Accor Sa

Good morning and welcome to the Accor Group's H1 2024 results conference call. Please note that this conference is being recorded. During the conference, your lines will be on listen and lay. However, you will have the opportunity to ask questions at the end of the presentation by typing star 1 on your telephone keypad. I now give the floor to Mr. Sebastian Bezen, Group CEO of Accor. To begin this conference, the floor is yours.

Thank you very much and good morning everybody on the phone. Very happy to be with all of you. To my next, you of course have Martin Gero, our CFO, who's going to be doing some kind of a tandem with me, with each of you for the next, whatever, 30 minutes or one hour together. So I'm going to start fairly quickly with the first slide. of what is presented to you, and I hope you guys have it easy. It's actually slide number four, which is the first one. There's two interesting surveys being done by the same organization, which is Oxford Economics. One was dated in June 2024, and you have it on the left, which is really trying to tell us what are the consumer spending likely to be for the year of 2024? And it was a precise question on travel spend. And what you see in that very simple chart is people acknowledging that, I guess, for the year 2024, only 18% intend to spend less than what they've done in 2023, 45% likely to spend the same, and then you have a hefty 37% where people are getting uh the inquiries that i guess say probably going to be spending 37 more than what they spend in 2023 and that's actually reflected in the numbers uh of our core and many other probably travel hospitality company in terms of demand and in terms of spending what's probably even more interesting is what you have on the right uh because that really take us forward uh not only for 24 but i guess projection for 2025 and that one is a bit 20 20 000 feet altitude asking A different question and it relates to many of you remember the base of international travelers in 2019 was 1.5 billion. And we're trying to compare where are we compared to that base of travel in 2019 as of today and likely to be in 2025. And of course, let's go region by region, but I'll go rather quickly on Europe. We are, and we should be in 2024, 3% above the level of 2019, and we were lacking by 8% last year, which you all know. But it's predicted to be 11% better than the level of 2019. You take North America, we're probably flat this year compared to where we were pre-COVID, likely to be 10% double digit up also in North America for next year. You have the same double-digit growth in Latin America in terms of projections by 11%. You see, and you will be surprised, when it comes to China and, of course, Asia, including China, we were lagging by a third last year. We're still lagging like 9%, 10% in terms of international visitors this year, but it should be also 10%-ish for 2025. Not a surprise either. We enjoyed all of it when it comes to Middle East. Super strong rebound and acceleration pace in last year by 11%. Still strong, even stronger, 31% this year. And look where we likely to be in 2025, 50% higher than what it was in 2019. So for the world, kind of a flattish 2% growth this year and likely to be double digit growth in 2025. Those numbers are super encouraging for groups like Accor being so well diversified in so many hosting geographies. Then we're gonna go to another slide and on purpose we give you something that of course many of you have dissected in terms of actually more granular on what Accor is but we purposely wanted to make it easy for people to read on Where are we in terms of room counts for the group? Where are we in terms of fee volume today in the portfolio? But where are we in the pipeline? And I think it is an interesting slide and I'm going to go and make some few comments. You're going to see in a minute by looking at the numbers where you have a better fee per room as opposed to a lesser fee per room because when you have in North America, 5% of the portfolio contributing to 13% of the fees of our core. Well, that tells you that the fees are pretty rich in America. And we have a 3% pipeline portfolio in North America. I wish it could be bigger, but it is what it is. But it's still a very high contributor by 12% total volume of fees as a pipeline for North America. Go all the way to the right, because that's exactly the opposite read when it comes to APAC. And that includes China, which is why you have a 34% portfolio room inventory in that region. But it's only 18% of the fees because the fee per room is probably a third, if not one fourth of what it could be in other mature market. And you see the pipeline for Accor is 51%, but it's going much higher, 31% of the fees. Why? Because we're getting in the pipeline a much greater fee per room that we had historically. You go for middle of the page, Europe and North Africa, 43% of the fees, 49%. We don't have a pipeline that represents the size of our network, which is absolutely legitimate because our network is so large and so profound, and we decided to go much deeper in the Middle East, in Southeast Asia, Indonesia, and other places. So you go to the Middle East, that gives you the right indication, 10% of room counts, 14% of the fees. Look what it is in terms of pipeline. 