Accor Sa

Hello and welcome to the Accor QM 2025 revenue conference call. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions after the presentation and this can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you'll be connected to an operator. I will now hand you over to your host, Martine Giraud, Group CFO, to begin today's conference. Thank you.

Thank you. Good evening, ladies and gentlemen. Thank you for joining Accor's first quarter trading update call. And I will start with the key highlights on slide three. So I'm pleased to report that we started the year with sustained momentum. So the strategy of ACOA, which is to focus our investments in higher growth regions and segments, is yet again delivering another quarter of very solid growth. First quarter, RESPAR reflects a solid trading at plus 5%, like for like, driven by strong performance in the Middle East, in Southeast Asia, and the Americas. March was softer than January and February due to calendar shifts, notably with Easter that is shifting in April, which for us created a headwind in March. April and May are trending much better, and thus far we are not seeing significant changes in demand trends in our key markets. Pricing continues to be the main driver. contributing about 80% of the group ref bar growth in the first quarter. Occupancy was up by one point in the first quarter at 61%. Net unique growth reached 2.7% on the NELTN basis, reflecting a lower pace of openings in the first quarter, and a churn which this year will be more front-loaded. We expect NUG to accelerate in the second half, and we are very pleased with the pipeline, which is improving 4.9%, on an LTN basis. Turning to revenue, group revenue increased by 9.2%, with management and franchise revenue up by 9.3%, a combination of REFAR and Natchini Growth. And as announced in February, we did reach 100 million oil members in March. Now, during this quarter, the group has remained active and continued to strengthen both its portfolio and its balance sheet, and you may have noticed that we recently announced a significant breakthrough in two high-growth markets in India, where we announced a strengthened partnership with Interglobe and Tribo to jumpstart our development in India, and in Mexico, where we announced the acquisition of 17 hotel management agreements and a brand rating platform for the acceleration of the development of Accor Brands, both in lifestyle and PME in Central America. We took advantage of what were supported markets, financial markets in February to successfully issue a senior bond for 600 million euro with an eight year maturity and a three and a half cent coupon. And finally, we launched, as we announced in February, a first tranche for 200 million out of the 400, 40 million share buyback program and as of today there's a bit more than 60% of this tranche that has been executed. Now if we turn to slide 4 on the Q1 Ref Bar starting with PME which posted a Q1 Ref Bar growth of 3.4% versus 2024 driven primarily as you can see here by solid pricing resilience. In the quarter, average room rate was at 3% year-over-year, and occupancy rate was up slightly, a bit less than a point, to 61%. In INAH, Europe-North Africa, Q1 RESPA was up 0.6%, solely driven by occupancy, which was up 0.4 to 58%, with a somewhat contrasting picture across the various countries that comprise this region. In France, Both Provence and Paris reported slattish to slightly negative growth in Q1. Both were positive in January and February, but March came in negative again due to a weaker event calendar and Easter shifting to April. However, when we look at April, on which we have good visibility, April bookings have responded quite strongly in France and are back to positive territory. In the UK, low single-digit negative RefBar growth in the first quarter mainly reflects a continuation of lower consumer confidence, which are prioritizing savings over spending. In Germany, RefBar overall for the first quarter was slightly negative, but sequentially improved, turning positive in March, thanks to a more favorable event calendar. And in Southern Europe, And Eastern Europe, those regions continue to be positive, solid positive contributors to the ENA Ref Bar. Turning to MEAPAC, the first quarter Ref Bar was up 4.6%, solely driven by rates. As you can see, excluding China, which is part of this region, the MEAPAC was up 7.2%, so very, very solid Ref Bar growth. Middle East Red Power was up in the mid-teens, so quite strong, notably benefiting from the Ramadan in Saudi