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and welcome to Accor Group's Q3 2024 Revenue Conference Call. Please note, this conference is being recorded. During the conference, your lines will be on listen only. 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 Madam Martine Giroux, Accor CFO, to begin this conference. The floor is yours.

Thank you and good evening everyone. Thank you for joining our third quarter trading update call. And without further ado, I will start with the key highlights on slide three. So I'm pleased to report yet another strong quarter with a robust top-line performance in line with our perspectives for 2024. So our activity growth, as you can see on the left side, was solid in the third quarter. Domain remained strong with a rest guard growth of 5.3% in the quarter, benefiting from the Olympic Games in France, but also the diversification of our portfolio. Pricing remained supportive with rates improving by 4% year over year in the third quarter. Occupancy was also up, gaining one point to 70% in the quarter. Turning to net unit growth, net unit growth reached 3.2%. on an LTM basis at the end of September, which is in line with all our quarterly guidance. As we anticipated, turn was higher this quarter as compared to the third quarter of last year, primarily driven by the portfolio upgrade program we have in the PME division, and we do expect this to normalize in the fourth quarter. We regained positive momentum in the pipeline, which increased 6% versus last quarter. Pipeline totals 231,000 rooms. and this was driven by the PME division. On a year-to-date basis, pipeline is up 3%. Our signings are also progressing well, and they're up 9% in value as we continue to drive up the average fee per room. Turning to revenue, revenue increased by a very solid 12% to slightly over €1.4 billion, and it's 9% when we adjust for fairing exchange and scope. M&F revenue was up a solid 7% in the quarters. We therefore remain on track to deliver our four-year guidance on all metrics. We are comfortably within our four-year Rothbard growth of 4% to 5%. And we have narrowed upwards our guidance, which is now expected, between $1,100 million and $1,125 million. And on the balance sheet side, We successfully completed the refinancing of our second hybrid bond insurance for $500 million at a lower cost than last year's refinancing. I'll now turn to slide four on rest parts. Starting with PME, PME posted a third quarter rest bond growth of 5%. Driven by continued strong pricing for about 80% and occupancy gain for 20%. In the quarter, average room rate was up 4% year-over-year, and occupancy rate was up 1.71%. In ENNA, Q3 left par was up 6% versus prior year, driven by a 7% growth in average room rate with France, obviously, and Germany equally being both strong drivers. In France, the thrift car was clearly boosted by the Summer Olympics. Gamescure delivered a peak performance, which was in line with our expectation, with ADR that was more than double in the period, and we also had 15 points of incremental occupancy. over the game period. The province had a fairly resilient summer. September was a bit softer. September had challenging comps because of the World Cup, which ran from September to October last year, as you may recall. In the UK, Ref Bar was broadly annoying with previous quarters overall, London being softer than the province. And in Germany, Ref Bar continues to perform well with a growth rate in the high single digits, and occupancy rate was up in the quarter, which is an improvement from previous quarters, where it was mostly pricing that was driving RESPAR growth. Turning to MEAPAC, RESPAR was up 1% in the quarter, with sharply contrasted performances. Southeast Asia was the best-performing region and continues to deliver double-digit RESPAR growth, benefiting notably from the outbound demand from China. Middle East Africa, Turkey's performance was softer this quarter. It was negatively impacted by the timing of some religious holidays, notably the hash, and the latest start of UNRWA, particularly in Saudi Arabia. We also had the reopening ramp-up of five hotels, which had been impacted by the April flooding in Dubai. However, we saw sequential improvement in RESPAR over the quarter, and we closed the quarter with high single-digit growth in Middle East Africa and Turkey. And if we combine those two regions, which are growth markets for REFGAR, we register the world, a solid 6% growth as you can see on the page. Pacific continues to be challenged with flat-ish REFGAR in the quarter. Macros continue to be weak and consumer confidence remains low. remains a challenging market. Ref par declined within the high single digits in the quarter, although that is less pronounced than what we have observed in luxury goods. Now, while China's outbound traffic continues to recover, and we see the benefit of that in Southeast Asia, domestic demand remains under pressure. Trading's improved somewhat over the golden week, which had a stable ref par year-over-year during that period. Thus far, the stimulus program has mostly benefited the financial sector. Turning to America, which, as you may recall, is mostly Brazil, we continue to post double-digit growth, with third-quarter FPR up 13%. Demand was very solid in Brazil. Occupancy was up 2 points and is now sticking 3 points above 2019. notably driven by corporate and events in Sao Paulo. High inflation also benefited the rates in Brazil. Moving to luxury and lifestyle on the right side, rest of the work was sustained at plus 7% with both