Good day, and thank you for standing by. Welcome to the Accor Q1 2023 revenue conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Jean-Jacques Morin, Deputy CEO. Please go ahead.
Good evening, ladies and gentlemen. Very happy to be with you today for this presentation of our Q1 2023 revenue. We implemented a new organization as of January 1st, 2023, so our segment reporting will re-reflect that setup. For reference purposes, the Q1 figures are available in the appendices under the previous reporting format. Without further ado, let's move to business with slide 3. The highlight of the quarter is that we continue to see an acceleration of the activity in Q1 2023 versus Q4 2022. The RevPAR is up a stellar 57% like for like versus Q1 2022. We benefit from a favorable base effect, as Q1 2022 was strongly affected by Omicron. Despite that, the performance is remarkable.
It, the 19% like for like RevPAR versus Q1 2019 is just a demonstration of it. Post-COVID, the consumer appetite for traveling is higher than ever, and Accor is perfectly positioned, both in term of the market, just by being in Asia, and also the brand portfolio, having brands like the lifestyle and economic brands in our hands. Talking about net unit growth, we reached 2.9% over the last 12 months. We will detail that a little bit later. All of that translated into a group revenue of EUR 1.139 million. That is an increase of 4%, sorry, versus Q1 2022 on a like-for-like basis. All this trading momentum is explained by a couple of things.
Number one, a strong capture from all Asia Pacific destinations, which have RevPAR in Q1 2023 versus Q1 2022, at 77%. Just as illustration, in Asia, flight capacity surged from 60% to 75% of the 2019 level in just 3 months. Lately, the zero-COVID policy lifting in China has been an additional catalyst. The second element on the trading momentum is the pricing power that remains remarkable. We have an average room rate, which is 22% above Q1 2022 and 27% above Q1 2019. Last but not least, as anticipated, occupancy is recovering. We see it improving quarter after quarter, and it is now reaching, in average, 60% in Q1 2023. There are still some headwind items, like the airline capacity and visa insurance backlog.
That explain why occupancy is still 5% below what it used to be in Q1 2019. To move to the next page 4, this is a summary of how the new segment reporting will work. On the left, you've got the premium midscale economy division, and it's a business model which is run by regions. We will report 3 geography, mainly Europe and North Africa, which we have been aggregating as ENA. Middle East, Asia Pacific, which will be aggregated by MEAPAC, and Americas, which is all of America, North and South America, just like we used to have before. On the right part of the slide, you've got the luxury and lifestyle division, which is a business model that is run by brand.
We will report it splitting between what is luxury hotels and what is lifestyle. Luxury, just for references, gathers Sofitel Legend and MGallery Brands, and lifestyle is even smaller. If we now move to the numbers, and the RevPAR, the analysis of the RevPAR, and I am on slide 5. You've got on the left of the slide, the premium midscale economy division, which posted a Q1 RevPAR growth of 60% versus 2022. You can see through the color coding that it is both driven by occupancy recovery on top of a continued strong pricing power. To go and look at the detail of that performance for each of the regions. In ENA, Europe North Africa, the RevPAR is at 54%.
That covers France, UK, Germany. France and the UK, France is about 50% of it. The UK is about 16% of the room revenue, and Germany is about 15% of the room revenue. Again, to put some numbers around what are those various geography. France and the UK behave the same way, i.e., strong province and a very strong capital city. Paris and London were extremely strong, and this is driven by the return of international tourists and look at the American tourists. Germany was lagging, but posted a strong improvement versus last year. You must remember that Q1 2022 was disastrous because of Omicron in Germany. In MEAPAC, the Q1 RevPAR is up 69% versus 2022.
MEAT, Middle East, Africa and Turkey, which is about 30% of the region, continued to post strong performance post FIFA World Cup Qatar 2022. This is explained notably by Saudi Arabia. There are immense plans in Saudi to develop tourism over the next 10 years, with hundreds of billions being invested. This time what we see is the reopening of the country has permitted religious pilgrimage to start again in large numbers. Just in 10 days during Ramadan, there were 9 million of pilgrims. Just to put this in perspective, this is 60% of the number of pilgrims that Saudi saw in 2019. In 10 days, they did the equivalent of what they were doing in half of a year of pre-COVID era.
Very significant flow. Pacific continues to held well versus the previous quarter. Pacific is Australia, largely Australia. Southeast Asia, which is about 25% of the room revenue of the region, is benefiting from the return of the reopening of international travel, and this is very key for Thailand and Indonesia. China, which is about 15% of the room revenue of the region, is recovering, you know, post the lifting of the zero-COVID policy and notably post the Chinese New Year. There is more upside potential with China. Moving now to America, which is dominated by South America. We have the RevPAR, which is up 49% versus 2019. Brazil, which is 60% of the room revenue of the region, is already above pre-COVID occupancy level.
