French hotel firm Accor reported a record €1 billion ($1.1 billion) in earnings before interest, taxes, depreciation and amortization in 2023.
That metric exceeded previous guidance of between €955 million and €985 million, and “is a major milestone for Accor,” said Martine Gerow, Accor's chief financial officer.
That EBITDA growth is a 49% increase over 2022, and across that period, revenue increased 20% to €5.06 billion according to an earnings news release.
Accor Chairman and CEO Sébastien Bazin said the firm has had a solid start to 2024 driven by higher occupancy and demand.
“How happy am I personally? If you asked me a year ago, did we know we’d reach a $1 billion EBITDA? I would say: ‘No. Simply no’,” he said. “These are great results, better than expected, and they will be even greater in 2024, and they will be even better in 2025.”
Analysts expressed concern over the firm’s portfolio churn, but Bazin was quick to dismiss such criticism.
“Churn is a question of conjuncture, reorganization, HotelInvest’s sales program. All of this we’ve understood and mastered. What [analysts] see is the number of hotels leaving the system, not the profits and fees those that remain are contributing. [Analysts] only look at the low-fee contributors. People should be focusing on the fee contributions of those hotels that remain,” he said.
Jean-Jacques Morin, Accor's deputy CEO and division CEO for premium, midscale and economy brands, said compared to “our U.S. peers, you would see [our disposals are] not fundamentally different. Now, for us, churn comes from purely a management decision.”
Disposals are “within the guidance we gave during our Capital Markets Day. We are pushing the actions to happen swiftly so we can move to the next stage. Of 400 hotels, 70% are dealt with,” he said, adding that much of this was within the HotelInvest portfolio, which Accor has a 30% ownership stake in.
“We now have more control in how to turn metrics into profits,” Bazin added.
Bazin said improvement resulted from two major factors: an increase in travelers — although there are discrepancies across geographies — and operational efficiencies achieved by a divisional split into two groups: luxury and lifestyle, and premium, midscale and economy.
“I'll give you one example. [We] are signing Sofitels in Europe where we have not signed any for years, including one in Prague that we’ve been chasing for years," Bazin said. “Most of the team is hired from outside, from our competitors. It is about autonomy, leadership and personality, and they know exactly what they have to deliver. Why did it take me so long to reorganize? That is probably the more relevant question.
“I said it would take 18 months to get the new leadership in place, and it took nine. We will never go back from having two divisions,” he said.
Driving Results
Accor's standard of new hotel signings will improve profitability, Bazin said.
“We have a record value of signings, and the pipeline is at an all-time high. The portfolio’s strengthening is confirmed by its higher fee per room, although that still differs by geography,” he said.
Accor's EBITDA guidance for full-year 2024 is for 9% to 12% growth, and revenue per available room is expected to increase 3% to 4% in the same period.
“Even if we are at the low end of network increases, we are at the upper end of profitability for those new hotels, due to the increase in fees,” Bazin said.
Morin said signed hotels on average account for a 35% boost in value across the portfolio.
Accor recorded recurring free cash flow of €596 million in 2023, up from €373 million in 2022, Gerow said. Capital expenditure rose from €159 million to €218 million.
The company also announced the next stage of shareholder redistribution, a buyback of a further €400 million in shares in 2024.
Gerow said that entire redistribution has occurred quicker than expected.
The ordinary share dividend for 2024 has been announced at €1.18 ($1.28), an increase of 12%, subject to board approval.
Spinning the Globe
In 2024, Accor will focus much of its attention on France, it's home market, and India. Bazin said the world will soon have 1.3 billion middle-class inhabitants, half of which will be in India.
“They will go to the east to Malaysia, Indonesia, Southeast Asia. To the west, to the Middle East,” he said.
India represents an opportunity because no other international hotel brand has dominated development in the country, Bazin said.
“The domestic tourism market in India is not as strong as it is in China, and we started in both countries at the same time. It takes twice as long to develop in India, with more risk. We are circling around India, as it is a must. We know the country well,” he said,
Accor has had a partnership with Indian airline IndiGo for 25 years, Bazin added.
“There are tens of millions of Indian travelers, and we are super-prepared. I hope in five years, we can say we have 100 hotels, but it is difficult,” Bazin said.
Bazin admitted he was wrong three years ago when he said that 25% of corporate travel will be lost, but he added its nature has changed.
“It is almost back, but it is different. Today, it is 10 cities with 50 people each, with the event grouped together with IT. … We have seen an increase in some markets for events, especially in Europe, where they are needed, where [gross domestic product] will not be bullish,” he said.
He said demand already is strong for the 2024 Olympic Games in France.
The return of Chinese travelers is another reason for optimism, he said, adding Accor's hotels in China continue to recover but have exceeded 2019 performance levels.
“[Accor’s] diversity is amazing now. It is our best asset,” Bazin said.
Globally, Accor’s premium, midscale and economy division has 5,052 hotels and 330,000 rooms in operation, and 1,047 hotels and 172,000 rooms in the development pipeline.
In Accor's luxury and lifestyle division, it has 532 hotels and 118,000 rooms in operation, and 268 hotels and 53,000 in the pipeline.
Morin said 50% of 2023 openings were conversions.
Bazin referred to some of those conversions as “instant noodles,” hotels changing flags between hotel firms and being reopened within two to three months.
“That can work both ways, though,” he said.
Bazin said Accor’s strategic priorities rely on simpler brand standards but also strengthened brand equity; market opportunities; signings that optimize value; and a focus on operational excellence, global leadership and guest experience.
He also gave a little color on the firm's Orient-Express brand. For upcoming cruise ships, bookings will begin in the summer or late summer for launch in mid-2026. Those ships and the brand’s trains are expected to contribute between 10% and 15% of luxury and lifestyle EBITDA by the end of 2027.
“We see the success of Ritz-Carlton [cruise ships], way ahead of expectations when they launched. We will be above them in [segmentation], fewer cabins,” Bazin added.
As of publication time, Accor stock was trading at €39.50 euros per share, an increase of 31.4% year over year. The Euronext Stock Exchange was up 17.48% over the same period.