Accor Sa

Good day and welcome to the ACOR Group's first quarter 2024 revenue conference call. Please note that this conference is being recorded. During the conference, your line will be listened only. However, you will have the opportunity to ask questions at the end of the presentation by typing star 1 on your telephone keypad. If you need assistance, you can press star 0 at any time and be connected to an operator. And I'll give the floor to Ms. Martine Giroux, I call Chief Financial Officer to be at today's conference. The floor is yours.

Thank you, and good afternoon, everyone, and thank you again for joining ICO's first quarter trading update call. So I will start with the key highlights on slide three. So I'm pleased to report that we started the year on a strong footing. Our operating performance was very solid in the first quarter, quarter, thanks to our portfolio diversification. So, starting with REF PAR, the REF PAR in the first quarter was an excellent 8% growth, reflecting the resilience in global demand and particularly strong performance in the MEA APAC region. Pricing continues to be the main driver, contributing about 75% of the REF PAR growth for the group. but we also had an improvement of one point in occupancy versus prior. So occupancy in the first quarter stood at 61%. We were very pleased this quarter to see the acceleration in our net unit growth, which reached 3.1% on an LTM, so last-month basis, in the quarter. That's 0.7 points above where we exited 2023, and it's driven by a strong pickup in openings. Actually, our opening in the first quarter is twice the level we had in the first quarter of both 2023 and 2022. So we are starting to see the benefits of the new organization on signings last year, and which is now starting to convert into improved net unit growth. And finally, on revenue, this revenue increased 8% on a like-for-like basis, to 1,236,000,000, which is in line with the rest part. Turning to capital allocation, we continue to execute on our capital allocation plan in line with our commitments. We are maintaining a solid investment grade rating. Actually, we reinforce that rating with the upgrade from Fitch, which means our outlooks are neutral to positive at the end of March. We are extended. our debt maturity and preserving our liquidity with the assurance of a new seven-year senior bond for $600 million and the coupon was 3.875. The issuance was actually well oversubscribed. And as we shared in February with you, we completed a second tranche of $400 million share buyback and we cancelled, as a result, 3.9% of our share capital at an average price of 40 euros and 31 cents. I will now turn to slide four and walk you through the main components of the REFCAR growth in the first quarter. So I'll start with premium scale and ECO, as we usually do, which posted a REFCAR growth in the first quarter, also very solid, plus 8%. driven by continued strong pricing resilience, as you can see here, for about three quarters, and occupancy gains for the remaining quarter. In the first quarter, average room rate was up 6% for the PME division, and occupancy rate was up one point at 61%. Turning to ENA, which is Europe-North Africa, RECPAR was up 5% in the quarter, and that was driven by a 3% growth in average room rate, with Germany actually overperforming both the U.K. and France. If I now turn to the main countries within the ENA region, in France, which is the largest market in that region, Paris and Provence actually reported fairly similar respite growth in the low single-digit territory. Following a slow start of the year, France growth accelerated in March, benefiting from a stronger event schedule in 2024, as well as a more favorable Easter calendar. In the UK, we also reached low single-digit growth, both in London and outside of London. And finally, in Germany, Red Bar was up in the high single digits in the quarter, therefore over-performing both France and the UK. And this results both from a steady improvement, but also from a lower base effect in 2023, as we've commented in the past, Germany was lagging the rest of Europe early last year. Turning now to Middle East Asia Pacific, or NEAPAC, RESPA was up a very strong 12% in the quarter, and was mainly driven by rate, as you can see on the chart. Middle East, Africa continued to report very solid thus far, driven by price, notably benefiting from a Ramadan in Saudi Arabia, which was this year mainly over the first quarter, as opposed to the second quarter last year. Southeast Asia also posted very strong performance, driven by Singapore, where