Arabia, which was fully in the first quarter this year. Southeast Asia also posted very solid growth in the mid-single digits, despite what was actually a challenging calm base for Singapore, where we had a number of tele-shoot concerts in March of last year. Pacific REST bar growth was sladdish. Pacific was impacted quite strongly by the alpha cyclone in early March, which affected the coast of Queensland, which is a big region for Australia for ECHO. In China, REST bar continues to be negative, high single digit growth. Recovery of Chinese tourism is really benefiting more the outbound market and Southeast Asia in particular. So we benefit from this indirectly. And we do not foresee, given the current events, we don't foresee China turning positive in the short term. Turning to America, Refbar continues to be very robust with up 13.1% in the first quarter. Brazil continues to post mid-teens RASPAR growth, driven by both price and occupancy, with a quite strong events calendar again in the first quarter. Moving to luxury and lifestyle on the right, RASPAR growth was 8.3% year-over-year with rate and occupancy gains. Rate was up 5% in the quarter. Occupancy was up 2 points to 60%. Luxury respire was at 9% with rates driving most of the gains. All brands reported high single-digit to low-teens respire growth as international tourism continued to be supportive of this segment. As for lifestyle, respire growth was a solid 6% mainly driven by occupancy. Resorts continued to perform well in Turkey, in Egypt, and the UAE. and benefiting from strong demand and boosted occupancy. I will now turn to slide five, which breaks down the hotel portfolio and pipeline by division, starting on the left with PME, where net unit worth was 2.4% on an LTM basis. As is usual for the first quarter, the pace of openings was moderate. but did include some notable openings such as Foreman in Chennai and a new hotel in Valencia. In addition, while we expect Churn to be in line with 2024 on a four-year basis, it will be more front-loaded in 2025, and that is what is impacting Q1 net unit growth. Pipeline is up 4.5% on a last-term basis, 178,000 rooms, thanks to a solid level of signings in Q1 in both volume and in value. And if you look at the M&F revenue on the last 12 months basis, it stood at 1,300 euros in the first quarter, which is up slightly from where it was for 2024. Moving to the right, luxury and lifestyle portfolio grew by 4.3% over the last 12 months. The network growth was really impacted by a more moderate pace of opening, but also the churn of two large hotels in lifestyles. Now, the impact of that churn will actually be quite minimal on lifestyle revenue as those properties, those two properties had very low fees per room, less than €1,000. And you contrast that to the average fee per room in lux and lifestyle, which is over €4,300. And as in PME churn, this year will be more front-loaded in luxury and lifestyle. Now, we do plan an acceleration in monitoring lifestyle of the natural growth as early as the second quarter, with the openings of two large rickshaws actually in Egypt and Hoxton and in Dubois, and also having a more normalized churn in Armenia as we go forward. And for the four-year, we do expect lifestyle to continue to grow its networks. in the Me Too High team fueled by pipeline, which grew 15% on a last 12 month basis, and which represents 80% of the lifestyle network. For the Division, the pipeline is also up a healthy 6% on an healthy last 12 month basis driven by lifestyle. And for the Division, pipeline accounts for 46% of the existing portfolio, which is up slightly from where it was last year. In terms of noticeable signings in the quarter, we're happy to announce the future openings of Raffles, Como in Italy. We have emblems in Cortina d'Ampezzo and Sofistel Porto in Portugal. All were signed in the first quarter. And again, M&F FIPA room at 4,100 euros is a very solid increase versus last year. Last year, FIPA room was 3,800 euros. So we continue to have signings that are accretive to the revenue. At group level, NUG reached 2.7% over the last 12 months. Again, what we expect, 2025 net unique growth to be above 2024. As we shared with you in February, it will follow a somewhat different profile. In 2024, and you may recall, H1 openings benefited from the large portfolio conversion of Daiwa in the second quarter. As a result, you will see an acceleration in NUG starting in the second half. Very good conversions in the first quarter. 