Accor Earnings: Travel Demand Remains Strong While EBITDA Margin Improves; Shares Attractive

On the heels of its June 27 capital markets day, narrow-moat Accor AC 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.

Net unit growth was 3.5% in the first half of the year, leading management to maintain its 2%-3% target for 2023. Accor’s pipeline reached 217,000 in the second quarter, up from 214,000 last quarter and 212,000 in the prior year, representing a respectable 27% of its existing base. We think room growth can average around 3% annually during the next decade, led by roughly 7% growth in the luxury and lifestyle segment.

Adjusted EBITDA more than doubled in the first half of the year to EUR 447 million, representing an 18.6% margin, up sharply from 11.9% in the year-ago comparable period. The improvement was driven by increased demand and an easing of marketing spending taken by the company last year as international travel markets reopened and began to recover. Management increased its EBITDA guidance by EUR 10 million to EUR 930 million-EUR 970 million, compared with our EUR 937 million estimate. With travel demand continuing to increase, we think the EBITDA target is achievable.

We think Accor shares are worth EUR 41.50 and see them as attractive, trading at 12 times forward enterprise value/EBITDA, an unwarranted discount to the 13-14 of some peers.