Hello, and welcome to Accor Group's Q3 2024 revenue conference call. Please note, this conference is being recorded. During the conference, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation by typing star one on your telephone keypad. I now give the floor to Madame Martine Gerow, Accor CFO, to begin this conference. The floor is yours.
Thank you, and good evening, everyone, and thank you for joining Accor's third quarter trading update call. And without further ado, I will start with the key highlights on slide three. So I'm pleased to report yet another strong quarter with a robust top line performance in line with our perspectives for 2024. So our activity growth, as you can see on the left side, was solid in the third quarter. Demand remains strong, with a RevPAR growth of 5.3% in the quarter, benefiting from the Olympic Games in France, but also the diversification of our portfolio. Pricing remains supportive, with rates improving by 4% year-over-year in the third quarter. Occupancy was also up, gaining one point to 70% in the quarter. Turning to net unit growth.
Net unit growth reached 3.2% on an LTM basis at the end of September, which is in line with our full-year guidance. As we anticipated, churn was higher this quarter as compared to the third quarter of last year, primarily driven by the portfolio upgrade program we have in the PM&E division, and we do expect this to normalize in the fourth quarter. We regained positive momentum in the pipeline, which increased 6% versus last quarter. Pipeline totals 231,000 rooms, and this was driven by the PM&E division. On a year-to-date basis, pipeline is up 3%. Our signings are also progressing well, and they are up 9% in value as we continue to drive up the average fee per room. Turning to revenue.
Group revenue increased by a very solid 12% to slightly over EUR 1.4 billion, and it's 9% when we adjust for foreign exchange and scope. M&F revenue was up a solid 7% in the quarter. We therefore remain on track to deliver our full- year guidance on all metrics. We are comfortably within our full- year RevPAR growth of 4% to 5%, and we have narrowed upwards our guidance, which is now expected between EUR 1.1 billion and EUR 1.125 billion. And on the balance sheet side, we successfully completed the refinancing of our second hybrid bond issuance for EUR 500 million at a lower cost than last year refinancing. I'll now turn to slide 4 on RevPAR. Starting with PM&E.
PM&E posted a third quarter RevPAR growth of 5%, driven by continued strong pricing for about 80% and occupancy gain for 20%. In the quarter, average room rate was up 4% year-over-year, and occupancy rate was up 1 point at 71%. In ENA, Q3 RevPAR was up 6% versus prior year, driven by a 7% growth in average room rate, with France obviously and Germany equally being both strong drivers. In France, Paris RevPAR was clearly boosted by the Summer Olympics. Games period delivered a peak performance, which was in line with our expectation with ADR that was more than double in the period and we also had 15 points of incremental occupancy over the game period. The province had a fairly resilient summer. September was a bit softer.
September had challenging comps because of the Rugby World Cup, which ran from September to October last year, as you may recall. In the U.K., RevPAR was broadly in line with previous quarters overall, London being softer than the provinces, and in Germany, RevPAR continues to perform well, with a growth rate in the high single digits. And occupancy rate was up in the quarter, which is an improvement from previous quarters, where it was mostly pricing that was driving RevPAR growth. Turning to MEA PAC, RevPAR was up 1% in the quarter, with sharply contrasted performances. Southeast Asia was the best performing region and continues to deliver double-digit RevPAR growth, benefiting notably from the outbound demand from China. Middle East, Africa, Turkey performance was softer this quarter.
It was negatively impacted by the timing of some religious holidays, notably the Hajj, and the later start of Umrah, particularly in Saudi Arabia. We also had the reopening ramp up of five hotels, which had been impacted by the April flooding in Dubai. However, we saw sequential improvement in RevPAR over the quarter, and we closed the quarter with high single-digit growth in MEA, Middle East, Africa, and Turkey, and if we combine those two regions, which are growth markets for Accor, we registered a solid 6% growth, as you can see on the page. Pacific continues to be challenged with flattish RevPAR in the quarter. Macros continue to be weak and consumer confidence remains low.
