Hello, and welcome to the Accor Analyst Call Q3. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only; however, there will be the opportunity to ask questions. This can be done by pressing star one to register your question at any time. If at any point you require assistance, please press star zero on your telephone keypad, and you will be connected to an operator. I will now hand you over to your host, Jean-Jacques Morin, Deputy CEO, to begin today's call. Thank you.
Thank you. Good evening, good morning, ladies and gentlemen. Thank you for joining us to review our Q3 2020 revenue. As a preliminary remark, Accor traditionally discusses guidance for the full year EBITDA during this Q3 call. Today, the group's ability to assess the impact of COVID-19 on its full year financials continues to be very limited. As a consequence, we will not discuss such a guidance. Without further delay, let me move to page three, which provides you with an overview of the Q3 highlights. Q3 marked a clear improvement over Q2, which was the trough of the crisis. It was driven by the end of full lockdowns and closed borders, and also by a satisfactory summer season, notably in Europe, where domestic travel was sustained. In terms of business updates, RevPAR improved by 20 percentage points from -88% in Q2 to -63% in Q3.
Occupancy was up by 20 percentage points from a low 15% in Q2 to 35% in Q3. And, you know, 90% of our portfolio was open as of the end of September. If you go to the second column, which discusses system growth, the Q2 system growth was solid. 7,800 rooms were opened during the quarter, which drove the last 12 months' net organic system growth to be at 3.3%. And talking of the pipeline, we ended up at 2,008, sorry, thousand rooms, which is up 2,000 rooms compared to the end of June, with a good level of new projects. All of that translated into the following financial performance: the group revenue followed the RevPAR and was down minus 64%, and the management and franchise revenue was by itself down 72%. So that's on the highlights.
So let's go a little bit more in detail, and we start with, on page four, a slide which is called "Recovery Driven by Domestic Travel." What you have here is you have an illustration of the business environment, and the top part of the chart are industry statistics from the UNWTO and also the IATA, so the International Air Transport Association. And at the bottom of the table, you've got the Accor figures. So, complete or partially closed borders remain a strong obstacle to the recovery of international, no surprise, which is critical for key gateways such as Paris and London, and more broadly for upscale and luxury hotels. At the end of August, sorry, border restrictions were still in place in 73% of the countries worldwide.
As a consequence, international air traffic has not been recovering as fast as domestic traffic, which you see very well on the right part of the table. The translation of that into the Accor world is the fact that the number of open hotels has more than doubled to reach 90% at the end of September from a low 38% in April. That's the chart that you've got on the left part. And the RevPAR, which improved to a level of minus 63% at the end of September to be compared to minus 92% at the end of April.
So that's some macro indication on recovery globally, but if you go and look at the regional view of it, and we are on slide five, you see that starting, you know, you see that the starting point is Europe, where you can notice that Europe has recovered much faster than the other geographies, everything being equal. The minus 57% RevPAR in Q3 was driven by a strong summer season, and this despite a muted MICE segment, MICE being industry conference, trade show, exhibition kind of business. To drill down what happened in Europe by country, France posted a minus 45% RevPAR in Q3. It was notably driven by the provinces, which is at minus 28% and had a good summer season, whereas in Paris, the same number was minus 72%, which was affected by the lack of international travelers.
Germany was not as good, and it ended up at -61%, and again here, no real surprise as the country is skewed toward more business travel, and this despite an earlier lockdown relaxation. Last but not least, the UK posted a -80% RevPAR in Q3, and again here, this is due to London's reliance on international travel. London is quite big for us, and also in general terms, more stringent restrictions in the UK that were taken versus what you would see in other continental Europe countries over summer. If you move to the situation in Asia-Pacific, the RevPAR was down -59% in Q3, enjoying some continuous improvements. We provided on the graph some details on Greater China, which is recovering much faster than the rest of the region, and they end up with a RevPAR for Q3 at -29%.
The recovery for China is driven by sanitary measures that have been implemented with extreme rigor, and the fact that China was also at the forefront of the pandemic wave and is a large country. So that should pave the way for the rest of the world in terms of recovery, sorry, synergics. In Asia, you've got also a significant part of the business, which is Australia, and Australia posted a -63% RevPAR, and that number is driven by the restriction that you've got on international travel. There is no international travel to Australia, and also on top of that, the fact that even in interstate, there is, within the country, limitation that has been put in place, and so essentially, the business is driven by some leisure and quarantine business.
