Accor Sa

Good morning, ladies and gentlemen, and welcome to the ACOR H125 results conference call. For your information, today's conference call is being recorded. If you would like to ask a question during the conference call, please press star 1 on your phone's keypad. I will now hand over to Sebastian Bazin, Chairman and CEO of ACOR. Please go ahead, sir.

Thank you. Welcome, everyone, on this H125. I'm here with Martine, Pierre-Lou, and I'm going to leave the floor very quickly now to Martine, and then I'll get back to you for the conclusions and for Q&A, of course. Martine, up to you.

Thank you, Sébastien, and good morning, everyone. So I'll start with the financial highlights on slide three, and I'm pleased to report that we've delivered Another quarter and a semester of solid growth despite multiple headwinds, both from geopolitics but also foreign exchange. Second quarter, REF PAR, like for like, remained solid at plus 4.1%, and it's driven both by price and occupancy and benefiting from our geographical and segment diversification. In the first half, REF PAR was up 4.6%. NARG on the last 12-month basis reached what was an expected low point for the year at 1.9%, and this is mainly reflecting a base effect related to the conversion of the Daiwa portfolio in Japan, which took place in the second quarter of 24. Our pipeline, on the other hand, grew at a very healthy rate of 10.7% over the same period, which supports the acceleration of opening and net unique growth, which we expect in the second half. Now, the euro has appreciated both rapidly and significantly since the first quarter against pretty much every currency, and in particular against the USD, and therefore all of the USD-pegged currency now. Our FX exposure is predominantly in currency which move with the US dollar, and as a result of that, the erosion of the dollar has had a negative impact on our reported result as of the second quarter. Now, at constant currency, group revenue increased by 5.1% in the first half, and at reported rates, revenue grew by 2.5%, reaching $2,745,000. Now, we translated this solid activity into solid financial results, which demonstrates the same discipline. Recurring EBITDA is up 13.5% at constant currency, which is above our midterm guidance, and at reported rates, Recurring EBITDA is up 9.4% to $552 million in the first half. And as you can see, foreign exchange rates had a negative four points impact on EBITDA growth in the first half. Recurrence rate actually improved to $136 million. That is a growth of 13.3% versus prior year. And finally, we keep to our shareholder return policy with $530 and $3 million of cash returned to shareholders in the first half through dividends, as well as the first launch of our 25-share buyback program. Now, let's turn to the second quarter red bar on slide five. I'll start with PME. PME posted a second quarter red bar growth of 2.9%, still largely driven by pricing for about three quarters last and occupancy for a quarter. Occupancy reached 69% in the quarter, which is still below 2019. In Europe, North Africa, or ENAF, REFBA growth accelerated from 0.6% in the first quarter to 3.3% in the second quarter, primarily driven by France. Occupancy was the main driver, reaching 73% in the second quarter for the ENAF region, which is a two-point gain versus prior. In France, RAFAR was up in the mid-single digit, driven by Paris, which was up in the low double digit. Paris benefited from very strong tourism inflow as well as favorable costs. In June, you might remember, we had a slowdown in 2024 ahead of the Olympics game. The RAFAR in the Provence grew in the low single digit in the second quarter. In the UK, the low single digit negative momentum for RAFAR remained both in London and the regions. still reflecting a depressed economic environment. In Germany, RESPAR was done in the mid-single digit with unfavorable comps in June, which, as you may recall, hosted the UEFA football championship in June of 2024. In Mayapak, Q2 RESPAR softened to 1.2%, and this is primarily driven by Saudi Arabia, which was negatively impacted by the timing of Ramadan as well as some stricter entry rules for the June hash pilgrimage. Now, China, negative high single-digit RefBar growth continues to weigh on the region. If you exclude China, Neapak region RefBar is up 3.6% in the second quarter, primarily driven by price. In the Middle East, performance was flat of all, but highly contrasted. UAE was up in the low double digits, despite some cancellation due to the tensions in Iran. But Saudi Arabia As I was just commenting, recorded negative growth for the reasons highlighted previously, timing of Ramadan, and strict entry rules for the Juhaj pilgrimage. Turning to Southeast Asia, Southeast Asia was solid, despite Thailand being negatively impacted by what was a lower inbound flow from China due to security concerns in Thailand and Indonesia facing economic headwinds due to government budget restrictions. But the other countries in Southeast Asia, mainly Japan, Korea, Vietnam continued to perform very well. Pacific rest bar rebounded in the second quarter with mid-single-digit growth following what was a soft Q1 which had been impacted by the Alfred cyclone in Queensland in March. And China, as indicated, saw no improvement in Q2 with still negative high single-digit rest bar growth concentrated in the eco-portfolio, which, as you might recall, is the vast majority of our portfolio in China. Turning to Americas, Americas continues to post solid, very solid growth, with Q2 Ref Bar up 9.1% versus prior year, driven by Brazil, which had solid pricing as well as solid corporate demand. Turning to Luxon Lifestyle, RASPAR growth was 7% in the quarter, equally driven by pricing and occupancy. Occupancy was up two points in the period for Lux and Lifestyle. Luxury RASPAR in the second quarter was up 5.3%, driven by both price and occupancy, with very solid momentum across all the brands. And as we noticed in the first quarter, luxury tend to overperform other segments in all geographies. Lifestyle posted an impressive 12% RASPAR growth driven by both price and occupancy with a very strong performance, again, in resorts in Turkey and Egypt and UAE. Moving on to slide six on Acclar network and pipeline by division, and I'll start on the left with PME. Net unique growth was 1.5% on the last four-month basis, an expected low point due to the Q2-24 base effect against from the opening of the DAGWA portfolio in Japan. In addition, this year, openings will be more skewed towards the second half, while, on the other hand, churn is more front-leaded, as we shared in our Q1 call. Overall, we do expect churn and openings for the PME division to be in line with prior on a four-year basis, but again, with a significant acceleration of the NUG in H2, which is supported by the pipeline. And actually, PME pipeline reached 184,000 rooms at the end of June, which is up 12% over the last 12 months. And it is worth noting that we just signed Arco's largest hotel worldwide in the U.S. with the signing of the 2,800 key treasure island hotel in Las Vegas, which will be under the handwritten bread. M&F revenue at €1,200 was stable. Moving to the right Luxury and lifestyle network grew by 4.3% over the last 12 months, still driven by any more. As we shared with you in our first quarter call, LTM9 for luxury and lifestyle is impacted by the phasing of the churn, which is predominantly in H1, actually Q1, notably in lifestyle. And the postponement of some openings to the second half, including two large Rixos property in Egypt. Now, it is worth noting the opening of four Fairmonts in the second quarter of 2025, as well as some Ennismores opening Montreal on the Gulf Coast and the Hoxton in Edinburgh. Luxem lifestyle pipeline continues to grow at a sustained pace, plus 6.3% on an LTM basis, and it is driven by Ennismore. Overall, the pipeline for luxury and lifestyle is 45% of the existing network. M&F revenue per room, 3,900 euros, also stable. Amongst the notable openings claimed in the second half, we have a finance area opening in New York City, Delano, Miami, South Beach, Mama Shelton, Zurich, and Hoxton in Dublin. So at group level, NUG again reached 1.9% over the last 12 months, which we hold as a low point, and we anticipate a strong acceleration in the second half based on what is a very robust pipeline. And conversions in the first half were 56% of our opening. Now, let's move to slide seven and the revenue breakdown by segment. As I stated in my introduction, group revenue reached $2,745,000,000 in the first half. That is up 2.5% on a reported basis versus prior year. And again, the reported growth is significantly impacted by