China remains a challenging market. RevPAR decline was in the high single digits in the quarter, although that is less pronounced than what we have observed in luxury goods. Now, while Chinese outbound traffic continues to recover, and you see the benefit of that in Southeast Asia, domestic demand remains under pressure. Trading improved somewhat over the Golden Week, which had a stable RevPAR year- over- year during that period. You know, thus far, the stimulus program has mostly benefited the financial sector. Turning to Americas, which, as you may recall, is mostly Brazil. We continued to post double-digit growth with third quarter RevPAR up 13%. Demand was very solid in Brazil.
Occupancy was up two points, and is now sitting three points above 2019, notably driven by corporate and events in São Paulo. High inflation also benefited the rates in Brazil. Moving to luxury and lifestyle on the right side, RevPAR growth was sustained at +7% with both rates and occupancy gain. Rate was up 3% in the quarter, and occupancy was up three points in the quarter. Luxury RevPAR grew 5% in the third quarter, with rates up 2% and occupancy up two points. Luxury momentum, when you look at it by market, by geography, was actually quite comparable to that of PM&E with a slight positive premium. Lifestyle sustained its double-digit growth at +14% in the third quarter, equally driven by occupancy and price.
Resorts had, again, a particularly strong quarters in Turkey, Egypt, and Dubai. Moving to portfolio and pipeline on slide six, sorry, five. As shared in my introduction, our net unit growth reached 3.2% on an LTM basis, starting with PME. Last 12 on net unit growth was 2.6%. In the PME division, that's in line with our mid-term guidance. It is down from 3.7% at the end of June, primarily driven by churn. Third quarter openings were back in line with prior years, following the uptick in Q2, which had the opening of the Daiwa portfolio.
However, churn, as indicated in my introduction, was above prior in the quarter, and this is mainly a consequence of the Portfolio Upgrade Program that we have launched in 2023, which is therefore more of an active, proactive churn. We do expect churn to normalize in the fourth quarter and fall back in line with prior. Now, with regard to pipeline, we're pleased to report an 8% growth over the quarter in the PME division. And the last twelve month M&F revenue per room is holding up at EUR 1,200.
Moving to the right, we had slight acceleration in the growth of the luxury and lifestyle net unit growth at 7.1% on an LTM basis. It continues to be driven by Ennismore, which was up more than 20% on an LTM basis. We see an improvement quarter after quarter in the net unit growth of luxury and lifestyle, and this is fueled by a high opening and a significant pipeline. In the quarter, overall versus previous quarter, pipeline was actually stable. Signing, however, in the luxury and lifestyle divisions are up 22% in value on a year- to- date basis, as we continue to focus on higher value deals.
Some notable openings in the quarter were the Raffles in Jaipur, the Rixos of Golden Horn, and Sofitel in Cotonou. In this division, we also see, you know, steady M&F revenue per room at EUR 4,000. At group level, net unit growth reached 3.2% on an LTM basis. It is at the low end of our midterm guidance as expected. We had a bit more conversions. Conversions represented 62% of opening, which is above our historical level, which is near 50%. Moving to slide six, which is the revenue breakdown by segment. Group revenue slightly over EUR 1.4 billion, up 12% versus prior.
Reported growth is positively impacted by the consolidation of Potel et Chabot, which is impacting luxury and lifestyle, partially offset by foreign exchange, which impacted us by a negative 2% in the quarter. On a like-for-like basis, revenue was up 9%. For premium midscale and economy revenue was up 7% in the quarter at EUR 821 million. Management and franchise was up 6%, that's one point above RevPAR. We also had a bit of a FX, a negative FX impact. On the positive side, we had some termination fees in the ENA region. In services to owners, the 14% year- over- year variation that you see here is mainly impacted by services that we provided to the Olympics organization.
Hotel assets and other performance remains driven by Australia and Brazil. So the revenue growth in this region, which is pretty flattish, reflects the you know softness in Australia as well as negative foreign exchange from the Brazil deal. Turning to luxury and lifestyle, revenue was up 18% in the quarter, EUR 635 million. Management and franchise was up 10% in the quarter. That's three points above RevPAR growth, which reflects the strong growth of the lifestyle portfolio, and again, partially upset by negative effects in this division. Services to owners growth was pretty much in line with RevPAR.