we had some strong concert activity, and Thailand, where we are seeing strong demand from Chinese tourists. Turning to Pacific, continue to deliver solid growth amid single-digit demand with occupancy of four points in this region. And China finally continued to recover, but at a slower pace with less . Chinese outbound traffic is recovering as expected, which is commented on the positive impact it had on countries such as Thailand, but we also see that in the Middle East. But the return of international guests, while it has accelerated, is still well below 2019. And finally, in America, which, as you know, is primarily Brazil for the PME division, REFPA growth was up 4% in the quarter. Brazil had recovered occupancy above pre-COVID level. We're still above 2019 level, but we've seen a little drop. drop in demand in the first quarter. Moving to luxury and lifestyle, on the right side of the page, restaurant growth was 7% year-over-year, with, as you can see here, pretty balanced rate and occupancy gains. Average room rate was up 3% in the first quarter, and occupancy was up two points in the first quarter and reached 60%. Now, despite being slightly more exposed to North America, which is the market which for Accra was actually flat in the first quarter, luxury ref bar was still up 6% on the ref bar perspective, with rates, as you can see here, driving most of the gain. Turning to lifestyle, we were very pleased to see growth resuming in lifestyle, with a very strong 10% ref bar growth in the first quarter. mainly driven by occupancy, as you can see here. Resorts had a particularly strong quarter in Turkey, in Egypt, and the United Arab Emirates, benefiting from strong demand, which also had a very positive impact on occupancy in that area of the world. I will now move to slide five and comment on net unit growth and portfolio. So as shared in my introduction, net unique growth accelerated in the first quarter, and this is both for PME and Lexan Lifestyle. So I'll start on the left with PME. Last 12 months, net unique growth for this division was 2.5%. That is in line with the midterm guidance for the division, which is between 2.5% and 2.5% CAGR, and it is up 0.6 points versus where we exited 2023. We had far stronger openings in the first quarter of 2024. Some of the no-go openings were The Tribe in Milano-Malpensa, and also Moventic in Muscat in Oman. Churn was also lower than prior year, helping to boost the net unit growth in the quarter. Pipeline was slightly down, 271,000 room, signs of traditionally low over the first quarter. And finally, looking at M&F revenue per room on an LTM basis was holding at €1,200 per room. Moving to the right, luxury and lifestyle portfolio also saw an acceleration in its net unit growth. The portfolio was up 6.8% over the last 12 months ending March 2024. This was driven by Ennismore, which had a remarkable net unit growth on an LTM basis of 23%. In February, we shared with you the positive momentum that we saw in signings and pipeline, and we were pleased to see that it is converting into an acceleration of net unit growth at 6.8%, which is an improvement of 1.3 points versus where we exited 2023 for the luxury and lifestyle division. And it is gearing towards or mid-term guidance of eight to 10%. Now this acceleration is fueled by a solid pipeline, which is up 2% versus December of last year. And the pipeline is now standing at 45% of the existing portfolio. Among the main notable openings, we had a Bricsos opening in Egypt, alongside with an M Gallery in Sapporo, Japan. And finally, on M&S revenue per room, also steady at 3,800 euro per room, so steady versus 2023. So at group level, NUG is 3.1% over the last 12 months, again, in line with the mid-term guidance of 3.5%, and conversions continue to be the majority of our opening, based to that 3.5% of our openings on our last 12-month basis. I will now turn to slide six and comment the main components of revenue. So, group revenue, as I was sharing in my introduction, was up 8%. On a like-for-like, it was actually up also 8% on a reported basis versus last year, with double GG growth in M&F revenue in both divisions, and I'll come back to that in the next slide. Revenue growth, both like for like and reported, is somewhat negatively impacted by lower reimbursement costs in the PME division, and I'll come back to that. Reported growth is positively impacted by the consolidation of Potere Chabot, which were acquired in October last year, or consolidated, sorry, in October last year, but that is offset pretty much fully by foreign exchange