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Accor shares had a strong run over the last 4 weeks, supported by above-consensus FY23 results, a return to the CAC40 Index, and faster-than-expected buyback execution. We believe there''s more to go, with two key areas where the group could surprise over FY24e-27e: revenue management software rollout supporting higher RevPAR, and Middle East Lifestyle room openings. We raise our forecasts and increase our TP to EUR48, with a bull case SOTP suggesting EUR55. Revenue management software rollout to drive group RevPAR On 28 February, Accor announced that it was retaining SAS''s IDeaS as its new global revenue management software (RMS). The rollout of a global RMS has previously been mentioned by management as offering ''several points of RevPAR upside''. We believe is not fully reflected in the FY24e-27e guidance for 3-4% group RevPAR growth pa. This is a timely development in our view given more widespread adoption of Business Intelligence data tools in Europe. We model +4.1% group RevPAR CAGR over FY24e-26e, vs consensus +3.4%. Middle East Lifestyle signings to drive net room openings Middle East Lifestyle brands opened c3,000 net rooms in H223, the second largest category/region contribution after APAC Midscale. Despite the geopolitical risks, we continue to see Accor''s exposure to the wider Middle East region as a key attraction. The group boasts a c31% share of industry pipeline in the UAE and Dubai, and the integration of development champion Rixos into the Ennismore/Accor JV is a strong commercial boost, as previously discussed here. We model +4.2% group net room openings CAGR over FY24e-26e, vs consensus +3.6%. Bull/bear SOTP scenarios: still asymmetrical upside Accor shares continue to look good value to us on 17.8x CY25e P/E (or c15.5x after adjusting for non-earnings-contributing assets). Our SOTP bull case points to EUR55. We raise our EPS by 10%+ to reflect slightly higher EBITDA, but also lower minorities and share count post buyback.
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The wider Middle East region represents c10% of Accor''s room portfolio but over-indexes in RevPAR, fees and share of growth. This means that factoring in the geopolitical risk is not enough: Accor investors need to be positively excited about the region. We look into the top 3 countries (UAE, Turkey, Saudi Arabia), top 3 brands, and recent organisational changes and come away optimistic on Accor''s FY27e guidance. We reiterate Outperform and lift our TP to EUR44 (from EUR42). The Middle East: it''s complicated, but there is a lot to like in Accor''s top three countries Middle East RevPAR has held up well since October 2023, with occupancy +2pt above 2019 and prices +42% above. Outside of a worst-case scenario of regional contagion, we see positive FY24e-27e trends: global attractiveness and market share wins in Dubai; regional leisure and USD-linked ''safe haven'' tourism assets in Turkey; and religious travel and infrastructure spend in Saudi Arabia. Three key Luxury and Lifestyle brands to win further share Accor''s Middle East portfolio in the fastest-growing Luxury and Lifestyle division is concentrated around Sofitel, Fairmont and Rixos. This core offer addresses a wide range of development opportunities relevant to the region, covering 20k-120k sqm properties across the Urban to Resort spectrum. Two key organisational changes to accelerate openings Accor''s 2023 reorganisation is still often perceived as a simple change in reporting. In the region, the folding of Rixos into Lifestyle JV Ennismore, new brand and development heads, and a leaner Midscale are not cosmetic tweaks - they are game-changers for the MT rollout potential, in our view. Valuation: TP to EUR44, SOP risk/reward skewed to the upside Accor looks good value, on 17.5x CY25e P/E even before adjusting for EUR600m-1,800m of non-earnings-contributing assets (SOP bull case EUR48). We make no material changes to our forecasts. Or DCF target price moves to EUR44 (from EUR42) to reflect a new...
The group reported slightly below-consensus Q3 revenue but upgraded its FY23 guidance amidst current macro and geopolitical uncertainties. The latter should be well-received but to an insignificant extent as the revised objectives are broadly in line with the market’s expectations. We have raised our 2023 EPS by 2.2%.