The rest of Asia, like Thailand, Vietnam, Indonesia, which is very heavily dependent on international travel, is very much affected and are to the tune of -75% to -80% RevPAR. Now, once we've done Europe and we've done Asia-Pacific, we've covered 80% of what we do, and there is a table that we provide, which is the rest of the world so Middle East and Africa posted a -70% RevPAR in Q3, and this is due, obviously, to border restrictions, but also because they have a large exposure to upscale and luxury. On top of that, you know, if you take the case of Saudi, which is a key country in Middle East and Africa for us, the Hajj pilgrimage, so the religious pilgrimage, which usually would gather 2 million pilgrims, was reduced to about 1,000 people.
They were not given permission to go and do the pilgrimage, so that obviously didn't help, and North America and South America were falling by more than 80% over Q3, so that's for the overview of what happened by geography. Just some words on developments, and I am on slide six. The net system growth was 3.3%, as I said before, and this is in line with our expectation. We opened 8,000 rooms, which is a figure which is comparable to what we did last year at the same time, or what we did in Q1 of this year. Asia-Pacific accounted for a bit more than half of the opening, which is a bit higher than what you would see usually.
As part of Asia-Pacific, the China region that I was describing before as being, you know, helping very much the performance of Huazhu, which has been opening in Q3 about 2,700 rooms, which means that bottom line, 35% of the group openings are coming from Huazhu. Our pipeline benefited from new signings to reach 2,208,000, sorry, rooms at the end of September, which is about the number that we had at the end of December 2019. Last but not least, over Q3, Churn was a bit above 2%, but still very much controlled. That's for the development.
If you go and look at the revenue and look at it for the segments which are ours, and I am on slide seven, you can see that Accor revenue was 329 million EUR, and basically, there is not much difference between the like-for-like and the reported number, besides the fact that we sold the Mövenpick lease portfolio at the beginning of the year. As for hotel service, the revenue was down minus 69% on the back of 63% RevPAR, so very much in line. I'll detail a bit further the M&F fees and give you some more detail on the next page. As far as the other component of hotel services, which is service to owner, the number was 153 million EUR, and it was down like-for-like by minus 67%, so very much in the same ballpark in terms of variations.
Moving to the next segment, which is hotel asset and other, the revenue was down a number which is a bit better, 57%, and that was driven notably by the strata activity, i.e., the management letting rights that we've got in Australia, which was more resilient and benefited, in fact, from strong leisure demand on the Gold Coast and the Sunshine Coast, so along the reef barrier, if you will, and so that's the business that went well over that period since people couldn't go into any other country. They've been benefiting from the nice part of Australia, which is that part of the country, the reef barrier.
As for the new businesses, revenue was down -44%, and what you see here is exactly what we saw in H1, i.e., the travel-related activities such as luxury, private rental, one-time stay are affected just like the REFPAR, which is not the case of other activities which are less linked to REFPAR, like the edge, which provides digital services. Moving to the next page, which is management and franchise revenue, which is down 70% on a like-for-like basis, two points.
I mean, first off, the revenue of 72% is, in fact, on the back of a RevPAR of -63%, and really what we saw here is that there was an improvement of the activity during summer, and notably of quarantine business, and notably in Asia-Pacific, which allowed to recognize some incentives in places like Singapore, in places like Australia, and this is why you've got a reduced distortion versus RevPAR, and by region, frankly, it's all very much consistent, i.e., the variation that you've got on M&F is very much the variation that you've got on the RevPAR. We take the opportunity of this presentation to cover briefly a press release that you may have seen issued this morning regarding the issuance of a partnership with BNP Paribas, and all of that being part of the larger initiative called Accor Live Limitless.
In 2019, we launched the ALL - Accor Live Limitless program with the objective to increase Accor brand awareness, loyalty, and partnership. The COVID-19 went on top of that, but we stayed the course, and we've kept making progresses as best as we can, and so the right part of that table tells you that we signed, in fact, on the 22nd of October, a partnership with BNP Paribas, which complements the one that we had with Visa, Visa being the payment scheme in that partnership. And so we will issue co-branded cards in Europe, starting with France early 2021. That's essentially what this is about. So just to remind everybody of why it is important, cardholders would use those cards for day-to-day purchases.
As they stay, they will earn points, and those points, they will be able to burn across the entire Accor ecosystem and its partners, so it's basically increasing the liquidity and the volume of loyalty points, which translates in a sustained incremental revenue stream for Accor. So it's a first step, but it's a good illustration of what we wanted to do and this Accor augmented hospitality strategy. On the left part of the slide, we took this opportunity to also show you a perception survey that was conducted by Kantar, and you will see from those statistics that premium and lifestyle come as being strong characteristics of the ALL brand, which is exactly what we wanted to reach, and so all of that is going in the right direction, granted that it would be much more lovely to have also the right level of RevPAR.