28% of fee contribution with 15% of our pipeline in that region. You know we're going and spend a lot of time in the Egyptian market, in Dubai, in Abu Dhabi, in Qatar, and of course in Saudi Arabia. And then you have South America, 8% of the room, 6% of the fees, and a tiny 5% of the pipeline and 3% of the fees. So that's a pretty good read of where ACCO is going and probably priorities of development. I'll go to the next page. It's really giving you in six or seven different sentences, where are we, how do we feel and what has been achieved? So you have the word achievement on the top of the page and very much related to the new organization put in place on 1st of January, 2023 premium. michigan and economy uh you guys might have seen it we celebrated the 50 years anniversary for ibis and it's been very well accepted by a lot of people we decided to do a major new brand campaign brand positioning for novotel with wwf and a lot of it is climate friendly protecting the oceans we are focusing on deeper market including japan and you've seen it with the dialogue portfolio signing which gets us into a second leadership position in Japan, and then as promised, and Jean-Jacques is actually in the room with us, we decided to deliver on a better margin in terms of execution, in terms of operating leverage for PME, and we already enjoyed a 100 basis point increase in ABDA MNF margin when it comes to PME. You go to the Lux Lifestyle, then you end up with different messages, It's all a matter of global leadership footprint. I talked to you about Middle East, Asia. We're going fast. We're going deep, and we accelerate in many of those questions in terms of accelerating our leadership, preserving it, and why not take leadership where we were not the leaders. The guest experience, we've been adding a brand to the portfolio a couple months ago called Our Habitats, which is very much also vegan, protecting the planet, and something very resorty interesting. Then we've done a partnership with LDMH on Orient Express, which is a very nice confirmation that we have to take us very seriously at core when it comes to Lux Lifestyles to be able to get partnership with those tycoons of the world, and certainly with a brand like Orient Express. So it is really going firmer on what do we stand for and you've seen a lot of the effort and a lot of our achievement when it comes to sofitel by the way which have been enjoying the 60 years anniversary for the year of 2024 and then accelerating the pipeline the development the signing the opening and you're going to see that into any small and lifestyle numbers where the pipeline which is 12 above for the last 12 months And then down below, you have the engine, the machine, what sticks us together in terms of shared platform at the corporate level. We've done and signed a big partnership with the best of the best, Amadeus, when it comes to CSR. And we've done it kind of actually following what's been done with ISD some 10 years ago and recently with Myriad. And it's about time, I guess, we joined. and benefit from the skill and the technology and the tools. Revenue management system, similar thinking, similar execution, similar signing with ideas, which is one of the leader when it comes to RMS. And then going and showing that I guess we could have all the right KPIs to join the carbon disclosure project A-list. There's not that many people on the A-list and we're super proud that I guess we've been able to join it confirming a lot of things being done by the csr people going in this organization and then my last slide for you uh probably uh one of the most telling uh which is on did we deliver on h1 uh result uh i remember you remember and we live and die by it on what has been announced in the market day, which dates a year ago in May 2023. And we gave you a lot of KPIs and we're going to get back to you every time we're going to be on the phone, every time we're going to be announcing numbers, every time we're going to be forcing ourselves to benchmark where do we stand compared to what was promised to you. And you see the actual for H1 on the left column and you see on the right column what was said at the time, which was An average growth for 2023 onwards until 2027. So REFPA, first semester, plus 6%, which is well in excess of the 3% to 4% that we got a due for. Net uni growth, 4.1%, better than the 3% to 5% range. MNF revenue growth, 10%, which is the high end of the range, the target between 6% and 10%. Service to honors, $17 million, which of course is positive. And that was promised to you. Group EBDA growth, 13%. We're very, very happy with the 504 million EBDA for the first semester, which is a record number. Never ACWA achieved half a billion for six months in the first semester, which is on the upper end and actually exceeding the 9% to 12% that we guided. And the cash conversion, we cannot do it on a semester. It has a lot to do with working capital, and the guidance was done on an annual basis, and we cannot really do it. as easily and it won't mean anything. And then when it comes to this return to shareholders, we promised 3 billion. You know what we've done last year. We've done another 686 through the first semester. So we are way in line and probably faster than what was contemplated in May 2023. So that's where we are. We feel confident. We feel strong. We feel we control the controllables. which was JJ's line to me and to many of us through COVID, this company is in good shape and certainly getting and enjoying whatever we can take from wherever the demand is with the brand needed, we are there. And we're getting through some difficult environment, of course we are, but we're also getting through an enjoyable environment and we make the most of it. So we're going to go back on the Q&A, but I just wanted to share with you that this group myself the team are extremely proud of having navigated through a difficult first semester and getting to where we wanted to be and probably marginally better than what we felt we would be at this very minute thank you so much i'll leave the floor to martin thank you sebastian and good morning everyone um and thanks for attending the earnings call for the first half so i'm going to start with the financial highlights uh which are

