Accor Sa

Hello and welcome to the Accor 2022 Q3 results. Please note this conference has been recorded. After the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star one on your telephone keypad. I will now hand over to your host, Jean-Jacques Morin, Deputy CEO and CFO, to begin today's conference.

Good evening. Good morning, ladies and gentlemen. Very happy to be with you today for this presentation of our Q3 2022 revenue. Before we start the presentation, and as usual, for the sake of clarity, we will continue to provide the left-half variation by region versus 2019, and we will do that up to the end of this year. As for revenue figures, we provide both the variation versus Q3 2021 and Q3 2019 in the document. Without further ado, let's move to slide 3, where you've got the Q3 2022 highlight. On the left, just to start with the activity dimension of it, you can see here that we've got the Q2 2022 activity, which is now well above 2019. You may recall that in Q2, we reached a level by which we were at about the level of 2019 in terms of fresh power, And we are now 14% above the level of 2019 in Q3. And you see that throughout all geography, as we will detail later on. The second point of highlight on the activities, there was a net unit growth acceleration. We reached 2.4% over the last 12 months. And that confirms that we are on track to reach our net unit growth guidance at around 3.5% for the year 2022. These performances illustrate continued hospitality recovery. We knew summer would be good. We were expecting summer to be good. I think two points I'd like to highlight here is that in September and in October, we did confirm the return of corporate and mice. And the other element to take into account here is that there is still upside potential in Asia, notably in China, in Southeast Asia, because they are still in the dynamic of the overall regions trailing. And we expect to see those benefits popping up in 2023. So on the high side, how does that activity translate in numbers? The group revenue reaches 1,149,000,000, which is an increase like for light of 83% versus Q3 of last year and 9% above Q3 of 2019. As for EBITDA, the combination of robust summer activity as well as the benefit of the sales, marketing, distribution, investment that we discussed with you when we published H1 2022. And all of that combined with some discipline makes us confident that we will be on the high end of the 610, 640 ABDA range that we communicated back to you at the end of September. And STO. Service to Honor, which was subject of many discussions at the end of July, will be breakeven in H2. So as we're entering in 2023, the group can leverage supportive operational lever on top of the business recovery that just went through, a strong pricing power, and also cost inflation mitigation plan in the hotel, as inflation is a subject of many, many industries today. If you move to the second page, we detail here the RESPAR over the values geography. And what you see is that the RESPAR performance is clearly driven by prices, the orange part of the graph that you've got face to you. And when you look at the RESPAR sequentially, I mean sequentially, every region goes up by around 10 points. We also see some occupancy recovery. And so you see that again on the table face to you. If you go by region, in South Europe, the RESPAR of Q3 is 11% above 2019. That is a nine-point sequential improvement quarter on quarter. France had a strong summer period, as we were expecting. And what is very visible now is the performance of Paris. which translate the fact that international guests have now returned. And that performance in Paris is lined up with the performance in Provence. There is no more a dichotomy between the dynamic of the two. In September, corporate recovery drove an occupancy level, which is now close to the pre-crisis level, 2019 level. Northern Europe, you find about the same type of trends, 9% above 2019, 16% sequential improvement, significant improvement from Germany, which had been trailing the rest of Europe as they went out of COVID a bit later than the other countries in Europe. And UK behaves like France, i.e. there is now no more differential between the province and London. If you move to Asia, again, here a sequential improvement to the tune of 9%. Pacific further strengthened, so Pacific is largely Australia, and it ends at 15 points above 2019 level in Q3. Prices is very much driven by prices, and you see some bubbling around cities that start to recover too. Greater China showed some improvement, but you see when you look at it period after period that there are still volatility, as the zero COVID strategy remains strictly applied. So on the one side, you do have some restriction easing that have been occurring, whether in Macao, in China, or in Hong Kong. On the other hand, strict application of the zero COVID creates today volatility, as it has been doing for the last two years. Southeast Asia reported a recovery versus Q2 of about 10 points, so 10 points of improvement sequentially to end up at a negative RESPAR versus 2019 of minus 21%. Hence the point I made that there is potential both in China but also in Southeast Asia of further recovery, everything being equal. In IMEA, which include India, Middle East, Turkey, the Q3 RESPAR is 68% above 2019, a significant job, which is boosted by a very strong summer in Turkey, you know, boosted on top of that by the inflation that you've got in Turkey. UAE was 17% up in Q3 and you will see a continued good performance from UAE in Q4 as the FIFA will now take place in Qatar over the second part of Q4, the second part of the year. Saudi Arabia is still negative at minus 14% below 2019 And then you've got some seasonality because, as usual, of the religious calendar of Saudi. When you move to America, the Q3 REF PAR is 12% above 2019, and that is a 7% sequential improvement, again, versus Q2. So same dynamic here. Brazil's performance is brilliant. They are the only region which has an occupancy rate today which is above the level of 2019. So they have recovered. the occupancy of the pre-crisis level. North America reported a stable RESPAR above 2019 level with good pricing power. So that's about the region view of the RESPAR. If we now move to the second lever, which is the net unit growth, the last 12 months net unit growth is now at 2.4%. That means that the Q3 that we just closed is the best ever in terms of opening in the group. The acceleration is driven by three factors. I mean, first off, Asia. Asia is a key driver in the net unique growth