Hello, and welcome to the Accor Q1 2025 Revenue Conference Call. Please note, this conference is being recorded. [Operator Instructions] I will now hand you over to your host, Martine Gerow, Group CFO, to begin today's conference. Thank you.
Thank you, and good evening, ladies and gentlemen. Thank you for joining Accor's First Quarter Trading Update Call, and I will start with the key highlights on Slide 3. So I'm pleased to report that we started the year with sustained momentum. So the strategy of Accor, which is to focus our investments in higher growth regions and segments is yet again, delivering another quarter of very solid growth. First quarter RevPAR reflects a solid trading at plus 5% like-for-like, driven by strong performance in the Middle East and Southeast Asia and the Americas.
March was softer than January and February due to calendar shifts, notably with Easter that is shifting in April, which for us created a headwind in March. April and May are trending much better. And thus far, we are not seeing significant changes in demand trends in our key markets. Pricing continues to be the main driver contributing about 80% of the group RevPAR growth in the first quarter. Occupancy was up by 1 point in the first quarter at 61%. Net unit growth reached 2.7% on an LTM basis, reflecting a lower pace of openings in the first quarter and churn, which this year will be more frontloaded. We expect NUG to accelerate in the second half, and we are very pleased with the pipeline, which is improving 4.9% on an LTM basis.
Turning to revenue. Group revenue increased by 9.2%, with Management and Franchise revenue up by 9.3%, combination of RevPAR and net unit growth. And as announced in February, we did reach 100 million odd members in March. Now during this quarter, the group has remained active and continue to strengthen both its portfolio and its balance sheet. And you may have noticed that we recently announced a significant breakthrough in 2 high-growth markets in India where we announced a strengthened partnership with InterGlobe and Treebo to jump start our development in India.
And in Mexico, where we announced the acquisition of 17 hotel management agreements and a brand grading platform for the acceleration of the development of Accor brands, both in Lifestyle and PME in Central America. We took advantage of what were supported markets, financial markets in February to successfully issue a senior bond for EUR 600 million with an 8-year maturity and a 3.5% coupon. And finally, we launched, as we announced in February, a first tranche for EUR 200 million out of the EUR 440 million share buyback program. And as of today, there's a bit more than 60% of this tranche that has been executed.
Now if we turn to Slide 4 on the Q1 RevPAR starting with PME, which posted a Q1 RevPAR growth of 3.4% versus 2024, driven primarily, as you can see here by solid pricing resilience. In the quarter, average loan rate was up 3% year-over-year and occupancy rate was up slightly, a bit less than 1 point to 61%. In ENA Europe, North Africa, Q1 RevPAR was up 0.6%, solely driven by occupancy which was up 0.4% to 58%, with a somewhat contrasting picture across the various countries that comprise this region. In France, both Provence and Paris reported flattish to slightly negative growth in Q1. Both were positive in January and February, but March came in negative again, due to a weaker event calendar and Easter shifting to April. However, when we look at April, on which we have good visibility, April bookings have rebounded quite strongly in France and are back to positive territory.
In the U.K., low single-digit negative RevPAR growth in the first quarter mainly reflects a continuation of lower consumer confidence, which are prioritizing savings over spending. In Germany, RevPAR overall for the first quarter was slightly negative but sequentially improved turning positive in March, thanks to a more favorable event calendar. And in Southern Europe and Eastern Europe, those regions continue to be positive, solid positive contributors to the ENA RevPAR.
Turning to MEA APAC. First quarter RevPAR was up 4.6% solely driven by rates. And you can see, excluding China, which is part of this region, the MEA APAC was up 7.2%, so very, very solid RevPAR growth. Middle East RevPAR was up in the mid-teens. So quite strong notably benefiting from the Ramadan in Saudi Arabia, which was fully in the first quarter this year. Southeast Asia also posted very solid growth in the mid-single digits despite what was actually a challenging comp base for Singapore, where we had a number of Taylor Swift's concerts in March of last year. Pacific RevPAR growth was flattish. Pacific was impacted quite strongly by the Alfred cyclone in early March, which affected the coast of Queensland, which is a big region for Australia for Accor.