rates and occupancy gain. Rate was up 3% in the quarter and occupancy was up 3 points in the quarter. Luxury rest part was 5% in the third quarter, with rates up 2% and occupancy up 2 points. Luxury momentum, when we look at it by market, by geography, is actually quite comparable to that of PMU with a slight positive premium. Lifestyle sustained double-digit growth at plus 14% in the third quarter, equally driven by occupancy and price. Results had, again, particularly strong quarters in Turkey, Egypt, and Dubai. Moving to portfolio and pipeline on slide 6, slide 5. As shared in my introduction, our net unit growth reached 3.2% on an LTM basis, starting with PME. Last year, our net unit growth was 2.6% in the PME division. That's in line with our mid-term guidance. It is down from 3.7% at the end of June, primarily driven by churn. Third quarter openings were back in line with prior years, following the uptick in Q2, which had the opening of the downward portfolio. However, churn, as indicated in my introduction, was above prior in the quarter. And this is mainly a consequence of the portfolio upgrade program that we have launched in 2023, which is therefore more of an active, proactive churn. We do expect churn to normalize in the first quarter and fall back in line with prior. Now, with regard to pipeline, we're pleased to report an 8% growth over the quarter in the P&E division. And the last 12-month M&F revenue per year is holding up at €1,200. Moving to the right, we had a slight acceleration in the growth of the luxury lifestyle net unit growth at 7.1%. on an LTM basis continues to be driven by any smaller, which was up more than 20% on an LTM basis. We see an improvement quarter after quarter in the net tuning growth of luxury and lifestyle, and this is fueled by a high opening and a significant pipeline. In the quarter over versus previous quarter, pipeline is actually stable. Signings, however, in the luxury and lifestyle divisions are up 22% in value on a year-to-date basis as we continue to focus on higher-value deals. Some notable openings in the quarter were the Raffles in Jaipur, the Ricks of Golden Horn, and Sofitel in Cotonou. And in this division, we also see, you know, steady M&F revenue per room at €4,000. So at group level, net unit growth reached 3.2% on a near-term basis. It is at the low end of our midterm guidance, as expected. We had a bit more conversions. Conversions represented 62% of opening, which is above our historical level, which is near 50%. Moving to slide six, which is the revenue breakdown by segment. Group revenue slightly over $1.4 billion, up 12% versus prior year. Reported growth is positively impacted by the consolidation of Coupe de Chabot, which is impacting luxury and lifestyle. Partially upset by foreign exchange, which impacted us by a negative 2% in the quarter. And on a life-or-life basis, our revenue is up 9%. For premium mid-scale and economy, revenue was up 7% in the quarter at $821 million. Management and franchise was up 6%. That's one point above red bar. We also had a bit of a negative FX impact. On the positive side, we had some termination fees in the ENA region. In services to owners, The 14% year-over-year valuation that you see here is fairly impacted by services that were provided to the Olympics organization. Hotel assets and other performance remains driven by Australia and Brazil, so the revenue growth in this region, which is pretty flattish, reflects your softness in Australia as well as negative foreign exchange from the Brazil deal. Turning to luxury and lifestyle. Revenue was up 18% in the quarter, 635 million euros. Management and franchise was up 10% in the quarter. That's three points above growth, which reflects the strong growth of the lifestyle portfolio, and again, partially upset by negative effects in this division. Services to owner growth was pretty much in line with REF PARC. And hotel assets and other growth, again, reflects mainly the acquisition of Portel and Chabot. which we did in the October of last year, and RICAS, which was at the end of the first quarter of this year. Turning now to specifically management and franchise revenue on slide 7, L&S revenue was up 7% in the third quarter. PME was up 6%, and as you can see here, this was primarily driven by the INA region, as previously mentioned. This region benefited from some termination fee, as well as obviously the very good growth in VETFAR. In the APAC, the M&F revenue growth at 2% is the main line with VETFAR growth, and in America, as you can see here, minus 2%, and this is the result of the depreciation of the Brazilian rail, primarily, as VETFAR was very positive in this region. Regarding luxury and lifestyle, MNF revenue grew by 10%. Luxury revenue, MNF revenue, is up 5%. That's in line with VEFAR. And for lifestyle, you're seeing 23% growth in MNF revenue, a combination of obviously very solid VEFAR growth, but also the very strong growth in the network in this segment. Turning now to page 8 with the key takeaways. As we expected, and as we shared with you, the group foresees a normalization of the RASPAR momentum towards our mid-term perspective of 3% to 4%. As for full-year 2024, we are confirming our RASPAR guidance, only between 4% and 5%. We're also confirming our net unique growth between 3% and 4%, confirming our positive services to owner EBITDA, And we slightly narrowed upwards our EBITDA guidance, which is now expected between $1,100 million and $1,125 million. And that concludes my introductory remarks, and I will now open the floor for questions.

