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.