61% of the openings were conversions. And again, total pipeline is at 4.9% on an LTN basis and standing at 28% of the network. I will now turn to slide six with a revenue breakdown by segment. So very good revenue growth in the first quarter, plus 9.2%. Premium mid-scale and eco, so PME revenue is up 1.8% versus the first quarter of 2024. Management and franchise revenue is up 3.9%, so slightly above REF PAR. Incentives are actually represented 32% of M&F fees in the first quarter, so quite stable. Services to owner continues to perform well, up 5.4%, outpassing REF PAR growth as we continue to drive improvement in our channel mix in the first quarter web direct channel was up 1.4 p.m hotel assets and other revenues down 3.5 percent uh this is where uh our mantra portfolio sits in australia and that was impacted by the tropical storm alfred as I shared in my introduction, and we also have the effect of the depreciation of the real in Brazil, which is impacting also this line. So luxury and lifestyle revenue is up 17.9%, so quite healthy growth, with management and franchise up 19.6%, so that's 11 points above REFAR growth, and that's the reflection of both Network work, but also good growth in incentives. Incentives were 35% of M&F fees in luxury and lifestyle in the first quarter, with good development of the hotel margin. Services to honor revenue growth driven by both activity, but also improved loyalty contribution at 14.6% in the quarter. And hotel assets and other, which, you know, with a growth of 25.9%. Now, that reflects the... consolidation of ReCAS, which was acquired in March of last year, as well as the openings of some new F&B venues. I will now focus on M&F revenue growth on the next slide, which again grew a very healthy 9.3% in the quarter, starting with PME. PME M&F revenue was at 3.9%, so again reflecting the global rough part growth of 3.4%. with a somewhat contrasted performance across regions. In ENA, the slight decline in M&F revenue reflects a lower FBAR, 0.6% in the quarter, but also the move to franchise. We have a limited number of management contracts that are moving into franchise contracts. We did anticipate this in our mid-term projections that we shared with you in June of 2023. And most of the impact is now expected in 2025. Now, we have taken the required adjustments to our cost base. They have been identified and they are being actioned to offset the MNF revenue impact on the PME division, which we estimate to be about 2% on a four-year basis. In MEAPAC, the revenue growth is well above REFAR, boosted by network growth and strong incentive fees, with a 13% growth in MEAPAC. And in the Americas, we're not seeing here the good performance, and it's really a reflection of what's happening to the real, which, as I said, is weaker in the first quarter. Turning to luxury and lifestyle, M&F revenue, double-digit growth, very strong at 19.6%, so well above our FPR. It's driven both by a solid activity performance, very good translation into incentives and more for lifestyle, obviously a very strong net unique growth. Turning to slide eight and to conclude this presentation with the key takeaways before we open the floor to Q&A. A core strategy of focusing investments in high growth geographies and segments is fueling yet another quarter of solid growth. And as shared in my introduction, we are not seeing material shifts in overall demand in the month of April and May or trending in line with our expectations and above where March was. Visibility is more limited beyond May given the short booking windows as always, but we feel good about where April and May are trending. We recently announced two significant breakthroughs in fast-growing markets in India and Mexico, which will accelerate our development in both regions and therefore further diversify our portfolios. We expect our net unique growth to accelerate in the second half as we lap over the direct portfolio conversion, which had boosted NAG in the second quarter of last year, combined with what we see as strong planned openings in the third and fourth quarter. Now, clearly the visibility is limited, given the volatility on tariffs in particular. Now, as a service business, the direct impact of tariffs on ACO is clearly minimal. Nevertheless, we are closely monitoring the situation, and we have tightened our cost control measures in this respect. And as always, we remain focused on delivering our midterm targets as we disclose during the June 2023 Capital Markets Day. And I will now thank you for listening, and I will now open the floor to your questions.