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

Yeah, hi there. I've got three questions. Firstly, just wanted to start on the road for Outlook. If we could just get a bit of a run through of the key geographies in terms of how you're seeing things evolving into Q4 and maybe next year. Particularly curious, obviously, on France, given the political backdrop, and also the Middle East. You mentioned there the exit rate of high single-digit, which I think included Turkey. Just as curious what that is without Turkey, what the rest of the region's doing, and how you're feeling about the outlook there for Q4, I guess, obviously, with some tougher comps. Second one's just on the net unit growth outlook. How are you feeling about that turn or the exit pace as we move into next year? Will that elevated pace of exits continue, or is that mostly going to be done then at the end of Q4? And the last one's just on Acro Invest. I saw the comment suggesting that the maximum equity injection now for me would be $34 million, not the $67 you've called out previously. But just given the progress that's being made there, both on disposals and on refinancing, how you're feeling really about the process, the likelihood of needing to make another injection in March, and obviously how that asset sale looks like it's progressing through to next year.

Hi, Vicky. Thank you for your question. So, look, in terms of the, you know, REFBAR outlook for the, you know, for the fourth quarter, you know, we're seeing, you know, as I said, we're seeing normalization of, you know, of REFBAR. So, you know, for the fourth quarter, you know, we're going to be in the, you know, in that range, which is in the, let's call it, you know, low single digits overall. Okay. which is just, you know, comfort, you know, 45% rest of our guidance. As far as, you know, giving you some colors across, you know, across the regions, you know, NR is post, you know, the Olympics period, NR is going to be more of a, you know, low to flattish, you know, growth, and, you know, France will be, in that same zip code, more or less. The beginning of October was a bit buffed in France. The second half of October is actually far better. With respect to your question on the Middle East, obviously Turkey continues to be strong. Dubai is relatively, you know, relatively flattish, but we're seeing, you know, we're expecting positive momentum in, you know, in Saudi Arabia, which is obviously a key, you know, a key market in this region. You know, China, you know, China, as indicated, was, you know, minus 9% in the third quarter region. The comps are getting a bit easier in the first quarter, but we expect China to be, you know, to be still negative in the first quarter. And I think that covers the key markets. It's a bit too early to, you know, share with the outlook for, you know, FY25 is obviously, you know, as I said, we're seeing Refgar normalizing towards, you know, that, you know, kind of 3% to 4% mid-term outlook. In terms of the churn, what we shared with you is that the program, which we call PURE, which is a portfolio upgrade program, was going to impact us more in 23 and 24. We'll have a bit of a last impact will be in 25, but we expect that impact to be less than what it was in 23 and 24. And with respect to ARCO Invest, yes, as you indicated, ARCO Invest has been too successful in financing since they just issued a second bond, which was actually at a lower cost than the first bond. So their, let's say, normalization of their debt structure is progressing at pace. They are also progressing at pace on their asset disposal program. The combination of the two reduces our maximum commitment to $34 million from previously $67 million. It's too early to tell whether we will have to extend that $34 million or not. All I can say is that at this point in time, the asset sale is progressing as planned.