FX, very limited scope effect over the period. On a constant currency basis, revenue was up 5.1%. For premium scale and economy, revenue was essentially flat at 1 billion 475 million with a similar FX impact as the one for the group. Management and franchise revenue was down 0.8%. There's a two point negative impact which we had called out in our earnings goal in the first quarter, which is related to the conversion of some of our management contracts to franchise contracts, and that is weighing on that line. And in addition, of course, FX is also negative for M&F revenue. Services to owner grew at a higher pace than M&F fees, reflecting improvements in both distribution and loyalty. We continue to gain share in our preferred distribution channels, where our revenue intake is higher, thanks to stronger loyalty contribution. All, which is our loyalty program, is sustaining high single-digit growth in its membership base in the first half. Turning to hotel assets and other, performance is driven by Australia and Brazil, and is therefore significantly impacted by the weakening of both the real and the Australian dollar versus the euro, with a negative impact in the mid-single digit from FX in hotel assets and others. For luxury and lifestyle, revenue was up 5.6% versus prior to reach $1,312,000,000, also impacted by FX. Management and franchise revenue was up 0.6%, with difficult comps stemming from the front-loading of the branded resident fees in H-124, which we had called out in our H-124 earnings call. Now, on a four-year basis, this has no impact, as we expect four-year residence fees to actually be slightly up versus prior years. So if you adjust for that phasing, then luxury and lifestyle M&F revenue growth would have been 7.5% at the point rate. Services to owners revenue primarily reimbursed costs for luxury and lifestyle, which are slightly down in the first half and largely due to effects. Hotel Assets and Others reflects the very strong performance of Paris Society Venues as well as the acquisition of RICAS, which took place in March of 2024. Turning to slide 8, Management and Franchise Revenue, M&F revenue is essentially flat in H1, reflecting both headwinds but also the two-point impact on the conversion from management to franchise in PME and the HICOM base last year of residential fees in lifestyle. Starting with P&E, M&F revenue was down 0.8% in the first half. ANR reflects low REF bar growth, as well as, again, the contract conversion, which is where the impact is concentrated is really in this region. Mayapak and Americas were both significantly impacted by FX. Constant currency growth remained solid in the mid to high single digits in both regions. Luxury and lifestyle M&F revenue growth with 0.6%, again, 7.5% if we adjust for the phasing of residence fees. Turning to EBITDA on slide 9, the group's overall EBITDA reached $552 million, again, up 9.4% on a reported basis and 13.4% on a constant currency basis. EBITDA growth reflects four points of effects, headwinds, and phasing effects, namely residential fees and marketing spends. Adjusting for phasing, both in marketing and residential fees, which we expect, again, to be broadly neutral on a four-year basis, NFX, the underlying performance of EBITDA in the first half would be 8%, which is a very solid performance. As for M&F, EBITDA growth is constrained by the lack of top-line growth for the reasons shared previously. Overall margin is flat as PME M&F margin improvement is offset by the high-con base, again, of residential fees. As for STO, the significant growth in STO services to owners reflects the structural improvement in distribution and loyalty EBITDA and a phasing of marketing costs, which is cued towards H2 in 2025. Last year, we had a larger portion of our spend in H1 ahead of the Olympics. Now, again, the phasing effect is neutral on a four-year basis, as we expect four-year STO EBITDA to be in line to slightly above prior years. As for hotel assets and other, the growth from retails and parish societies is partially offset by P&E. Now, regarding premium mid-scale and economy EBITDA is up by 6.7% to $385 million at reported rates. As for M&F, slight EBITDA growth is reflecting a one-point improvement in M&F margin, which is in line with our mid-term perspective. As for STO, EBITDA was positive for the reasons mentioned previously, with favorable marketing phasing, more benefiting PME. As for hotel assets and other EBITDAs impacted by the tropical storm in the first quarter and the disposal of ACA Vacation Club in March of last year. Regarding luxury and lifestyle, EBITDA is up a solid 14.3% to 224 million at recorded rates. As for M&F, EBITDA is down 2.4% again, mainly due to the comps and residential fees, again, neutral on the folio basis. As for STO, EBITDA is slightly ahead of prior, and as for hotel assets and others, EBITDA mainly reflect the growth of both RICAF and Paris Society. Moving on to slide 10, we achieved a net profit of $233 million in the first half, which compares to $253 million in the first half of last year. If we adjust for S&D, S&D is the new name of AccorInvest, adjusting for S&D contribution, which had benefited, and you may recall, from gains on asset sale in the first half of 24, net profit would be up by 19% in the first half. Now, I'd like to call out the main highlights. Other in common expenses as well as DNA are essentially flat to prior. Share of net profit loss of equity investment was negative 19 million. This line is mainly driven by S&D, our stake in S&D. And as I was commenting earlier, our stack, this line saw a profit in the first half from capital gains resulting from the asset disposals of S&D. Net financial expense, two-thirds of the increase that you see here is actually non-cash and is driven by the variation in non-cash FX gains and losses. This year, we recorded a small loss versus a gain last year. Cost of debt is actually stable. in the first half of 2025 versus prior same period. Income tax expense is down from prior, mainly from a baseline effect. We recognize in the first half of 24, a tax expense related to the reorganization of the group. Turning to cash flow on slide 11, The recurring free cash flow improved to $136 million, which is a 13% growth versus prior, with a slight improvement in cash conversion ratio from 24% to 25%. Really, four main highlights that I will call out. Cash interest slightly decreased. It's really mostly from favorable timing. Cash tax increased from $105 million to $121 million this year, and that is due to higher taxable profits in 4 and foreign jurisdictions where we have net operating losses, which essentially have been extinguished. Recurring investment increased from $90 million to $120 million, and that is completely aligned with the strategy and the guidance we communicated during our CMD, which is to bring over time or annual recurring investments up to $300 million, and that is to support the network growth in luxury lifestyles, which tends to call for higher key money than PME. The working capital improvement from prior reflects the continued improvement and control of our cash collection, and I do remind you that our working capital change is seasonal in nature, and therefore negative in the first half and positive in the second half. Finally, net debt reaches $3.94 billion at the end of June 2024. As a reminder, net debt was $2.5 billion at the end of December last year, And the main movements in the first half are really the recurring free cash flows, the return to shareholders, and the reimbursement of the outstanding hybrid, which was refinanced in the second half of last year. Finally, let me now introduce our guidance for 2025 on page 12. RASPAR like-for-like growth is expected in line with our midterm guidance, between 3% and 4%. It reflects the solid start of the year, but also in the second half, the negative comp base of the Olympics, which will impact the third quarter, which, as you may recall, we expect to be our weakest quarter. Net unique growth is expected at around 3.5%. That is a robust acceleration versus the first half, given the high volatility of SX. we have decided to provide a recurring EBITDA growth guidance at constant currency, which is expected between 9% and 10%, in line with CMD perspective. Assuming the forecast by Bloomberg for the second half, which has a US dollar at 1.17 against the euros, a reported four-year 2025 EBITDA growth would be negatively impacted by about 5 points or 6 million, which implies a stronger FX headwind in the second half, given, again, where the dollar closed in the second quarter. And this concludes my opening remarks, and I will now turn the floor over to Sébastien for closing remarks.