And you heard from Sébastien that we are very pleased with our performance in the first half, which is at the high end of our mid-term guidance. So overall, you've heard it from Sébastien, demand was strong, demonstrating the resilience of a portfolio which is not only well diversified, but also aligned with what are the highest growth geographies. In the second quarter, the ref bar was a solid 4.8%. H1 was at plus 6%. As we saw in the first quarter, pricing remains the main driver. We had a 3% increase in pricing in the second quarter. So that's about two-thirds of the ref bar. The all-capacity was also up by one point, and we closed the quarter at 68%. As we had expected and as we had already shared with you in the first quarter, we're seeing a steady acceleration in our net unit growth, which reached 4.1% on a last 12-month basis in the second quarter, and that's a point up from where we stood at the first quarter on an LTM basis. The conversion of REVPAR and NUG into revenue was very solid. As you can see, M&F revenue was up 10%. in the quarter, reaching 673 million. And overall revenue was up 11%. The combination of solid revenue growth and cost discipline drove a 13% growth in EBITDA, 504 million for the first half, and as importantly, an improvement of 160 basis points in the MNF margin in the first half versus prior year, which, as you may recall, is a goal that we are pursuing very actively. So that puts us for the first half slightly above the 9% to 12% CMD EBITDA guidance we shared with you a year ago. Earnings per share at $0.90 is up 11% in the first half, primarily from the cancellation of the shares we bought back over the period. And finally, last but not least, we returned close to $700 million to shareholders through a combination of share buybacks and dividends. And that translates into what we feel is an attractive yield of 7.9% of our market cap as of January 1st, 2024. So in the first 12 months, since our CMD, we will have returned a total of 1.1 billion euro, which is slightly over a third of the 3 billion capital allocation we committed to in June of last year. I will turn to slide 10 and give you a bit more color on REF PAR for each division, starting with PME on the left. PME posted a second quarter REF PAR growth of 4%. As you can see here, it's driven by continued strong pricing for about 70% of that growth, and occupancy gain was up in the quarter, accounting for about 30% of the year, so about a point in the quarter. The rate was actually up 3% year-over-year, and OER, so occupancy rate, sorry, was up 1 point at 68%. The performance in PME was somewhat contrasted, as you can see here across the regions. In ENA, which is Europe, North Africa, performance was contrasted with negative performance in France, upset by robust growth in Germany and the UK. In the second quarter, NRFR was up 1% with a 2% growth in rates, and a point declining occupancy in the quarter. And that was primarily driven by France, where Ref Bar was down in the quarter, and that was solely driven by Paris, which also suffered from difficult comps. You may recall that we had the air show of Le Bourget in 2023 in June, and June actually was a very, very strong month with occupancy at 86% in Paris. The province here was actually better. The province had a positive red bar growth in the second quarter. In the UK, red bar growth was in line with the first quarter. The province continues to perform slightly better than London. And in Germany, we had a very good, as expected, red bar in the quarter, particularly in June, which was up 17% on a red bar. And that was driven by the European Food Growth Championships. Mayhapak continues to be a very dynamic region, solid growth in the second quarter, up 7%, also mainly driven by rates, and very, very strong momentum in the Middle East and Southeast Asia. Middle East, very solid. Refbar growth in the high teens in both UAE and Saudi Arabia. And of course, the quarter benefited from the Hajj pilgrimage in Saudi Arabia, which was in mid-June. Southeast Asia, Also very strong, also double-digit REFBAR growth. Countries like Thailand are benefiting from the gradual recovery of the Chinese outbound tourists. Pacific, we saw an increase in occupancy, but REFBAR was slightly negative, and that is driven by what we see as being lower demand on the leisure on the East Coast. Now, Australians are actually favoring traveling outside of the country. Now, that benefits Accor. given its strong presence, notably in Southeast Asia, which I just commented had double-digit growth, but obviously it impacts the domestic market. China continues to be challenging, while Chinese outbound traffic is recovering as expected, and again, benefiting Southeast Asia and the Middle East in particular. The domestic market is more challenged, with lower than expected corporate demand, and that is impacting rates America is very strong in the quarter. Ref Bar up 12% versus 