Accor Earnings: Solid Sales Growth Continues, but Looming Macro Headwinds Could Hinder 2024 Growth

We don’t plan a material change to narrow-moat Accor’s AC EUR 41.50 fair value estimate, other than for time value, after its third-quarter sales update pointed toward solid second-half demand. We see shares as undervalued, trading around 10 times 2024 enterprise value/EBITDA versus peer multiples of 13-14 times.

Third-quarter revenue per available room, or revPAR, rose 15% on a like-for-like basis, a deceleration from 25% last quarter. Accor noted that revPAR levels were steady throughout the quarter and increased its 2023 revPAR growth guidance to slightly exceed 20% from around 20% prior. That said, while we have been steadfast on travel demand resiliency since the summer of 2020, we expect Accor’s revPAR growth to decelerate to around 2% in 2024 (down from our 2%-3% prior forecast), driven by mounting headwinds such as lasting inflation, depleted consumer savings, and conflict in the Middle East, where around 10% of the company’s portfolio resides.

Development is tracking toward our forecast, with Accor’s pipeline up 3% annually to 219,000 rooms, providing confidence in the company reiterating its 2%-3% net unit growth for 2023, which harmonizes with our 2.6% estimate. Beyond 2023, Accor believes it can report unit expansion of 3%-5%. We still see around 3%-4%, driven by high-single-digit expansion in the luxury and lifestyle division (about 10% of current hotels but around one third of total fees), where the room pipeline is around 50% of its existing base.

Finally, although the release was focused on updating the sales environment, Accor did increase its 2023 adjusted EBITDA guidance to EUR 955 million-EUR 985 million from EUR 930 million-EUR 970 million. We plan to lift our EUR 940 million forecast by around EUR 25 million off the back of slightly stronger sales in the back half of this year. We still see adjusted EBITDA growth averaging a high-single-digit percentage during 2024-27.