* Announces 225 million euro investment in digital push
* Buys French travel software company Wipolo
* Group goal is to generate 50 percent of sales online (Writes through, adds detail, Bazin and analyst comments)
By Dominique Vidalon
PARIS, Oct 30 (Reuters) - Accor will spend 225 million euros (283.5 million) over five years to beef up its digital business, the hotel company said on Thursday, responding to competition from online booking rivals such as Expedia and Booking.com.
Europe’s largest hotel group’s traditional competitors are the likes of InterContinental, Marriott and Starwood, but it faces multiple challenges online.
These range from online travel agents (OTAs), which have squeezed the margins of traditional hoteliers with commission fees of up to 20 percent of the cost of a room, to the growing popularity of home-sharing website Airbnb.
Accor said that as part of its plan it had bought French start-up Wipolo, a travel software company that offers mobile and web itinerary management services. It did not disclose the sum paid.
“OTAs have taken a large slice of the pie. They eat too much, but they also provide me with customers. I want to enter their game more efficiently,” Accor Chief Executive Sebastien Bazin said at the company’s Digital Day, having ditched his traditional business attire for a more casual black T-shirt.
Bazin took over a little more than a year ago and initiated a reorganisation that has now turned to the online arena, focusing on beefing up its IT tools and systems, improving existing services such as its reservation system, bolstering its loyalty programme and seeking to attract more direct bookings.
One goal is to increase the share of online reservations to 50 percent of the group’s business volume, from 35 percent currently, while limiting the share of OTAs, Bazin said.
Exane BNP Paribas recently estimated that OTAs account for 14 percent of Accor’s gross revenue, against 11 percent for InterContinental and 7 percent for Marriott, having more than doubled their share of the market since 2008.
“Online travel agencies represent a long-term threat to industry returns,” the brokerage had said, adding that it expected hotel groups to respond with a new phase of IT investment, marketing partnerships and potential mega-mergers.
In the battle against OTAs, Bazin said that the Accor loyalty programme and its 17 million members are key to its efforts to persuade customers to book directly through the company’s websites.
However, the Accor programme that started in 2008 remains small compared with those of InterContinental or Marriott, both of which have more than 50 million members.
Bazin would not say how he planned to counter the rise of Airbnb, but he acknowledged that the success of the customer-to-customer site should be a “wake-up call” for the hotel industry.
In a move to regain more control over distribution, Bazin appointed former Orange executive and technology specialist Vivek Badrinath last year as deputy CEO in charge of marketing, digital and information systems.
The latest digital initiative comes after a busy first year for Bazin, in which he has had to grapple with a group that reported 2013 revenue of 5.5 billion euros from its 3,600 hotels in 92 countries, spread across 14 brands ranging from budget Ibis to luxury Sofitel.
His first move was to split Accor into two divisions - HotelServices and HotelInvest - to separate its operating and franchising business from its real estate activity in an effort to boost profitability.
The online challenge could take considerably longer, though the group’s share price made a little headway on Thursday’s announcement, rising 1.8 percent by 1453 GMT, against a 0.3 percent rise for the European travel and leisure index. (1 US dollar = 0.7937 euro) (Editing by Andrew Callus and David Goodman)