Accor's Shares Discount Strong Revenue and EBITDA Improvement, Which We See Enduring in 2023

For the better part of the past year, narrow-moat Accor’s share price has unduly been held back by concerns about European and Asia-Pacific travel demand and company profitability, in our view. Accor’s 2022 performance should ease these concerns, with revenue of EUR 4.2 billion above our EUR 3.9 billion estimate. The 92% sales growth (80% organic) was aided by stronger revenue per available room, which reached 102% of 2019’s level versus our 98% forecast, a currency benefit of EUR 189 million, and an acquisition tailwind of EUR 72 million. 2022 EBITDA of EUR 675 million surpassed our EUR 637 million estimate and company guidance of EUR 610 million-EUR 640 million, helped by a higher-margin business mix in December as corporate travel improved. As a result, 2022 EBITDA margin was 16%, up from 1% in 2021. Additionally, Accor sees no signs of demand slowing: It expects 2023 revPAR growth of 5%-9%, easily outpacing our 2% estimate. We plan to lift our revPAR forecast to within that range, aided by the human-ingrained desire to travel, improving group and business demand, the shift to service consumption, remote work flexibility, and the removal of China’s COVID-19 policy in January. We expect to increase our EUR 38 fair value estimate by around a mid-single-digit percentage, leaving the shares undervalued.