Accor Earnings: Demand Deceleration in Lower Price Tiers, but Desire for Travel Is Healthy

We see narrow-moat Accor’s first-half results as mixed to positive. On one hand, we see signs that enduring inflation and falling savings rates could now be relatively impacting lower-income household travel. For instance, Accor’s higher-priced luxury and lifestyle, or L&L, segment saw consistent 7% revenue per available room, or revPAR, growth in both its first and second quarters. This outperformed the 4% second-quarter revPAR growth for its premium, midscale, and economy, or PME, business, which decelerated from the first quarter’s 6% increase. Also, domestic travel in China has waned under the pressure of lower economic growth. But travel remains strong in the Middle East and Southeast Asia, which we think is being driven by relatively healthier economic conditions and a growing middle-income class. Additionally, corporate travel, which initially lagged the covid-19 recovery in leisure excursions, is seeing renewed strength, which we think is aided by strong corporate profits and the need for in-person meetings. In fact, Accor is seeing corporate price increases of 4%-6% for travel being booked over the next one to two years, which confirms recent surveys for business trip improvement. Also, the company highlighted a June 2024 survey from Oxford Economics that showed intent to travel this year and next remains high. Amid this outlook, Accor increased its 2024 revPAR growth to 4%-5% from 3%-4%, which compares with our 3.5% forecast. Our fair value estimate is EUR 43 per share, and we see shares are slightly undervalued.