Merci beaucoup, Martine. So, on... On the last two slides, two or three takeaways for the first semester of 2025. What is important for me and obviously for you is validation of the rubbishness of the business model, the transformation down the segmentation in between PME on one side, luxury lifestyle on the other side, through ownership of all the CEOs, of both divisions. They are performing well. They're basically doing maximum on confirming operating leverage between revenues to ABDA and, of course, a successful model when it comes to diversification of geographies and trying to get the growth wherever it exists on this planet. Because of the segmentation, because of the management ownership, and thanks to the diversification of geography, we have shown solid result. for H1 despite the 21 million cost of currency impact. The third element, which we talked a little bit about it, but you're going to be hearing us talking much more about it, is the program, which is stronger and stronger every trimester passing since we've launched four years ago. We passed the 100 million new member a couple months ago. We said to you last year that I guess we had 11 million plus new members in 2024. I do expect that I guess we're going to do even better in 2025 in terms of new member. It is a very attractive and solid with a greater number of partnership, and you've seen that into the STO number in terms of contribution to profit. And finally, it is our compass or our North Star. We're never going to let go. from our commitment on achieving the CMB target as promised to ourselves and promised to many of you. When it comes to H2, we clearly are looking at the impact of currency. I know we've talked quite a bit about it. And we just cannot do nothing about it. So we are reentering a very stringent operational and financial discipline, trying to mitigate whatever we can from the foreign exchange into contribution to profit. We're going to be accelerating the opening and the development. Martin talked to you about the 10.7% growth in pipeline. That's never been better in terms of signing pays in all different segments and across all geographies, and certainly back strong in Europe when it comes to the premium segment. Three, we are really deep in the process when it comes to SMD, which is, as you may know, the new name for ARCO Invest. The vandal diligence is almost finished. We're probably 90% there. You're talking 4,000 documents into the data room. And, of course, we have interested parties looking at all that immense data room, vandal diligence, and we expect to be on time when it comes to receiving documents. letters of interest and offers in the second semester of 2025. And finally, let's finish orderly the share buyback program of $240 million for the H2 and probably starting as early as next Monday.