Hotel assets and other growth, again, reflects mainly the acquisition of, Potel et Chabot, which we did in October of last year, and Rikas, which was in, at the end of the first quarter of this year. Turning now to specifically management and franchise revenue on slide seven. M&F revenue was up 7%, in the third quarter. PME was up 6%, and as you can see here, this was primarily driven by the, India region. As previously mentioned, this region, benefited from, some termination fee, as well as obviously, the very, you know, good growth in RevPAR. In APAC, the M&F revenue growth, at 2% is broadly in line, with RevPAR growth.
And in America, as you can see here, minus 2%, and this is a result of the depreciation of the Brazilian real, primarily. RevPAR was you know very positive in this region. Regarding luxury and lifestyle, M&F revenue grew by 10%. Luxury M&F revenue is up 5%. That's in line with RevPAR. And for lifestyle, you're seeing 23% growth in M&F revenue. Combination of obviously very solid RevPAR growth, but also the very strong growth in the network in this segment. Turning now to page eight with the key takeaways. As we expected, and as we shared with you, the group you know foresees a normalization of the RevPAR momentum towards our midterm perspective of 3%-4%.
As for full- year 2024, we are confirming our RevPAR guidance, so it'll be between 4% and 5%. We're also confirming our net unit growth between 3% and 4%, confirming our positive services to owners EBITDA, and we slightly narrowed our upwards our EBITDA guidance, which is now expected between EUR 1,100 million and EUR 1.125 billion. And that concludes my introductory remarks, and I will now open the floor for questions.
Thank you very much. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star one on your telephone keypad. Our first question is from Vicki Stern with Barclays. Please go ahead.
Yeah, hi there. I've got three questions. Firstly, just wanted to start on the RevPAR outlook. If we could just get a bit of a run through of the key geographies in terms of how you're seeing things evolving into Q4 and maybe next year. Particularly curious, obviously on France, given the political backdrop, and also the Middle East. You mentioned there the exit rate of high single digit, which I think included Turkey. Just as curious what that is without Turkey, what the rest of the region's doing and, and how you're feeling about the outlook there for Q4, I guess obviously with some tougher comps. Second one's just on the net unit growth outlook. How are you feeling about that turn or the exits pace as we move into next year?
Will that elevated pace of exits continue, or is that mostly gonna be done then by the end of Q4? And the last one, just on AccorInvest. I saw the comment suggesting that the maximum equity injection now from you would be EUR 34 million, not the EUR 67 million , you've called out previously. Just given the progress that's being made there, both on disposals and on refinancing, how you're feeling really about the process, the likelihood of needing to make another injection in March, and obviously how that asset sale looks like it's progressing through to next year?
Hi, Vicki. Thank you for your question. Look, in terms of, you know, RevPAR outlook for the, you know, for the fourth quarter, you know, we're seeing, you know, as I said, we're seeing a normalization of, you know, of RevPAR. You know, for the fourth quarter, you know, we're gonna be in the, you know, in that range, which is, in the, let's call it, you know, low single digit, overall. Which therefore just, you know, comfort in our 40-45% RevPAR guidance.
As far as, you know, giving you some color across the regions, you know, post the Olympics period, RevPAR is going to be more of a low to flattish growth. And, you know, France will be in that, you know, in that same zip code more or less. You know, October, the beginning of October was a bit soft in France. The second half of October is actually faring better. With respect to your question on the Middle East, obviously, you know, Turkey continues to be strong.
You know, Dubai is relatively flattish, but we're seeing, or we are, you know, we're expecting positive momentum in, you know, in Saudi Arabia, which is obviously a key, you know, a key market for Accor in this region. You know, China, as indicated, was -9% in the third quarter. The comps are getting a bit easier in the fourth quarter, but we expect China to be, you know, still negative in the fourth quarter. And I think that covers the key markets. It's a bit too early to, you know, share what the outlook for FY 2025 is.