Okay. Thanks very much.

Thank you very much. Our next question is from Julian Richer of Kepler. Go ahead.

Yes, good evening. Two follow-ups, one for me, please. The first one on the demand trend by clientele. Have you seen any deceleration in, for example, merger, leisure demand, international leisure demand, or domestic leisure demand on the business side? Happy to have your view on that. And the second one on if you have seen any change in construction and development due to interest rate evolution recently. Thank you.

Thank you, Julian, for your question. So with respect to demand by kind of type of customers, what we've seen is we've seen high growth coming from business and groups. Leisure demand is still positive, but it is, you know, it's progressing at a lower rate than both business and groups. It's about a 1 to 2 ratio between, you know, business groups and leisure. And with respect to the loosening, if I may say, or reduction in interest rates, it's certainly a bit early to tell. What we have seen is we've seen a higher rate of conversion in our openings in the third quarter. And not unlike, I think, what you've seen from other players.

Okay, thank you.

Thank you. Our next question is from Muneeba Kayani with Bank of America. Please go ahead.

Thanks for taking my question. Can you talk about the potential impact on you from the tax changes that are being talked about in France, both from an income tax perspective and also on airfares? And then secondly, in the 1A training school, there was discussion around luxury and lifestyle and kind of, possible actions to crystallize the value, and it would be reviewed, I believe, in December. Anything changed on that front, and how should we be thinking about that business? And then from a signings perspective, can you give a bit more color around what regions have driven the third quarter, and how are you thinking about that into year end? Thank you.

Thanks for your question. So with respect to the tax change, so we have really two impacts. One is the corporate income tax and the other one is share buyback. Based on the analysis that we've taken, and you have to recall that we still have big, fairly large net operating losses in France. And France is only 20% of our, less than 20% actually of our business. On a corporate income tax basis, and let's say share buyback, assuming 400 million share buyback, the impact is less than, is around 10 million euros for us. Definitely something that is relatively de minimis. On the luxury and lifestyle, we really have no plan to do any sort of capital transaction with this division. And on signings, most of the, and this is not different from what has been happening certainly this year, the focus or most of the signings are in Southeast Asia and the Middle East. We're also getting good traction, starting to get good traction in the U.S.

Thank you. Thank you.

Our next question is from Jaina Mistry with Jeffrey. Please go ahead.

Hi. Good evening, Rufin. One question on 2025, and it's a bit of a follow-up to the first question. Just wondering how you're thinking about the moving parts to West Power in 2025, how you're thinking about the Middle East, China, and actually in particular Asia ex-China, how you think the shape of growth could pan out there next year? Second question is just around the Olympics. I wondered if you could quantify the benefit at the group level in Q3. is around France, you know, it's been more flagged that there's weakness in France post-Olympics. You mentioned that the second half of October looks a bit better. Do you think traffic to France recovers in Q4? Any early signs of what's happening there? Thank you.