Voilà.

That's what it is. Can't wait to go deeper with many of you when it comes to Q&A, and let's do it now.

Thank you. As a reminder, if you would like to ask questions on today's call, please press star 1 on your telephone keypad. We'll take our first questions from Jamie Rollo from Morgan Stanley. Your line is open. Please go ahead.

Thank you. Good morning, everyone. Three questions, if I may. First of all, just on the implied second half guidance, you know, Ref Par obviously has slowed down to it looks like one and a half to three and a half percent. You flagged the Olympics, but are you factoring in any other slowdown there outside of sporting events? And also the EBITDA guidance, also quite a sharp slowdown to sort of 5% to 7% constant currency. Some of that looks to be REVPAR. Some of it looks to be services to owners, where I think you said similar to last year. So that implies minimal profit in the second half, if I'm right. So could you talk a bit about that sort of second half? Slow down, please. Secondly, on the net unit growth guidance of 3.5% from 1.9% at Q2, how much of that is coming from the portfolio deals and some of the conversion brands, like you mentioned, Treasure Island? Should we expect a similar fee contribution to the rooms contribution on those, please? And then just finally on currency, are we correct to calculate a sort of rule of thumb that 1% on your basket of currencies is around 12 million euros to EBITDA, and with the dollar now back up to 115, not 117, is the 60 million headwind a bit too big? Thank you.

I like it, Jamie, when you start with three questions and you end up with six. Let me actually turn it to Martine on most of it, and then I'll interject on some.

Hi. Good morning, Jamie. So with respect to RESPAR, you're right, the second half is softer than the first half. Most of that is really the Olympic Games, which impacts ENA, which, you know, France in particular, and therefore the third quarter. And it's really mostly the Olympics in the third quarter. And that's where you'll see the impact of that. So a rough part in the second half. With respect to EBITDA, you're right, the second half will be softer than the first half. And is this really related to the STO line? We actually expect the performance in M&S at constant currency to be improved. particularly in lux and lifestyle, right? But it's really the services to owner that will drive that slower growth in EBITDA in the second half. And as I shared with you, on a four-year basis, we do expect STO to be in line, if not slightly above, last year. And it's really driven by the phasing of our marketing spend. Last year, we had a phasing of the spend that was ahead of the Olympics. This year, we've actually concentrated our spend more in the second half, also to, you know, support demand. On net unit growth, actually, all of the contracts that we have in the pipeline and that will open in the second half have a similar level of fee contribution. We don't have portfolio deals, you know, per se with lower M&S fee per room, so you should not expect dilution from that. We're very focused on maintaining, if not increasing, fecal room. And on currency, actually, we have provided on slide 17 a currency sensitivity as well as the expected currency impact. And you're absolutely right. Your rule of thumb is very, very spot on.

I thought you had 11, not 12.

It is 11 million, so you're very close, Jamie.

All right.

And if the dollar is... Sorry, James, go ahead.

No, sorry, you were about to answer the second part of the question on market-to-market currency.

Yes, so look, if the dollar, again, the $60 million impact that we've given is based on the dollar at $117 for the second half. If the dollar improves from that level, then you should have a lower FX impact than the $60 million we called out.

Great, thank you very much and apologies for missing the slide.

No, no worries.

Thank you. We will take our next questions from Mudiba Kayani from Bank of America. Your line is open, please go ahead.

Good morning, thanks for taking my questions. Can you talk a little bit around incentive fees and how you're thinking about that for your guidance for this year? Then secondly, just on this new treasure island in Vegas, can you touch about how you're thinking about the U.S. at this point and kind of your strategy there? Would you be looking at more of these? And what was it about this specific transaction that was attractive for you? And thirdly, to your point around loyalty, hearing a lot more in your comments today on that. You know, it's clearly reflecting the launch of that program. What do you have ahead? How should we be thinking about it in terms of EBITDA contribution in the next two years? Thank you.

I'll take the – good morning. I'll take the first question and then turn it over to Theda. So on incentives, it's actually quite stable as a percent of overall M&S fees, as is, you know, as is the margin in the time.

