A twist of fate: Raffles is part of AccorHotels

The Raffles Singapore has been an institution in the city-state since its founding in 1887. It was acquired by AccorHotels in July as part of a $3 billion purchase of FHRI Holdings, which operates the Raffles, Fairmont and Swissotel brands.
The Raffles Singapore has been an institution in the city-state since its founding in 1887. It was acquired by AccorHotels in July as part of a $3 billion purchase of FHRI Holdings, which operates the Raffles, Fairmont and Swissotel brands.
Yeoh Siew Hoon
Yeoh Siew Hoon

For nine years, Michael Issenberg, chairman of AccorHotels Asia Pacific, sat in his office at Raffles City in Singapore, never thinking that the hotel he'd long looked at from across the road as "an icon and institution" would one day come under his watch.

In July, Raffles Hotels & Resorts officially became part of the portfolio of AccorHotels' managed properties following the completion of the $3 billion acquisition of FHRI Holdings, which operates 115 hotels and resorts under the Raffles, Fairmont and Swissotel brands in 34 countries. It has another 40 properties under development.

You couldn't get a more Singaporean icon than the Raffles Hotel. Its history is intertwined with that of the city-state of 4.5 million people, and every first-time visitor pays homage to it when they imbibe a Singapore Sling.

Issenberg was the executive entrusted by AccorHotels CEO Sebastian Bazien with overseeing the integration. He spent seven months shuttling between Paris and Toronto, returning to Singapore in between to do his "day job."

It was, he said, "very humbling."

"Who would have thought Raffles Hotels would become part of Accor?" he said when I caught up with him in Sydney recently, after completing the integration project.

Several Accor senior executives based in Singapore are also shaking their heads in disbelief at the development, proving once again that in the topsy-turvy world of business, anything is possible.

Within the Raffles City tower, Accor will also take over management of the Fairmont and Swissotel properties.  

In Singapore, there were hardly any ripples, apart from headlines declaring that "ownership would not change, just the management," revealing local acceptance of -- perhaps jadedness about -- global corporate machinations.

I've followed the Raffles Hotel story with interest over the years, and its narrative is the story of Singapore and tells the twin tales of colonization and globalization.

Established in 1887 by Armenian hoteliers, the Sarkies Brothers, it was named after British statesman Sir Thomas Stamford Raffles, the founder of Singapore whose statute can be seen on the banks of the Singapore River.

In 1963, two years before Singapore's secession from Malaysia, Malayan Banking bought the property, and in 1972, it came into Singapore's hands when it was sold to the Development Bank of Singapore (DBS). It stayed firmly in Singapore's hands until 2005 when Raffles Holdings, the vehicle set up for the listing of DBS Land's hotel and resort business, sold the Raffles brand to Colony Capital, an investment firm in Los Angeles.

That sale created a media storm, with locals asking how a national brand like Raffles could be sold to foreigners. For Singaporeans, it wasn't about who owned the physical property, it was more about the brand ownership.

From then on, things changed fairly quickly. In 2006, Saudi Arabia's Kingdom Holding Co. teamed up with Colony Capital to buy Fairmont Hotels and Resorts' chain of hotels in 24 countries for $3.9 billion. Fairmont combined with Raffles to form Fairmont Raffles Hotels International (FRHI) as the new owner of Raffles Hotel. FRHI now owns the Fairmont, Raffles and Swissotel brands.

In 2010, Qatari Diar, the principal real estate entity of the Qatar Investment Authority, injected $467 million into FRHI in exchange for a 40% stake. It also bought Raffles Hotels from the group for $275 million.

AccorHotels came into the picture in 2015, agreeing to buy FRHI for $3 billion from the Qatar Investment Authority, Kingdom Holding Company and Omers' real estate division, Oxford Properties Group.

That it now belongs to a French hotel company, the fastest-growing hotel group in Asia, is merely another turn of the cards.

For Issenberg, who spent enough of his life in Asia to believe in destiny, it's an uncannily coincidental turn.

Born and raised in the U.S., he started his hotel career at the St. Francis in San Francisco. He was the one who put up the sign flagging it as a Westin, but down the road was the Fairmont, "which we always saw as our competitor, and I always thought Fairmont was an American, not Canadian, company."

