Accor (Euronext:AC) Q2 2026 Earnings Call

0:00 Welcome to the Accor Half Year twenty twenty six Results Presentation. Today's conference will be hosted by Mr. Basen and Martin Giraud, Group CFO. For the first part of the conference, the participants will be on listen only mode. During the questions and answer session, participants are able to ask questions by dialing 5 on their telephone keypad. I will hand the conference over to Mr. Basen. Please go ahead.

0:26 Well, good morning, everyone. Very happy to have you all for the first semester results. I'll do the conclusion. At the end, we're I'm gonna let the floor to the best of us to Martin as chief financial officer. She's gonna guide you through the results and comments, and then we'll go straight conclusion and q and a. But at least thank you so much each of you to actually being on the phone with us. Martin. Thank you, Sebastian. Good morning, ladies and gentlemen. And, again,

0:56 thank you for attending our earnings call for the for the first half. So I will kick off on the financial highlights on page four. So following a very strong start of the year, the situation in The Middle East has impacted our trading in the second quarter, but to note that the performance in other regions remained very solid. We activated in March a profit protection plan, which has enabled us to largely offset the impact of the conflict and deliver a very steady set of results for the first half of twenty six. The operating performance is contrasted across regions, but did improve throughout the quarter adjusting for the hash calendar. Q two RevPAR came in at minus 02%. Now that is a headline set max two very different situations outside The Middle East. Q two RevPAR was up 3.3% driven by both pricing and occupancy, which demonstrates a continued strength of demand and the attractiveness of our brands.

1:52 In The Middle East, RevPAR was down 29% driven by The UAE, which was down 67% in the quarter. As other countries, which is Egypt and Saudi Arabia namely post posted positive RevPAR growth in the mid single digit. We exited the quarter with a marked improvement in The UAE and an acceleration in other regions notably in Europe. This drove our h one twenty six RevPAR growth to 2.24.6% excluding The Middle East. Room revenue growth was driven by both business and leisure with individual leisure travelers and business groups growing in the mid single digit. Net unit growth was 3.2% on our last twelve month basis with limited openings in h one and some churn in our Germany Revo portfolio, as well as in China.

2:43 Pipeline growth remained very healthy at 11.4% growth over the last twelve months, supporting an acceleration of not going forward. Signings also grew at a strong pace. Moving to financials, we adapted very quickly to the geopolitical events producing a solid set of results. M and F revenue was up 4.8% at constant currency reaching 685,000,000, that's a solid performance, and m and F EBITDA was up by 9.1 at constant currency, which is a 280 basis points margin improvement. Total revenue was up 3% at constant currency and 4.8% on a like for like basis when we adjust for some disposals in Paris society. And total EBITDA was up by six and a half percent at constant currency and 7.4% on a like for like basis adjusting for scope.

3:36 FX had a negative two points impact on group revenue and four points on EBITDA and was concentrated in the first quarter. Based on current rate, we expect EBITDA to turn positive in the second half. Scope impacted revenue by two points in the first half and EBITDA by one point. Recurring free cash flow reached $194,000,000 that's up 42% versus prior year. And we delivered strong shareholder return year to date at 541,000,000, which equates to a 4.8% return, bringing total return to shareholders over the last three and a half years to 2,600,000,000. Actually, by the end of twenty twenty six, when we factor in our second tranche for share buyback, we will have returned 2,800,000,000 to shareholders with dividends and share buyback in the in the first four years, which puts us in line of sight of the 3,000,000,000 return which had earmarked in our capital market days almost a year ahead of schedule.

4:37 Let's now move on to the second quarter RevPAR for each division on slide five. PM and E posted a flattish RevPAR growth of point 1% driven by pricing. In the quarter, average rate was up 1%, and occupancy rate was down one point at 68, driven by The Middle East. Excluding The Middle East, RevPAR was actually up 1.1%. In Anna, RevPAR was also flattish at point 2% driven by pricing, stable occupancy year over year. Our three largest countries report actually very different trends. France and The UK posted low single digit RevPAR growth, while Germany was negative. Now we did know that trading improved in June in all three markets with RevPAR in the low single digit to mid single digit.