I'll conclude that presentation with a few key takeaways, and I am on slide 10. So Q3 marked a clear improvement over Q2, which was the trough of the crisis, and the summer season helped a lot, and notably in Europe. Europe is about 50% of what we do, as you may recall. From a liquidity perspective, Accor's position remains solid, and we have more than €4 billion of liquidity as of the end of September, and that gives us, in fact, the comfort to do what's right for the business.
As far as the operational performance, which is not the subject of the call, but we thought it was important to provide you some high-level updates here, we do confirm the sensitivity we had provided back in August when we did the H1 release, i.e., an EBITDA sensitivity to one point of RevPAR, which is below €20 million, and a monthly cash burn around €80 million. Last but not least, the €200 million recurring cost savings that we, again, had announced back at the end of August is on track, and we will provide you a more comprehensive update on that when we do the year-end publication next February.
So, as the global environment remains challenging, and with, I mean, I can't say it better, no visibility, very limited visibility. Look at what's happening right now in France as an example. We strongly believe that discipline, adaptability, and cost control are of paramount importance. Hence the fact that we use that crisis to accelerate the transformation of the organization and the structure to enhance performance and also put the right focus on what we do in terms of segments. And we are going to keep continuing optimizing value creation for hotels with new additional sources of revenue and a strengthened loyalty program. I just went through that, and all of that will make us in a better position when the upcoming recovery will come, and the upcoming recovery will come at one point in time, for sure.
So thank you very much for your attention, and the floor is yours for questions.
Thank you. So if you would like to ask a question, please press star one on your telephone keypad, and please ensure your line is unmuted locally, as you will be advised when to ask your question. So once again, that's star one if you would like to ask a question. And we do already have a couple of questions in the queue. So the first question comes from the line of Jamie Rollo from Morgan Stanley. Please go ahead.
Thanks. Hello, everyone. Three questions, please. First, it's a bit of a geeky one, but the drop in revenue for services to owners, that decline of 69%, that's not too different to the drop in the second quarter, but the RevPAR drop's obviously much less, which could have implications for the bottom line.
I'm just thinking about how should we model that? Is that more linked to M&F revenue rather than RevPAR? Secondly, on signings, I think we can work backwards, but it looks like you signed around 10,000 rooms in the third quarter net of any pipeline attrition. So I mean, that's quite normal for Accor, but are you seeing any slowdown in development or interest looking forwards? And then finally, if possible, it would be quite helpful to break down the €80 million cash burn between the relevant items in operating, working capital, CapEx, and interest. Thank you.
Yeah. You know, on the second question, no, there is really nothing that you can take from the number, except the fact that there is some inertia in all the work that we've done, and we're benefiting from that inertia in the development.
What the big question is, is what are the next months going to be? Today, candidly, it's still very sustained, and we provided to you a guidance of somewhere between 2%-3% for net system growth, and we should be more or less at a number which is around those 2% plus. So that's really where we are currently. The question is going to be, where is the world heading? And if there is no stronger recovery of the economy, you will certainly see a number on net openings, which is going to be impacted by that, with, as a counterpart, the fact that we may be able to gain an addition in our network conversions. And so it's something that you should mechanically see going forward, because up to now, we've not seen a lot of distressed hotels.
In our network, there is no distressed hotel, but you would think that with what's happening and with time, you should see more distressed hotels, and at that point in time, when you have those distressed hotels, you should see some people looking for a big brother, if you will. So that's, I think, what you would see. Okay. In terms of the cash burn, or let me take the STO. In fact, the STO decreases with RevPAR, and this is particularly true in the US. So I don't know if this is your point, in fact, Jimmy, but you would think, or you would see that the STO is being like that, and it's going to be true in the US, where you have a -70%, off the top of my head, on STO.
And then in terms of cash burn, the problem with the cash burn and the difficulty with the cash burn is exactly the one that you raised, which is there is a portion of it which is working capital, and the working capital is the portion which is much tougher to assess. So I think on this one, we'll probably give you more visibility on this one when we have the full year, but at this juncture, I don't want to go there. Okay. Okay. Thank you very much.
The next question comes from the line of Jared Castle from UBS. Please go ahead.
Good evening. Thanks. Three as well. You did touch on partnership revenue, so just any further color in terms of if there's anything else in the pipeline which you see, I guess, in the next six months being converted.