effects. So starting with the premium mid-scale and economy, revenue was up 6% on a like-for-like in this division at $690 million for the quarter. Management and franchise revenue, very healthy, up 14% in the quarter. That is six points above REF PAR, and it's boosted by incentives, particularly in the mail-packed regions. Incentives represented 33%. of our M&S fees, and that is in line with where we closed 2023. This demonstrates the continued solid operational performance of the hotel across the region and the segments. As you may recall, the incentives are a function of hotel gross operating profit. Moving to services to owners, we have – we're showing here a slightly negative variation year-over-year, and that is really the results of baseline baseline of 2023. In the first quarter last year, revenue benefited from the final cost reimbursement incurred under the accommodation service agreement for the FISA World Cup. Now, as a reminder, this has no impact on EBITDA as it is a pure pass-through, but it did impact the revenue on a year-over-year comparison. Turning to hotel assets and others, Like-for-like performance remains driven by Australia, which is the main country under that segment, and Brazil. The revenue growth reflects here the geographic mix, and the reported performance, which is 1%, is impacted by effects on the Australian dollar. Turning to luxury and lifestyle, luxury and lifestyle revenue is up 12% in the quarter at $566 million. Also, solid growth in management and franchise, which was up 11% in the quarter. That is four points above REF PAR growth. Services to owners grew slightly above REF PAR, thanks to a slightly better share of feeable channels. And then hotel assets and other like-for-like growth mainly reflects the opening of new venues at Paris Society. And the reported figure is, again, impacted fairly by the consolidation of since October of last year. I will now turn to slide seven on management and franchise revenue. As I was commenting, overall, M&F revenue is 13% up in the quarter, which is five points above the , so good conversion. Starting with PME, 14% growth. As you can see here, M&F revenue is pretty robust across all regions and consistently above Ref Bar growth. Mainly driven by incentives in Mayapak, as you can see here, 21% like-for-like growth on M&F revenue in that region. We also had a very strong growth in America. This is obviously a much smaller part of that portfolio, and that was impacted fairly by a termination fee we received in the quarter. Turning to luxury and lifestyle, again, M&F revenue up 11%. As you can see here, revenue growth in M&F is above lifestyle growth for both lifestyle and luxury division. And for lifestyle, the worst was particularly strong, driven by a higher level of incentives in the quarter. So I will now conclude my presentation. If we can move to slide eight with the key takeaways. And as stated in my introduction, we started the year on a strong footing with an 8% red bar growth and an acceleration of our net unit growth to 3.1%. And again, this was one of the benefits we expected from the new organization, and we are really pleased to see it starting to take shape. As we called out in February, we launched and completed a second tranche of €400 million share buyback in the first quarter, and this allowed it to actually maximize the accretion for shareholders. In the first 12 months following the CMV we held in June of 2023, and taking into account the dividend of €0.18, which will be proposed for approval at the next AGM, on May 31st, we will have returned over that first 12-month period 1.1 billion to shareholders. So we are well on our way to execute our plan to return between 3 and 3.5 billion over the 2023-2027 period. Third, we leveraged the Share Buy-Back Program to facilitate the rotation of some of our historical shareholders named Jean John, whose ownership is actually today slightly below 4% as compared to 10% at the end of 2023. And this, combined with our rejoining the CAC 40 in March, is translating into renewed interest from long-only investors, some of which have already become new shareholders of Accor. Now, whilst we continue to operate with a certain level of macro and geopolitical challenges, we are pleased, again, with our Q1 trading results, and it gives us confidence in reaffirming, as we did in February, our midterm growth perspectives, and we will communicate 2024-specific guidance with our H1 results at the end of July. to conclude my opening remarks. Thank you for listening, and I will now open the floor for your questions.