Thank you. We already have several participants queuing for questions, but as a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. If you change your mind and want to withdraw your question, please press star 2, and please ensure your lines are unmuted locally, as you'll be prompted when to ask your question. The first question comes from a line of Jaina Mystery from Jefferies. Please go ahead.

Hi, thank you very much for taking my question, Martin. Um, my first question, I wanted to double click on what you were saying around April and may current trading. Um, I know you said it's above March. Can you maybe give us the March exit rates and are you seeing any signs of cracks in demand from particular nationalities? There's been a lot, a lot in the news around the us consumer. Are you seeing any slowing in us to Europe? And I, you know, how material is the American consumer for Apple's business? My second question is net unit growth. I saw you're in talks to acquire some hotels from the Royal Hotels Group. Would this be in addition to the net unit growth board guidance that you gave earlier this year? So could we realistically expect a number that's maybe above 4% for 2025? And then my last question, if I may, the market's talking about macro. know people are concerned about the consumer does this have any impact on the timing of the aqua invest disposal and and what are you hearing from your conversations with potential acquirers slash investors thank you uh thank you for your question janet so uh in terms of the exit rate uh so march was overall for the group march was um

low single digits. What we see for April is mid-single digits. And May is basically also mid-single digits. So a pickup of a few points from March into May. Again, we're not seeing cracks in demand. To your question as to How critical or not critical is the U.S. for alcohol? So the U.S. market, if I include both the Americans traveling in the U.S. as well as international foreigners traveling in the U.S., it's about 5% of our room revenue. And if we now look at Americans traveling outside of the U.S., it's less than 3%. of our room revenue, so quite minimal in our overall portfolio. Certainly, when we look at April and May, we're not really seeing much change in American bookings. The only market where we've seen an inflection, it's actually benefiting us, is Canada, where we see Canadians who were planning to travel in the U.S. actually staying in Canada, and some events which were planned in the U.S. being now repositioned in Canada. With respect to your question on net human growth, as you know, We will communicate our guidance in our July earnings release. What we said in February is that we expected net unique growth to be better than 2024. 2024 was 3.5%. The acquisition that we made in Mexico is not factored in that improvement over And with respect to the AccorInvest, we continue to think that this is going to be a 12 to 18-month process. We're going through the required motions of that process, and we haven't heard thus far that the current environment is lengthening that process.

Very clear. Thank you.

The next question comes from a line of Muneeba Kayani from Bank of America. Please go ahead.

Thank you for taking my questions. Just following up on the demand trends, could you kind of break that out across different segments like group, business transient, leisure transient, any kind of anything to point out there in terms of the demand trends color that you'd given earlier? And then just wanted to follow up. I think that Mr. Besson had mentioned that there was a drop in European bookings into the U.S. this summer of around 25%. Things are changing rapidly, so just wanted to check on kind of how that has evolved. And then third question, just the economic uncertainty, like how are your discussions with hotel owners and Clearly the pipeline is looking good, but if there is kind of any concerns from hotel owners on new builds, if that's come up in conversations. Thank you.

Sure. Thanks for the question, Miba. So on demand, what I would say is what we see is we see still good demands from groups. and leisure and software demand on business individuals. That's what we see today. With respect to what we see in terms of bookings to the US, We saw some softness. In March, if you look just industry-wide, in March, bookings to the US are down 10%. And some European countries are more, for example, Germany, Denmark, UK, less so for France. But again, in terms of what that business represents for us, it's less than 3%. Now, the other good news is, and I was kind of giving you the example of Canada, if they don't come to the U.S., they usually end up going somewhere, which is where Accor is present. And in terms of what we see and the impact on the macros on new constructions, we're not seeing deals coming out of the pipeline. What we do see, but it's more anecdotal at this point, is we see a bit more time, so a bit longer process in terms of renovation. But it's more anecdotal. It's not a trend at this point.

Thank you.

The next question comes from a line of Jamie Rollo from Morgan Stanley. Please go ahead.

Thank you very much. Any questions, please? Just continuing the theme with the outlook, just moving down the P&L a bit, what contingency plans do you have to protect margins or indeed make other changes if we do get an economic slowdown? Maybe talk a bit about the cost flexibility and so on, please. And the other questions are just on the two deals. India sounds positive for net unit growth, but much less so for fees, given it's mostly a master franchise agreement. So could you talk a little bit about that balance? Because normally the company is very focused on fees, not rooms. And the Mexican deal appears to be sort of a bit like key money because you're buying contracts. So what IP are you getting with that? And why couldn't you just win the contracts off the company without having to put in the money you did? Thank you.