This is also not his first integration project for Accor. He also led the exercise after Accor's acquisition of Mirvac in Australia and had worked at Mirvac before he joined Accor.

He said you couldn't compare the Mirvac and Fairmont integrations. "Mirvac was one country, 40 hotels," he said. "This is way bigger, more global: 115 hotels across 40 countries."

But he did learn one lesson: "Keep it whole until you are ready to integrate."

Issenberg, said it's been an "intellectually stimulating and challenging" exercise to learn about the history of the Fairmont, Raffles and Swissotel brands and figure out how to meld them. Out of the 115 hotels, 70 are Fairmont, 32 Swissotel and the rest Raffles.

"We couldn't really execute on anything until the acquisition was finalized," he said. "We had to operate as two separate entities."

Two key motives drove the acquisition: giving Accor access to the North American market and gaining a strong foothold in the luxury market.

"Part of buying brands is the people, and that's been our singular focus: retaining the right people and getting that message out early," Issenberg said. "We have to find a way to preserve the Fairmont culture but also integrate it with Accor."

Nine executives were let go after the merger was finalized, and inevitably, there will be some job losses. "This is the least pleasant part of any integration," he said.

Where Fairmont is better than Accor, he said, is in service. "They do a tremendous job with service. We do a good job, but they are even better. While this is done mostly through people, we can look at how we can expand the processes."

What Accor does better is distribution, because of its scale, and development. "There is amazing opportunity to grow the brands in Asia Pacific," he said. "Raffles, Fairmont and Swissotel are underrepresented. There is also opportunity to grow the Sofitel brand in North America now that we have a footprint there."

In Asia Pacific, AccorHotels reached its 700th hotel in June and is opening one hotel in the region every week. The Asia Pacific pipeline constitutes close to 50% of group development.

One of the first moves is setting up a luxury division and headed by Chris Cahill, a former Fairmont employee, who will lead six luxury brands: Sofitel, Pullman, M Gallery, Raffles, Swissotel and Fairmont.

Issenberg said there is no reason to rationalize the number of brands. "I feel we could have more brands," he said. "It's a world where brands are every bit as important but it's become less physical and more experiential. It is also less important to differentiate your own brands than to differentiate from the competition."

Distribution systems will be integrated, sales forces will be combined and it is studying what to do with the three loyalty programs run by Fairmont. "They were going to combine the three when they went on sale," said Issenberg, who noted the acquisition brought about 50 million members into the Accor fold.

And if you thought Issenberg took his foot off the pedal in his day job, you're wrong. "I was working 24 hours a day, never took my eye off the ball," he said, laughing.

Development in Asia Pacific hasn't slowed down, with 330 hotels under development, with most markets remaining strong. "Australia is stronger than it's been the last few years; Indonesia, Thailand and Vietnam are healthy; South Korea has bounced back; Japan is strong. China is less strong; there is so much supply, but demand is keeping up."

Trends and future opportunities

While there are many forces at work in the Asia travel market, Issenberg picked out one single megatrend. "Travel is only going to increase, particularly in Asia," he said. "As the middle class grows, more people are going to travel, and we will need more and more hotels, and we need brands that resonate with every category of traveler."

The second megatrend is digital, but Issenberg believes the human element will remain as important. "The whole process before you arrive and after you leave has changed, but the in-hotel experience hasn't changed that much, and I think much more important than technology is the human element.

"Content is king, content is the experience, we own the content, we must give a great experience. Why are salaries of athletes escalating? They are the content. We have the content, we control the content. That's what we have to do best."

On Accor's investments in Square Break and Oasis Collection and acquisition of OneFineStay, Issenberg said the company could look at possibly expanding into alternative accommodation for the Asia Pacific market. Asked about hostels, he said, "Watch this space."

On trends such as the rise of the sharing economy and how it would impact hospitality, he said, "I heard a futurist describe it as 'the digital layer of underused assets'. So for hotel companies, digital is what we have to get better at so that we can find ways to make use of our underused assets, be it our executive lounges, meeting rooms, lobbies. That's the key."


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