Thank you very much, Ms. . Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star 1 on your telephone keypad. Our first question today is coming from Vicky Stern . Please go ahead. Your line is open.

Yeah, hi there. Just wanted to start on the demand outlook. So it doesn't seem like there are any obvious cracks in demand out there, although we've obviously seen some softer data coming through in markets like the US and the UK. Just curious on your sense on the demand outlook now, anything to call out perhaps in terms of phasing to have in mind in coming courses, and then putting it all together, how it's sort of leaving you feeling about the full year rev path of this year. I think consensus is around the 4% mark. Does that feel sensible based on what you see? Secondly, you've made the comments there on net unit growth, obviously a sort of acceleration from where you exited last year. Similar question really, how does that leave you feeling for the full year net unit growth this year? Is there any sort of phasing to have in mind there on the churn piece? Or could we start to think about something perhaps a touch better than the bottom of the range that you talked about with the full year results? And then just finally on the share buybacks, obviously you've just done the 400 million. I guess the real question is sort of to what extent you might be willing to increase the leverage to the upper part of that two and a half to three times range that you've talked about and give more back already this year. Thanks.

Thank you, Vicky, for the question. So on the, you know, on the demand, we're seeing, you know, the softening in the U.S. I think we had already, you know, started to notice that as we exited last year. So I would say nothing particularly new on that front. We're continuing to see very, you know, very good demand in the Middle East, Asia Pacific. You know, China is a bit softer, but China is, you know, far less impacting for our call from the revenue perspective. And Europe is, you know, no particular – you know, France was soft at the beginning of the quarter, but, you know, March was – March was better, and we have the Olympics in France over the summer where we expect a bit of an uplift. So, yeah, I feel very, you know, comfortable with the 3% to 4% midterm guidance that we gave on the VETPAR. And as we commented, I believe that, you know, in February, probably toward the higher end of that guidance for VETPAR. So that's kind of in mind where the consensus is today. With respect to net unit growth, we were pleased with the acceleration in the first quarter because that puts us actually into the low end of the guidance, which is not where we were when we exited 2023. There might be some churn later in the year. So right now, I would still guide towards the lower end of that three to five net unit growth midterm guidance. And finally, with your last point, we are, you know, staying with that two and a half to three times leverage. This is where we want to operate. We have, as I commented, we've somewhat accelerated the return to shareholder versus what certainly our initial view was when we put that, when we shared that plan with shareholders. So keeping with that two and a half to three times leverage.

So sorry, just to follow up on the last one, I guess at the moment you'd be sort of towards the lower part of that range. So any sort of appetite to think about more shareholder returns this year?

I think that, you know, that's too early in the year to say the key. We'd like to start, we'd like to start, recovering some of our cash flow and seeing where that leverage is as we progress throughout the year. Great. Thanks very much.

And thank you very much, Mrs. Stern. We'll now go to Jamie Rollo from Morgan Stanley. Please go ahead.

Thanks. Morning, Martin. Sorry. Three questions, please. So very good like-for-like sales of 13%, REVPARP 8, net user growth up 3, just very simple math. That two-point sort of benefit which you talk about from RMS, are you saying we should expect that gap to narrow for the rest of the year as you've seen a very strong recovery in the first quarter? Secondly, on services to owners, obviously the Qatar revenue sort of distorts the picture. It would be quite helpful to get within STO what the actual SMDL revenues are, so stripping out all the cost reimbursement, and whether you're still expecting to make a small profit this year in services to owners. And then finally, you referenced the termination fee in your statement. Could you just clarify that, please, and quantify how many rooms that relates to? Thank you.

So, hi, Jamie. So, you know, on your first point, as we communicated in the, you know, in the midterm guidance, you know, we are expecting a, you know, positive distortion between REF PAR and MNF revenue growth. And we're certainly seeing that in the first quarter. I don't expect, you know, five points on a four-year basis. and that is not what we put in our meeting guidance. I think the positive impact in our meeting guidance was closer to three to four points. In terms of the STO, if we look at just the PME division and we exclude the reimbursed cost, STO is actually up 9% in the quarter, which is still about a point above REFCAR for that division. And yes, we still expect to turn a small positive profit or, you know, positive EBITDA for STO on a four-year basis. On the termination fee in Brazil, it's basically, I mean, if you take that impact out, the America's M&F revenue growth would be closer to 14% as opposed to the 33% headline that you have. I don't have the number of rooms that correspond to that.

But it's in the quarterly room count. Yeah, yeah, fine. Thank you very much.

Thank you, sir. We'll now move to Leo Carrington of Citi. Please go ahead. The line is open, sir. Thank you.