It's the only region which is above pre-COVID occupancy, just to translate the dynamism of the country. If you move to the right half of the slide, you see there luxury lifestyle, and you see that the RevPAR growth is 50% over Q1 2022. While price was the driving force of the recovery in 2022, you see now through the blue bar that occupancy increase is pulling the performance. Both segments recover faster than last year than the rest of the business, which explains why the recovery of lifestyle and luxury, the RevPAR of lifestyle and luxury is slightly behind the RevPAR of premium, midscale, and economy. This is because lifestyle and luxury was much stronger than premium, midscale, and economy last year, if you recall.
There is still, by the way, upside potential on occupancy on luxury, as an illustration. The occupancy remains 6 points below the level of 2019. In terms of the lifestyle division, both the hotel and the resort reported a similar performance in terms of RevPAR. That's about the illustration of the RevPAR by segment. If we move to the portfolio of hotels or network, I am on slide 6. Again, here you see the breakdown according to the new organization. On the left side, the premium, midscale, and economy. This is 86% of the room count and 64% of what is being traded in terms of management and franchise. 74% of the group pipeline, but 43% of the value. On the right side, I'm sorry.
ENA, which is Europe, North Africa, is the largest network as you would expect, and MEAPAC has the largest pipeline as you would expect. If you move on the right side of the slide, that's why you see the luxury and the lifestyle. Here it's only 14% of the room count, but it is 26% of the pipeline. More importantly, it is close to 60% of the value in the pipeline. Which means that what you will see over time is what we've been, you know, talking of, and we go into deep details when we do the Capital Markets Day on the end of June. You will see a mix in the business, which is gonna shift towards luxury and lifestyle with time. There will be a richer mix and a richer fee generation.
Again, as a reference, the average fee, traded in the luxury and lifestyle division is 3 times more than the one of the premium, midscale, and economy. If we talk now about net unit growth, we end up, as I said, at 2.9% over the last 12 months. Q1 is traditionally a soft quarter, the weakest quarter of the year. What you have in term of environment is what we all know, which is a challenging economic environment with tightening of bank financing and construction costs. What I would say is we are well equipped to go into that with a couple of things. In first off, we have a very large number of conversions, and that's helpful in those conditions.
59% of what got opened in Q1 was conversion. Number 2, Asia is recovering. Asia, if you recall, was the thrust behind the development over the last years. We should see that coming into action. Last but not least, we talk a lot about managing growth, but what we would like to talk to you in the future is not number of things, but it's fee generation. You will see that in the commentary from the unit, the mix is getting richer into the capabilities that the group have to generate more fees, which in the end is what matters to the bottom line. That's what we wanted to say on the portfolio. Moving to the revenue on the next page. I am on slide 7.
You see here the revenue, which is at EUR 1.139 million in Q1 2023, up 64%. The reported growth is positively impacted by perimeter effect. As you are now consolidating D-EDGE. You may recall we acquired D-EDGE and considered D-EDGE since December last year. This is in the hotel asset and other segments, and that explains the perimeter effect. As a reference also, luxury and lifestyle generate EUR 277 million of fees of revenue in Q1 2023, and that is about 42% of the total. If you go and look at management franchise, the revenue is up 77% to reach EUR 268 million.
What it really means is that the incentive level is now back to the level of pre-COVID. We are at 35% of the M&F Management & Franchise fees being constituted by incentives, and that translates the strong operational performance of the hotel. The recovery is there at the hotel level, and capacity is there, and my incentive is back, and my M&F fees are growing faster than the rest. If you move to service to owner, the like-for-like revenue is up 60%, so very much in line with the rest are growth. Moving to hotel asset, like-for-like growth is smaller at 37%.
This is fundamentally a base effect because you may recall that Australia was quite strong last year with a recovery notably of small cap in Q1 2022, which was summer for that part of the world, that part of the hemisphere. There is a base effect here that explains why it is smaller in term of growth. That is the average of the sector, but in the end, it will be better. If we go to the next page and drill down on M&F revenue, you see that it's quite magical because the like-for-like M&F growth is 71%. The premium economy grows 71%. Luxury and lifestyle is then 71%. Everything is very much homogenic.
If you go and look at the premium economy, the variation by regions reflects 2 things, either base or speed of recovery around COVID. 2 example, MEAPAC, which is showing the Asia acceleration. Asia was hit last year and is now much less hit this year. We all know that this was the trailing part of the world on the COVID recovery. On the other hand, America was the first region to recover in 2022. Again, when you compare it on a like-for-like basis, you see a smaller number as you would expect. Moving to luxury and lifestyle, the same type of comments apply. M&F growth is very homogeneous across luxury brands. Fairmont is +80-85%. Sofitel is 79%. Raffles around 60-61%. All in the same ballpark.