Welcome to the late-cycle stage of the current cycle, where Occupancy flatlines, and room Rates, at best, track inflation. We think the US looks unattractive. But Europe has further to go given an incomplete pricing recovery in the previous cycle, as well as some regulatory and structural support. We reiterate Accor Outperform as our preferred Hotel stock, upgrade Whitbread to Neutral on solid cost control, and downgrade IHG to Underperform after a strong run this Summer. Three reasons European Hotels can still price higher: macro, antitrust, and structural With flatlining Occupancy globally, will prices now inevitably turn? It is a legitimate risk in the US. But our ''Real RevPAR'' cycle analysis suggests that Europe has another +15pts of pricing to catch up on, taking 2007 as the relevant peak. Information-sharing among hotel chains will also be unlocked by newly clarified EU antitrust rules, and new hybrid uses are still only starting to benefit the region. Accor (+): reiterate Outperform, superior FY25e-27e EBITDA growth and SOP upside Accor continues to look good value, with a 16.9x CY24e P/E masking EUR600-1,800m of non-earnings-contributing assets (SOP bull case EUR46). The EUR400m share buyback announced yesterday is c. 5% of market cap. The group is a direct play on Europe, and the FY25e-27e guidance is achievable in a range of macro scenarios. Whitbread (=): capitulating on solid cost control, upgrade to Neutral and see potential upside Whitbread is on track to meet its cost inflation target for the first time since 2021, helped by tight cost control, new discipline on ''discretionary'' opex, and the payback on workforce retention. 15.3x CY24e P/E is not cheap for an asset-heavy play at this stage of the cycle, but operating leverage is working. IHG (-): least preferred on US exposure and capped upside risk, downgrade to Underperform It is difficult to see downside to IHG shares without modelling an outright US recession. But US ''real''...
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We update our ESG Materiality Map and our associated scoring on Workers and Climate issues, also introducing a complete Responsible Gambling analysis for the Gaming companies. Overall, we still see the track record on labour issues as good and expect the integrated procurement models to leverage scale to get suppliers to do some of the heavy lifting. Our ESG leaders are Compass, Sodexo, and Flutter, but no longer include Accor and FDJ (both downgraded to Average rating). Our ESG laggards are Evolution and TUI, but no longer include Dufry. Workers The wider Hospitality industry continues to benefit from a fragile status quo: one of the lowest-paying industries, but also one of the largest for creating opportunities. Recent developments include promised margin upticks into H223e/H124e as wage inflation normalises, some unexpected progress in employee engagement and gender diversity, and more focus on CEO pay gaps. Climate As most emissions data at hand still covers periods of incomplete post-COVID volumes recovery, the wider Leisure sector cannot prove it is on track for material emissions reductions. Recent developments include initial Scope 3 reporting and a higher bar for third-party assessments. Responsible Gambling The societal cost of problem gambling is material, both in human and economic terms, and should be mitigated. The large, listed operators should benefit as higher regulatory and compliance hurdles spur market share consolidation, and the sector Leaders could also enjoy a valuation boost in a scenario where they are removed from exclusionary lists. Where do we differ from ESG consensus? We rank Compass and Sodexo very close. We do not pick any hotel stock as overall ESG leader. We think Flutter is the most ESG-friendly Gaming stock, a full notch above Entain, while we do not think FDJ has high enough Climate ambitions to be an overall ESG leader.
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Accor reported a consensus-matching H1 and revised its 2023 outlook modestly upwards. We arrive at a higher EPS forecast after factoring the new information into our model and expect a slight increase in the consensus.
Accor provided a closer look at different brands, regional businesses and the new organisation on its investors day. The 2023 guidance is, overall, market-beating and the magnitude of growth for the mid-term remains in line with our expectations. The major surprise came from the larger-than-expected €3bn shareholder returns through dividends and buy-backs. We have upgraded our target price and recommendation.