Good evening, Martine. If I could ask two questions, please. First, if you could elaborate on the pipeline itself, very fractionally down sequentially. Is that just due to the strong openings that you referenced, or is there any other phasing in terms of signings or attrition that we should know about? And then secondly, A couple of weeks ago, there was a Bloomberg article suggesting that Ennismore is looking for some standalone expansion capital. Can you just elaborate on this a bit further, if you can, and update us where this has got to and what we might expect in terms of the strategy there and the use of that capital? Thank you.

Thank you, Leo, for the question. Q1 is always a, you know, Q1 is always a, I think you got the main elements of that. Q1 is always a low quarter in terms of moving to the pipeline. And because we had a, you know, pretty healthy level of openings in the quarter, that actually impacted that pipeline. Most on the PME side, because in last and last time, actually, the pipeline, I think, was slightly up. You know, with respect to, you know, to any SMORE, we... You know, we have, there's no, let's say, no projects right now with respect to the extension of capital in Ennismore. Ennismore has had a very, very solid performance in the first quarter, and I have no, you know, nothing to report on that front.

Okay. Thank you very much.

Thank you, sir. We'll now take questions from Jared Castle, calling from UBS. Please go ahead.

Thank you, and good afternoon, everyone. Can you just talk a little bit about exit rates on your hotels, what the churn rate was, you know, versus the gross additions? Just be interested in that. And then just in big picture terms, kind of any views on business versus leisure versus group, you know, how that's contributing towards growth now. I'd be interested just to hear your thoughts there. And then just lastly, I mean, I know probably your bookings are immaterial at the moment, but just, you know, how are you seeing the bookings for the European summer at the moment, if there is any commentary around that? Thank you.

Sure. And just, Jared, thanks, Jared. Your question on return, was that the exit rate IE for year 2023? I'm assuming that was the question, right?

No, sorry, it was just around, like, you know, hotels leaving the portfolio because they weren't meeting brand standards or they were converting or something else.

Okay, got it. Okay. So what we – so we had the – you know, some of – we had more of that in the fourth quarter of last year than we did in the first quarter of this year. We actually had a relatively limited churn in the first quarter, sorry, of this year. I would set a, you know, kind of big picture. We're still staying with the PURE program, which is the, you know, bringing the portfolio up to standards, you know, the grant standards. That impact is still estimated to be around two points over three with most of the impact to be in 2024. And with respect to the Olympics, the bookings are in line with what we expected for the summer and we do expect some pickup as the Olympics Committee releases more room.

Thanks. Any comments on business?

We're seeing good traction on both. We're seeing good traction on the business bookings. Business bookings are actually up in the low teams in the quarter on a good team's value. And we're also seeing an increase in group beatings, although it's more, and I think we commented on that previously, but it's more smaller groups than larger groups. But those are also, and it's very, you know, it's obviously very different by region because it depends on what kind of events you have. But overall, we're seeing also a a nice pickup in small meetings.

Great. Thanks very much.

Thank you very much. We'll now move to Mudiba Kayani from Bank of America. Please go ahead.

Yes, thanks for taking my question. We've seen a pickup in deal activity in Europe this year. How are you seeing the market and what's your appetite for the bigger conversion transaction? And then secondly, just from an earlier question on demand, last year we'd kind of seen Americans coming to Europe benefiting in the region. Are you seeing that trend continuing? And also just on Asian travelers, you said you were seeing them into Thailand, but are you seeing them coming into Europe yet or not? Thank you.

Thank you for your question. To your first question, we don't have an appetite to pick up really additional brands. We have 46 brands in the portfolio. We had a conversion rate of 55% of our openings were conversions, so we feel we have a portfolio that allows us to meet our net unit growth targets without having to acquire brands like some, you know, you see some other players doing that at various, you know, at various sizes. With respect to the Asian travelers, we are seeing good pickup from Asian travelers, Chinese travelers in particular, in Southeast Asia, and we're starting now to see them also in the Middle East. in the Middle East region. We're not seeing them much yet in, you know, in Europe or, you know, certainly the U.S. And I think that's a general industry trend. And with respect to – and I'm sorry, I forgot your second question, which was on demand. Oh, just Americans into Europe. Oh, yes, sorry, Americans into Europe. Well, we – We actually had a fairly good leadership demand from Americans. It's early to tell with respect to the summer. We may have a lower demand from the U.S. this summer, but we'll have a stronger demand from Europeans because of the Olympic Games. And conversely, you know, that could mean that we'll have a stronger demand from the U.S. before the Olympics and after the Olympics. So our take right now is that it shouldn't have much, we shouldn't see much of a, let's say, lower level of demand or higher level of demand from versus what we had in 2023, which was a pretty robust demand from American travelers.