Hi, thank you for your question. So in terms of 2025... In fact, you know, if I start with, you know, with China, we would expect that, you know, China is, you know, at best probably relatively neutral. And that really depends on what the stimulus program, you know, will be about in terms of the impact it will have on consumption. You know, we know that it's going to help real estate. We know real estate is an important, you know, asset for Chinese. but not clear how it's going to affect Chinese consumption. So a bit arbitrary to tell, but probably neutralized this. In terms of NR, we think probably in the low single-digit growth, and we continue to see positive mid-single-digit growth for China. the Merpac region excluding, you know, excluding China. And the U.S., you know, U.S. Canada is a smaller market for us. And here, you know, probably, again, most in the region. With your question on the Olympic Games, I mean, overall, you know, we were expecting two points uplift in, you know, in France on a four-year basis. And that's pretty much where we landed. In terms of France, France was softer in September. Some of that is related to the post-Olympics peak, and some of that is also related to, and I alluded to that in my introductory remark, to the fact that we had a pretty good September and October in France last year because we had the Rugby World Cup, in the cities outside of Paris.

Thank you.

Our next question is from Leo Carrington with Citi. Please go ahead.

Good evening, Martin. Thank you. Patrick, could I just clarify on the comments you made about the churn, the elevated levels of churn? Is this the 30 biggest hotels in Germany that were sold back for the best by B&B or other exits that I've not spotted. And in terms of competition, I mean, how do you see the situation in Europe? You know, there's Marriott expanding Moxie, B&B hotels, obviously. In general, a big focus on conversion, which you've benefited from. What's your view on the latest competitive developments? And then, secondly, just to follow up on Vicky's question, really, I mean, the midpoint of 2024 REVPAR guidance does allow for some slowdown from Q3 and from year to date. Is this an element of caution, or are you factoring in some specific areas of deceleration? Thank you.

Thank you for your question. I'll actually start with the last one. So on the REVPAR outlook for this year, you know, I said that I was We're comfortably within our 45% REVPAR guidance, and so our expectation for Q4 is that it's probably going to be in the low single-digit territory, which you should expect some normalization in REVPAR, and that's what we've seen actually throughout the year. Our expectation going forward is that we'll be in that 3% to 4% range that we indicated and shared with you at the CND, and that's still where we are given the diversification of our portfolio. In terms of the churn, so we had a bit of a higher churn in PMU in the third quarter but when we look at the term for the four-year, it's in line with our expectation for the four-year, and it's certainly in line with our net unique growth guidance of 3% to 4% in 2024, and we're not giving guidance by division for net unique growth, But all I can say is that we expect PME to be in line with the CMT guidance we gave, which is 2.5% to 3.5%. Some of the turn in the N2-3 was related to the BNB portfolio. That being said, we're still leader in Germany by far. We're about twice as large as our next competitor. And with respect to that particular portfolio, this was an asset-heavy portfolio. and our strategy is, you know, very clear to move away from asset-heavy and remain an asset-light. And therefore, you know, that portfolio did not, you know, did not fit within, you know, within our strategy. In terms of the competition, you know, yes, competition is, you know, healthy in... in Europe, not just in Europe, but again, we show that we have a strong portfolio of brands and that we can defend ourselves and continue to increase our net unique growth, including in Europe. But as I said, our priority growth markets are Middle East and Southeast Asia, and that's what most of our openings and most of our swings are.

Thank you.

Our next question is from Alex Rignell of Redbird Atlantic. Please go ahead.

Thanks so much for taking the question. Looking at the four-year guide, obviously some focus on where there's a slowdown allowed for in Q4. kind of looking at the revenue in Q3, it seems to be on a good trajectory. Is there anything in the cost line that is stopping EBITDA being upgraded somewhat or perhaps in services to owners? It's obviously always a tricky number to call on an annual basis because it moves around a bit. And then the second question, the signing is obviously better and the churns, kind of heavy churn phase is going to be over in Q3. well, this year, certainly more so the next year. So looking at the net unit growth expectations for FY25, what do we think is realistic for within that previously announced range of three to five? Thank you.

