Accor plans to open more than 1,200 hotels as travel demand climbs

The hospitality industry has benefited from higher prices and a rebound in travel demand in the wake of the pandemic.

Accor, Europe's largest hotels group, plans to open more than 1,200 hotels in the next five years, increasing the number of its resorts by more than one-fifth, in the latest sign the industry is betting on strong travel demand long-term following the pandemic.

The group also said it plans to return around €3bn to shareholders in the 2023-2027 period via dividends and share buybacks, and raised its 2023 core earnings outlook.

The hospitality industry has benefited from higher prices and a rebound in travel demand in the wake of the pandemic, with consumers rushing to travel even as rising interest rates stoke fears of a recession and inflation erodes household purchasing power.

Accor forecast 2023 revenue per room to grow by 15% to 20% amid reorganisation plans implemented in January, and expects core earnings of €920m to €960m. 

In the first quarter of 2019, Accor estimated the average price of a room at €89 per night. After the reorganisation, the average price was €106, marking an increase of around 19%.

However, the company warns about comparing these two numbers, noting it "didn't communicate the elements in the same way, since we didn't have the two divisions", it told Reuters.

Swelling demand

Chief executive Sébastien Bazin attributed growth to the confirmation of very broad international demand across different countries, and said he expected swelling demand in almost all of the group's segments and geographies.

This demand reflected "the desire to travel, the growth of the middle classes, especially in Asia, and the appetite of younger generations for experiences", the company said. 

"We like the commitment to return €3bn to shareholders by 2027, which we expect the market to focus on today, and 2027 earnings targets imply circa 12% upside to consensus if the company executes on its strategy," Jefferies analysts said in a research note.

"However, FY23 guidance is in-line of consensus at the midpoint and shy of buyside expectations, in our opinion," the analysts said.

Earnings growth

Accor also said it aims to grow earnings by 9% to 12% annually from 2023 through 2027, and its average revenue per room by 3% to 4% per year over the same period.

The firm plans to expand worldwide, but particularly in the Asia Pacific and Middle East.

In May it said it planned to double its presence in Saudi Arabia by 2027, opening hotels in, among other cities, the capital Riyadh, as well as Jeddah.

Peers such as Spanish Melia Hotels, Stockholm-listed Scandic, and Pandox have also planned an increase in the number of hotels, as the sector outlook brightens. This is despite inflation hitting customers throughout the leisure industry on purchases such as concert tickets or cruises. 

Reuters