When it comes to Treasure Island in the U.S., the deal actually happened quite fast in between the owner of the property and ourselves. It was actually built upon one thing which is validated and very interesting. Las Vegas, as you know, is very much U.S.-centric in terms of demand. And it's a very large property, and that ownership wanted to diversify from the domestic U.S. gamblers and visitors and wanted to attract a greater European, Asian populations, or Middle Eastern for that matter, and actually turned to our core by saying, you guys have the best distribution, the best network, and the best presence away from America. Can you bring me that additional customer that I do not enjoy today at all? So it's a diversification of demand for themselves, too. Basically getting associated with a call, Live Limitless, the old program, where he wanted to get the partnership and the benefit from all of his customers to enjoy the double points being earned on the old program because some of his customers U.S. domestic demand. He's actually also traveling abroad and he wanted to get another benefit for them. And three, trying to get a better direct distribution and moving away from the OTAs, which he was a little bit too dependent from. So it's both loyalty, distribution, and geography of demand. And it's interesting because that kind of demand did not exist a couple years ago, three years ago. Handwritten was actually not even created a couple years ago. So that soft brand permits to basically be attached and connected to many properties, many large properties in the U.S. and outside of the U.S. And people are looking today even more so deeply on the benefit of all, which is actually in many ways very similar to Bonvoy outside of America. So we're going to continue going to go deeper in the U.S. We're going to be extremely disciplined. because we don't have the market share that our competitors have in the U.S. But you're going to see more of those transactions likely in some targeted cities where we can contribute European demand. And two, you're going to see, of course, an acceleration of any small expansion through its 18 portfolio brand. And we've talked to you about Delano reopening in Miami. We've talked about FINA opening in New York. And there is some which I can't talk to you about now, but likely to be confirmed and signed in the next few weeks, many of them being in America. So America is clearly a priority for us. America at large, because that includes Mexico, in which also we are enlarging our footprint. So this is what it is.

And just on loyalty and how do we think about it in EVTA contributions?

Loyalty, you know, we have I'm old. I'm being in this business now. I'm turning to alcohol. We, in January, February 2020, was actually in Berlin. We've launched the new program, which we called All Alcohol Limitless, formerly was called Alcoholic Club Hotel. That program, Alcoholic Club Hotel, was launched in 2005, which is exactly 20 years after the launch of similar loyalty programs done by Mayor Hilton in 1985. So we've been late 20 years. So it's about... catching up on time, and we're doing, and at that time it was a $50 million program. Now it's already $100 million in a matter of five years. And we said at the time we should be going from $6 million revenues from partnership at the Absoluti program in 2020 and targeting for $100 million in partnership revenues, and then you transform 30%, 40% of that in EBTA. So I won't be more precise yet on the numbers, but I can confirm to you that I guess we're going to be reaching that over 100 million revenues in the next 18 months. So it is really a matter of getting those revenues. So those are 75 different partnerships. And we're probably going to be crossing over 100 different partnerships in the world. And each of them have a BDA contribution to the extent of 25% to 40% margin. It depends on geography. So we're still far from the billion-dollar revenues from Bonvoy or Hilton Rewards that they have in America. But at least we are doing so much better than the minuscule 6 million in 2020.

Thank you.

You're welcome. Thank you. We will move to our next questions from Jared Castle from UBS. Your line is open. Please go ahead.

Good morning, everyone. Three from me as well. You obviously announced the second tranche of your buyback, the 240, which, I mean, you had, you know, given us some good guidance in February. Did it cross your mind maybe to do a bit more than that? So just kind of how you're thinking as we move on. Obviously, your net debt's a little bit higher as well. And then in the past, you've also spoken about unlocking value for lifestyle and luxury. Any thoughts there at the moment? And then lastly, I think you sold one of your nightclubs. Is there anything more to sell when we look into the second half of the year? Thanks.

The second tranche on the 240 million, and you're absolutely correct, is exactly what we have been announcing four months ago by doing 440, which we've done the first couple of hundred, and we're just finishing the job. Give us the benefit of another quarter and actually a better understanding of where we stand in terms of activities. We don't plan at this stage to enhance the 440 million share buyback. But it is a constant discussion being held at the board level in terms of actually capital allocation. So it's not a no, but it's not planned as of this minute. The unlocking lifestyle luxury, only confirming what I've said to you in the first quarter, that we are spending a very large amount of time on how to accelerate further any small in the U.S. and in many different growth geographies. because we believe we are probably a couple years ahead of any of our competitors when it comes to the depth and the growth and EBITDA of any small as an entity. It needs to shine better. It needs to grow faster. It needs probably to have a different currency in order to attract a higher level of partnerships. So we haven't lost anything as of yet, but we do spend a fair amount of time with any small shareholders and any small management team on how to really respond to what we want to do when it comes to an accelerated expansion in many geographies and mostly in the U.S., for that matter. So too soon to disclose anything but a continuation of reflections and development process. When it comes to nightclubs, yeah, we sold. That was part of it. It's more, actually. That was sold, and it was sold only because it was not a BDA contributing. It required a lot of different personnel, and it was better. to be put under entrepreneur ownership, and he was enhancing the margins of Paris Society, which owned the nightclub at the time. So by actually eliminating 120 plus employees who were actually involved in nightclubs, it is a further boost and a margin expansion without any immediate disruptions. But there's nothing of notice that I could disclose to you at this minute, but anything of that sort, which is limited BDA contribution, where we don't need to remain at the shoulders, yes, we are diving into any works that we can actually turn.

Yeah, thanks very much.

You're welcome.

Thank you. We will move to our next questions from Leo Carrington from Citi. Please go ahead.

Good morning. Thank you very much. also ask three questions. First, as a follow-up on the points you've been making around the USA, has anything changed about the appeal of this market? Is it that Accor's brand and loyalty program is simply stronger, hence Treasure Island, or is there something about owners in the US looking looking at lifestyle in particular, let's say, and your brands that are, I suppose, new to the market. So just more about what's changed throughout that market for you would be really, really interesting. Secondly, I mean, you've mentioned the road car outlook. Can you just, and away from the sort of Olympic comps, can you just give us some more colour in terms of what's happening across the key category, the corporate, selected travelers, and groups. And then lastly, just a quick modeling question on the H2 Ascendi contribution. Should we be expecting an H2 profit? Thank you.