Hi, Jean. Thanks for the question. So in terms of the contingency plan, so we, I mean, one, our cost structure is more flexible today and more variable today than it was, let's say, pre-COVID. We have a variabilized, you know, some cost elements. We do have greater flexibility from that standpoint. But more generally, we are... very careful about our cost structure. And you may have noticed that last year we announced some restructuring, and the benefit of that restructuring will actually fall into 2025, which would help weather a change in demand. In terms of your second question, so the two deals are quite different. India is a longer-term project, so the impact short-term on the echo, net unit growth or revenue is really going to be very minimal until 2025, non-existent. So it's more of a kind of medium to long-term transaction and impact. In terms of Mexico, we're doing two things. We're acquiring HMS, but we're also acquiring a brand which is called Park Royal, which will serve as a platform to develop in Mexico. So it's really those two things that are part of the deal.

Do you think we should expect more of these portfolio type deals from a company going forward and a bit less organic or conversion?

In 2024, we had a portfolio deal which was Daiwa, which was 23 hotels. So in Japan, total is now 23 hotels, which we were able to convert quite quickly and which actually didn't require any money. Portfolio deal, you should expect to have as part of a strategy, but there's it's a minimal contribution to our role in NetUniverse. It will not be the driver of the NetUniverse. And pipeline is really what is driving NetUniverse. And as you've seen, pipeline is actually growing at a healthy rate.

Okay, thank you very much.

The next question comes from the line of Jared Castle from UBS. Please go ahead.

Yeah, good evening, I guess. Just kind of following up from some of the questions, I mean, what kind of REVPAR do you think you need to see to be able to grow margins? Obviously, you've also got cost programs, but what are we talking about before margins start to get squeezed? Secondly, just on development, is there any concern in terms of people who've signed up in terms of the cost of development? I'm thinking of certain of the materials which might be subject now to tariffs, especially in the U.S. And then just lastly, you seem to be making good progress on the initial tranche of the $200 million buyback. When this comes to an end, should we expect a quick follow-on in terms of the remaining tranche?

Thanks. Look, with respect to REFAR, where we sit today, we are still confident in our ability to be within that 3% to 4% REFAR guidance, which we gave at the Capital Marketplace. We're not seeing cracks in demand thus far, but we are obviously remaining very vigilant and very focused because there is volatility in the environment. You know, in terms of, in terms of the red bar sensitivity, you know, what we've, what we've shared with you in the past is that, you know, one point of red bars is, you know, about, you know, eight, give or take eight million impact on EBITDA. So a couple of point of red bar is certainly something that we can manage. We have enough flexibility to, to be able to, you know, to, to absorb that. In terms of the, In terms of the development, again, as I said, we're not hearing from our development teams major concerns in terms of cost of construction going up. Cost of construction was actually already going up prior to the announcement of tariffs. I think the situation is quite fluid. We'll see whether the tariff situation eases a bit or not. We're not planning on it, but with respect to our portfolio, we're not seeing, everyone, anecdotally, any changes in trends, and so we're not really concerned. And you have to remember that full macro actually conversions is driving most of the openings. And I'm sorry, you had a third question on the share buyback program.

Yeah, that's right. Thanks.

With the share buyback program, you should expect a second tranche in the second half.

Thanks very much.

The next question comes from a line of Leo Carrington from Citi. Please go ahead.

Thank you. Three questions for me as well, please. Firstly, just briefly follow up on the Americas-Mexico deal. In terms of that renovation contribution, have you locked in longer management contracts than you would otherwise? Secondly, on incentive management fees, they seem to have expanded fractionally year over year. Is there any further room to take that higher? And then lastly, on the move of some PME management contracts moving to franchises, net of the cost savings you mentioned in your remarks, what would you say the impact is on EBITDA? Thank you.

I'll take your last question last year. So we don't expect an impact on EBITDA because we've taken the measures to offset that. This is something, again, that we would would take place. This is actually the strategy of some extent is to move towards more franchise. The move to franchise is actually a trend that exists now for several years. So this is something that we have anticipated, that we have planned for, and we have taken the measure to address the necessary cost-based adjustments in particular. this will not impact our ability to deliver our targeted 9% to 12% bid-add worth over the 2023-2027 period. With respect to America's Mexico deals, I mean, there's about more than half of the price that we pay for will go towards renovation of those of those properties. Those contracts are long duration contracts. They are above 20 years, as is often the case for those types of contracts. And your last question, incentives. Incentives have been We're hovering in the 33, 34, 35%, and that's a level where we expect incentives to remain, and they could be up or down a point, depending on the years, but 34, 35% is probably the right level.