Secondly, can you give a little bit of color on the closures? I think the answer's no, but is some of it due to failures? Is some of it due to you saying to owners, "We don't want you using the brands anymore," and or is it kind of owners coming to you and saying, "We're going elsewhere"? And then any updates on Travelodge and the situation there, or any opportunities that you are seeing at the moment? Thanks.
On Travelodge, in fact, the discussions are ongoing. Some of you who may follow the files know that they're supposed to come to some kind of a decision before Christmas. So I think we should hear more, but this is progressing as well as it can in terms of negotiation. I think that's on Travelodge.
On the partnership, the other thing that is being discussed, or a key element of what is in partnership, is airlines. So the discussion with airlines, as you may guess, are not progressing as easily as you would have planned one year ago because they have their own problems. So really, what we're going to refocus is on things like partnership cards which are linked to banks, because as I was mentioning, the BNP agreement is mostly an agreement for Europe, and so we are working on the same thing, but for other continents. And then you have also some discussion in other types of services like rental car, but today, the key focus is around, in fact, credit card, if you will, co-branded card, which turns out to be a good stream of revenue when you can secure them because it's a stream of revenue for the long run.
I think that's what I would say on this one, and in terms of the 2% in itself is not a number which is much different than what we've been seeing before, so there is really nothing special to read into that. There is not something which occurs which is linked to, for example, an increased number of failures. We don't see that, and again, I said that earlier, up to now, there is a very limited number of, in fact, asset owners that come to us for strong financial problems asking us for help. We don't see that.
I'm not saying that it is not something that we will see, but today, we don't see that, and I think it has probably to do with the fact that many of these people have been helped significantly by initiatives taken by government, whether this is on personal cost or whether this is on bridge loans. So the question is going to be, when are those subsidies coming down, and when they're coming down, will you have at that point in time a business level which is sustained enough that you can basically cross the bridge, if you will? And so that's really the question mark around those, but there is nothing special in the closure related to business which are impaired.
Okay. Thanks, JJ. Sure.
The next question comes from the line of Leo Carrington from Credit Suisse. Please go ahead.
Hi, good evening. Hello.
I have a couple of questions. First, if you could elaborate on the variation between like-for-like and RevPAR for managed and franchise revenues. I guess this is at the moment exclusively the incentive fees. Can you just help us with the mechanics of these in the quarter and also when we look out to 2021, how we would expect performance versus RevPAR and if there would be any differences by region as well? And then the second question is around the demand outlook, but particularly on the corporate side, if you've got any sort of points you can share with us from the kind of rate negotiations for 2021 and broader kind of MICE negotiations as well.
Yeah. On the difference, I mean, you said it. I mean, the key deviation or variance is coming from incentive.
What we saw, and I alluded to that, is the fact that over Q3, we had some hotels that have been doing very well in terms of incentive. I mean, you may recall that we had discussed in H1 the fact that incentive was significantly down from what it used to be. It used to be something like 30%-35% of our total fees, and so it has been reducing significantly. And here, what has been happening is that some hotels have performed extremely well, notably because of the quarantine business, if you want to believe it.
This is notably true in Asia, where, in fact, the procedures were very stringent in places like Australia and places like Singapore, and so they basically book hotels, they take all the hotels, and they are using the hotels as they see fit in order to put people that they want to quarantine. And so that's one example of why, despite having conditions around the business which are not so good, we ended up having some amount of incentive, granted that the incentive is still a small amount. We talk about very small amounts, and so we're not going to be at 35% of the total fees that you run, which is going to be incentive. Yeah. So that's the key deviation. Your other question was on corporate. So on corporate rate, it's early in the negotiations, right?
It's very early in the negotiations because part of those negotiations, and notably, one of the good negotiations that we would have is the one around the airline, is that the key question is, what volume are you providing? And then depending on what volume you provide, I tell you what rate I can do. So this is going on like that. Could you expect that there will be some pricing pressure around those corporate rates? The answer is absolutely. But then we're not going to commit around prices that are not substantiated by business volume that we can feel comfortable about. So this is what is ongoing there on the airline crew. So we'll know more in the coming months, weeks.
That's great. Thank you. Sure.
The next question comes from the line of André Juillard from Deutsche Bank. Please go ahead.
Yes. Hello. Good evening.
Do you hear me? Hello. Yes. Do you hear me? Yes. So three questions, if I may. The first one is related to the headquarters disposal. Could you give us an update on what is going on, and you have some clarification on the potential disposal? The second one is about AccorInvest and the rumors which came out in the French press about a potential rights issue that could be done. Could you also give us some more color about that and your potential implication? And last, about the new sources of revenues, could you also give us some more color about what is put in place and what it could represent in the future? Thank you.
