Accor's Issenberg: It Will Be Tough In The Second Half.
By Yeoh Siew Hoon
Tuesday, 18th March 2008
Accor AP chief believes Asia will not be totally spared from the threat of economic slowdown. Yeoh Siew Hoon reports.

From the new Accor Asia Pacific's office on the 37th level of Raffles City Tower, you can pretty much see most of the city scape of Singapore. The green, green grass of Padang right beneath your feet, the heritage buildings flanking it, the Marina Bay scape, a slice of the "durian", the Esplanade, peeking out from behind another tall building, the Singapore Flyer looming large and round …

"Does this remind you of Sydney," I ask the new chairman of Accor Asia Pacific, Michael Issenberg (pictured), who's moved to Singapore to run the hotel group from a location closer to the heart of its expansion.

"No," he laughs.

You can understand Issenberg, recently promoted from managing director/CEO, feeling on top of the world. His region is the fastest-growing in the group – while still a small part of the global Accor pie, it's full of promise.

Right now, it represents five percent of the company's profits but Issenberg wants to grow it to 10% by 2010.

With 330 hotels in Asia Pacific, another 100 under development and possibly another 100 lined up – it will invest one billion Euros in Asia Pacific between 2007 and 2010, it's pretty much lined up to meet that target – unless something goes horribly wrong.

Could that something be the economy?

Issenberg is not buying into the line that Asia will be immune to the troubles going on in the US. He believes it will be a tough year, especially the second half. "I'm not an economist but a lot of India's outsourcing business comes from the US and China sells a lot of goods to the US."

All this presents a new challenge to hotel groups, he says. For the first time, hotels will have to manage growth in a slowing economy.

"We have the dichotomy of having to manage a growth region in a slowing economy. In the US and Europe, which are more matured markets, you can cut costs.

"But we can't cut costs because we still have to grow. We have huge operations to run and huge developments to drive – it's the first time really we've been in this situation in Asia."

Despite it moving its regional headquarters to Singapore, Issenberg said Accor's strategy remains "to be in country". The corporate office will have a maximum staff strength of 50, while offices in Sydney, Shanghai, Delhi, Bangkok, Ho Chi Minh City, Jakarta and Auckland "will be as close to the countries as possible".

He identified two other hot button issues for the year – the environment and people.

"It'd be wrong to say the environment is increasing in importance because it's always been important. I don't like it that it's trendy now – it is a longterm issue.

"The second issue is that of people – attracting and retaining good people – in a tough labour market. It's hard to find staff everywhere, not just in Singapore. We have near unemployment in Australia and New Zealand. In China and India, where there are literally millions of people, training is such a huge issue."

Meanwhile, the Accor Asia General Manager Conference will be held in at the new Sofitel Wanda Beijing from March 31-April 2. Accor CEO Giles Pelisson will be leading a big delegation from the Paris head office to the bi-annual event.

Said Issenberg: "There is strong interest in China and, particularly in Beijing, due to the Olympics. It's a watershed event for China and as it turns out, rather ironic timing. The world economy is slowing and China will not be impacted till the second half."

He also believes what happens after the Beijing Olympics will be different what happened in Sydney after the 2000 Games when interest in the city died down as soon as the event was over.

"For Australia, the Olympics was a big event in a small country while in China, it's a big event in a big country. It's all about the economy, not the Olympics.

"Yes, there will be some sort of oversupply in Beijing after the Games but China as a leisure destination is also growing in popularity and we're all waiting for the day when Chinese domestic travel truly takes off.

"In the economy hotels, and in the tier two cities, domestic travel is already a huge chunk of the business. That's why we have Ibis lined up – for the day when China's domestic market comes into its own."

Yeoh Siew Hoon, one of Asia's most respected travel editors and commentators, writes a regular column on news, trends and issues in the hospitality industry for 4Hoteliers.com.

Siew Hoon, who has covered the tourism industry in Asia/Pacific for the past 20 years, runs SHY Ventures Pte Ltd. Her other writings can be found at www.thetransitcafe.com . Get your weekly cuppa of news, gossip, humour and opinion at the cafe for travel insiders.

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