for the group, has been, continues to be. And so the activity rebound during summer was largely due to China. The second reason is still very strong and will continue to be very strong number of conversion. We are now year-to-date at the conversion rate on properties of 50% of the opening. So much, much bigger number than anybody in the industry. Reason three is that we had some one-offs in terms of churn in H1. You may recall the COVID portfolio we had discussed. And we're now back to a normalized level of churn at around 2%, 2% plus. And that also explains the number that you see for the end of September. So all of that together, we confirmed the guidance at around 3.5% net unique growth for 2022. What is also a point we would like to make today is that the people on the ground, the developer on the ground, see asset owner showing appetite for the positive long-term prospect of hospitality industry. And this notably when you compare them with other real estate investment classes. And so despite some tough times, interest rate environment, we see the prospect in terms of development very solid. All of that drives the pipeline to remain stable at around 212,000 rooms, with an Asia-Pacific which, as customary, is about half of the pipeline, and EBSCAN and Luxury, which is getting an always larger share of the pipeline. It's now accounting for a little bit more than 40% of the pipeline, just as a reference, it was about one-fourth of the pipeline four years ago, 25%. If we now move to the revenue, and I am on page six, you can see here the breakdown by segments, the segment reporting. So in global, ACCO revenue is at 9% to the tune of 1,149,000. The like-for-like increase versus Q3 2021 is 83%. If you were to look at the same figure in reported figure, it would be even bigger because of the strength of the USD versus most of the currency in the world. You would be to the tune of 95%. If you look at the segment of hotel services, revenue is at 9% again, and you are 84% above Q3 2021. That reflects the REFPA rebound. And I'll detail the M&S fees in the next slide. As for service to owner, we reached a level of €556 million, which is up 8% versus Q3 2019, so very much what you would expect. Moving to hotel assets and other, the revenue is up 6% versus Q3 2019, or 76% versus Q3 2021. same rationale that the one that we had described back in H1, and Australia, which is about 50% of that segment, which is doing very well, and notably because of a strong leisure demand in coastal areas, and as I was mentioning before, recovers period after period in Australian cities, in the large Australian cities, which have been trailing in terms of performance as they depend on corporate demand. And on the other side, Brazil, which is having, as I mentioned before, a buoyant activity this year, and so is also helping the growth on the teleset. If you move to the deep dive on M&S revenue, you can see here that versus Q3 2019, M&S revenue is above 2019 level. The incentives continue to kick back. You had many questions over time on how the incentive would come back, and I am very happy to confirm what we had said before, i.e. that we will be for the full year somewhere between 30% to 35%. You may recall 35% was kind of the number for 2019, kind of the reference number for history. So as business is coming back, because we've got good pricing in the hotels, you've got a good bottom line at the hotel level, which kicks back to us in terms of incentives. Versus Q3 2021, again, a strong rebound, as you would expect. The revenue growth is 93%. So very, very steep recovery since Q2 of this year. If you go to the last slide, which is some takeaways here, I mean, the rest part is above 2019. You know the levers, which is corporate event, Asian market pricing power. I went through that. Net unique growth, we don't see that changing. There is demand on the ground, and so we'll continue to fill up the pipeline with demand. EBDA at the high end of the guidance. And the last point I would like to make is on the business profile of Accor. Business profile of Accor is today more resilient than ever. We continue on the asset red light, the couple of milestones that were still missing. So we just, as you probably saw, announced the sale, the disposal of the Sequana headquarter in Paris. And we think we will close that transaction between now and Iran. The variability of our cost base has been worked upon during the COVID crisis. It was one of the themes that we worked on during the reset project and so forth. That's definitely helping going forward. And there is a lot of talk around inflation here, and we just would like to say a couple of words for what concerns Accor. First off, inflation is not the same depending on where you are in the world. The inflation that you face in Europe is not the inflation that you're facing in places like Brazil or places like Middle East and Africa. Middle East and Africa is, in fact, you know, getting a lot of benefits coming from the their capability to sell petrol and gas instead of Russia. And Brazil is, in fact, not depending on the rest of the world, neither for commodities nor for gas, neither for food. And so two examples of large regions in our portfolio where the situation that you see is not the situation that you've got in Europe. So I think this natural aging of us being in many, many places in the world is paying off. It didn't really pay off when there was a pandemic, but this is not a pandemic that we face here. And the other element that I would like to say is, by the way, Europe is 50% franchise. So whatever may be the effect of inflation to the bottom line of the hotel, Europe is the place in the world where you've got the largest percentage of franchise businesses versus any other regions. We are, in average, at 30%. Europe is at 50%. So there is also here some kind of an edging coming from the nature of the business that we do in Europe. And then there is the work that we've been doing with our procurement teams in order to edge the cost of energy by buying in advance, so basically getting some term contracts on energy purchases, which is most definitely going to help us in 2023. And last but not least, we are obviously putting all kinds of measures in the hotel in order to reduce consumption, everything being equal. So a lot of things that make us confident on how we will weather inflation going forward if it was to continue. I think that's the positive note we wanted to give for this year. Q3 result, and the floor is now yours.

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