Obviously, you know, as I said, we're seeing RevPAR normalizing towards, you know, that, you know, kind of 3-4%, midterm outlook. In terms of the churn, what we shared with you is that, you know, the program, which we call Pure, which is a portfolio upgrade program, was going to impact us more in 2023 and 2024. You will have a bit of a, you know, last impact will be in 2025, but we expect that impact to be less than what it was in 2023 and 2024. With respect to AccorInvest, yes, as you indicated, AccorInvest has done two successful refinancings.
They just issued a you know a second bond, which was actually at a lower cost than the first bond, so they are you know the let's say debt structure is progressing at pace. They are also progressing at pace on their asset disposal program. The combination of the two reduces our maximum commitment to EUR 34 million from previously EUR 67 million. It's too early to tell you know whether we will have to extend that EUR 34 million or not. All I can say is that at this point in time the asset sale is progressing as planned.
Very clear. Thanks very much.
Thank you very much. Our next question is from Julien Richer of Kepler. Please go ahead.
Yes, good evening. Two follow-ups, one for me, please. The first one on the demand trend by clientele. Have you seen any deceleration in, for example, leisure demand, international leisure demand or domestic leisure demand, or on the business side? Happy to have you on, your view on that. And the second one on if you have seen any change in construction and development due to interest rate evolution recently? Thank you.
Thank you for your question. So with respect to demand by kind of type of customers, what we've seen is we've seen high growth coming from business and groups. Leisure demand is still positive, but it is, you know, it's progressing at a lower rate than both business and groups. It's about a one-to-two ratio between the, you know, business groups and leisure. And with respect to the loosening, if I may say, or reduction in interest rates, it's certainly a bit early to tell. What we have seen is, you know, we've seen a higher rate of conversion in our openings in the third quarter.
And not unlike, I think what you've seen from other traders.
Okay. Thank you.
Thank you. Our next question is from Muneeba Kayani, with Bank of America. Please go ahead.
Thanks for taking my question. Can you talk about the potential impact on you from the tax changes that are being talked about in France, both from an income tax perspective and also on airfares? And then secondly, in the Q1 earnings call, there was discussion around luxury and lifestyle, and kind of possible actions to crystallize the value, and it would be reviewed in, I believe, in December. Anything changed on that front, and how should we be thinking about that business? And then from a signings perspective, kind of, can you give a bit more color around what regions have driven the third quarter, and how are you thinking about that into year-end? Thank you.
Thank you for your question. So with respect to the tax change, so we have really two impacts. One is the corporate income tax, and the other one is share buyback. Based on the, you know, analysis that we've taken, and you have to, you know, recall that, we still have big, fairly large, net operating losses in, you know, in France. So, and France is only 20% of our... Less than 20%, actually, of our business. So on a corporate income tax, basis, and let's say share buyback, assuming, you know, EUR 400 million share buyback, the impact is less than, is around EUR 10 million for us. So definitely something that is, relatively, de minimis.
On the luxury and lifestyle, we really have no plan to do any sort of, you know, capital transaction with, you know, with this division, and on signing, most of the, and this is not different from what has, you know, been happening in certainly this year, the focus or most of the signings are in Southeast Asia and the Middle East, but we're also getting good traction starting to get good traction in the U.S.
Thank you.
Thank you. Our next question is from Jaina Mistry, with Jefferies. Please go ahead.
Hi. Good evening, Mathilde. One question on 2025, and it's a bit of a follow-up to the first question. Just wondered how you're thinking about the moving parts to RevPAR in 2025. You know, how you're thinking about the Middle East, China, and actually in particular, Asia ex-China, how you think the shape of growth could pan out there next year? Second question is just around the Olympics. I wondered if you could quantify the benefit at the group level in Q3. And another is around France. You know, it's been well flagged that there's weakness in France post-Olympics. You mentioned that the second half of October looks a bit better. Do you think traffic to France recovers in Q4? Any early signs of what's happening there? Thank you.
Hi, thank you for your question. So in terms of 2025, if I start with China, we would expect that China is at best probably relatively neutral. And that really depends on what the stimulus program will be about in terms of the impact it will have on consumption. We know that it's gonna help real estate. We know real estate is an important asset for Chinese customers, but not clear how it's going to affect Chinese consumption. So a bit too early to tell, but probably neutral I think.