Sure. When it comes to, I'll leave Martin on the RFR outlook, and I'll go back on Ascendi. You are, what I've been telling the US, it's One significant element, you know, we've been going to NYU large hotel conference every year. We, of course, attend Alice in Los Angeles. For the last couple years, probably because of the size of the portfolio today of our core, which is 48 brands, we've never seen so many entry calls from owners in America, including Southern Farm. in asking whether they can get a pitch from Ennismore, from Sofitel, from Fairmont, and return was not expected, and that was a phone call we received. There is an enormous envy from hotel ownership in the U.S. to probably diversify away from what is today 85% U.S.-centric brands organization, and they are looking for something which is different maybe in some ways more unique, maybe European flavor, but something different. That never existed five or six years ago. And that sentiment exists all over the different geographies. The one thing we have to be very careful when we receive those phone calls, and of course we also pitch and we go and try to seduce as many owners as we could, is not to overpromise. Because of the lack of scale in America, there is things we simply cannot promise. in terms of domestic distribution capacity. But it's really a response to a very new environment and the seduction of our core branch, which probably did not exist before, or actually maybe we do a better job in reaching out. And certainly having opened the office in New York on this avenue was a great marker in terms of the ability to finally meet and basically charm Ownership as opposed to we see them into a lobby of another 10 on Times Square also fit a lobby on 43rd Street, so it's it's a major Move in terms of the way we present ourselves so and it's probably a focus for us on trying to get the best Martin Where where it is which happens to be in America in terms of fee contribution So it's probably a combination of both on SMD I'll give it to Martin

So, hi, Leo. On the S&D, so, yeah, we do expect to have a positive contribution from S&D from gains and sales, so that share of net profit loss of equity investments will turn positive on a four-year basis, but it will be a much smaller contribution than it was last year. On your question on your colors on the FAR across segments, so What we saw in the second quarter is actually quite similar to what we observed in the first quarter, which is, you know, business essentially flattish, and the growth is really coming from, you know, coming from leisure, which continues to be very, you know, very solid. And this is true for both individual business traveler as well as, you know, group business traveler.

Thank you, Martin. Thank you, Sebastian.

Thank you. We will take our next questions from Alex Wignall from Rotham and Cole Redburn. Your line is open. Please go ahead.

Good morning. Thank you very much for taking the question. I'll just start to give you some time back.

So on Ascendi, I appreciate what you can say is going to be limited by the process, but you had made comments around the valuation that actually kind of been trending upwards a little bit as we went into the process. Could you give us anything that you can in terms of what people you've been talking at have looked in terms of valuation? Does it look broader than what you had signposted before the process started officially? And then secondly, you've talked a lot about how net universe would trough in Q2 and then start to accelerate as churn falls and then grow again in 2026. Could you talk a little bit about how that number will look, but obviously more important is revenue, so how fee per room progression will look in 2026 based on the pipeline of things that you expect to bring through. Thank you very much.

On the S&D, way too soon, Alex. It's nothing has been articulated. Nothing could actually be articulated in terms of valuation by any prospect since they just entered. we abandoned the diligence a couple of weeks ago. So they have to do their own homework and they have to come up with the risk and opportunities. So we'll have certainly a much better insight by the probably, I would say, October, November of this year. But they need a solid 90 days to do the homework before we can actually stipulate anything. So on the NERG, I'll give it to you, Martin.

So, yeah, so you're right, absolutely, Alex. On the nugget trough is the, you know, is in the second quarter, and we do expect an acceleration in the second half. I'm not going to, you know, comment on what we see in 2026, but, you know, as you know, our CMG guidance is maybe between three and five, and we, you know, we do expect our net human growth to increase over time. In terms of the fee per room, we do expect that fee per room. We're very disciplined on that fee per room and therefore in the signings that we do. And we expect the M&S fee per room to slightly improve over time. But you have to remember that whilst what we sign is of a higher value in terms of fee per room and what we churn is actually of a lower value, In FIPA room, given the size of the network, it takes a while before it actually shows up in the revenue line. But stable at a minimum.

But the true confirmation, which is well noted, exactly what Martin said, which is clearly imposed on anyone, the FIPA room of all the hotels we've signed is greater and better than the existing portfolios. in 90% plus of all cases. So there is some very small exception, but those are meant to be exception. All the rest has to be of a greater importance. That is the strategy of our call. And the mix help by doing more premium in PME, by doing more lifestyle, by doing more in luxury, ultra luxury. Of course, the fee contribution is two, three, five times bigger in some cases than the current networks.

Brilliant. Thank you so much.

Thank you. We will move to our next questions from Esther Wainwright from J.P. Morgan. Your line is open. Please go ahead.

Hi. Good morning. On REF power first, is there anything that would make you more or less confident now to achieve this 3% to 4% REF power growth in H2O and next year? Also, another question, you're committing to the low end of that guidance range for EBITDA growth this year, which is a year with REF power growing nicely. In the coming years, REVPAR growth should normalize. How confident are you to achieve this EBITDA growth in that context? And maybe just the last one on Thailand and Indonesia. There were some mixed trends there. Can you just give us an update on the latest developments? Thank you.