5:24 In France, in the second quarter, RevPAR was in line with the first quarter, although more driven by the province with strong and steady leisure demand. In The UK, demand was also sustained notably in London confirming a low confirming, sorry, a solid low single digit RevPAR growth. In Germany, demand softened in April and May, but improved in June with a positive RevPAR in June driven by a more supportive event calendar. In May APAC, q two RevPAR was down 1.1% impacted by the conflict with significant decline in occupancy and rates in The UAE. Excluding Middle East, RevPAR would be up 1.9% driven by UAE as Egypt and Saudi Arabia were up in the mid single digit. Southeast Asia remains a growth engine for the region with RevPAR in the mid single digit territory with notably good performance in Japan, in Vietnam, and in Indonesia.

6:18 Pacific slowed down somewhat versus the fourth quarter reporting a flattish RevPAR growth due to lower international traffic and lower consumer and business confidence. In Mayotte, obviously, impact of the conflict. Mayotte was down in the low teens in the quarter. The negative performance, again, attributable to The UAE. The UAE RevPAR decreased in April in the mid eighties, but improved since the decline in in June in The UAE was only in in the forties. Saudi, Egypt, and Turkey continued to perform well. China stayed in low single digit negative territory. Supply growth is leveling off, so the industry should be at or, you know, near the bottom of the cycle, but RevPAR recovery is actually highly uneven, and there is clear underperformance of the mid and eco segment, which is where most of our portfolio sits.

7:13 In China, to note that recovery is already well in place in luxury since the fourth quarter, and continuing through the second quarter with positive RevPAR growth. Americas posted mid single digit growth with with q two RevPAR up 4.8%. Region remains driven by, Brazil. Turning to luxury and lifestyle, q two RevPAR decreased by 1.4% led by occupancy and red decline in The Middle East. Excluding The Middle East, luxury luxury and lifestyle RevPAR would actually be up by 9.4%, which is in line with the first quarter and confirms the healthy demand for this segment bar, the conflict. Luxury reported positive RevPAR growth of 2.5%, excluding Middle East, it would be up 9.1%. All brand, all regions, again, reporting grilling RevPAR outside of The Middle East.

8:03 Europe and NORAM demand were particularly robust with excellent performance in in NORAM in Fairmont and Raffles. Lifestyle is a segment which is the most impacted given its larger exposure to The UAE, which weighed down on RevPAR, which is down 11.3% in the quarter excluding Middle East. RevPAR would be up 10.3% for lifestyle, Within lifestyle, resorts were the most effective. Lifestyle collecting was actually only slightly down due to its larger presence in the Europe and US. Let's now turn to slide six, which breaks down our portfolio and pipeline by division. PME grew its network by 2.6%. The pace of openings remained steady, and pipeline grew a stellar 12.7%, reaching 28% of the PME network, which is up three points from prior year and confirming again the attractiveness of our brands. PME signings grew by 10%.

8:57 The sequential slowdown of the NUG results from, as I mentioned in my introduction, some churn in the REVL portfolio in Germany, as well as the ACR segment in in China, where we see some hotels actually closing down due to the lower activity level, particularly in the third and second and third tier cities. On the right, luxury and lifestyle portfolio grew by 6.8%, that's driven by any small pipeline growth picking up from the first quarter at 7.4%. Now we did transfer the joint portfolio in h one, which impacted the nug of luxury and lifestyle by about one point. So if you look at the underlying luxury and lifestyle note growth, it's closer to 8% on an LTM basis when we adjust for that transfer. It was marginal obviously on PE, which is a a larger larger network.

9:45 There were fewer openings in the first quarter sorry, the first half. There are more concentrated in the second half. Some openings in The Middle East were actually pushed to the second half. As we expected, churn was lower compared to prior year. Some notable openings of the second quarter includes Raffles, Jeddah, and Orontex Place in Venice. Pipelines are still very healthy, stands at 46% of the networks. That's also up one point from prior year, and signings grew by 39% in volume. At group level, net tuning growth reached 3.2% over the year with an accretive mix. Newly open hotels will generate fee per room, which is approximately twice as high, so two x as fees generated by churn hotels over the last twelve months as you can see on the box at the bottom of the slide.

10:33 Versus last year, is up 11.4% at group level in volume, and group signings in volume are up 13%. And conversions still represent more than 55 of our openings, that's quite in line with last year. Now let's turn to slide seven with revenue by segment. The revenue by segment and by division is actually provided as we always do it in the appendix and in the press release. The group revenue reached 2,760,000,000 in the first half. That's up 3% at constant currency, and it's up 4.8% adjusting for the scope effect from the disposal of Paris Society festive. Again, FX and scope impacted revenue by a negative two points each, lowering the reporting growth to point 6%.