Yeah. I mean, on the Sequoia, the tower sale, I mean, this is an ongoing process.
As you know, we've been putting the tower as an asset for sale in our account, so there are negotiations. There are right now people that we are discussing with and trying to find the best term for the company, so this is an ongoing process, and we'll keep you updated once this transaction progresses and is finalized. In terms of Accor Invest, so yes, there has been some rumor. I think the best people that can answer you on what's happening in Accor Invest are Accor Invest people, obviously, but being a 30% shareholder of Accor Invest, I think the one thing that I would tell you is that we're going to act as a rational equity investor. It's an important part of what we do. It's 25% of what we do.
And so we just want to make sure that the solution is fit to the situation that AccorInvest is facing. And the situation that AccorInvest is facing is no different than the situation that many of the people who are asset-heavy are feeling with the current crisis, i.e., an operating leverage which is much higher, and the situation in terms of cash pressure which is much higher. And so there are strong shareholders in AccorInvest. And so I'm sure that between that, the banks and the governments will find the right mix of a solution. So that's on AccorInvest. On sources of revenue, what we had mentioned and the target that we've been quantifying was €100 million coming from all these programs and partnerships, if you will.
So the number is a good number, and it is substantiated by a lot of parallel initiatives to get there. I mean, significant ones were the two I mentioned before, i.e., the airline and the banks. And so all of that was before COVID. So as I was saying, on the banks, there is a way by which you can progress, and we've proven it with this Visa partnership. On the airline, the airline right now have got their own problems. So this discussion is probably, I would say, delayed up to the point that they have resolved, and they are in a situation into which they can deal with those kinds of partnerships. And so it will come, but it will come in a delayed manner. That's what I would say to be candid here. And there are other things that we can look.
And I was mentioning car rentals. I mean, it's another good one. And so there are discussions right now with car rental companies. I mean, I'm sure, Andre, that you will understand that the COVID crisis has taken its toll. I mean, it is really painful today to do business for some corporations. But what matters here is that in terms of intent, we are not changing the cap. So we are staying on the same course. And so we will find our path towards what we think was important for the business in a way which takes into account different circumstances.
Okay. Thank you. Just to come back on Sequoia and AccorInvest, the discussions you have at the moment could be taken before the year end, or are we more talking about 2021?
It could, but I don't know that it will.
No, because as every negotiation, you always want those negotiations to be as fast as possible. But on Sequoia, let me give you an example. We do have some offers, yeah? But there are some of those offers that I don't want to take now. I would prefer to look a little bit more and wait and see whether some of the other investors who are working on the side are ready to give me something which is better. There is a tendency with what the world is for every investor to look for the good deal, the bargain deal. And we're not a forced seller. I mean, we don't have a liquidity problem here, right? We have all what we need in order to do what's right.
And that's also why I was making that conclusion on the fact that we've got the comfort to do what's right for the business, which is not the case when you are in a liquidity crunch. And so that's also why I'm not more precise on this one. But will we sell Sequoia? The answer is yes. It's just going to be depending on what is the right time and the right price. Okay. Thank you.
The next question comes from the line of Jaafar Mestari from Exan. Please go ahead.
Hi. Good afternoon, everyone. I have two questions, please. So the first one is really just a follow-up on AccorInvest. I don't want to be contrasting your tone and your comments, but if I remember correctly, in August, you sounded a lot more relaxed on AccorInvest and in particular what you mentioned. They got a covenant holiday.
They've got assets that they can monetize. So I'm just curious whether it's just a natural progression and a company that's looking more into the future and thinking, "Maybe actually I need to fix the balance sheet," or if anything has changed. And only from public information, some investors will have picked up that you mentioned yourself just now that AccorInvest has a number of solid shareholders. One of them, Colony Northstar, seems to be divesting of hotels and investing more in digital assets, for example. That's one new-ish thing I would pick up on. So if you could comment on why you're a lot more open now to that scenario compared to where you were in August. And second question on the payments card that you announced this morning, is there anything more you can say on the fee model there?
I'm not an expert at all, but it looks like what some other global brands are doing is effectively newly issued credit cards to their partners, whereas if I understand correctly, your model looks like just a new payment app on your existing current account. So can this fetch the sort of fees that you've previously benchmarked yourself against from global players? Can this fetch €100 million in fees once it's fully rolled out globally?
