CEO of Europe's biggest hotel group on a new, uncertain environment

This interview was taped before the tragic events in Nice, France. Included below is a statement from AccorHotels’ CEO on the events.

Uncertainty and tragedy have dominated Europe in recent days, from the attack in Nice, France to the coup attempt in Turkey, both of which followed a terrorism attack in Paris in November. Even more uncertainty came after a majority of British voters opted in June to leave the EU.

Sebastien Bazin, chairman and CEO of AccorHotels — Europe’s largest hotel group with brands including Sofitel, Mercure and Ibis — sat down with Yahoo Finance in the Palm Court of New York’s Plaza to talk about hotels in a new era of uncertainty.

The company announced on July 12 the closing of its $2.7 billion acquisition of Fairmont Hotels. Fairmont — previously owned by the Qatar Investment Authority and Prince Alwaleed Bin Talal’s Kingdom Holding Co — includes iconic properties like New York’s Plaza, along with The Savoy in London, Raffles Singapore, and Fairmont San Francisco.

Uncertainty in Europe

The impact of the Brexit vote on June 23 certainly impacts AccorHotels, according to Bazin.

“If anything we know for sure, tourism is extremely linked to currency,” Bazin said. “It’s inevitable that with the pound dropping, you’ll have less outbound market from the UK to Europe and elsewhere. At the same time, you have many people coming into London from elsewhere because as an inbound market, it’s going to be cheaper. Will one balance the other? I don’t know.”

Bazin is most worried about the lack of clarity.

“I hate uncertainty,” he said. “I don’t see anything good coming out of the Brexit. It’s going to be slow growth in the UK which means it’s going to be slow growth in Europe, because we’re all interdependent.”

In the end, though, he said he is used to uncertainty.

“We operate in 92 countries,” he said. “Every year, I have five countries going wacko for geo-political event, for a lot of social-economic event. But every year, I have five other countries doing remarkably well.”

Meanwhile, terrorism has become a more regular event, Bazin said.

On Thursday, a truck in Nice, France killed over 80 people and injured over 200 in what President Francois Hollande called a terror attack. Then on Friday, unrest in Turkey picked up following a military coup attempt. AccorHotels’ stock fell sharply at the end of the week amid the uncertainty.

“Our thoughts are with the victims’ families and loved ones, and with the entire population of France, which has been affected by this tragic situation,” Bazin wrote via email after our interview. “Unfortunately, these types of situations have become all too common. Sadly, this is a new business reality for us and as a leader in the hospitality industry we now need to plan for them. More than ever we are investing in risk assessment and planning to allow us to react and respond in a timely fashion.”

State of the industry

Despite continued risks, Bazin remains optimistic about the travel industry.

Tourism and travel have been increasing 5% per year for the last 10 years, according to Bazin. This is likely to increase the same for the next years, he says, largely because of the emergence of more purchasing power from consumers in Korea, India, China and Malaysia, along with the advent of low-cost airlines.

He added that the supply of new hotel rooms is increasing just 2% per year.

“It’s very rare to be in an industry where you have macro supply and demand working in your favor,” he said. “We may be in a 12 to 14 year cycle.”

Bazin also said he welcomes industry disruptors from Priceline (PCLN) to Expedia (EXPE) and Airbnb.

“[Airbnb] is a wake-up call for me and I love it that way,” he said.

The company recently broke out its HotelInvest unit, as part of an asset light strategy to focus more on building brands.

Betting on luxury

As for the recent Fairmont acquisition, Bazin said it’s a bet on luxury, which is something AccorHotels continues to develop.

“Luxury is never associated with one single man. Luxury is a collection of a number of individuals with one thing in common — purity,” he said.

Fairmont’s Plaza Hotel — which used to be owned by Donald Trump — has gone through many changes over the years.

For now, Bazin is focusing on building out its luxury portfolio to attract overnight guests and local visitors as well.