And China, RevPAR continues to be negative high single-digit growth. Recovery of Chinese tourism is really benefiting more of the outbound market in Southeast Asia, in particular. So we benefit from this indirectly. And we do not foresee -- given the current events, we don't foresee China turning positive in the short term. Turning to Americas, RevPAR continues to be very robust, was up 13.1% in the first quarter. Brazil continues to post mid-teen RevPAR growth, driven by both price and occupancy with a quite strong event calendar again in the first quarter.
Moving to Luxury and Lifestyle. On the right, RevPAR growth was 8.3% year-over-year with rate and occupancy gains. Rate was up 5% in the quarter, occupancy was up 2 points to 60%. And Luxury RevPAR was up 9%, with rates driving most of gains. All brands reported high single-digit to low teens RevPAR growth as international tourism continued to be supportive of the segment. As for Lifestyle, RevPAR growth was a solid 6% mainly driven by occupancy, resorts continue to perform well in Turkey, in Egypt and UAE, and benefiting from strong demand and boosted occupancy.
I will now turn to Slide 5, which breaks down our hotel portfolio and pipeline by division. Starting on the left with PME where net unit worth was 2.4% on an LTM basis. As is usual for the first quarter, the pace of openings was moderate, but did include some notable openings such as Pullman in Chennai and a hotel in Valencia. In addition, whilst we expect churn to be in line with 2024 on a full year basis, it will be more front-loaded in 2025, and that is what is impacting Q1 net unit growth. Pipeline is up 4.5% on a last 12-month basis, [ 178,000 ] room, thanks to a solid level of signings in Q1 in both volume and in value. And if you look at the M&F revenue on the last 12-month basis, it stood at EUR 1,300 in the first quarter, which is up slightly from where it was for 2024.
Moving to the right. Luxury and lifestyle portfolio grew by 4.3% over the last 12 months. The network growth was really impacted by a more moderate pace of opening, but also the churn of 2 large hotels in lifestyle. Now the impact of that churn will actually be quite minimal on lifestyle revenue as those properties -- those 2 properties had very low fees for room less than EUR 1,000 in contrast that to the average people room in Lux and Lifestyle, which is over EUR 4,300. And as in PME churn this year will be more front-loaded in Luxury and Lifestyle.
Now we do plan an acceleration in Luxury and Lifestyle of the net unit growth as early as the second quarter, with the openings of 2 large Rixos actually in Egypt in Hoxton, Ennismore and also having a more normalized churn in MEA as we go forward. And for the full year, we do expect Lifestyle to continue to grow its network in the mid- to high teens, fueled by pipeline, which grew 15% on a last 12-month basis and which represents 80% of the Lifestyle network.
For the division, the pipeline is also up and healthy 6% on last 12-month basis, driven by Lifestyle. And for the division, pipeline accounts for 46% of the existing portfolio, which is up slightly from where it was last year. In terms of noticeable signings in the quarter, we have to announce the future openings of Russell Como in Italy, we have Emblems in Cortina d'Ampezzo and Sofitel Porto in Portugal, all were signed in the first quarter. And again, M&F fee per room at EUR 4,100 is a very solid increase versus last year. Last year, fee per room was EUR 3,800. So we continue to have signings that are accretive to the revenue. At group level, NUG reached 2.7% over the last 12 months.
Again, what we expect 2025 net unit growth to be above 2024. As we shared with you in February, it will follow a somewhat different profile in '24 and you may recall, H1 openings benefited from the large portfolio conversion of Daiwa in the second quarter. And the result, you will see an acceleration in NUG starting in the second half. Very good conversions in the first quarter, 61% of the openings were conversions and again, total pipeline is up 4.9% on an LTM basis and standing at 28% of the network.