The luxury over performance versus lifestyle is what I explained before, i.e., the fact that when people have the capability to travel again and consume, they want, they have on a lifestyle brands. You have the counterpart here in term of collective growth. That's about the presentation of the numbers. Just a few takeaways in order to summarize where we stand. Number one, the Asia momentum is definitely coming up. We were expecting it. We anticipated it. It is there. Based on the Q1 performance, and our view of the business perspective, we upgrade the guidance that we have provided of RevPAR. We said in February that we will be somewhere between 5%-9%. We say today that it's gonna be a double-digit number.
If you look at another angle on how the business can be assessed, which is the balance sheets and the rating agencies, you can see that both rating agencies have acknowledged the strengthening of the business. Fitch upgraded us from BB+ to BBB-. I mean, we are back in different way of rating, and S&P upgraded us from outlook stable to outlook positive. Last but not Mleast, we will set up that Capital Markets Day on June 27th, so it will be a good time to go into much more detail, get into the discussion on the potential of development of the group mode de vie , and so a lot to come. With that, I close here my comments, and I'll take a question.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile a Q&A queue. We will now take the first question. It comes from the line of Jamie Rollo from M.S. Please go ahead. Your line is open.
Thanks. Afternoon, everyone. First question, Jean-Jacques. It all sounds wonderful. Are there any signs of demand weakness at all anywhere? Number two, the double-digit RevPAR guidance is obviously a bit open-ended. Is it fair for us to assume that the bottom end of that is 10%-14% if you keep the sort of 4% spread? If so, what's the top end? I guess you can't answer that, but any scale would be helpful. I-IMS back to 35%, so back to 2019 levels. What, what should they be given the sort of mix of the groups a bit richer now on luxury and lifestyle? What's the fair comparison, or is that really a like for like full recovery? Thank you.
Yeah, sure. You know, on your first point, I can only agree with you. on your second point, yeah, I mean, I again, you answer yourself the question that you ask now, which is I cannot answer on the top hand. sure, the 10%-14% is probably what we mean by double digits at this juncture. I think here, Jamie, to be fair, the dynamic as it is amazingly strong. Right? Everything stays the same. You know, we're gonna be double digits on the upper half of double digits. There is all things that may happen that we don't know of. We've been surprised in this world by things.
I mean, you know, nobody could foresee what happened in the Silicon Valley banking environment a couple of weeks ago as an example. I think, you know, at this juncture, knowing what we know, knowing the actual that we have, I have a good view on Q1 obviously, I have a good view on Q2 obviously. The question is how strong will you foresee H2 to be. To say that it is double digits is a given, to say that it is somewhere between 10 and 14 is the most probable scenario at this juncture, and it can be higher than that. The last question, I think you should assume in your model 35%. It's a good number. Everything being equal, it's a good number.
Right now, what you have going for you on the profitability of the hotel engine is the fact that you have an occupancy rate which is lower than what you should be at a nominal level. You are still 5% in average below 2019 level. The profitability then aren't pushed by the fact that you get it through pricing. The question and what can we be making. Sorry. What I'm saying evolve is what would the, you know, pricing upside potential would be. At this juncture, I will not assume more upside potential. I will assume, you know, something along what we have today and hence my answer.
Okay. Thanks a lot.
Sure.
Thank you. We will now take the next question. It comes from the line of Jarrod Castle from UBS. Please go ahead. Your line is open.
Thank you. Good evening, everyone.
Mm-hmm.
Yeah, 3 from me. Firstly, your room count and your pipeline, kind of reversed since, you know, the full year. I know you're kind of saying, you know, focus on absolute revenue generation and mix, you know, between the classes. Any commentary on that? Is this just a timing thing and, you know, we should expect, you know, the pipeline to exceed, year-end numbers and for system to continue to grow or, you know, are you just pruning out, you know, kind of underperforming hotels? Secondly, I don't know if you will, but, like, any comments on sensitivity to RevPAR changes at the moment?
Just lastly, you know, with the balance sheet rating, I don't know if you can say anything in terms of current thoughts on capital to shareholders. Thanks.
Yeah. On the pipeline, your statement is obviously correct. I think you should assume the pipeline to continue to grow, Jarrod. By the way, that's what you've seen over the last period, even when it was cash flow. The comment on pruning is a good one, which I think what you see coming out of the crisis is two things. I mean, the environment is what it is, right? I mean, the funding thing, we all live it every day. It's not as easy as it used to be. If you want to buy a car, if you want to buy a home, it's more complicated today than it used to be 12 months ago. Nothing really that I'm teaching anybody on that call.
Also what you see coming out of the crisis is Some hotels have not done the investment that they should be doing in order to be at the right level of the brand standard. That is a problem, because you want to ensure that you've got the quality. As part of the number of Q1, there was a higher level of hotel that we've been exiting the network on our decision. We want in fact those hotel not to be anymore in the portfolio because they were not at the level you would like. It's not a lot of hotels, but nevertheless, it is something that we will for sure ensure getting out of the crisis that we monitor.