Thank you very much, Martine.

Before proceeding to the next questions, as a reminder, if you would like to join the queue for questions, please press star one on your telephone keypad. The next question comes from a line of Alex Brignol from Redburn Atlantic. Please go ahead.

Afternoon. Thank you very much for taking the questions. So on the India deal, could you just talk about perhaps what the So fee rate is for the master franchise agreement, perhaps comparing it to similar arrangements you have in China. And then obviously the churned rooms that you had in luxury and lifestyle had lower fees and you're actually exiting. We've got a meaningfully higher churn rate at the moment than other competitors. I imagine that there's a similar dynamic with the other rooms that you're exiting. Could you just confirm that? other rooms that you're churning out are at lower fees, is that therefore sort of supportive to that underlying take rate or fee conversion rate? Thank you.

Sure. So with respect to the master franchise in India, there will be a rate that will be uh comparable to the uh uh uh to the you know to the uh chinese uh wazoo array because it's you know it's a master franchise agreement and the benefit for our college really uh is really expanding uh our portfolio of hotels in india uh you know to upwards of 300 hotels which obviously give a tremendous amount of availability of the alcohol brand as you are. India will be the fifth largest outbound market and is already the third largest or will be the third largest domestic market by 2030. So that's really where we see the strategic rationale for the deal. And again, we're doing this with a partner that has been a partner of ours for quite some time. I can confirm that in terms of the properties that are churning on both divisions, they are at lower fees than the properties that we are signing and opening. And so in some sense, the churning is accretive.

Fantastic. Thank you very much.

The next question comes from the line of Jafar Mestari from BNP Paribas. Please go ahead.

Hi, good evening. I've got two, if that's okay. So, firstly, on booking trends after April and May, I appreciate it's going to be on very, very low numbers, as you said, probably less than 20% booked. But you do have something on the books today. So, Is your message that it's completely in line or is your message that maybe it's a bit soft, but it's too early and maybe it's just late bookings because of the uncertainty? And secondly, on the portfolio review, when you started talking about reviewing some of these countries, your logic was we either need to have critical mass or we need to exit. It seems like both Japan last year and Mexico this year, we could even count India, you've decided to add some scale. As a recap, have there been any exits and what countries are still being assessed, please?

Hi, Jafar. So, look, in terms of very, again, very limited visibility in June, What I would say is that June last year was not a great month, certainly in ENA because of the pre-Olympics, so we'll in some sense benefit from that, but it's just too early to tell. In terms of the country strategy, we're not planning to exit any markets at this stage, and we're pleased to see that in those countries which we felt were either more white spaces or countries where we really could accelerate our development. Pleased to see that we did this in Japan, doubling our size in Japan. We're doing this in India. Again, it's mid-term. The other thing about India also is that it's a development play, but it's also with a very strong loyalty, will be a very strong loyalty partnership with Indigo Airlines, and Indigo Airlines obviously is a very, actually the number one airline in India, and they just launched their loyalty program. So we expect traction from that. And then Mexico, we're pleased to now have a platform to accelerate our development in actually both division lifestyle and TN.

Thank you very much.

A final reminder, if you'd like to join the queue for questions, please press star one on your telephone keypad. The next question comes from a line of Estelle Vingroth from JP Morgan. Please go ahead.

Hi. Thanks for taking my questions. Just two from my side. The first one, looking at EBITDA margins for the full year, how should we look at the margin expansion in PME versus structural and lifestyle? All else equal, should both division margins grow the same magnitude despite the diverging revenue trends? And second question, on the UK and France, which have weighted on the rough power in Q1, are you seeing any improvements post-march, in April and May? Thank you.

Hi, Estelle. France is definitely faring better in April and in May. In the UK, not much of a change, certainly in April. And with respect to your question on EBITDA, we'll provide obviously more information as we really start in July.

Thank you. There are no further questions, so I hand back over to you for conclusion.

Thank you. Well, thank you all for listening in and joining this call, and thank you for your question, and I wish everyone a good evening.

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