11:23 FX impact concentrated in q one, and again expect FX impact to be positive from q two onwards. M and F revenue growth up 4.8% at constant currency, that's in line with the algorithm at group level. Hotel assets and other revenue was down 5.4% at constant currency and up point 8% adjusting for scope. Paris society, recast restaurant activity in Dubai was highly impacted in the first months of the conflict, although trading significantly improved in the later part of the second quarter. SMDL, which is sales marketing distribution, and loyalty revenues were up 4.7% at constant currency, which is pretty much in line with m and f revenue. And to note that our loyalty contribution was up almost four point in the first half year over year, and we reached a 121,000,000 members as of June.

12:13 Turning to management and franchise revenue by segment on slide eight, which grew at 4.8% in the first half. Q two m and f revenue was at 1.6% at constant currency, impacted by lower incentive in The Middle East as well as flip to franchise, a point we, you know, we have commented in the previous quarters. Residential fees were stable in the first half as we expected. PME m and f revenue was up point 7% at constant currency, slightly higher distortion related to the switch from management to franchise as we've called out before, which is about a, you know, one point negative impact on growth and also lower incentives due to the conflict in The Middle East. And as a result, the distortion is more pronounced in the second quarter than in the first quarter. Luxury and lifestyle m and f revenue grew at 12% at constant currency, that's slightly above RevPAR.

13:04 Q two m and f fees were up a solid 9%. That segment is also impacted by the lower incentives in The Middle East, but we also had, as we call that, some termination fee in the in the first quarter, which helped offset. Now let's turn to EBITDA on slide nine. The group EBITDA reached 563,000,000, that's up 6.5% at constant currency and up 7.4% adjusting for scope. We showed adaptability, we showed strong reactivity to navigate what is a challenging global environment. The reported EBITDA growth at 2.1% include a negative FX impact of 23,000,000, again concentrated in q one, and we expect FX to turn positive in the second half.

13:49 As for m and f, more detail by division are provided in the appendix, EBITDA at 9.1%, strong margin improvement resulting from the profit protection measure embedded as of March and to a lesser extent some termination fee. We expect the full year m and f EBITDA margin improvement to be above our annual guidance of a 100 basis points. Both divisions improved their m and f margins.

14:11 As for hotel assets and other, EBITDA growth is impacted by the conflict in The Middle East combined with scope, which accounted for negative seven points in the first half. As for SMDL, EBITDA was at 8.3% at constant currency, benefiting also from profit protection measure with an 8% margin. And we expect SMDL EBITDA to be balanced between h one and h two, and we expect full year margin to be above our 6% plus guidance. And finally, to note cost of our hold the holding are down slightly with again strong cost containment measure. Moving on to the p and l on slide 10. In h one, we achieved an adjusted net profit of 231,000,000 and an adjusted EPS of 83¢, flat versus prior year. Other income and expenses at a negative 130,000,000 in h one included amongst primarily a 44,000,000 valuation adjustment on our SND stake, which reflects the time value of the earn act, which we expect in this transaction, and I'm sure you've all seen the press release we just issued. And 37,000,000 restructuring costs, this is mainly in the European region, and that is to support the move to a more franchise model.

15:22 DNA was flat in the first half. Share of net profit of associates in the JV minus 37,000,000, slightly more than half of the loss related to S and D, has reported lower capital gains on disposal and high impairment losses in the first half. Net financial expense driven primarily by a high gross debt, the cost of debt remains very reasonable. Income tax expense is flat. ETR is also flat if you adjust for non recurring item which carry a significant lower taxation both in '25 and in '26. We expect the full year ETR to be to be broadly flat. Minority interests are down year over year and this is due to the lower profits in in in The Middle East in any small.

16:07 Turning to cash flow on slide 11, recurring free cash flow reached a 194,000,000. That's up 42% reflecting a 34% cash conversion, which is about nine points above prior year. Four main highlights, Cash interest increased as we expected driven by the increase in debt level, but notably an additional bond we issued in '25 with the first coupon paid in h one of twenty six, as well as lower interest income. So h one is pretty, I would say, representative of of what second half will be. Cash does decreased from 121,000,000 to 85,000,000, mainly driven by a tighter monitoring on installments between h one and h two, and we did accelerate refunds in France.