23%. Very strong event calendar in Brazil, in Sao Paulo, and in Rio. Moving to the luxury and lifestyle division, Ref Bar was a solid 8% in the quarter. As you can see here, it was mainly driven by occupancy. Rate was up 3% in the quarter, and occupancy was up 2 points in the quarter to 66%. Luxury, ref bar growth of 6% in the quarter. All brands are performing well, primarily driven by occupancy, but rate was also slightly up. Lifestyle, an impressive 14% growth in the second quarter, driven by rates and really driven by resorts where we have very strong momentum. We continue to have very strong momentum in Turkey, Egypt, and the UAE, which benefit from still very strong leisure demand. I'll now move to the networks on page 11. As I shared in my introduction, we continue to gain traction towards our mid-term net unique growth guidance of 3% to 5%. We closed the quarter at 4.1% on the last 12-month basis. That puts us squarely in the middle of our mid-term guidance. And we had good momentum in both PME and luxury and lifestyle. With PME, on the left side, at the end of June, for the PME division was 3.7%, and that is at the high end of our mid-term guidance, which was 2.5% to 3.5%. The openings in the second quarter were boosted by the opening of 6,000 rooms from the Daiwa portfolio, which is in Japan, and those properties will be rebranded under Mercure and Grand Mercure. Current was actually slightly lower than the prior year in the first half, although we expect this to increase in the balance of year in line with our expectations. Our pipeline is down in the first half, and that's primarily due to the unusually strong level of openings in the first half, driven by the Daiwa portfolio I just mentioned, but also openings in other regions, which were also very strong in the first half. The M&F revenue per room, as you can see here, is holding at €1,200 per room. Now, moving to the luxury and lifestyle, whose portfolio grew by 6.9% over the last 12 months, and that is driven by Anismore, which grew at the remarkable rate of 24% on the last 12-month basis. We opened three M-Galleries and three Sofitels in the second quarter. One of the M-Galleries was actually in Mexico. The acceleration is fueled by a solid pipeline, which accounts for 44% of the existing portfolio of that division. And the revenue, MNF revenue per room, is €4,000, which is an improvement versus where we stood in 2023. So at group level, again, 4.1% on an LTM basis, straight in the middle of our guidance. Conversions, I know this is often a question you have, 68% of the openings in the first half, and that's boosted by the Japanese portfolio. We'll close it to our normal 57, 60% if we exceed that. I'll now move to the revenue on page 12. So revenue up 11% in the first half on a reported basis. Reported growth is positively impacted by the consolidation of Pétale-Chabot, which took place in October of last year, and that's partly offset by foreign exchange. So on a like-for-like basis, revenue is up 9%. PME revenue is up 4%, with very good growth in management and franchise, which is up 7%. That's one point above REFAR, and it's supported with good incentive growth, particularly in the Asia-Pacific region. Incentives represented 34% of the M&F fees, and that's in line with the full year of 2023. And so that demonstrates the continued solid operational performance of the hotels across the regions and the segments. Moving to SDO services to owner, the lower revenue growth of 3% that you see here reflects really a baseline effect. We had actually called that out in our first quarter call, and you may recall that. related to the cost reimbursement for the FIFA World Cup. In the second quarter, which does not have these baseline effects, STO revenue is actually up 11%. We're having a very strong momentum from distribution and loyalty, which is pushing up the revenue in STO. Hotel assets and other performance remains driven by Australia and Brazil, and Australia was impacted by, as I commented, weak leisure demand, but also effects. Moving to luxury and lifestyle, Revenue was up 22% in the first half, with 15% growth in management and franchise. That's eight points above the RASPAR growth, and that is driven by exceptional growth in fees from branded residents in H1 in lifestyle. STU grew at a higher pace than RASPAR, up 9%, reflecting the growth of the network as well. And hotel assets and other, 84% growth. That's primarily driven by the consolidation of Côté des Chabots, as I indicated earlier. Turning to management and franchise, specifically on page 13, 10% growth in the first half compared to 6% growth of RevCard. So that's a four points positive distortion. And as you heard from Sébastien, that's at the high end. of our CMD guidance. So I'll start with PME. Growth in MNF revenue was robust, as you can see here, across all of the regions, and consistently above RFR growth, as was the case in the first quarter. And as I previously mentioned, this is supported by good development in incentives, notably in Asia Pacific. Regarding luxury and lifestyle, MNF revenue, again, grew at a very healthy rate of 15%. strong benefit from the branded residences in the first half, we actually doubled down our efforts on this activity, which is going to experience significant growth in 2024, although I will point out that the growth will be skewed more towards H1, notably linked to a large resource branded residence in Dubai. I'll now turn to EBITDA on slide 14. So 504 million EBITDA