Hi. Good morning. So, you know, on REVPAR, we're very confident with that 3% to 4% guidance on a four-year basis. And it really is the – you know, the slowdown in the second half is really mostly reflecting the calm base of the Olympics in the third quarter last year. You know, we are – in terms of the EBITDA growth, you know, we're at the – towards the low end of the range on net tuning growth, and we are – you know, kind of towards, let's say, you know, low to mid-end of the range in the Rothbard growth. And therefore, you know, that is why we guide an epitome at constant currency between 9% and 10%. So that's in line with the algorithm. Going forward, as I, you know, just indicated earlier, we do expect that net new growth to accelerate. So you're writing a Rothbard may normalize maybe towards, you know, the lower end of the guidance, although we do have a very diverse geographic portfolio across segments as well. So our RFPAR should stay healthy. So we're very confident in our ability to be within that 9% to 12% growth on EBITDA in the years to come. With respect to Thailand and Indonesia, so Thailand was really related to a security incident with respect to Chinese travelers. There were some Chinese travelers that ran into some trouble, and that basically scared the Chinese away in some sense. That's really more, I would say, at a point in time, I think that that was right, and we do expect Thailand to... to have a better second half. With respect to Indonesia, it's really the economic situation. The government is being very tough on spending restrictions and basically very government spending, and that is impacting business in Indonesia now. Southeast Asia overall remains with positive restful growth, and we expect that to continue because we have other countries in that region. But those two countries in particular were impacted in the second quarter.

The one thing I just want to add, because we do talk about it quite a bit when it comes to one-on-one meetings with investors, and we're likely going to do it in the next four days, is that we just want to stress again and again that we are in the midst of developing – for different softwares that include IDs for revenue management, Adobe Salesforce for CRM, Oracle for having a PMS on the cloud. So all of those systems basically are enhanced when it comes to in a constant response environment to boost ABDA contribution because of the greater direct distribution machine because of the greater resilience and repeat business from the customers when you have a greater and a better personalized push a greater pricing dynamics with those software. Those are being deployed roughly between 40% and 60% of the network the last two years. So any year passing is going to be another 25% network expansion in terms of ability to use those AI-driven software, and that job will be finished probably by the end of 2027. Those particular softwares are clearly one of the KPIs that I guess we thought of at the time of the CMD to get the 9% to 12% CMD guidance to the BDA. And you see some of it in the STO, by the way, that we have seen in the first semester. So I just want to make sure you know about it. Things that I guess Mayor Hilton probably have done five or ten years ago.

Okay, thanks a lot.

Thank you. We're now taking our next questions from Jaffar Mestari from BNP Paribas Exchange. Please go ahead, sir.

Hi, good morning. I have three, if that's okay. The first one is just on the minutiae of REF-R. Some of the disruptions you mentioned all sound like they occurred in June, like the pilgrimage or that Thailand point. Of course, France was very strong in June. So just wondering if there's... monthly sequence of ref art during Q2 we should be aware of and related to that how's July to date trending and how are the books looking please for the summer at this stage and then just third question services to owners probably not a very fitting name given how it's evolving everything you say suggests that In the H1 profits, there is some clean profit growth. There's profit pools that are being rolled out in loyalty, et cetera, that we shouldn't just look at and exclude or adjust for. But then I'm struggling to reconcile that with the guidance for the full year where you basically say it's slightly up. So effectively, it just sounds like a lot of phasing, a lot of marketing, a lot of the normal system fund stuff rather than loyalty or paid memberships or all these things that are core EBITDA. So, yes, just curious whether we should see some clean growth in SEO this year.

I like you. Martin was pushing me on the side because I've been exactly having the same work over the last three or four days. We need to change that STO appellation. It's a mix of so many things. We need to basically clarify for the market what is really system fund related in which you have a zero sum gain in terms of reinvesting whatever you collect on that. on sales and marketing, but you have also part of STO, things on which you are meant to not only do profit but increase profit. Those are distribution. Those are loyalties. Those are partnership. And we shouldn't be defensive. We should be happy, and we should show the growth. So give us a benefit of another two to three weeks, but I guess I'm so happy you said that.

Hi, Jeff. I'll take the minutiae of Jeff Fark. In terms of the – so you're right. Within the second quarter, June was clearly, you know, a low point for the reasons you mentioned, certainly in the Middle East Africa region. You know, in terms of what we see, you know, and as you know, we don't have, you know, a ton of visibility into the bookings. What we see – and I'm going to put ENA aside because, you know, ENA, the consul, so, you know, challenging to read in some sense. But what we see is, you know, with respect to July, we see trends that are similar to June, really. And what we see is we see actually, again, outside of, you know, France because of the Olympics, is we see a pickup as we go towards August. So I guess the bottom line is July will be soft, and August is expected to be better within the third quarter, and obviously I don't have a view into September. And just to go back on services to owner, we do expect, and we'll think of a name that better captures the dynamics and really profitability of that group of activities. We do expect services to honor profitability, so EBITDA to grow over time. We're maybe, you know, call it cautiousness for this year where, you know, again, we're going to in line to slightly adverse as far as it's really giving us flexibility in the marketing for the second half.

Thank you.

Thank you. We're now taking our next questions from Sabrina Blanche from Bernstein. Please go ahead.

