When European hotel giant Accor won the mandate to operate the Old War Office in Whitehall, SW1, under its Raffles Hotels & Resorts brand, it cemented its position as a leading luxury operator in the London and wider global hotel market.
The 580,000 sq ft Grade II listed Edwardian property will be the UK debut for Raffles, famous for its Singapore hotel.
The Ministry of Defence sold the Old War Office to Hinduja Group and Spanish developer Obrascon Huarte Lain Desarrollos for £350m in 2016. Inside, there are two miles of corridors connecting more than 1,100 rooms where Winston Churchill and the secret service worked during the second world war. These are being converted into a 125-bedroom hotel.
When news of the acquisition broke, the asset quickly shot to the top of the hit list of the global luxury operators looking for a debut UK location. Accor won the instruction in June 2017.
Growing portfolio
When it opens in 2020, Raffles will sit among Accor’s growing portfolio of luxury London hotels, which includes The Savoy, WC2, Sofitel St James, SW1, and Victory House, WC2.
The portfolio reflects a 20% share of London’s luxury hotel market, but 20% isn’t enough for ambitious Accor.
The European hotel giant, more commonly known for its budget and midscale Ibis and Novotel brands, propelled itself into the luxury market in 2015 when it acquired Fairmont Group for $2.9bn, adding the Raffles, Fairmont and Swissôtel brands to its portfolio. Now it is on the lookout for further opportunities in London and the UK , not just for its luxury offering, but for all its brands.
Accor’s next London opening is boutique lifestyle brand Mama Shelter, which will debut in Shoreditch, E1, next year. Mama Shelter is part of a new clutch of brands, including 25h Hotels and Jo & Joe, aimed at millennials, and which Accor is keen to expand.
New strategies
The company is in the process of selling a 55% stake in its real estate business AccorInvest to Public Investment Fund and GIC, Credit Agricole Assurances, Colony NorthStar and Amundi, for €4.4 bn (£3.8bn). The sale of the real estate will position Accor as an “asset light” business and proceeds will be used to fuel the company’s expansion.
Accor brands
Lifestyle and economy
■ Jo & Joe – for millennials and travellers
■ Ibis, Ibis Styles, Ibis Budget – contemporary economy
■ 25h twenty five hours hotels – upscale economy
■ Mama Shelter – midscale lifestyle
Midscale
■ Adagio Aparthotel – midscale long-stay apartments
■ Novotel – modern upper midscale
■ Mercure – Locally inspired midscale
■ MGallery by Sofitel – boutique upper upscale
■ Pullman Hotels and Resorts – cosmopolitan upper upscale
Luxury
■ Swissôtel Hotels & Resorts – contemporary upper upscale
■ Sofitel Hotels & Resorts – modern luxury
■ Fairmont – unforgettable luxury
■ SO Sofitel – lifestyle luxury
■ Raffles Hotels & Resorts – emotional high-end luxury
■ Orient Express – mysterious high-end luxury
Phillip Lassman, former head of development at rival hotel group IHG, was hired as vice-president of development at the end of last year to spearhead expansion in the UK. He is using his experience from 10 years at IHG and understanding of how to operate an “asset light” hotel business to ensure Accor meets its expansion targets.
Lassman is cautious to put an exact figure on how many hotels he wants to open this year, but says that he is looking to “accelerate” on the 10 openings and 16 signings the group achieved in 2017.
“We are taking every opportunity that we can to grow the portfolio in the UK,” he says.
“Asset light is the main thing at the moment,” he says. “We are aligning ourselves with the way that business is done. Being asset light frees up a lot of the capital to invest growth in further acquisitions and development.”
Lassman is looking at the UK by destination, evaluating where Accor does not yet have hotels, as well as locations where it would like to increase its presence. He is considering rebranding opportunities, as well as new-build developments, specifically targeting UK where new infrastructure is being developed.
Accor has an existing pool of partners that it works with, but this is something that Lassman wants to expand as well.
“We want to be able to build a new breed of partners and we are open to new business,” he says. “Where we need to expand and work greater with more partners is in the upscale segment and we need to grow our MGallery and Pullman brands, particularly in Zone 1, and then we need to increase our midscale distribution outside of central London.”
Luxurious ambitions
The acquisition of the Fairmont brand in 2015 was a game changer for Accor, having previously only held its own Sofitel brand under its luxury umbrella.
Although the acquisition proceeded Lassman’s appointment, he acknowledges its significance.
“It was a massive acquisition and it was perfect for us,” he says. “We are now the second-largest operator of luxury hotels worldwide and we have used our leverage and network to double the pipeline of Fairmont, Raffles and Swissôtels, so it has been a great return on investment and really completed the network so that we have a vast array of brands that we did not have before.”
Lassman is particularly keen to open a Swissôtel in London to complete its luxury holdings in the city as well as the UK. He is targeting Kensington, Chelsea and the West End in London, and Liverpool and Manchester outside the capital. He is also keen to secure a Raffles for Edinburgh.
“We would like to see all our brands present at some point in the UK, and would like to see Swissôtel in multiple locations. We are also looking at opportunities for the Orient Express in London as well as more MGallery hotels,” he says.
Accor acquired a 50% stake in the Orient Express brand in October last year, partnering with existing shareholder, French rail operator SNCF, to develop a new range of hotels under the Orient Express brand.
Although sometimes viewed as more resilient sector against macroeconomic factors, Lassman is aware of the challenges of the luxury market.
“We cannot take these brands for granted,” he says. “We have to constantly improve them and we will have some external factors challenging us.”
He adds: “We have Brexit on the cards and we need to make sure we can retain our talent and attract new talent when we open new hotels. But we are positive about the future. There are challenges in every life and business, but it is about how you adapt and address those which puts you apart from the competition.”
That, and perhaps one of the most unusual hotel sites in the capital.