Yeah. I mean, the €100 million, Jaafar, as you certainly will realize, is not only coming from this deal. So it's a sum of deals that are going to make the €100 million. And again, remember, the €100 million in itself may look like a big number, but as I know what some of our competitors are able to do in those fields, and it's not €100 million.
It's hundreds of millions, to not say billions, and so I think there is the potential here with the specificities that are the specificities of our markets. I mean, some markets, like the U.S. market, is obviously much more favorable to those kinds of schemes than European markets, to start with the fact that interchange fees are much higher in the States than they are in Europe, as an example, but also culturally, people are much more living on credit. So I think that's one element on the Visa and the payment card. Now, the model in itself, to answer your question, I mean, Visa is making some money just like they would make on any account.
What you do is that you have a model by which they would reverse to you part of the money that they make on the basis of the card fees that they're able to earn on the issuance of the card and also part of the percentage, sorry, of the spend that they do through the card that they have been issuing with you. It's a very standard way of doing those things. That's how it would work. It's a sharing of what they make, and we agree upfront on what is the percentage that we will have on what they will make on the card issue. That's on the Visa scheme and how the mechanics work. In terms of AccorInvest, you're right in what you say. I did mention the covenant holiday.
And by the way, the covenant holiday is in place and will be in place. They just have to renegotiate the next phase of the covenant holiday, which is what they are doing now. And I had mentioned asset to monetize, and this is true. They have a significant portfolio that they can monetize. I mean, one is in Latin America, and the other one is in Australia. Now, these two assets are significant in terms of numbers. I mean, it's triple-digit in terms of the revenue that you could make by selling those. So that's why I'm saying that they have some means by which they could act.
After that, the question that you have here again is, do you want to be a forced seller and sell part of what you think is worth X at a number, which is X minus Z, because the market is not there and is not sustaining, in fact, the valuation that you could have expected a couple of months ago? So I think that's why everything is being looked at, but some things that you could do, you don't want to do if you find something which is smarter. So last but not least, I think you live in Europe. You know what's happening in Europe. I think you may even live in the U.K. Jaafar, no, don't you? Yes. So you know exactly the beauty of spending the 14-day quarantine when you go from London to Paris and take a train.
And so it's a real pain in the neck. And so what's happening is the AccorInvest portfolio is essentially European, besides the two that I mentioned that you could sell. And there is more than two, by the way. That's the two main. And so in fact, on Europe, I mean, the prospects are tougher. There is no doubt that the prospects in Europe are tougher, and they have been starting to be tougher at the end of August, hence the fact that when you project yourself, you look at it and you say, "Yeah, maybe I need to be thinking about other ways of, as you say, fixing your financials." So I think that's another element to take into account. And as far as the investor, yeah, I know about Colony. I know about what I read in the press.
Again, here, I don't have that sense from the discussion of the people we interfere with, but in the end, it is something that will find its way. And as you know, the Tour de Table is a Tour de Table of very, I would say, strong and significant investors throughout the world, two being governmental funds, so pretty strong, and some being French insurance companies, as you know. So I think you've got a Tour de Table of investors which many companies would love to have.
All right. Thank you very much for that.
The next question comes from the line of Sabrina Blanc from Société Générale. Please go ahead.
Good evening, Jean-Jacques. I have two questions, if I may. The first one is regarding the cost-saving plan. You said that things are ongoing, but could we have some color?
Which type of breakeven sensitivity could we expect following this cost-saving? The second question is regarding the initiatives that have been further announced in terms of co-working and so on. I would like to understand if, firstly, if that requires some investment from your part. And secondly, is this type of initiative that you have put, for example, in the new businesses and which finally had a limited impact?
Yeah. Okay. On the cost-saving, as I said when I was talking of it, I mean, we'll give you a comprehensive update when we do the February call. I mean, in July, what we provided you is the framework, i.e., the top-down approach on where we think we want to head.
We are in the midst right now, looking at all the details and working out the detailed organizational changes that we need to go do. This is going to take us some months, but by February, we will have a good view, and then we will give you a comprehensive update on what are the effects on all the other KPIs. But the ballpark that you have is what we will do, and this is what we're targeting. I think that's on this one. And your other question was? On co-working. Yeah. On co-working, sorry. I mean, the idea there is to use, in fact, hotels that are already existing.
So to some extent, the investment that is required on this one is limited because what you would do there is you would use as much as you can the space that are already existing, the assets that are already existing, find a mechanism by which you can remunerate everybody. And from there on, what you basically are doing is making a better usage of your asset. And finally, to some extent, answering a need that you've got today, even more after the COVID crisis than before, of people looking for a place into which they can work, which is not exactly an office that may not exist anymore, but is not exactly their home either, and is equipped with what you need, video conference, internet, and some services around that. And so that's how this thing would work.