Yes. Good morning, everybody. I have a free question from my part. The first one is regarding what you have mentioned in terms of conversion. Can you come back on the impact on the second quarter and what could expect on full year basis and if you intend to continue on this way? And that will be the opportunity to speak potentially about the term that you had scheduled. The second key question is regarding the incentives We'd like to understand which part of your hotels under management are currently paying incentive fees. Is there any big differences between areas? And the last question is regarding Paris Society, the development. We understand that you have opened new areas, but how do you see this growth and change? and how do you see potentially a franchise business model in the Paris society?

Good morning, Sabrina. So on the conversion, and I'm assuming you're talking about the conversion rate in openings, as I mentioned in the call, it's 56%. in the first half, which is quite – I think last year we were at 55, I think, on a four-year basis. We're a bit higher in the first quarter, so it tends to move around a couple of points. Basically, the mid-50s is kind of where we expect that to be. In terms of the incentive fees, again, it's broadly stable. I would say that the You know, the only region where, you know, incentives as a percent of M&F revenue is lower is ENA, because ENA has a much higher franchise mix than the other regions. And I will let Sébastien answer the question.

The answer about our entire society, its development in France is fairly slow, because I think we Monopoly has quite the large destinations, but we are going very fast in different other markets. We just signed Gigi in Bodrum, which is a resort in Turkey. We signed in Istanbul another Gigi Monden. We signed a pop-up two restaurants in Mykonos for the summer. So it's the expansion of Paid Society Teams of Brand Awareness. Trust you, add this to Regas. which is another set of brand called and others. As you've seen in Rome on Orient Express . So it's not only the beginning, but it is a very fast expansion outside of France. We're actually reentering London. So it's under different tutorships. So the society, France is actually managing all the French operations. And then out of Dubai and London and others, we're managing the expansion. of all our restaurants brand. I think we have 27 IP of brand concept when you add up versus IT and recast. So it's a very natural and expansion we have been designing for the last couple of years and executing now.

Thanks very much.

Contract with the movie contract. We don't, there is no contract with the restaurants.

Okay, and just a small question you haven't answered regarding the churn.

I'm sorry, can you remind me of the question, Sabine?

Yeah, regarding when you are speaking about net unit growth, you haven't mentioned the churn that you had in Q2 this year and what you are expecting on a four-year basis.

So, we expect the churn in number of units to be flat versus But we expect that this turn is going to be more front-loaded this year, and really because of what happened in the first quarter in the lifestyle property mainly, but flat to prior on a four-year basis.

Thanks.

Thank you. We are now taking our next questions from Andre Juliet from Deutsche Bank. Your line is open. Please go ahead.

Good morning. Just a follow-up question. First one about the PME report trend in H1 in ENA region, which is surprisingly low. Do you expect any improvement on that side? Second question about S&D calendar. You are mentioning that you are expecting some letter of interest in H2. Do you still confirm the timing of beginning of 26 for the closing of a potential deal? And third question about perimeter. Do you have any news flow about Hotel F1 or nothing to mention at this stage?

Thank you.

Good morning, Olly. I'll take the first question, and then I'll turn it over to you. So on REF PAR trends, so ENA actually had a better REF PAR growth in the second quarter. It accelerated. In the first quarter, ENA was up, REF PAR was up 0.6%. In the second quarter, REF PAR was up 3.3%. And so it's an acceleration of basically 2.7 points. And this is really driven by France. You know, France was up in the mid-single digit in the second quarter, and it's really driven by Paris, which was, again, up in the low double digit, you know, lots of inflow from tourists. And then we had Le Bourget, of course, which we didn't have in June of 24. You know, Germany was, you know, kind of actually – worse than the first quarter because, you know, you have a calm base in, you know, in June, so it's really, really to June in the UEFA Championship, which took place in Germany. UK, not much change from, you know, from the first quarter. It's really the sequential improvement is driven by France and Paris.

André, on SMD, we are, yeah, we confirmed the timing. We actually gave to each of you in March, which is a 12 to 18-month process, so... It's going exactly as planned in terms of prospect, in terms of vendor diligence. We believe we're going to be receiving those indications of interest, as I told you, probably by November. And then we're going to have to select the lucky two finalists probably by Christmas or January. And as I said, it's probably either an early summer or late summer 2026 closing. But it's nothing that's changed since what we said. In March, on Hotel F1, it's a long process. It's not an easy process, and there's something which is added which is super sad. Our partner, Atrin Sio, died last Friday, which unexpectedly, and he was really our main person that I guess we've been exchanging on Hotel F1. The company, of course, remains. He has partners. in this company, but I just want to make sure, I guess, we first respect what happened 10 days ago before we re-enter in some discussions.

Okay, thank you.

Thank you. It appears there are no further questions. At this time, I'd like to turn the conference back to Mr. Sebastian Bajin for any additional or closing remarks. Please go ahead, sir.

Well, thank you so much for attending, all of you. Thank you for the many questions which actually get us even more prepared for the World Show in Paris, London, New York, Boston over the next four days. So we'll be with each of you more. And again, don't lose sight of we know exactly what we need to do to deliver on the Capital Market Day. We control all the things we can control, but there's some elements that I guess we don't control, and one of them is foreign exchange. Let us accept it, and let's fight on all the other items in which we probably should, and every trimester get better. That's what it is. Merci beaucoup, Amber. Thanks a lot for connecting. Thank you, everyone. Have a good weekend.

This concludes today's call. Thank you for your participation. You may now disconnect.