I will now turn to Slide 6 with the revenue breakdown by segment. Very good revenue growth in the first quarter, plus 9.2%. For Premium, Midscale and ECO, so PME revenue was up 1.8% versus the first quarter of 2024. Management and franchise revenue is up 3.9% to slightly above RevPAR. Incentives are actually represented 32% of M&F fees in the first quarter, so quite stable. Services to owner continues to perform well, up 5.4% outpassing RevPAR growth as we continue to drive improvement in our channel mix. In the first quarter, web direct channel was up 1.4 PME. Hotel assets and other revenue was down 3.5%. This is where our Mantra portfolio sits in Australia, and that was impacted by the tropical storm Alfred as I shared in my introduction, and we also have the effect of the depreciation of the real in Brazil, which is impacting also this line.
So Luxury and Lifestyle revenue is up 17.9%, so quite healthy growth with Management and Franchise up 19.6%. So that's 11 points above RevPAR growth. And that's the reflection of both the network growth and also good growth in incentives. Incentives were 35% of M&F fees in Luxury and Lifestyle in the first quarter with good development of the hotel margin. Services to owner revenue growth driven by both activity, but also improved loyalty contribution at 14.6% in the quarter and hotel assets and other, which -- with a growth of 25.9% that reflects the consolidation of Rikas, which was acquired in March of last year as well as the openings of some new F&B venues.
I will now focus on M&F revenue growth on the next slide, which again grew very healthy 9.3% in the quarter, starting with PME. PME M&F revenue was up 3.9%. So again, reflecting the global RevPAR growth of 3.4% with a somewhat contrasted performance across regions. In ENA, the slight decline in M&F revenue reflects a low RevPAR 0.6% in the quarter, but also the move to franchise. We have a limited number of management contracts that are moving into franchise contracts. We did anticipate this in our midterm projections that we shared with you in June of '23 and most of the impact is now expected in 2025.
Now we have taken the required adjustments to our cost base. They have been identified and they are being actioned to offset the M&F revenue impact on the PME division, which we estimate to be about 2% on a full year basis. In MEA APAC the revenue growth is well above RevPAR, boosted by network growth and strong incentive fees with a 13% growth in MEA APAC. And in the Americas, we're not seeing here the good performance, and it's really a reflection of what's happening to the real, which, as I said, is weaker in the first quarter. Turning to luxury and lifestyle. M&F revenue double-digit growth, very strong at 19.6%, well above RevPAR driven both by solid activity performance, very good translation into incentives and more for lifestyle, obviously, very strong net unit growth.
Turning to Slide 8 and to conclude this presentation with the key takeaways before we open the floor to Q&A. Accor's strategy of focusing investments in high-growth geographies and segments is fueling yet another quarter of solid growth. And as shared in my introduction, we are not seeing material shifts in overall demand and the month of April and May are trending in line with our expectations and above where March was. Now visibility is more limited beyond May given the short booking windows as always, but we feel good about where April and May are trending.
We recently announced 2 significant breakthrough in fast-growing markets in India and Mexico, which will accelerate our development in both regions and therefore, further diversifying our portfolio. We expect our net unit growth to accelerate in the second half as we lap over the Daiwa portfolio conversion, which has boosted NUG in the second quarter of last year, combined with what we see as strong planned openings in the third and fourth quarter.
Now clearly, the visibility is limited, given the volatility on tariffs, in particular. As a service business, the direct impact on tariffs -- of tariffs on Accor is clearly minimal. Nevertheless, we are closely monitoring the situation, and we have tightened our cost control measures in this respect. And as always, we remain focused on delivering our midterm targets as we disclosed during the June 2023 Capital Markets Day. And I will now -- thank you for listening, and I will now open the floor to your questions.
[Operator Instructions] The first question comes from the line of Jaina Mistry from Jefferies.
My first question, I wanted to just double-click on what you were saying around April and May current trading. I know you said it's above March. Can you maybe give us the March exit rate? And are you seeing any signs of cracks in demand from particular nationalities? There's been a lot in the news around the U.S. consumer? Are you seeing any slowing in U.S. to Europe? And how material is the American consumer for Accor's business.
