Accor Sa

Hello and welcome to the Accor Q1 2022 Revenue Conference call. My name is Jess and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. This can be done by pressing star 1 on your telephone keypad to register your question at any time. If at any point you require assistance, please press star zero and you will be connected to an operator. I will now hand over to your host, Jean-Jacques Morin, Deputy CEO and CFO, to begin today's call. Thank you.

Thank you very much. Good evening, ladies and gentlemen. Very happy to be with you today for this Q1 2022 revenue call. Before we start the presentation, and for the sake of clarity, we will continue to provide the RESPAR variation by region versus 2019 for this year. This is to ease the understanding of performance, and notably because of some base effects. As for revenue figures, we provide both the variation versus Q1 2021 and Q1 2019 in the documents. So with that, and without further ado, let's move to the slide number three, where you've got the highlights of the quarter. I'm very happy to report that Q1 continues to show an improved business performance and momentum. Q1 22 RESPAR, more than doubled, versus Q1 21. And the RESPAR versus Q1 2019 continues to improve sequentially, quarter after quarter, to post a minus 25% number in Q1, which is what we had told you during the result, year-end result in February. Net unit growth reached 2.5% over the last 12 months, and we're going to detail that a bit later on. All of that translated into a group revenue of €701 million, which is an increase of 85%. versus Q1 2021 on a like-for-like basis. So what are the drivers of this performance? And this is the right part of the table that you've got faced to you. Number one, there is sustained rebound led by domestic demand. And this is domestic demand for both business and leisure, as we see through notably events. The second reason is that there is an acceleration of international travel As you see across the world, across the globe, the reopening of borders, there is one notable exception to that, which is China. The third key reason is that we've got in our hand a strong pricing power across all regions and all segments, and we have today an average room rate which is above the level of Q1 2019 on a like-for-like basis. So this is stemming from three things. Number one, the continued pent-up demand, notably for luxury and lifestyle properties. Number two, there is inflation in this world, as we all know, and we are in a business where you can pass it through to business or leisure individuals, and you see that in the numbers. And the last reason is as business is coming back, you've got a progressive improvement of visibility, a so-called booking window, and that also leaves us a better capability to yield rates. If you move to the next page, page four, what you've got here is how this RESPAR is declined by geography. As anticipated at group level, February and March have been more than offsetting the pause of January. The pricing power remains strong, and the last four months have been above the 2019 level. When you look at Europe, more generally, Omicron largely affected Europe. Europe was the most affected geography by Omicron. But the blip was short-lived and really was limited to the month of January. Already in March, occupancy in Europe is back to the level of Q4 2021. If you go into the explanation of South Europe and North Europe, so in South Europe, the Q1 REFPA was minus 21% versus Q1 2019. The French province remains strong, and the gap between Paris and the province is getting reduced month after month because of the recovery of international business. In Northern Europe, Q1 RESPA was minus 38% when compared to Q1 2019. The UK is at minus 15% and continues to be the driver for the region. And they have today a province RESPA in the UK, which is at the Q1 2019 level. London, just like Paris, is seeing the gap between the capital and the province being reduced significantly. Again, because international travelers go back to the capitals. Germany was bleak at minus 62%, and we all know that Germany was severely impacted by restrictions over Q1. Since then, those restrictions have been lifted. They've been lifted in April. And if you look at the numbers for the month of April, you see the very strong rebound of Germany already. If you move to the second big region, which is Asia-Pacific, the Q1 RESPA is a sequential improvement of five points, and we end up at minus 43% versus Q1 2019. The Pacific region, which is mainly Australia, leads the pack, and the Q1 was at minus 31% versus 2019. There you've got the phenomenon of the reopening of the state border at the end of last year. And since February of 2022, you add to that international border reopening. And so that will continue to fuel the recovery. Greater China had a Q1 performance that was a pullback because you end up with minus 42%. This is all driven by the Omicron outbreak in China compounded by zero COVID strategy in China. Southeast Asia, the Q1RF bar is kind of stable at minus 55%. But there again, the situation is getting better. If you – I'll give you an illustration. If you look at places like Singapore, Bali, Vietnam, Thailand, they are now all reopening with limited restrictions. And so business, because of that, will come back, should come back. There are two gating items. Number one, you've got to be able to find a flight to get there. And so the international air flight traffic recovery is a gating item. And the second thing is that some Asian tourists are so far not allowed to travel to those destinations. And as an example, China is a good illustration. Moving to the fourth region, which is IME8, Middle East, Africa, Turkey, you see here Q1 RESPA, which is an improvement of three points versus