Accor’s rosy Q1 sales were largely led by the long-awaited recovery in Asia, robust pricing and improving occupancy. The solid trading momentum enabled the group to upgrade its FY guidance, which also strengthened our bullish conviction. We expect an increase in the consensus and our estimates.
Accor''s appeal as a late recovery play is clear. What may not be fully reflected in the +36% ytd share price performance is the dual benefit to growth and margins of the ongoing reorganization. Our first stab at divisional PandLs for the two future divisions shows a healthy combination of high-single-digit growth (Luxury and Lifestyle), and efficiencies fuelling opex reinvestments (Premium, Midscale, and Economy). The shares trade on 18.0x CY24e P/E, our new DCF-derived target price is EUR37.5, and we also derive a EUR31-40 SOP range with further upside from non-core assets. New organization: we like what we expect to see We use brand mix, operating model mix, and category RevPAR premia to build an early estimate of the new divisional PandLs to be disclosed this summer. Luxury and Lifestyle could represent c. 30% of group EBITDA before central costs, and can deliver c. +9% revenue CAGR, driven by room openings, with opex reinvestments into business development still allowing c. +7% EBITDA CAGR. These will be financed by efficiencies in the more mature Premium, Midscale, and Economy division, at c. 70% of EBITDA, and growing only c. 4% p.a., but improving margins toward the mid-80s (in %). The projects, the people, and the risks Our review of Accor''s trademark and subsidiary registrations suggests that the reorganization has progressed on track against the ''Q1'' target, and that the group plans incremental innovation around the new structure rather than any disruptive new launches this time. The plan relies heavily on the new divisional and function leaders, with in particular current Group Deputy CEO Jean-Jacques Morin, tasked with the delivery of PMandE cost savings as new divisional CEO. Risks include the number of leadership changes, and the timing of savings vs reinvestments. What this means for valuation: SOP range EUR31-40 with upside from non-core assets These different growth profiles certainly justify different multiples, but we see a floor at c....
Solid trading momentum in Q4 with robust pricing having fully offset the dawdling occupancy. The FY top-line recovered earlier than expected and the EBITDA beat the guidance, despite more efforts on margin resumption being needed. We expect an increase in the consensus and our estimates.
In this report we assess how the major themes of 2023 could play out across the core sub-sectors of European and US Leisure, with a focus on demand upside / downside scenarios and margin drivers, and not forgetting to keep an eye on ESG. Our key convictions are Accor (upgraded to +), Whitbread (-), Flutter (+), and Compass (+). We also downgrade Entain and IHG to (=). The themes For the 16 stocks in our core Europe and US coverage, we present quantified sensitivity analysis, or relative preferences for each sub-sector, on 6 key themes: global macro downside, UK consumer risk, China reopening, cost inflation, discretionary opex trends, and ESG sentiment catalysts. We have also published separate reports detailing our rating changes on Hotels (Freeze! Who''s been over-earning?) and on Entain (Longer odds: we cut forecasts for 2023). Where it holds: increased conviction on Compass, Flutter, upgrading Accor to Outperform Accor (upgrade to +) boasts the strongest RevPAR run-rate in a balanced market, upside from APAC and from China outbound on both revenue and asset values. Compass (+) offers defensive growth by continuing to take the lion''s share of new contracts globally, also with a strong inflation pass-through track record and the peak of contract start-up costs behind it. Flutter (+) is the most advanced on self-regulating its UK business, with consensus still too conservative on US profits. Where it is stretched: avoid Whitbread, Draftkings, downgrading Entain and IHG to Neutral Whitbread (-) owns a GBP1.6bn cost base in the most stretched RevPAR market globally, the UK, and could have budgeted more conservatively for FY23e cost increases. Draftkings (-) will struggle to improve gross profits while defending market share. Entain (downgrade to =) has too much exposure to the UK consumer and only distant bid prospects. IHG (downgrade to =) is unlikely to rerate as Midscale loses category leadership in the last leg of the US RevPAR recovery.