My second question on net unit growth. I saw you're in talks to acquire some hotels from the Royal Hotels Group. Would this be in addition to the net unit growth forward guidance that you gave earlier this year. So could we realistically expect a number that's maybe above 4% for 2025?
And then my last question, if I may. The market is talking about macro, people are concerned about the consumer. Does this have any impact on the timing of the AccorInvest disposal and what are you hearing from your conversations with potential acquirers/investors?
Thank you for your question, Jaina. So in terms of the exit rate, so March was -- overall for the group, March was low single digits. What we see for April is mid-single digit. And May is basically also mid-single digits. So a pickup of a few points from March into May. Again, we're not seeing cracks in demand. To your question as to how critical or not critical is the U.S. for Accor. So the U.S. market, if I include both the Americans traveling in the U.S. as well as international foreigners traveling in the U.S., it's about 5% of our room revenue. And if you -- if we now look at Americans traveling outside of the U.S. it's less than 3% of our room revenue.
So quite minimal in our overall portfolio. We're not -- certainly when we look at April and May, we're not really seeing much change in American bookings. The only market where we've seen an inflection, it's actually benefiting us is Canada, where we see Canadians who are planning to travel in the U.S. actually staying in Canada and some events which were planned in the U.S. being now repositioned in Canada.
With respect to your question on net unit growth, as you know, we will communicate our guidance in our July earnings release. What we said in February is that we expected net unit growth to be better than 2024. 2024 was 3.5%. The acquisition that we made in Mexico is not factored in that improvement over 3.5%.
And with respect to the AccorInvest what we -- we continue to think that this is going to be a 12- to 18-month process. We're going through the required motions of that process, and we haven't heard thus far that the current environment is lengthening that process.
Next question comes from the line of Muneeba Kayani from Bank of America.
Just following up on the demand trends. Could you kind of break that out across different segments like group business transient, leisure transient? Any kind of -- anything to point out there in terms of the demand trends, color that you had given earlier? And then just wanted to follow up, I think that Mr. Bazin had mentioned that there was a drop in European bookings into the U.S. this summer of around 25% and things are changing rapidly. So I just wanted to check on kind of how that has evolved. And then third question, just the economic uncertainty, like how are your discussions with hotel owners? And clearly, the pipeline is looking good, but if there is kind of any concerns from hotel owners on new builds, if that's come up in conversations?
Sure. Thanks for the question, Muneeba. So on demand, what I would say on the -- what I would say, what we see is we see still good demand from groups in Leisure and softer demand on business individuals. And that's what we see today. With respect to what we see in terms of bookings to the U.S., we saw some -- I mean we saw softness. In March, if you look just industry-wide, in March, bookings to the U.S. are down 10%. And some European countries are more, for example, Germany, Denmark, U.K., less so for France. But again, in terms of what that business represents for us, it's less than 3% now.
The other good news is, and I was kind of giving you the example of Canada, if they don't come to the U.S., they usually end up going somewhere, which is where Accor is present. And in terms of what we see and the impact on the macros on new constructions, we're not seeing deals coming out of the pipeline. What we do see, but it's more anecdotal at this point is we see a bit more time, so a bit longer process in terms of renovation. But it's more anecdotal. It's not a trend at this point.
The next question comes from the line of Jamie Rollo from Morgan Stanley.
I have few questions, please. Just concluding the theme with the outlook, just sort of moving down the P&L a bit. What contingency plans do you have to protect margins or indeed make other changes if we do get an economic slowdown. Maybe talk a bit about cost flexibility and so on, please? And then the other question is just on the 2 deals. I mean India sounds sort of positive for net unit growth but much less so for fees given it's mostly a master franchise agreement. So could you talk a little bit about that balance because normally the company is very focused on fees, not rooms.
And the Mexican deal appears to be sort of a bit like key money because you're buying contracts. So what IP are you getting with that? And why couldn't you just win the contract of the company without having to put in the money you did?
