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Narrow-Moat Accor Is Attractive, as Investors Are Discounting Europe’s Upcoming Travel Recovery

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Just as the U.S. has experienced a strong travel recovery in 2021, we see an opportunity to participate in Europe's forthcoming vacation demand rebound in 2022 by investing in Accor shares, which trade at a 17% discount to our EUR 38 fair value estimate. The Continent’s expected recovery is driven by three main factors. First, Europeans possess a strong desire to travel, encouraged by laws that grant workers at least 20 paid vacation days a year. Europe’s long-term (1995-2019) average hotel occupancy rate is 67%, well above the 62% rate in the U.S. (which lacks similar laws). Second, after initially lagging, European vaccination rates surpassed those of the U.S. over the summer, lifting confidence of a return to normal activity. Third, although European countries have generally been more stringent than the U.S. in COVID-19 restrictions, rising vaccination rates have allowed for looser policies recently. As a result, revenue per available room, or revPAR, in Europe climbed to 82% of 2019’s (prepandemic) mark in August, up from just mid-20% of 2019 levels during the first four months of this year. Thus, despite the delta variant, we expect Europe’s travel demand to rebound in 2022 as global vaccination rates rise (aiding the region, which historically is inundated with more foreign visitors than the U.S.) and society becomes more accustomed to waves of COVID-19 cases (which was observed in the U.S. during 2020 surges).

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Company Profile

Business Description

Accor operates 762,000 rooms across over 30 brands addressing the economy through luxury segments, as of June 30, 2021. Ibis (economy scale) is the largest brand (38% of total rooms at the end of 2020), followed by Novotel (14%) and Mercure (15%). FRHI offers additional luxury and North American exposure. After the sale of the majority of HotelInvest (owned assets) in 2018-19, the majority of total EBITDA comes from HotelServices (asset-light). Northern Europe represents 23% of rooms, Southern Europe 21%, Asia-Pacific region 32%, Americas 13%, and India, Middle East, and Africa 12%. Economy and midscale are 74% of rooms.

82, Rue Henri Farman, Tour Sequana, Issy-les-Moulineaux
Paris, 92130, France
T +33 145388600
Sector Consumer Cyclical
Industry Lodging
Most Recent Earnings
Fiscal Year End Dec 31, 2021
Stock Type
Employees 191,773