The quality of what we provide in hotel is paramount to the quality and the brand equity. We are in a world into which, as you've seen through the organization, we're gonna ensure that the brands are as pure as possible. summary, if we continue to grow in term of net unit growth, we will show you how the value grows even faster. We will make sure in order to ensure that the value grows faster, that we don't focus on unit, that we focus on value. That's on the first question. On sensitivity, I've said many times, we don't do that anymore. I don't think it is relevant in a world which is still changing that much with variation that we see them today.
Then in terms of capital return, nothing really has changed. We wait until we are in investment grade. We wait until we have enough space to ensure that we keep that investment grade that we've been searching. That we now have S&P rating, i.e., one agency out of the two has given us the investment grade. We think the second one will follow with the right level of performance that we are focused on delivering. So from there on, we'll go through the discussion on what makes sense in terms of capital return.
Great. Thanks very much.
Sure.
Thank you. We will now take the next question. It comes from the line of Vicki Stern from Barclays. Please go ahead. Your line is open.
Yeah, hi there. Just firstly wanted to start, coming back on that net unit growth. You touched on it in your prepared remarks, just wanted to dig a little bit deeper on what you're seeing, and particularly if you've seen much of a shift really since SVB and credit squeeze in terms of things getting tighter. Obviously that's a theme running for the U.S., quite heavily right now. I know you obviously have very different types of owners across Europe, across Asia. Just perhaps a little bit of color on sort of how the different geographies are playing out and what you're really seeing on the ground on the development front and signings.
Related to that, you mentioned then that the sort of higher level of exits in Q1, is that then gonna run through the year? I know you don't wanna give a sort of net unit growth guide, but perhaps any sort of color then on what that sort of exit pace should be as we're looking out this year. Just finally coming back on Jamie's question, I'm not sure you answered that in terms of any kind of cracks in demand anywhere that you see. I suppose particularly curious if any softening in the booking environment in France, just given the strikes and protests there. Thanks.
no, there is no cracks, Vicki. You know, I, it's, I'm exactly the same situation as the one I was when we published in Q3, and then we published at the year on where there were, you know, question mark on how long is it gonna last. There is no cracks. By the way, the, what you saw in France has 0 effect on the numbers. If you look at the numbers of France, they are intact as times I can say. There is very little there. I cannot see nothing at this juncture on any weakening anywhere.
In fact it's pretty sound because not only does the pricing, you know, pursue being strong, but on top of it you see an improvement on occupation rate, which I think is also sound. So that's on your first question. On the exit, there is not really a plan per se to go and push exit, Vicki. It's more us looking at, you know, what's happening and based on that taking decision. There is not a time at which I'm saying I'm gonna do 10,000 hotels and churn them. I'm not doing that. I'm just looking at what's happening. I'm looking at the performance of the hotel.
I'm looking at what the MPI and the ARI, RGI, sorry, all these indices can be. We're just gonna be a little bit more stricter post the COVID because I think that post COVID, people are paying high prices, right. They want high quality. The last thing I want is I don't want to dilute my brands, you know. I want my luxury to be true luxury. I want my lifestyle to be true lifestyle. I want my Midscale and Eco to provide the right service that you would expect from a select service type of hotel, and I don't want anything diluted. We've been probably very Latin, very France trying to understand everything from everybody. This is not probably the stance that we're gonna take post-COVID. Jerry.
In term of the other part, no, there is nothing really that changed from where we were, in term of funding, 6, 9 months ago when all of that and the BBP, the rate, kind of, took off, in term of capability, to finance any asset, if you will. The U.S. team has not changed anything. We've got in our population of investors, very different populations. Some, France, you know, several in France, where in fact, this is not an issue at all, as you may guess. To the opposite, we've got private equity for who this is quite important, the capability that they've got to leverage.
Depending on who is financing what, you don't have also the same answer. I would say also, Nicky, that what plays for us is there is a lot of hotels which are in this 100 hotel, and the owners of those 100 hotel are people that have got 1, 2, 3 hotels, not necessarily 200 hotels. When these people do that, they very often do it on a basis which is cash basis. i.e., I have done a good business in my life. I have some money that I would like to invest. I invest my cash into one of those hotels. Those people are very often also local people with strong relationship with local banks.
I think this is not so much, really, affecting lately differently than the statement that I'm making here, which I could have made nine months ago.
Thank you. That's really helpful. Just a quick follow-up.
Yeah.
Are you able to give the percentage that's under construction within your pipeline? It's quite helpful to know right now.
Yeah. I mean, you know, 60% is conversion. The rest is basically new build.
I'm sorry, just the proportion that's actually under construction rather than the.
Oh, that I don't have. We don't have that detailed chart. I don't have the data.
Okay. Thanks.