Jamie, thanks for the question. So in terms of the contingency plan, so we -- I mean, one, our cost structure is more flexible today and more variable today than it was, let's say, pre-COVID. We have a variabilized cost elements. So we do have greater flexibility from that same point. But more generally, we are very careful about our cost structure. And you may have noticed that last year, we announced some restructuring and the benefit of the restructuring launch we saw into 2025, which would help weather a change in demand.
In terms of your second question, in -- so the 2 deals are quite different. India is a longer-term project. So the impact short term on Accor net unit growth or our revenue is really going to be very minimal and certainly in 2025, nonexistent. So it's more of a kind of medium to long-term, let's say, transaction and impact. In terms of Mexico, we're doing 2 things. We're acquiring HMS, but we're also acquiring a brand which is called Park Royal, which will serve as a platform to develop in Mexico. So it's really those 2 things that are part of the deal.
Do you think we should expect more of these portfolio type deals from the company going forward and a bit less organic or conversion?
Look, in 2024, we had a portfolio deal, which was Daiwa, which was 43 I think -- sorry, 23 hotels. So in Japan total is now 23 hotels, which we were able to convert quite quickly and which actually didn't require any key money. Portfolio deal, you should expect to have as part of our strategy, but there's it's a minimal -- it's, let's say, a minimal contribution to our role in net unit growth. It will not be the driver of the net unit growth and pipeline is really what is driving net unit growth for Accor. And as you've seen in our pipeline is actually going at a healthy rate.
Your next question comes from the line of Jarrod Castle from UBS.
I guess just kind of following up from some of the questions. I mean what kind of RevPAR do you think you need to see to be able to grow margins? Obviously, you've also got cost programs. But what are we talking about before margins start to get squeezed. Secondly, just on development. Is there any concern in terms of people have signed up in terms of the cost of development. I'm thinking of certain of the materials, which might be subject now to tariffs, especially in the U.S. And then just lastly, I mean, you seem to be making good progress on the initial tranche of the EUR 200 million buyback when this comes to an end, should we expect a quick follow-on in terms of the remaining tranche?
Jarrod, look, with respect to RevPAR, where we sit today, we are still confident in our ability to be within that 3% to 4% RevPAR guidance, which we gave at the Capital Markets Day. We're not seeing cracks in demand thus far. But we are obviously remaining very vigilant and very focused because there is volatility in the environment. In terms of RevPAR sensitivity, what we shared with you in the past is that 1 point of RevPAR is about 8, give or take, EUR 8 million impact on EBITDA. So a couple of point of RevPAR is certainly something that we can manage. We have enough flexibility to be able to absorb that.
In terms of the development, again, as I said, we're not hearing from our development teams, major concerns in terms of cost of construction going up, cost of construction is actually already going up prior to the announcement of tariffs. I think the situation is quite fluid. We'll see whether the tariff situation eases a bit or not. We're not planning on it. But with respect to our portfolio, we're not seeing other than anecdotally any changes in trends. And so we're not really concerned and you have to remember that for Accor actually conversions is driving most of the openings. And I'm sorry, you had a third question on the share buyback program?
Yes. Yes, that's right.
And the share buyback, you should expect a second tranche in the second half.
The next question comes from the line of Leo Carrington from Citi.
Three questions for me as well, please. Firstly, just briefly follow-up on the Americas, Mexico deal. In terms of that renovation contribution, have you locked in longer management contracts than you would otherwise? Secondly, on incentive management fees, they seem to have expanded for actually year-over-year. Is there any further room to take that higher? And then lastly, on the move of some PME management contracts moving to franchise net of the cost savings you mentioned in your remarks. What would you say the impact is on EBITDA?
So I'll take your last question, last year. So we don't expect an impact on EBITDA because we've taken the measures to offset that. This is something, again, that we knew would take place. This is actually the strategy to some extent is to move towards more franchise. The move to franchise is actually a trend that exists now for several years. So this is something that we have anticipated that we have planned for and we have taken the measure to address the necessary cost base adjustments in particular. So this will not impact our EBITDA and certainly not our ability to deliver our targeted 9% to 12% EBITDA growth over the '23, '24 period.
