Accor may put 16 upscale brands up for IPO – is the loyalty scheme to blame?

According to press reports, Accor is considering an IPO (stock market listing) of its lifestyle hotels joint venture, Ennismore.

In a separate transaction, LVMH is reported to have secured an option to take control of Accor’s fledgling Orient Express hotel brand in 2027.

With the Ennismore brands potentially leaving Accor as part of an IPO, and Orient Express likely to go to LVMH, it raises an interesting question – is Accor Live Limitless the reason why Accor isn’t committed to the upper end of the hotel market?

Let’s be clear that there is a lot of ‘if’ here. Ennismore may or may not IPO, and there is no certainty that the brands will leave Accor Live Limitless if they do. Many of the 16 brands in Ennismore, which includes The Hoxton, Mondrian, 25hours, Gleneagles and Morgans, are not bookable via Accor now, either fully or in part.

However, let’s assume the brands go. Ennismore has its own loyalty scheme, Dis-loyalty, so it isn’t dependent on Accor Live Limitless.

It’s also virtually certain that LVMH exercises its option to take full control of Orient Express hotels to add to its existing Belmond and Cheval Blanc brands.

The big hotels groups have been piling into luxury

The last decade has seen the major hotel groups do whatever was necessary to add ‘luxury and lifestyle’ hotels to their portfolios.

Accor bought Raffles, Fairmont and Swissotel as well as half of Ennismore. Hilton launched LXR, bought NoMad and did a major Small Luxury Hotels partnership. Hyatt bought The Standard, Alila etc and the Mr & Mrs Smith marketing group. IHG bought Regent and Six Senses.

Why? Well, it’s not because they move the needle on profitability.

Hilton has over 8,000 hotels, of which a grand total of 36 are Waldorf Astoria branded. Even if you throw in 50 Conrad hotels, a couple of NoMad’s and the LXR ‘soft brand’, you are looking at well under 2% of the portfolio. It’s a rounding error. Yes, these hotels have higher daily rates than the other 98% but they are often smaller in terms of room count.

However, these hotels have a disproportionate impact due to Hilton Honors. Hilton is convinced that the prospect of a luxury hotel redemption is what drives everyday stays at their cheaper brands.

Why did Hilton do its deal with Small Luxury Hotels in 2024? A senior SLH director told me earlier this year that he couldn’t believe that Hilton was letting members book their hotels for points, given what Hilton was paying SLH in return.

A senior Hilton manager answered the question for me very recently – it needed to bulk-up in luxury to keep selling a dream to the buyers of those midscale and economy rooms.

IHG and Marriott believe the same thing, although IHG is moving closer to fully revenue based redemption pricing. IHG’s attempt to use Six Senses to drive the loyalty programme has been messed up by the refusal of most hotel owners to join IHG One Rewards.

What has this got to do with Accor?

It is generally agreed that the best ‘pence per point’ hotel redemptions are at luxury properties. This is deliberate, to encourage customers to do the large number of stays required to get the necessary points.

Accor Live Limitless is a pure revenue based programme. 1 point is worth 2 Eurocents.

There is no carrot, at all, for spending your points at a high end Accor hotel. You get the same 2 Eurocents of value at an ibis or a Raffles.

More importantly, the spend needed to get the points for a high end hotel is crazy. A £1,000 stay at Raffles requires 58,000 Accor Live Limitless points. Given that you earn 2.5 points per €1 spent – elite members get more, admittedly – it’s not a realistic target, requiring £23,200 of spend.

A £1,000 room at a Park Hyatt, on the other hand, would cost no more than 45,000 World of Hyatt points. You earn at 5 points per $1 spent, plus elite bonuses. You only need to spend $9,000 (£6,600).

Marriott pricing is semi-dynamic, but you’d expect to pay around 120,000 points for a £1,000 room at The St Regis New York. You earn these at 10 points per $1 spent, plus elite bonuses. You only need to spend $12,000 (£8,800).

Accor also runs fewer bonus point promotions than the other big brands. In reality, you would get away with spending a lot less at Hyatt or Marriott than the numbers above.

The bottom line, as I see it, is that Accor Live Limitless is unlikely to drive redemptions at Accor’s most expensive luxury and lifestyle hotels. Why hoard points when a luxury redemption isn’t proportionately better value?

If your upmarket hotels are not encouraging guests to earn points at day-to-day mid-market hotels, you don’t have a strategic need to keep them.

This is potentially why Accor is willing to lose Orient Express and potentially the Ennismore brands – because it won’t change the behaviour of the person staying at a Novotel once a week.

It will also explain why the hotel groups which DO use luxury and loyalty to drive business to their cheaper brands will think about acquiring Ennismore, bypassing the mooted IPO. Heaven help us if IHG, Marriott, Hilton or Hyatt gain another 16 brands in one go though ….

I also suspect the other big chains will also be sounding out Accor about any interest in selling their bigger leisure driven luxury brands, Fairmont and Raffles.