slip-ups that have attracted negative headlines but he believes travellers will be smart enough to distinguish between the hotels themselves and any incidents that happened at them.

“They’re great strong brands that have served us well. And let’s not forget we’ve delivered hospitality at the highest level to these quarantine guests — they didn’t want to be in dormitories.”

McGrath says having hotels in the scheme, which has a total of 32 properties in this country across a range of companies, wasn’t highly profitable.

“Ultimately it hasn’t provided a great lot of profit to owners but it kept people in jobs. Essentially, we were able to keep more of our staff in jobs than would have otherwise been the case.”

Even so, New Zealand staff numbers have fallen from about 5000 to about 3500. Throughout the Pacific (mainly Australia, New Zealand and Fiji, where there are 395 hotels with 66,900 rooms) staff numbers have fallen from 21,000 to about 13,500.

McGrath said while staff here are not paid an extra allowance to work in MIQ hotels, those in need could tap into a global hardship fund Accor had set up, which pays up to $5000 for eligible workers.

The France-based business had established a $116m global fund.

Isolation and quarantine operators are in negotiations with the Ministry of Business, Innovation and Employment over new contracts. The ministry will not disclose what it pays to individual hotel groups, but in figures supplied to the Herald it says more than $305 million was paid out in the seven months to March 31.

This figure includes all costs paid to the hotels, primarily for guest rooms and food, but may also include smaller amounts for services such as staff rooms, meals, security, additional laundry, cleaning and waste disposal.

The scheme started on April 9 last year and so far 130,000 people have passed through isolation and quarantine hotels.

McGrath said many people who had been through Accor chain hotels would have had a good experience. “The headline of the 1 per cent of incidents has unfairly outweighed the beautiful stories.”

So how’s staff morale? “They miss the day-to-day interaction with the guests but they do get to know them over a period of 14 days, even if it is behind a door. It’s certainly tough on them but I think it is acknowledged how important it’s [MIF] been.”

Spin-off from the pandemic

For the business, the pent-up demand for travel gives him optimism.

While there would be an initial rush of people crossing the Tasman to visit friends and relatives – which is of little benefit for hotels – corporate travel would recover, and then leisure.

McGrath said that between New Zealand and Australia, there were 10 million outbound visits a year and with the rest of the world largely closed off, many of those would be spent in each other’s countries.

Domestic travellers make up a higher proportion of hotel guests in Australia than New Zealand (80 per cent compared to 50-60 per cent) and in the past four months Accor had seen bookings for North Queensland up 153 per cent on 2019, the Sunshine Coast up 173 per cent and Gold Coast rise 120 per cent.

McGrath expects winter destinations in New Zealand, such as Queenstown, and entry ports to be very popular with Aussies this winter, as long as the bubble holds.

“Once people are confident that this border is a genuine border that’s open, then I think it will flow through the rest of New Zealand. You’ve got a consumer traveller that would have typically been off to Europe this time of year.”

The pandemic had reinforced the need to stay close to loyalty members (Accor has 5 million in the region) and shown customers the value of dealing directly with hotels themselves.

While online travel agent booking sites had an important place, McGrath said the providers could win from the pandemic.

“I’m channel agnostic [but] in a world where there’s uncertainty, where flexibility of booking and cancellation policies is required, you want to be a name not a number.”

The ability to connect with the customer gave Accor a market edge.

“In boom times, Booking.com, Airbnb and Expedia are all good platforms and all do very well but customers are saying they want to have a personal relationship and they want to be able to trust you in uncertain times.”

Another positive spin-off from the pandemic could be a new-found respect for tourism.

Not only was the hotel industry at risk serving returning New Zealanders, but the absence of overseas visitors had emphasised how important they were to this country.

“I think it’s really significant for New Zealand — when you take it away, you really appreciate it.”

McGrath, a long-suffering Wallabies supporter, also thinks New Zealand has led the response to Covid.

“For what it’s worth, I think New Zealand has led the Pacific. Some of the decisions that were made were not easy. It’s easy to be critical because it’s not easy to make the first decisions.”

He said this region was sometimes referred to as the as the hypochondriac of world economies. “We think it’s pitch dark but only when you step out do we realise how lucky we are, and I think we were very fortunate because of the decisions made early on in New Zealand on border safety and job support.”

Around the world, Accor has 753,000 rooms in 5100 hotels located in 110 countries.

In its latest quarterly results, revenue was down 57 per cent on 2019. The group had opened 56 hotels with 1200 rooms during the quarter.

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