Thank you. We will now take the next question. It comes from the line of Leo Carrington from Citi. Please go ahead. Your line is open.
Thank you. Good evening.
Good evening.
Evening, Jacques. Could I ask, firstly, Accor's obviously been participating in some discussion in the French press around issues with shortage of flights from China to deliver tourists. I know it's be hard to quantify. Do you have a sense of the incremental points of occupancy, or RevPAR that your portfolio could benefit from with better airlift? Second question, you mentioned obviously the split credit rating with the latest updates. Is there any sort of implication for capital return that we should bear in mind from this or watch the space?
Yeah.
Thank you.
On the split capital, on the split rating, I can of say this earlier, but I'll say it maybe in a more detail or more clear way. You know, we first want to be investment grade. We're not gonna do anything until we have a status with S&P that they are grading us to investment grade. They upgraded us from an outlook which was stable to an outlook which was positive. The thing they said is they said, you know, we said we had a great 20 to 22 years. Let us see what's happening in 2023. We've always that question mark that people have on, you know, what's gonna happen in 2023 for many, many weeks.
I think what we are delivering in numbers right now as of the first quarter and what they can see for the rest of the year should make people more and more comfortable that this is gonna be a strong year for the hotel business around the world and with Accor. I think that where we are with the rating agency. Once we get that, then we need to ensure that we don't lose it. We'll do whatever it takes to keep the share, the investment grade rating and be able to do a share buyback, dividend with the shareholders. That's how we will deal with that.
Again, bear with me, we go in more detail along those lines on the Capital Markets Day because shareholder return is a core question of any strategy for a business and literally no business. We will give you more detail, but that's where we are on this one. In term of the China flight, I can see that you read the press quite thoroughly because I was aware of the issue, but never really considered it as being a very important one. What happened is the following.
Some businesses in France have been saying as part of a discussion that occurred between governments, the Chinese Government and the French Government, that it would be good if things were done in order to promote traveling, opening between France and China. The reasoning here is simple. You know, Chinese population has been a provider of good business to France. They come, they visit Paris, they fill my hotel, they go to duty shop, they fill the guy luxury. It's all good business. That's the only thing that this letter is pushing, i.e., their way by which now that the zero-COVID has been lifted, that you can accelerate the liberation of capacity between China and the rest of the world and France.
In term of effect, it's relatively limited because what you discuss, you discuss about 2 to 3 to 4 million of Chinese travelers that are coming into France. Most of the effect of the release of the COVID policy in China is helping me in Asia. Where I see the effect of the release on increasing the capacity of flight in my business is in Asia. By the way, that's why the Asia number are strong. That's also why I'm saying that the Asia number will become stronger because just in 12 months, the level of capacity installed in China has been multiplied by 7, just as a reference. That's a small number multiplied by 7. I think that's what the scenario is. I hope I was clear. If I am not, please ask again.
Very clear. Thank you, Jean-Jacques.
Thank you. Thank you.
Thank you. We will now take the next question. It comes from the line of Richard Clarke from Bernstein. Please go ahead. Your line is open.
Thanks. Good afternoon, Jean-Jacques. Thanks for taking my questions. Three, if I may. Just, the first one, just thinking about the shape of the year ahead. Obviously, you've kinda given the double-digit guide, and you said you're not seeing any cracks in demand. Will the Middle East fall off in Q2 because you're losing the impact from the pilgrimages? Will then you see a re-acceleration in Q3 and Q4 from the Rugby World Cup? Is that the way we should think about the year, or are those effects reasonably small? The second question, I guess, you know, the, we've seen a few announcements about that this luxury and lifestyle business is not really gonna be an homogeneous business, but each brand is gonna have its own headquarters and its own CEO.
Just the level of additional costs that's going into that division to have all of those different brands, Fairmont, Raffles, having their own sort of separate presence and separate management teams. Is that material anything to pull out? Then the third question, you've obviously sort of on this call mentioned you don't think unit growth is necessarily the right KPI. You've said in the past in lifestyle, kind of F&B is it can be just as important as room revenue, but the release is still RevPAR and unit growth numbers. Is there any way you can sort of have different metrics that maybe help us follow what you're saying in terms of value creation from the unit portfolio, or showing some of that non-room revenues within the luxury and lifestyle?
Any plans to change, the way we think about those segments?
Yeah. I think, I mean, these are all good questions. I mean, on the net unit growth, which is a very critical one, please help me. Just bear with me a couple more months. You know, June is in two months, we'll be able to give you all kind of details on that, and how to reconcile what you're trying to do, which is any model, what you are seeing in numbers, and that's really part of the TMG. That, that's only so I mentioned, if I may. On the cost structure, you know, you should not expect this energy of any size on the creation of these two divisions.