With respect to the Americas Mexico deals, I mean we -- there's about half -- more than half of the price that we paid for towards renovation of those properties. Those contracts are long-duration contracts. They are above 20 years as is often the case for those types of contracts. And your last question, incentives. Look, incentives have been hovering in the 33%, 34%, 35%, and that's a level where we expect incentives to remain and they could be up or down a point, depending on the years, but 34%, 35% is probably the right level.
[Operator Instructions] The next question comes from the line of Alex Brignall from Redburn Atlantic.
Two please. So on the India deal, could you just talk about perhaps what the sort of fee rate is for the master franchise agreement perhaps comparing it to similar arrangements you have in China? And then obviously, the churn rooms that you had in Luxury & Lifestyle had lower fees, and you're actually exiting, you've got a meaningfully high churn rate at the moment than other competitors. I imagine that there's a similar dynamic with the other rooms that you're exiting. Could you just confirm that other rooms that you're churning out are at lower fees, that's therefore sort of supportive to that underlying take rate or fee conversion rate?
Sure. So with respect to the master franchise in India, it will be a rate that will be comparable to the Chinese Huazhu rate master franchise agreement. And the benefit for Accor is really expanding our portfolio of hotels in India to upwards of 300 hotels, which obviously gives a tremendous amount of visibility of the Accor brand as you are -- India is -- will be the fifth largest outbound market and is already the third largest or will be the third largest domestic market by 2030. So that's really where we see the strategic rationale for this deal. And again, we're doing this through a partner that has been a partner of ours for quite some time. And the other question, sorry.
Lower fees.
Lower fees, sorry. Yes, in terms of the -- so yes, I can confirm that in terms of the properties that are churning on both divisions, they are at lower fees than the properties that we are kind of signing and opening. And so in some sense, return is accretive.
Next question comes from the line of Jaafar Mestari from BNP Paribas.
I've got 2, if that's okay. So firstly, on booking trends. after April and May. I appreciate it's going to be on very, very low numbers, as you said, probably less than 20% booked. But you do have something on the books today. So is your message that it's completely in line? Or is your message that maybe it's a bit soft, but it's too early and maybe it's just late bookings because of the uncertainty.
And secondly, on the portfolio review, when you started talking about reviewing some of these countries, your logic was we either need to have critical mass or we need to exit. It seems like both Japan last year and Mexico this year, we could even count India, you've decided to add some scale. As a recap, have there been any exits? And what countries are still being assessed, please?
So look, in terms very -- again, very limited visibility in June. What I would say is that June last year was not a great month certainly in ENA because of the pre-Olympics. So well, in some sense, benefit from that. But it's just too early to tell. In terms of the country strategy, we're not planning to exit any market at this stage. And we're pleased to see that in those countries which we felt were either white spaces or in countries where we really could accelerate our development, pleased to see that we did this in Japan, doubling our size in Japan. We're doing this in India again its midterm. The other thing about India also is that it's a development plan, but it's also with a very strong royalty -- will be a very strong loyalty partnership with IndiGo Airlines and IndiGo obviously is very -- actually the #1 airline in India and they just launched their loyalty program. So we expect traction from that. And then Mexico, we're pleased to now have a platform to accelerate our development in actually both divisions Lifestyle and PME.
[Operator Instructions] The next question comes from the line of Estelle Weingrod from JPMorgan.
Just 2 from my side. The first one, looking at EBITDA margin for the full year, how should we look at the margin expansion in PME versus Luxury and Lifestyle. I mean all else equal, should both division margins grow the same magnitude despite the diverging revenue trends? And second question, on the U.K. and France, which have weighted on the RevPAR in Q1, are you also seeing -- are you seeing any improvement post March in April and May?
So France is definitely faring better in April and in May. U.K., not much of a change in -- certainly in April. And with respect to your question on EBITDA, we'll provide obviously more information as we really start in July.
There are no further questions. So I hand back over to you for conclusion.
Thank you. Well, thank you all for your -- for listening in and joining this call, and thank you for your question, and I wish everyone a good evening.
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