Company Reports

While inflation and slow economic growth present near-term demand headwinds, we expect Accor to expand its share in the hotel industry over the next decade as a result of its solid loyalty membership of around 90 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury and premium rooms, which was 23% of its total in 2023. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against narrow-moat Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core Europe and North African region (44% of total rooms in 2023).

We believe the strength of narrow-moat Accor's diversified portfolio was reflected in its first-quarter 2024 sales update. Despite lapping a tough comparison (up 57% in the same period last year), revenue per available room (revPAR) grew 8% on a like-for-like basis, driven by positive pricing and volume. Less constructively, management maintained its 3%-4% average annual revPAR and unit growth targets (2023-27), implying sequential deceleration for the remainder of the year. The full-year guidance squares with our prior 2024 revPAR forecast, which was based on our positive near-term outlook on both business travel and leisure excursions.

Narrow-moat Accor's shares now trade near our EUR 42.50 fair value estimate after appreciating 16% year to date through Feb. 29, more than tripling the roughly 5% performance of the Morningstar Global Markets Index.

While inflation and slow economic growth present near-term demand headwinds, we expect Accor to expand its share in the hotel industry over the next decade as a result of its solid loyalty membership of around 90 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury and premium rooms, which was 23% of its total in 2023. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against narrow-moat Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core Europe and North African region (44% of total rooms in 2023).

Narrow-moat Accor's shares traveled 7% higher on Feb. 22, driven by solid 2023 results and bullish demand and supply commentary over the intermediate term. Our fair value estimate is EUR 41.50 per share.

While inflation and slow economic growth present near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty membership of around 90 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury/premium upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against narrow-moat Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022).

While slow economic growth presents a near-term demand headwind, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty membership of around 90 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury/premium upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against narrow-moat Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022).

While inflation, depleting consumer savings, and the conflict in the Middle East present near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty membership of around 90 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury/premium upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against narrow-moat Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022).

We don’t plan a material change to narrow-moat Accor’s EUR 41.50 fair value estimate, other than for time value, after its third-quarter sales update pointed toward solid second-half demand. We see shares as undervalued, trading around 10 times 2024 enterprise value/EBITDA versus peer multiples of 13-14 times.

While inflation presents near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty membership of 89 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury/premium upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022).

On the heels of its June 27 capital markets day, narrow-moat Accor reported second-quarter results that included revenue per available room, or revPAR, up 25% on a like-for-like basis. Growth was evenly distributed across its two segments, with premium, midscale, and economy revPAR up 26% and luxury and lifestyle up 24%. The hotelier said summer demand remains strong, aided by increasing inbound travel to Europe and a domestic recovery in China. As a result, Accor now expects 2023 revPAR growth to reach the higher end of its 15%-20% guidance, which is achievable barring a sudden sharp turn for the worse in economic activity, which we see as unlikely.

While inflation presents near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty membership of 89 million and increasing exposure to the premium, luxury, and lifestyle segments, supporting its intangible brand asset advantage, the source of its narrow moat. Accor's growing room share is being driven by an increased presence in higher-end luxury/premium upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against Airbnb and other alternative accommodations. Overall, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022).

During the past decade, narrow-moat Accor has become more asset-light (97% of rooms managed and franchised today versus 59% in 2013), broadened its portfolio mix to luxury and lifestyle units (34% of fees now compared with 11% in 2013), and expanded its scale via organic and inorganic measures (over 800,000 total rooms currently from 462,000 in 2013). At its June 27 capital markets day, the hotelier laid out its midterm strategy to focus on design and consistency across its portfolio, with a heightened focus on premium brands and key geographical regions; we see this as prudent at this stage of the company’s evolution. We plan to maintain our EUR 41.50 fair value estimate and see the shares as attractive, trading at 12 times forward enterprise value/EBITDA, an unwarranted discount to the 13-14 of some peers.

While inflation presents near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty and exposure to the millennial traveler through its growing lifestyle brands, supporting its intangible brand asset advantage, the source of its narrow moat. As a result, we see Accor posting 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022). Accor's growing room share is being driven by an increased presence in higher-end luxury/upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against Airbnb and other alternative accommodations.

The main takeaway from narrow-moat Acco's first-quarter sales update was that revenue per available room, or revPAR, growth is now expected to rise a low-double-digit percentage in 2023 versus a 5%-9% lift expected previously. Against easier year-ago comparisons (due to Omicron) first-quarter revPAR grew 57%, slightly ahead of our 54% estimate, and representing 119% of the comparable 2019 period. Specifically, Asia Pacific (27% of total room revenue) revPAR jumped 77%, as countries such as China (about 5% of total room revenue) have recently reduced COVID-19-related travel restrictions. We plan to lift our 2023 revPAR forecast to 14% from 5%, increasing our EUR 40 per share fair value estimate by a mid-single-digit percentage. Trading at around 12 times 2023 EV/EBITDA we see shares as undervalued relative to the 15 times of similarly positioned narrow-moat peers.

While inflation presents near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty and exposure to the millennial traveler through its growing lifestyle brands, supporting its intangible brand asset advantage, the source of its narrow moat. As a result, we see Accor posting more than 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (43% of total rooms in 2022). Accor's growing room share is being driven by an increased presence in higher-end luxury/upscale rooms, which were 27% of its total in 2022. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against Airbnb and other alternative accommodations.

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.

While the coronavirus, geopolitical conflict, and inflation present near-term demand headwinds, we expect Accor to expand share in the hotel industry over the next decade as a result of its solid loyalty and exposure to the millennial traveler through its growing lifestyle brands, supporting its intangible brand asset advantage, the source of its narrow moat. As a result, we see Accor posting more than 3% unit growth on average over the next 10 years, well above the roughly 1% long-term industry rate in its core European region (58% of total hotels in 2021). Accor's growing room share is being driven by an increased presence in higher-end luxury/upscale rooms, which were 27% of its total in 2021. This higher luxury presence diversifies Accor from its core economy/midscale exposure, which more directly competes against Airbnb and other alternative accommodations.

Accor’s third-quarter revenue per available room, or revPAR, traveled higher to 114% of 2019’s level versus 101% seen three months prior, driven by volume and pricing improvement across all regions. Northern Europe (21% of rooms) revPAR lifted to 109% of prepandemic marks in the quarter (from 93% last quarter), Southern Europe (24%) to 111% (versus 102% three months prior), and Asia-Pacific (31%) to 91% (compared with 82% a quarter ago). Systemwide, the brand’s pricing power remained strong, with its room rates reaching 123% of 2019’s level, up sharply from 113% last quarter.

Despite enduring travel demand into the fall of 2022 and our view that it can continue into 2023, investor concerns around future trips and credit availability have grounded share price performance across the industry. As a result, we see meaningful opportunities to book investment stays in Sabre, Accor, Booking Holdings, and Norwegian, which trade at 64%, 42%, 44%, and 54% discounts to our $15, EUR 37.50, $2,900, and $28 fair value estimates, respectively.