Thank you.

Thank you very much. We'll now go to Julian Adichie calling from Kepler. Please go ahead.

Two for me, please. The first one on the Olympic impact, you mentioned the summer situation, but is it likely to think that in Q2 we might have a negative impact coming from people postponing their travel or avoiding France and maybe Paris because of the Olympics coming? And the second question on Apple Invest, if we can have an update on the refinancing process and where we stand.

Sure. So the way we thought about the You know, the way we thought about the impact of the Olympic Games was, and, you know, we've shared that with, you know, with you in the past, is that we think it's roughly, you know, it's about a two-point improvement in, for the, you know, sorry, for France. Now, France is about 20% of the business, and that's on a four-year basis, by the way. So that's about, you know, college. 40 to 50 basis points in RESPAR on a full year basis. So we haven't planned for an uplift overall, but we haven't planned for a massive uplift with respect to RESPAR at group level. And the way we've thought about that is, to your point, we think that there might be a bit of a softening in the shoulder, what we call the shoulder, both before and during the Olympic season. but we think that we'll see maybe some pickup from different regions before and after. So, you know, we've looked at what happened in London, and in London there was a bit of a softening cell in Q2 and Q3, but there was a strong pickup over the Olympic period. We think it's probably likely that the same thing will happen, at least for the European travel for the Paris Olympics. Now, we also had... Ramadan was in the first four weeks, so that helped. We have some sports events that should also help Q2. So overall, again, we think we may have an impact on Q2 and Q3. Sorry, Q2 and Q4, which is a shorter season, but not dissimilar to what we saw in London, which was not massive by any stretch. In terms of the refinancing on Ecole Invest, that is progressing well. So we're still, you know, we're still expecting to see that refinancing being concluded by the end of the, by the end of this quarter, really.

Mr. Richer, does that answer your question, sir?

Yes, thank you.

Thank you very much. Thank you, sir. Ladies and gentlemen, as a reminder, if you have any questions, please do press star 1 at this time. We'll now go to Alex Springnell of Everton Atlantic. Please go ahead.

Afternoon. Thank you very much for taking my question. I just have one on RASPAR. You've clearly done a very good Q1. Your guide for the rest of the year, I guess you could look at it two ways. One would be that on a year-on-year basis, it's going to be kind of much lower rate of growth. The second would be that on a kind of versus 2019 basis, you're actually anticipating a small deceleration in Rav Park roads to get to kind of the midpoint of your guidance range. Do you still think that it's best to kind of keep 2019 in mind when we look at your quarterly numbers through the year, just how we're doing the modeling? Thank you.

Thanks for your question. So, you know, yes, we had a very – in the first quarter, we were – We're keeping to our three to four midterm guidance. As I indicated, we'll give more clarity on the 2024 guidance specifically when we publish our H-1 results at the end of July. Right now, we're staying with that upper end of that RFR guidance. With respect to your question, which is should we still be looking at 2019, I think my simple answer to you would be we don't internally. We actually now, for the first year, are looking at year-over-year growth because we feel that the recovery effect is behind us and we're now back to a more normal pattern of travel, if anything.

Fantastic. Thank you very much.

We have no further questions. I'll give the floor back to to conclude this conference.

Thank you. Well, thank you for joining us on this call, and thank you for your questions, and I will now wish you a very good rest of the day.

Thank you very much. Ladies and gentlemen, that will conclude today's presentation. Thank you for your attendance. You may now disconnect. Have a good day and goodbye.