In terms of NR, we think, you know, probably in the low single digits, you know, growth, and we continue to see positive, you know, kind of mid-single digit growth for the MEAPAC region, excluding, you know, excluding China. And the US, you know, US, Canada is obviously a smaller, smaller market for us, and here, you know, probably, again, low single digit. With your question on the Olympic, you know, Olympic Games, I mean, overall, you know, we were expecting two points uplift, in, you know, in France on a full- year basis. And, that's pretty much where we, that's pretty much where we landed.
In terms of France, you know, France was softer in September. You know, some of that is related to the post Olympics, you know, peak. And some of that is also related to, and I, you know, alluded to that in my introductory remark, to the fact that we had pretty good September and October in France last year because we had the Rugby World Cup, particularly in the, you know, in the cities outside of Paris.
Great. Thank you.
Our next question is from Leo Carrington with Citi. Please go ahead.
Good evening, Martine, thank you. Firstly, could I just clarify on the comments you made about the churn, the elevated levels of churn. Is this the 30 Ibis hotels in Germany that were sold back to AccorInvest by B&B, or are there other exits that I've not spotted? And in terms of competition, I mean, how do you see the situation in Europe? Notice Marriott expanding Moxy, B&B hotels, obviously, in general, big focus on conversion, which you've benefited from. What's your view on the latest competitive developments? And then, secondly, just to follow up on Vicki's question, really, I mean, the midpoint of 2024 RevPAR guidance does allow for some slowdown from Q3 and from year to date. Is this an element of caution, or are you factoring in some specific areas of deceleration? Thank you.
Thanks for your question, Leo. I'll actually start with the last one. On the RevPAR outlook for this year, you know, what I said was that we're, you know, comfortably within our 4%-5% RevPAR guidance. Our expectation for Q4 is that, you know, it's probably going to be in the kind of low single digits, you know, territory. Which, you know, you should expect some normalization in, you know, in RevPAR, and that's what we've seen actually throughout the year.
And again, you know, our expectation, going forward is that we'll be in that, you know, 3-4% range that we indicated and shared with you at the CMD. That's still where, that's still where we are, given the diversification of our portfolios. In terms of the churn, so we had a bit of a higher churn in PM&E in the third quarter. But when we look at the, you know, the churn for the full- year, it's in line with, you know, our expectation for the full- year, and it's certainly in line with our net unit growth guidance of 3-4% in 2024.
We're not giving guidance by division for net unit growth, but all I can say is that we expect PME to be in line with the company guidance we gave, which is 2.5%-3.5%. Some of the churn in Q3 was related to the B&B portfolio. That being said, we're still leader in Germany by far. We're about twice as large as our next competitor. And with respect to that particular portfolio, this was an asset-heavy portfolio. And our strategy is very clear to move away from asset-heavy and remain in asset-light.
And therefore, you know, that portfolio did not fit within, you know, within our strategy. In terms of the competition, you know, yes, competition is healthy in Europe, not just in Europe. But again, you know, we feel that we have a strong portfolio of brands, and that we can defend our sales and continue to increase our net unit growth, including, you know, including in Europe. But as I said, our priority growth markets are Middle East and Southeast Asia, and that's where most of our openings and also signings.
Thanks very much, Martine.
Thank you. Our next question is from Alex Brignall of Redburn Atlantic. Please go ahead.
Good afternoon. Thanks so much for taking the question. Looking at the full- year guide, obviously some focus on RevPAR, where there's a slowdown allowed for in Q4. But kind of looking at the revenue in Q3, it seems to be on a good trajectory. Is there anything in the cost line that is stopping EBITDA being upgraded somewhat, or perhaps in services to owners is obviously always a tricky number to call on an annual basis because it moves around a bit. And then the second question, the signing's obviously better, and the churn, this kind of heavy churn phase is going to be over in, well, this year and certainly more so the next year.
Looking at the net unit growth expectations for FY 2025, what do we think is realistic, sort of within that previously announced range of three to five? Thank you.