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How much further can hotel prices go? Not much, we argue, with price increases at December 2022 already baking in a full 4 years of inflation. Accor has the strongest run-rate growth if things just freeze from here, while newsflow on non-core assets should also improve: we upgrade Accor to Outperform, shifting our preference from IHG (downgrade to Neutral). Whitbread (reiterate Underperform) still operates a GBP1.6bn cost base in the most stretched market globally, the UK. Back to basics: Hotels is a zero-real-pricing market As of December, Hotels RevPAR is trending +15% to +24% above 2019 levels, with Occupancy levels broadly back at pre-COVID levels, but prices +15% to +25% above. We update our cycle analysis, adjusting for historical inflation to assess ''real'' RevPAR trends. Developed market hotels aren''t quite over-earning, but they have already passed a full 2020, 2021, 2022, and 2023 worth of inflation to their customers, so that RevPAR just freezing at current levels is a realistic scenario. So who has more fuel in the tank into FY23e? Very simply, the regions where the recovery has been the most back-end loaded in FY22e should see the strongest momentum into FY23e as they just annualise from a lower base. There is mechanical upside in Accor''s Europe regions (Q4 exit rate c. 115% vs FY22e to end Dec c. 98%). Whitbread''s UK trends are closer to stabilising (Q4 exit rate c. 26% vs FY23e to end Feb c. 24%). Accor SOP also becoming more reliable Up to 20% of Accor''s equity value lies in non-core assets with less reliable valuation reference points, sometimes 2019 stake sales: European REIT AccorInvest, the Mantra leases in Australia, a portfolio of digital assets collectively breakeven. The sale of their remaining stake in Huazhu last week at the first sign of improving newsflow on China is supportive in this regard, and we continue to see a EUR26-36 per share SOP range.
Accor’s quarterly RevPAR and revenue both surpassed their 2019 levels and by a greater magnitude than in Q2. Trading was supportive in all regions except in Asia, while the zero-COVID policy in China is likely to linger for longer. We expect a minor increase in the consensus but we will maintain our estimates, which are in line with the renewed guidance.
The share price fell due to the market-missing Q2 EBITDA and conservative outlook, despite a strong rebound in RevPAR to above its 2019 level. We expect a downgrade in the consensus, but no major change is expected to our current estimates which remain consistent with the guidance.
The market reaction is expected to be positive to Accor’s consensus-beating Q1 revenue. Despite the lack of financial guidance, especially in terms of inflationary pressures, we will upgrade our FY22 revenue estimates to reflect the encouraging recovery in the Travel & Leisure activities.
Accor reported slightly market-beating FY21 results, thanks to sequential RevPAR improvements and stronger-than-planned cost reductions. The group expects a robust restoration of activities in FY22, largely led by favourable pricing, and aims to resume dividend payments as soon as possible. Regardless, the outlook might be affected by some inflation pressures.
Accor’s Q3 revenue improved considerably from last quarter, but it still lagged by 40% from the 2019 level. Q4 would be hard to perform much better due to seasonability effects. Nevertheless, the narrowing EBITDA loss is worth noting, even though the improvement is not significant.
We had an Investment Conference with Accor: the latest statistics support the group’s previously communicated forecast for its FY21 performance.
Accor’s H1 results beat the market thanks to tighter cost control and helpful business recovery in Australia. However, the market did not celebrate due to the H2 guidance with no surprises and few improvements vs H1. The consensus is expected to be downgraded.
Accor delivered a weaker-than-expected revenue in Q1, with no major improvement vs. in the last quarter, but it confirmed rather positive indicators in margins and cash burn.
Accor’s FY20 results suffered from the global travel restrictions and fewer travellers, but were broadly consistent with the market’s expectations and the liquidity position remained solid as usual. However, we do not expect a much better FY21, especially the cheerless H1.
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