Thank you very much. Sure.
The next question comes from the line of Vicki Stern from Barclays. Please go ahead.
Yeah. Hi. A few questions. Just coming back on AccorInvest. So you talked about potential asset sales. Just to check within the management contract agreements, are there any sort of change of ownership clauses we'd need to be aware of, or are those contracts pretty rock solid no matter who the ultimate owner of the assets are? Just secondly, around cost cuts, obviously, you talked about the €200 million plan previously, and you said you'll come back on that in February. But just, I mean, if the recovery does come through more slowly, are there additional levers you think you could pull that would go beyond that?
And then finally, just around owner distress, I think you sort of commented on the fact that clearly there's a lot of support in the system right now with furloughs, etc. So to some extent, things are kind of delayed on that front. But you also touched on, obviously, it's highly unpredictable in terms of forecasting now working capital. In your discussions today, are you seeing any incremental need to offer sort of more support, be it sort of fee postponements, anything like that, to your owners? Thanks.
The last question, can you repeat just what you just said, the last one?
Yeah. Any need? You talked about previously the need to offer kind of deferrals on fees for your owners. Just where are we at on that, the sort of latest round of discussions, and how you should think then about the implications on working capital? Thanks.
Yeah. Sure.
Sure. I mean, on the deferral of fees, I mean, there is no difference versus what I told you back at the end of H1, and it's also linked to the comment I was making on the fact that we don't have a lot of companies today which are owning assets and come to us saying that they are bankrupt, and so they are in significant financial distress. And so because of that, we have not been giving many deferrals on fees except for significant partners. AccorInvest, for example, is one partner which is a significant partner to whom we've given some help. But we don't do that because we're not in the business of financing the asset owner. We can't do that, and so on this one, that's our stance.
What you would hope is exactly what I described before, i.e., the support that they get is going to be well-timed in such a way that they never cross the red line. I think that's the answer to your last question. On the exit clause, there is really nothing you should be aware of. On the cost saving, I think we've done the one that we announced back in July are a little bit of a different nature of the one that we've done up to the beginning of the crisis. At the beginning of the crisis, we did the typical things, i.e., you stop traveling, you basically look at your marketing expenses and you reduce them significantly, you don't hire, you force people into vacation, you try to take subsidies.
This is all what I would call the short-term type of initiative in order to deal with an emergency situation. What we do with the project that we call Internal Reset, by the way, is something which is deeper on which we are basically doing a zero-based budgeting. And so the zero-based budgeting is something into which you really think deeply on how everybody works in the organization and rethink some of the processes end to end. And that's why it takes some time because it's really a rethinking of everybody's role and responsibility, if you will. And it's wider than just role and responsibility. It also includes the system that needs to go with that.
The €200 million number that we quoted is a very significant number because you may recall that it meant that about 20% of the people that support, in fact, the headquarter would be let go. So it's not a small number. So I think this is what I would say here. If the crisis was to continue, Vicky, we can always continue the measures that we had been putting in place in April, May, and June for reducing the cost. But the one that we launched, sorry, this summer is of a different tenure. It's much more deep.
Okay. Understood. Thanks very much. Sure.
The next question comes from the line of Richard Clark from Bernstein. Please go ahead.
Good evening. Just a couple of questions on slide four, if I may. Looks like a fairly modest falloff between August and September.
Just wondering whether you could comment on what that maybe looked like for Europe and then any commentary on how that's trended into the first couple of weeks of October and whether the 90% of hotels open is still standing today or whether that's an end-of-September number. And then just coming back to your press release this morning about the BNP card, my read from that, it looked like you'd had some fairly healthy growth in your loyalty members, actually, I think since half-year results. Am I reading that correctly? And anything you could say about the loyalty contribution, if you managed to increase that through the crisis?
Yeah. The number of loyal customers did increase. I mean, we've got since the beginning of the year a number of loyal customers now, which is closer to 70 million, and it used to be a bit north of 60 million.
So we have increased the number of loyal customers, which, by the way, I found a great result taking into account the world in which we live. Granted that, again, here, in terms of revenue associated with all of that, you know the numbers, and so it is impacted by the COVID crisis in terms of absolute revenue euros attached to the number of loyal customers. So this has been, I would say, going well. And then your other question was around what? Sorry. Say that again.
Just basically, what does the bottom right chart look like on slide four about the monthly red bar? What does that look like for Europe? And what does it look like into October?