Q4, which ends up at 8%. above 2019, Q1 2019 level, and this is very much driven by prices. In UAE, Q1 2022 is above Q1 2019, and there is the boost of the Expo 2020. In the rest of the year, the FIFA World Cup, Football World Cup in Qatar, which is going to occur in Q4, will be an additional boost for the 2022 performance. If you move to Saudi, which is the second big element in the performance of EMAT, you've got here finally a resumption of pilgrimage to all the cities for both international and domestic travelers. And so that is obviously boosting the numbers. Ramadan in April is going very well, and you will have some pilgrimage, the Hajj pilgrimage in July, And that will also continue to fuel recovery in Saudi Arabia. The last region is Americas. You see here a 5% response sequential improvement to reach a level of minus 14%. And again here, a good pricing power. Brazil is in fact seeing a nice recovery. And North America, despite Omicron, also benefited from a nice business travel on top of a strong leisure demand that was already pre-existing. So all of that explains why America has been doing well in Q1. So if we move to the next page, we talk now about net unit growth. We mentioned the last 12 months net unit growth at 2.5%. We always measure the last 12 months of performance. In fact, in Q1, the openings were limited. It was a soft quarter. It's usually a soft quarter, but this was compounded this year by the tough situation I described in China with the COVID outbreaks. On the other hand, the churn in Q1 was well in line with the historical level. So that was a positive. As for the pipeline, we're more or less at the level of the end of last year at 212,000 rooms. And the conversion that we've been disclosing to you every quarter were quite high at 57% of the Q1 openings, again, on a basis which was a small number because the Q1 opening was a smaller number than usual. So after a soft Q1, we will see acceleration starting the next quarter, and that's why we feel confident to renew our net unique growth guidance at 3.5% for 2022. If we go now in the detail of the revenue by reporting segment, which is the slide six of the deck, you see the group revenue at the $701 million that we had mentioned before. The LAC4LAC decrease at minus 23% is slightly better than the RESPAR decrease of 25%. And the difference is related to the hotel asset, as you can see on the table, with benefiting from favorable exposure of being skewed towards Pacific. For hotel service, the LAC4LAC revenue growth more than doubled versus Q1 2021, and is down 25% versus Q1 2019. The decrease is down in line with the 25% rest part drop that we had before mentioned. And if you split hotel services between MNF and STO, you see that MNF is down 33%. I'll detail that in the next slide. And STO is only down 21%, so less than MNF. And this is largely explained by the fact that the STO is skewed toward the U.S., and you had a better activity in the United States. In North America, I should say. For hotel asset and other, the like-for-like revenue growth was 52% versus Q1 2021, and down 19% versus Q1 2019. Again, here it's predominantly Australia and the Mantra business, and Mantra is... is very strong on the Gold and the Sunshine Coast, which is the Queensland. And as it was the Australia summer, and as people were finally free to travel within Australia, they had a very good season, which is why the numbers are what you see. Moving to page seven, you've got to drill down here on the M&F portion of the hotel service business. Explanations are very much standard with what we've been explaining for many quarters. M&F revenue doubled with the activity recovery as you would expect. By region, the variation reflects the activity recovery in that region. With occupancy level above 40%, which is kind of the rule of thumb threshold for going back to incentive, you see the incentive gradually recovering across the board. The numbers are better than what they were in average last year, and this is no different than what we've been telling you in the year-end projections or questions regarding incentives. Versus Q1 2019, MNF revenue decreased by 33% on the back of the REF PAR decrease, and this is the typical distortion that you find because of the incentive in management contract That creates, by the way, when business comes back, an opportunity with additional operating leverage. If you move to page 8, which is the takeaway, and to close this presentation, I mean, the positive booking trends we see in April confirm the solid underlying momentum going into summer. We will have a strong summer, and we will see the rest part continue to improve sequentially. So since Q2 last year, every quarter has been better and that is not to stop. The second point is we've talked about domestic travel. The domestic travel will be back in 2022 to the 2019 level. So it confirms the eagerness that people have got to go and and be back in the hotels when it comes to domestic travel. As for international travel, there is more delay here, as we all know, and it will continue. It is catching up. I have been explaining that. And it is catching up with an Asia which is lagging, so it will take more time. So domestic travel back to 2019 level and international travel will be later. On development, I've said it, but I wanted to close with that. We reconfirmed the 3.5% net unit growth. And with that, I close this presentation. And I'm ready to take all your questions.

If you would like to ask a question, please press star 1 on your telephone keypad. Please ensure your line is unmuted locally, as you will be advised when to ask your question. So once again, it's star 1 if you would like to ask a question. And the first question comes from the line of Jamie Rollo from Morgan Stanley. Please go ahead.