Thank you for your questions. You know, again, with respect to RevPAR and kind of EBITDA, you know, in July, we gave a guidance of 4-5% RevPAR, 3-4% net unit growth and an EBITDA range. And honestly, you know, we're still within that range. And therefore, we're expecting, you know, the same EBITDA. We didn't change the EBITDA guidance. We moved it upwards a bit, but fundamentally, you know, we're still within that range.
With respect to your question on net unit growth for FY 2025, I think what we said at the CMG was our net unit growth guidance on the midterm was 3%-5%, and our expectation was that at the beginning of the plan, we would be towards the low end of that guidance. Hence, our guidance for this year of 3%-4%. And as we moved, you know, towards the middle and the end of the planning, we were expecting that net unit growth to pick up towards the higher end of the guidance. You know, 2025 will be somewhere in that middle.
Thank you very much.
Thank you. Our next question is from Estelle Weingrod with JPMorgan. Please go ahead.
Hi, good evening. I've got a couple of questions. The first one, could you quantify the impact of the COP in the UAE last year, that lasted for at least for a week, I think, in December? That's the first question. The second one, would you mind just, I'd like to look at the, the potential for further margin expansion, like into next year? Just to understand better, what other key levers left for Accor, for M&F in particular. Thank you.
I'll take your second question on margin expansion. On margin expansion, what we, you know, what we shared, I think in previous calls, was that our expectation was to have an operating leverage on M&F, sorry, M&F margin of about 100 basis points. You know, that's certainly where we were tracking at the end of the first half. That's you know, certainly where we will be tracking on a full- year basis, given what our EBITDA you know, guidance here. We're still essentially you know, on that, still on track with delivering that kind of margin improvement on a you know, on the duration, over the duration of the plan.
With respect to your question on, you know, the COP, I mean, it's a little challenging to isolate one particular event. So, I'm afraid I'm not gonna be able to give you a good answer on that one.
Okay, thank you.
Thank you. As a reminder, if you'd like to ask a question on today's call, please press star one on your keyboard. Our next question is from André Juillard with Deutsche Bank. Please go ahead.
Yes, good evening, Martine. Three questions, if I may. First one about the MICE segment. You were mentioning that the recovery was continuing on the corporate, but do you see any real improvement on trade fairs, big events? First question. Second question about the corporate rates. You must have been starting the renegotiation for 2025. Could you give us some more color about that? And last question about asset disposals. Could you give us an update on the Mantra disposal, where you are and what is still to be done? Thank you.
Sure. Hi, André. On the MICE segment, as we said, you know, we had a better growth in the groups in the third quarter as compared to usual. What we actually see, we don't have a visibility into the events, you know, kind of never seen in the world, but in the top cities, what we see is we actually see a very, very robust event calendar. What we have received for destinations is, you know, up to 20% increase in attendance in events in the key cities. So we should have a robust MICE business in the fourth quarter.
With respect to the, you know, corporate rate negotiation, look, it's a bit early to tell. But in terms of the, I would say the guidance that we are giving, our, you know, our sales team is to have a rate increase in the same territory as what we did this year, which was, so I would say, you know, kind of mid-single digit. And with respect to-
Anna Button.
Yeah, with respect to asset disposal and management, particularly, we've done a lot of the asset disposal already, as compared to where, you know, what we had when we made the acquisition. I think we have about a hundred-
Or twenty. I don't know.
Yeah, we have EUR 100 million. Yeah, that's right. We have EUR 100 million left on the balance sheet. Those leases are a bit harder to, you know, to dispose. We went from EUR 400 million at the time of acquisition to EUR 100 million now. So we basically have the, you know, the harder lot in some sense to dispose. But we're still working, and we're, you know, we are slowly but surely disposing of those assets. But I would say most of the heavy lifting has been done.
Okay, thank you very much. Just to come back on Vicki's question about AccorInvest. You still maintain the timing of H2 2025, early 2026?
Correct.
Okay, thank you.
Thank you. As we have no further questions in the queue, I would like to turn the call back over to Madame Gerow for any closing remarks.
Thank you for attending this call, and you know, I wish you a good rest of the evening.
Thank you very much. That concludes today's conference. You may now disconnect.