Yeah. The number of hotels opened, by the way, has not changed today. It's still around the 90%.
So the number was the end of September, but if you were to look at it today, it's still that number. It's 91%, to be precise. What you need to monitor here, Richard, is what are going to be the consequences of all the measures taken. Again, today, the French government took additional measures to put in a red zone, much more departments. That will have an effect. So I think you need to look at Europe and notably France in Europe because I know France better as a place where the numbers are not going to improve in Q4 versus Q3, everything being equal. And again, as I said, there is no visibility whatsoever. Every day changes. But if I just look spot at what's happening, it's not going in the right direction. That is for sure.
So, I think that that's what you should expect. We've seen at the beginning of October, and you should expect. In terms of the numbers for September, you're right to point out that there is a little bit of a slowdown. And this is coming from the fact that August was extremely boosted by vacation and leisure. I mean, what has been rebounding since the beginning of this crisis, as I've been saying, is the leisure and the domestic. And we took full benefit of that with frontiers well opened in July and August. Then at the end of August is when everybody came back from vacation and started again to put measures, whether it is the UK, whether it is France, whether it is Germany, whether it is Belgium. You can see that in many jurisdictions. And that has an effect on the business.
And that has even more an effect on the business that, starting September and for the rest of the year, the part of the business which is stronger is the business. So you've got leisure, which is strong over summer because it's summer vacation. And then from September on, what should take over is business. And notably in business, things like conventions, people meeting for deals and these kind of things. And today, we don't see that. Today, the MICE business, as I said in my pitch, was muted. I mean, there was 2,000 events, and most of them were either canceled or postponed. That's really where we stand in terms of that part of the business. And so this is affecting the business portion of the numbers, which is about two-thirds of what we do.
And you see that in the little spike that you highlighted in the September curve.
If I can just ask one quick follow-up. A few people have asked today about some of these new revenue sources that you're attacking, like co-working and car rental. Under franchise agreements, normally the fee is just on room revenue. Can you capture a fee on these other revenue streams as well?
Yeah. It would be obviously much easier if you are on a management type of model. That's for sure. You're right. And remember that probably 75% of what we do is managed. So the first point of focus will be managed.
Okay. Thanks very much. Sure.
There are currently no questions in the queue. So as one final reminder, please press star one to ask a question. And another question has come through. This comes from the line of Simon.
Simon LeChipre from MainFirst, please go ahead.
Yes. Good evening. Just two questions, please. Regarding SBE, where do you stand in the asset restructuring process? And secondly, on the new businesses, where do you stand in terms of the review of the portfolio and especially what about John Paul?
Yeah. In terms of, I'll take new businesses first. New businesses, we have had a lot of discussion with many people. What's happening with new businesses is that it's back to the comment I was making before on Sequoia. People today want to do deals, but as they think that you are in a weaker situation, they try to take advantage of the situation in order to get, I would say, a bargain deal.
And so in many of the discussions that we had started, we've been slowing them down up to a point where, in fact, the proposal or the offers that we get are, in fact, more reasonable in terms of what we think the value is. And so you have a lot of those deals which today are standing on the back burner and we're waiting for better times. I think that's what you have on new businesses. I'm not saying that this is true for all of them. I'm just saying that if people are coming up to us with offers that don't make sense, we're not going to sell them for selling them. It's just like Montreal. On SBE, it's moving ahead. So they are working on that restructuring. And so you should have more news in the coming months. Thank you.
There are no further questions in the queue, so I will hand back over to your host for any closing remarks.
No, I think there is a question that we got from somebody that cannot connect by phone. Somebody's telling me there is a question that we got from somebody, and the question is, would it be possible to ask this to management? How would Accor's balance sheet balance the risk between achieving investment-grade rating versus so many opportunities that may arise in this crisis? Will achieving the investment-grade rating take precedence? I mean, I'll say it very clearly. Today, the focus of the company is on making work what we started and improving it for the rebound. And so that's why the key focus of the company is around the reset project and making sure that we use that crisis as an opportunity to do what is right.
And what I mean by that is that the mindset of people and the capability of people to work on those kind of initiatives is today much stronger, much bigger than what it used because people are understanding that they need to do something and they have, to some extent, the time and the bandwidth to go and work on things that they wouldn't do in a world into which business is growing day after day at a significant pace. And so I think we want to use that opportunity to do that cleansing. And that's the number one priority today. Okay. There are no more questions?
No further questions in the queue.
Okay. So thank you, everybody, for taking the time. And we'll talk to you for the year-end results. Bye-bye
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