in the first half, 13% growth year-over-year above the high end of our 92% CMD guidance. EBITDA growth reflects mainly the drivers that we highlighted during CMD in June of 2023. So first, a sustained activity level, as you just heard, translated into solid operational leverage with M&S margin, as I called out, improving by 160 basis points versus prior in the first half. strong cost discipline on services to owner with a slightly positive EBITDA, as you can see here, and the integration of Côté des Chabots in hotel assets and others. So, more closely looking at the PME division, also very good growth in EBITDA, 9%, 360 million, that is at the high end of the CNP guidance for this division. M&F EBITDA is up 8%, benefiting from operating leverage with M&F margin improving by 100 basis points, and you know that this is a strong commitment from Jean-Jacques for the PME division. As for STO, EBITDA was positive, 13 million. Hotel assets, another slight EBITDA decrease, which is related to, again, the weak leisure demand in Australia and a somewhat unfavorable cost environment. Regarding luxury and lifestyle, EBITDA is up 13% to $196 million. Very good growth in M&F with EBITDA up 20%, which drives a 260 basis point improvement in M&F margin for the division in the first half. As for STO, EBITDA is slightly positive, but it is below last year due to the ramp-up of costs during 2023 in this division, which was, as you may recall, created in January of 2023. As for hotel assets and other, the growth in EBITDA mainly reflects the acquisition of Hôtel du Chabot. I'll now move to the rest of the income statement on slide 15. We achieved a net profit of 253 million in the first half versus 248 million prior. EPS earnings per share, 90 cents in the first half is up 11% and it's mainly from the impact of lower share count. So let me call out the main highlights. Depreciation and amortization increase is mainly driven by the sale leasebacks of our Paris headquarter in June of last year, and the integration of Potere-Chabot mainly. Very good performance in share of net profit from our equity investments, which as you can see here, is up by 40 million, and that is really driven by our 30% share in Ecolimus. In the first half, Ecolimus made meaningful progress towards its asset disposal program and that generated capital gains in the period, but the underlying activity is also performing very well. Net financial expenses, which are lower versus prior year, benefited from a favorable non-cash foreign exchange movement. Tax expense increased in the first half on the count of, one, the activity recovery, but also the tax impact of the reorganization and the extinguishment of some of the net operating losses we had, particularly in Australia and Belgium. And finally, minority interest increase was driven by any small performance. I will now turn to cash flow. On page 16, the recurring free cash flow reached $120 million in the first half, and it is below last year for the following reasons. High cost of debt, which is driven by the increase in net debt, but also the interest component, which sits in that line, of our lease portfolio, and again, this is the sale-leaseback of our Paris headquarters. Income tax increase, mainly driven by the activity recovery and the extinguishments of annuals in Belgium and Australia, as I mentioned previously. Reimbursement of lease liability, again, the sale-leaseback of our Paris headquarters, and the consolidation of Côté des Chabots. Recurring investment was $90 million in the first half, It's up slightly from last year by about $10 million, and that's really driven by higher key money as we had anticipated and planned. Working capital change is negative $123 million. We have a timing impact on our VAT, which is about $23 million. And I do remind you that our working capital change is seasonal in nature, and we do expect this change to reverse in the balance of year and be positive for the balance of year in terms of working capital changes. And finally, net debt, which was slightly above $2.9 billion at the end of June. That's a $800 million increase versus where we stood at the end of December, and it is mainly the close to $700 million share buyback and dividend, as well as some acquisition we did in the first half, non-recurring costs related to the new organization, and partial offset from recurring free cash flow. I'll now turn to page 17 with our full year guidance. for 2024. Starting with REF-PAR, we expect a REF-PAR growth on a four-year basis between 4% and 5%. Given the solid start of the year, we're confident to deliver a four-year REF-PAR growth that is slightly above our initial expectations and CMD guidance. Net unique growth is expected between 3% and 4%. This is in line with what we had signaled during our previous calls where we indicated that we would be towards the lower end of the three to five mid-term guidance. But it is still a robust acceleration versus last year, which was, I remind you, 2.4%, and reflects the trend we saw in the first half, taking into account the uplift related to the opening of the Japanese Daiwa portfolio, and as I call that, a slightly higher level of churning PME in the second half. Services to owner, squarely positive, and EBITDA is expecting between $1.95 billion and $1.125 billion, and that translates into a 9% to 12% growth versus last year, which is again perfectly in line with our CMB targets. And with this, I will now turn it back to Sébastien for concluding remarks.