We've been working it in such a way that we have so whole detailed plan in order to ensure that there is energy, there are extremely limited. Again, we show that in the presentation of June, that all the plan has been built on the ramp up of some competencies at the same time that you work out some optimization on the rest of the business in order to ensure that this is kind of a neutral thing, because on the contrary it would make no sense to go and do anything of significance around what you are saying. On the track, you know, we talked about, you know, Saudi and the pilgrimages.
I mean, first off, there is another thing called the Hajj, which you may be aware of or may not be aware of, but which is gonna occur sometime in July, which is a very important event in the life of Muslim population. We foresee huge number of people going to Mecca because they've not been able to do that pilgrimage for because of COVID. We can still foresee on that specific point some good activity in Middle East as an example. I'm trying to rebound on the question that you asked. By the way, I will also say that I'm sure you're right, that there is enormous effort which are put by the Saudi government in order to develop their international tourism, which is not for the current year.
It's gonna take some years. The plan is a 10-year plan. We talk about, I think, $100 billion being put at work for the next 10 years in order to grow the business in Saudi. We are extremely well positioned in Middle East and Africa. We've got the highest level of connection in Saudi, in Qatar, in Dubai because of the presence of the group, because of the work we've done, because of our investor portfolio. Today we've got Saudi, we've got Qatar, as you know, as some of our core anchor investors. I think there is a lot of things that is gonna happen. This is not for this year, but I'm trying to say here that there is more potential.
After that, the description that you made, yeah, we will benefit from the Rugby World Cup. I mean, France is 30% of the business of the group. You know, there is gonna be a very strong activity here on the Rugby World Cup this year, on the Olympic Games next year, as an offset of what we have happened in Middle East and Africa, in last year because of the Qatar FIFA or because of the Dubai International Convention. If I look at the level of convention that is coming up, not only are they confirmed, but they are confirmed with good attendance. Again, no crisis I can talk of.
Thank you very much.
Sure.
Thank you. We will now take the next question. It comes from the line of Alex Brignall from Redburn. Please go ahead. Your line is open. Alex Brignall from Redburn? Is your line on mute? Okay, we will go to the next question. One moment, please. Next question comes from the line of Jaina Mistry from Jefferies. Please go ahead. Your line is open.
Hi. Thanks very much for taking my questions. Can I check, can you hear me?
Sure, sure.
Brilliant. I've got three questions. First question is on the balance sheet. We've discussed buyback quite a bit today, I wondered, are there gaps in your portfolio, gaps in your operational expertise or in your wider hospitality platform where you think there's scope for potential M&A? If so, are you seeing targets, you know, coming onto the market? Second question is around business versus leisure. In particular, what's your view on the recovery of business travel this year? Where have you got to in Q1, how do you see the profile of recovery between small businesses and larger corporates? My last question is on China.
Could you talk about the RevPAR recovery that you've seen in China and then also the outlook for the year, you know, could you talk to the visibility around forward bookings and whether you think China RevPAR could reach 2019 levels at year-end?
Yeah. Let me start with the last one, which is China. China, we probably are versus last year at the same time at the RevPAR, which is between 60%-70%, depending on whether you're talking power brand or you're talking lifestyle and luxury. Make it simple, 60% plus is what we've got as a RevPAR for Q1 versus Q1 2022. If you look at it versus Q1 in 2019, which is probably north eleven, you're probably a negative 10%, 10%-15% on China. That's kind of giving you an idea of where we stand.
You see here that China has not recovered to the level of the rest of the business because the rest of the business is a positive 19% versus 2019. Again, no surprise here. What's happening with China is that in China, domestic activity is very close to the level of 2019 already in Q1. We are probably 90%-100% at the 90%-100% level in all hotels versus what we were seeing in 2019. What has not recovered is international because it's complicated. I mean, it's complicated. It's only a matter of since a few weeks to travel to China as a tourist.
It was opened, I think, like 1 month and a half ago for business. It got opened, like, 1 month ago for tourism. For not every country, by the way, it's only the West. You have that part of the business which is missing in China. The domestic is already there. You know about their economy. I think that's the answer on China. In terms of the business and the small group, large group, what I would say is that you're not gonna recover the business level by the end of this year fully to the level of 2019 because you still have a nature of business which is linked to international traveling that you don't build to the level of what was 2019.
I will add to that a complexity, which I'm sure you can understand, which is getting more and more difficult to distinguish between what is business and leisure. You've got leisure, and you've got people that are now extending their trips quite systematically, one or two more days, you know, to stay the weekend or come on the before and so on and so forth. We still are trying to the best of our ability to track those. I think this business leisure thing is kind of mixing up the analysis that you may be able to do there. As far as the balance sheet is concerned, we've got 43 brands. We've got everything we need.
