Accor, The First Big Hotel Group To Suspend Business In Russia
On March 4th, Accor, a French multinational and the largest hospitality company in Europe announced their situation update about Ukraine. One of the largest hospitality companies in Russia, which has more than fifty locations, announced that they have decided to suspend development activities and future investments in Russia while keeping current hotels open. Worthy to note that Accor is the first hotel group to announce the suspension in Russia.
In their statement, Accor states that during this tragic historical event in Ukraine, they have been concentrating on making sure their teams, guests, and local partners stay safe. As a result, they have activated the ALL Heartist Fund to support their approximately 3,500 employees in the region. Additionally, Accor has collaborated with the UN Refugee Agency (UNHCR) to collect donations to Ukraine within the company. Furthermore, as for the humanitarian relief efforts, Accor is offering shelters and resources in neighboring countries such as France, Poland, Italy, etc., to welcome refugees. If I can add one suggestion, maybe Accor, as a company, should provide monetary support to Ukraine instead of collecting donations from employees.
After understanding their situation updates about Ukraine, I wonder if you have some similar questions as me.
- Why can Accor not just shut down all the hotels in Russia?
- If they are still operating, what are they doing now? What is the purpose?
After doing some research, here are some possible answers to the two questions above.
Why can Accor not just shut down all the hotels in Russia?
I was confused at first because I couldn’t understand why Accor (or other hotel groups) could not just pull out entirely as Starbucks and Coca-Cola, those major companies did? Why are they risking reputational damage? The pressure for major companies to pull out from Russia is high.
After reading the related article from The Washington Post and the BBC, to simply conclude: Accor is restricted by complex franchise agreements that impede complete withdrawal. So, what exactly is a franchise agreement? According to JDSUPRA’s explanation, the franchise agreement is a license agreement between the hotel owner and the hotel brand that sets forth the rights and obligations of the owner to operate the hotel under the brand or “flag” in exchange for fees. Simply put, it is the third parties that run the hotels in Russia. But, according to BNN Bloomberg, Accor doesn’t own any of its hotels in Russia; the decision of whether the hotel is operating is on the hotel owner, not the hotel brand. And, it is complicated and time-consuming for the hotel brand, Accor, to negotiate with the owners if they want to shut down one specific hotel. In addition, while most of the Accor hotels in Russia are operating, five of the fifty-plus hotels are closed because western governments sanctioned the hotel owners.
Other major hotel groups such as Hilton, Marriott, Hyatt, and IHG are also under the franchise agreements. So, now the promise they can make is to halt the development activities and future investments in Russia and humanitarian efforts. And on March 25th, Hyatt announced that they had terminated the contract with Hyatt Regency Moscow Petrovsky Park, but other Hyatt hotels are still operating. So, in conclusion, it takes time for the hotel groups to take further action. Stay tuned for the updates.
If they are still operating, what are they doing now? What is the purpose?
Some people might be guessing it must be MONEY. However, in the Skift interview with the CEO of Accor Sebastien Bazin, Bazin indicates that in Russia, the occupancy is 35–40 percent, and the company “does not make a dime.” The reason why they are operating is that they believe it provides value. First, even though travel to Russia for leisure is almost impossible currently, there are still other visitors such as journalists, non-governmental organization employees, and western diplomats. Those people need a safe place to stay in this critical period; otherwise, we might not be able to see the news anymore. Accor hotel is responsible for ensuring their accommodations. Second, Accor is trying to take care of its employees in Russia. Bazin indicates that he is making a very distinct decision between the Kremlin and Mr. Putin and the population of Russia. Ordinary people should not be punished because of government actions. Their employees in Russia are in tears and panic, and Accor is taking care of them, as the announcement states.
I fully understand the expectations from people to see the major companies withdraw from Russia. Accor and other major hotel groups are making various humanitarian efforts and suspending any future activities for now, and I believe we can expect further actions and statements soon (here is the link if you want to check some major hotel groups’ actions). The world is in chaos; at least, what we can do is stay patient and rational, not blindly call out.
Using their properties to provide accommodations for refugees is a good start. Still, they should include more such as using the hotel restaurants to provide food, using the space for the medical team to provide physical examination and mental therapy, and offering monetary support to Ukraine or organization. It is essential for companies to make efforts during a crisis like this.
With the Covid-19 pandemic, Ukraine War, and the recent air crash in China, I deeply miss the peaceful, joyful, and harmonious time of days. My heart, thoughts, and prayers go out to everyone who has lost loved ones in those terrible tragedies.