Thank you for your questions. Again, with respect to RepR and kind of the big data, In July, we gave a guidance of 4% or 5% earth bar, 3% to 4% net unit growth, and an EBITDA range. And honestly, we're still within that range, and therefore we're expecting the same EBITDA. We didn't change the EBITDA guidance. We moved it upwards a bit, but fundamentally we're still within that range. With respect to the... With respect to your question on net unique growth for FY25, I think what we said at the CMD was not our net unique growth guidance in the midterm was 3% to 5%, and our expectation was that at the beginning of the plan, it would be towards the low end of that guidance, hence our guidance for this year was 3% to 4%. And as we moved towards the middle and the end of the plan, we were expecting that net unique growth to pick up towards the higher end of the guidance. 2025 will be somewhere in that middle.

Thank you very much.

Thank you. Our next question is from Estelle Weingard with J.P. Morgan. Please go ahead.

Hi, good evening. I've got a couple of questions. The first one, could you quantify the impact of the COP in the UAE last year? It lasted for at least a week, I think, in December. That's the first question. The second one, would you mind just, I'd like to look at the potential for further margin expansion into next year, just to understand better what are the key levers left for Accor, for M&S in particular. Thank you.

I'll take your second question on margin expansion. So on margin expansion, what we shared, I think, in previous calls was that our expectation was to have an operating leverage on M&S margin of about 100 basis points, and that's certainly where we were tracking at the end of the first half, and that's certainly where we will be tracking on a fully basis given what our EBITDA the guidance here, so we're still essentially on track with delivering that kind of margin improvement over the duration of the plan. With respect to your question on the COP, it's a little challenging to isolate one particular event. I'm sorry, I'm going to give you a good answer on that one.

Okay, thank you.

Thank you. As a reminder, if you'd like to ask a question on today's call, please press star 1 on your keyboard.

Our next question is from Andre Juilliard with Deutsche Bank.

Please go ahead.

Good evening, Martin. Three questions, if I may. First one about the MICE segment. You were mentioning that the recovery was continuing on the corporate, but do you see any real improvement on trade fairs, big events? First question. Second question about the corporate rates. You must have been starting the negotiation for 2025. Could you give us some more color about that? And last question about asset disposals. Could you give us an update on the Montreux disposal, where you are, and what is still to be done? Thank you.

Sure. Hi, Andrew. On the nice segment, as we said, we had a better growth in the groups in the third quarter as compared to Asia. What we actually see is We don't have a visibility into the events in every city in the world, but in the top cities, what we see is we actually see a very, very robust event calendar. What we have received as estimation is up to 20% increase in attendance in events in the key cities. So we should have a robust MICE business in the fourth quarter. With respect to the, you know, corporate rate negotiation, look, it's a bit early to tell, but in terms of the, I would say, the guidance that we are giving, you know, our sales team is to have a rate increase in the same territory as what we did this year, which was, so I would say, you know, kind of mid-single-digit. And with respect to assets... With respect to asset disposal and mentoring particularly, we've done a lot of the asset disposal already as compared to what we had when we made the acquisition. I think we have about 100 million left on the balance sheet. Those leases are a bit harder to... you know, to dispose. We went from 400 at the time of acquisition to 100 million now. So we basically have the, you know, the hard a lot in some sense to dispose. But we're still working and we're, you know, we are slowly but surely disposing of those assets. But I would say most of the heavy lifting has been done

Okay, thank you very much. Just to come back on Vicky's question about AgroInvest, you still maintain the timing of H2 25, early 26? Correct.

Okay, thank you.

Thank you. As we have no further questions in the queue, I would like to turn the call back over to Madam Drill for any closing remarks.

Thank you for attending this call, and I wish you a good rest of the evening. Thank you very much. That concludes today's conference.