Today what we need to do is we need to basically use those brands and make the best of it, which is why we are reorganizing with the two focuses between what was the core Accor, the mid-scale, premium, and economy, what made Accor 50 years ago, and what is what we've been doing lately with the acquisition of Fairmont and later on the acquisition of MGallery, which is moving into the upper scale of luxury and lifestyle with extremely strong positioning because we clearly are number 1 on lifestyle and depending on what ranking you do, number 2 or number 3 on luxury. I think what we've got here is to basically reap the fruit of those brands. There is no lack, no missing in the current portfolio.
Today, everything we need, call, if there was, some money, put aside, it probably will go first to shareholders.
Thank you.
Thank you. We will now take the next question. It comes from the line of Andre Juillard from Deutsche Bank. Please go ahead. Your line is open.
Yes, good evening. Thank you for taking my question. Most of them were already answered. I just wanted to come back on the RevPAR trend. I wondered if you could explain us a little bit more the difference between the RevPAR growth between on one side, premium mid-scale or economy up 60% and luxury lifestyle 50% and especially on lifestyle. What is the explanation for a growth of only, I know that it's already high, but only 33%? Thank you.
Yeah. I mean, you're gonna love the answer because I tried to explain it, but apparently I was not too clear. It's base effect.
Okay.
Let me try to be a bit more specific. One year ago, when we were discussing the results in Q1 2022, you may recall we had a slide that was showing that the RevPAR of lifestyle was probably 15%-20% higher than the rest of the business. You may recall we had a slide like that when we did the presentation. What really happened there is that lifestyle, there is a big part of the business, which is culinary and around food and beverage. When people had the opportunity to get out of COVID restriction, what they did is they could not travel internationally, but they could travel within that vicinity.
We had some dinners with friends they have not been seen. I'm making it simple, but this is really what occurred. There was an incredible boost, and notably in places like Miami, where we've got some very strong electro properties where people want outdoor in order to consume. That created a strong base on that side. You find that today when you compare the current business with the business at that point in time, it had recovered faster. That is fundamentally the reason. You add to that the fact that on the other part, which is luxury, you've got Fairmont. Fairmont is very much North American, it's very much Canadian and North American.
It recovered also faster than Sofitel, and recovered faster than the places like Germany, or Asia Pacific, and hence you got again, a base effect, a smaller base effect, but still a base effect. It has really nothing to do with the performance in itself of the hotel. It clearly has to do with the fact that there is a differential in the value. By the way, just look at the valuation that our American peers have done over the last two days, and you see that very well. Our RevPAR is much better.
Okay. Very clear. Thank you very much.
Sure.
Thank you. We will now take the next question. It comes from the line of Ali Naqvi from HSBC. Please go ahead. Your line is open.
Hi, good evening. Thank you for taking the questions. If I could just ask, regarding the occupancy and how the regions are recovering, when do you expect occupancy to start closing the gap to 2019 levels? Is there anything to say with how occupancy is trending at the start of the quarter versus the end of the quarter? Secondly, in terms of the guidance increase that you're expecting, how much of this is gonna be driven by price for recovery and occupancy over the course of the year or change in the, let's call it, international travel recovery versus in-intra-region travel recovery over the course of the year?
Yeah. I mean, in terms of occupancy, we used to be in average at 65% in Q1 2019. We are in Q1 2022 at 47%, and we ended the Q1 2023 at 60%. You can see that there is a clear acceleration of the recovery in 2023, which by the way, was also kind of present last year because the gap last year in Q4 was to the tune of 7 points if my memory serves me right. The 7 points versus 2019 has become 5 points in 2023, Q1. Q4 versus 2019, 7 points. Q1 versus 2019, 5 points. You can see that the gap is closing.
I believe it's gonna take some time. I don't think that we're gonna be back to the level of the occupancy rate of 2019 before end of this year, beginning of next year. Again, part of the limits are capability and freedom of people to freely travel. I mean, there is a lot of recovery that has been done on traveling, but you are not in every region back to 100%. In fact, there is limited number of countries in the world where we are back to 100% in term of travel capability, and I'm taking the airline as an example. My hunch is beginning of 2024. That's on the occupancy rate.
After that, you know, on what's gonna drive going forward, I kind of answered a little bit that question before, but I'll treat with you a different angle. What has been really, most of the RevPAR recovery last year was price. You can see today on lifestyle and luxury that it is 50/50. You can see that on mid-scale, premium, and economy, that it is more 70/30.
I think you're gonna find out that this is gonna continue, i.e., the 50/50 of lifestyle and luxury is gonna move to something like 30/20 by year on, and the one of mid-scale, premium, and economy will follow the trend of the lifestyle and luxury recovery of pricing versus occupancy. You know, we're gonna try the potential recovery and pricing being less of a contributor to the rest of all.
Excellent. Thank you.
Thank you. We will now take the next question.
You mean the last question. I'm kidding.
Next question comes from the line of.
I make a lot of jokes on my last call.
Jaafar Mestari from BNP Paribas Exane.
Come on, Jaafar.
Hi. Thank you.
Hello.
Thank you very much for taking the last question. 2 for me, please. Firstly, if I look at how you've reported this first set of revenue numbers, with the 2 division, it looks like every dollar of revenue is going into 1 of the 2 divisions. You've allocated everything, if I'm judging from the first table. This means the other assets and the digital. Just a question on this, is this just a reporting exercise that you make a decision on what belongs where? Should we also expect you to articulate, you know, fundamental reasons why it's better for onefinestay to be in the luxury division, why the DH offer to independent hotels benefits from being in Premium, Upscale and Luxury, or is it just allocation?
No, no. It's. Okay. Sorry, you had another question.
Yeah. Yeah, no. I, you know, related to that, very personally, moving on to the CEO role, can you tell us a little bit about your plans for the next couple of months? Are you starting from a blank page there, assessing some of the efficiencies? These are going to be a lot to review, or do you move roles with basically a list that's already made of things that, you know, didn't quite make it to the reset plan, but you know as a group CFO, you're gonna know exactly where to go to find extra efficiency. You know very well what's been delivered in the last few years and is left to deliver.
Yeah. I've been seven years with the company. Do I have some views? I certainly do. Did I have the power to, you know, make those views become reality? Yeah, I had some power because usually, you know, it's the power of somebody who's in a function, in a support function as being the CFO. I think moving into operation will be one way for me to, you know, test the ideas with your management team and make sure that, you know, we've got agreement on what is the right way to move ahead. Yes, I do have some views.
I'm doing it in a very structured manner, i.e., we have spent the last three months working on the strategy and making some strategy workshop, you know, the right way with the right help of people in order to come up with what we think makes sense top down too. That's what we will show you when we are together at the Capital Markets Day. I don't really want to go into the levels today in that call. It's both things. It's what is in my stomach. I also need the process, which is a much more rational process by getting people to work together for the last three months and get to a strategy that we will detail in two months.
That's what I would say, Jaafar. I think I know how to make it. On the first point, yeah, you know, again, at the CMA, I don't want to say, it's probably a question that is at the CMA. What we've tried to do is allocate all the businesses one way or the other. For example, onefinestay, that's that way. Mantra, you know, which is not in the EBITDA, but is an important part. It's only in economy and economy premium. I think what we do is we'll show you for each of the business lines that you know, where they pertain in the Capital Markets D ay.
Most of them are either in the one side or in the other one. There is only a few of them that it was making sense to keep in Sales, Marketing, Distribution and Loyalty because they are more Sales, Marketing, Distribution, Loyalty by essence. Like for example, DH. You know, DH, which is our internal sales solution, is definitely something that pertains to Sales, Marketing, Distribution, Loyalty. But the two other examples that I provided, just like onefinestay or Mantra are clearly only on one side. I hope I am answering your question. We again show you in details at this end. After that, sorry, just to be complete. At the hotel level, it's very clear.
It's either one or the other one, so that's easy. There is an allocation exercise that will be done in SBL from the various components of SBL to the various businesses. Some of the fees in SBL or the cost in SBL are very easy to allocate because they are collected at the hotel level and you know exactly where they pertain. What is not difficult to allocate is the cost base. That's the exercise that you, we will show you when we show the EBITDA for each of the two division. Again, in June.
Thank you very much.
Thank you.
Is there one-
We will now-
One more question.
Just one more, sir. It comes from the line of Alex Brignall from Redburn. Please go ahead. Your line is open.
Evening. Can you hear me this time?
Yes, we can.
Fantastic. Lucky me. I have one more question just on the pipeline. We have thought about them that you neglect . On the pipeline.
Yeah.
It's obviously gone down and Q1's always a strange quarter, but maybe you could just help us to understand, because it's not like you opened a lot of the rooms in the pipeline. I think that was 4,400. Within the pipeline itself, have you had a sort of tidy up process as part of your divisional mix or just a very light quarter in terms of signings and how might that evolve? Thank you.
Yeah, I mean, it's a little bit of both. I mean, it was not a stellar quarter by any means. It's a Q1 quarter. It is a quarter which was not a strong quarter in term of openings as every Q1 is. On top of that, we've done a little bit of, you know, active churning, I would say. That's why the pipeline is getting down in Q1. That's what I said earlier, but I'll restate it here. Again, the assumption that you should take, it doesn't mean the pipeline is not gonna go down for the rest of the year.
It is, a snapshot, a picture taken at the end of March with all the limit of something which is taken at the end of March.
Great. Thank you very much.
Good. I think... Are we done?
There are no further questions on the lines. Please continue.
Lovely. Listen, thank you very much for, you know, your questions. Thank you for your patience. We'll talk again in different capacities. I'll see you at the end of June on the business. I really look forward to that and be a little more precise in all the questions that you've been asking and that I have not answered fully today. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.