16:53 And we expect our full year '26 cash tax to be broadly stable versus prior year. Recurring investment were below last year at 93,000,000. We controlled CapEx in what is a, you know, challenging geopolitical environment, but key money was also lower in the first half. For the full year, we continue to expect an increase of the CapEx in line with the guidance provided in the CMB probably closer to 250,000,000 for the year. Working capital is stable year over year, and finally net debt reaches 3,500,000,000 at the end of June. As a reminder, that's about 400,000,000 up from December. Main movement in h one being recurring free cash flow, which as you know is, you know, seasonal and more occurring to the second half, return to shareholders and hybrid coupon.

17:44 To conclude and before I turn it over to Sebastian, let me now introduce our guidance on slide 12. RevPAR like for like growth is expected between two and two and a half percent depending on the pace of recovery in The UAE. The RevPAR guidance includes an second half scenario for The UAE, which is pretty much between where we are in June, which is around minus 40% to to minus 20%. Net unit growth is expected at circa three and a half percent in line with f y twenty five, and it's a notch below my comments from last February, taking into account a few things when some delay in openings in The Middle East, as well as the impact of the rebel bankruptcy and and some turns in in the China eco hotel given the the economic situation. That being said, as we as I commented before, the fee per room of the new openings is about twice the fee per room of the closures.

18:42 Recurring EBITDA is expected between 1,260,000,000 and 1,285,000,000 that includes a negative FX impact of 10,000,000, and it represents an EBITDA growth year over year between six and eight percent. And this concludes my opening remarks, and I will now turn over the floor to Sebastien for some closing remarks. Martin, thank you so much. We're gonna go into at least the h one takeaways, the way we look at them. The first is, you probably heard me many times, I guess, it's being confirmed probably every quarter passing for the last three years now. It's ability of Accor to navigate through the storms. And, of course, we have storms in many different countries over the last few years, and the last one had been the Middle East impact between Iran

19:35 and GCC countries. And I I was telling the board a couple days ago that I guess that Accor has an enormous granularity on its cost. We have an enormous control on operating metrics all over the different geographies. The CEOs as the head of business departments have a total grip on what they conduct, which actually permits us to navigate, to evaluate, to actually get into action, to build buffers against countries in which we have not expected

20:12 unforeseen events. And I never had seen that before in this company in terms of actually ability to get close enough to result, if not on the results, even though it's not going according to plan. And that's something which actually gives us an enormous comfort to actually be in front of you this morning. The number two, why are we able to build buffers is because we need to take actions on what we call PPP, you heard marking profit protection plan. It's really putting together a lot of different initiatives, lot of indecision, impacting a lot of different people in different countries in terms of hiring freeze, travel freeze, and a lot of actually investment no longer being made, not to the detriment of Accor moving forward.

20:57 But that plan has been put into action early March. You've seen the result quickly up until the first semester. That plan will not let go. We're gonna be continuing deploying it as long as necessary, certainly for the second semester. The third is of a very different nature, which is all about loyalty partnerships, and I'm gonna go in it in a minute on the next page, but it's something which is extremely important in our ability through

21:27 all membership deployment, which is going at a very fast pace, as you know, probably 15 to 20,000,000 additional members every year. He's trying to actually incorporate a lot of actually daily use of the old loyalty program, and we've signed deals, and I'm going I'm going to go back to it in a minute. But it is a 15 to 20% growth per year, both on revenues and on EBITDA, which is basically a faster growth that we can build that the one we can benefit from from operation, which is is nine to 12%. And finally,

21:59 very proud. You know about it because it was announced four or five days ago. Extremely proud for the team to ability to sign SND, which is a very, very large transaction, probably by far the largest hotel transaction in Europe for the last ten years. I think the first one the last one was Booster at the time we put this 8,000,000,000 asset portfolio together, but that is today also one of the largest. It's still a 7,500,000,000 hotel portfolio in which we invited in Blackstone to come in alongside Colony. So very happy, very proud for the team who's gonna give us an enormous flexibility moving forward on cash deployment. On the next page, I just want to tap upon two minutes on Uber, Amex, Indigo, and we're gonna talk about H, which is Waju.

22:53 The one on the left is a very different nature, and the one we really did not dwell with before over the last few

23:00 years, which is really going trying to go into enhanced travel experience. It's all about kind of actually using different cards, different partnership into your daily use. And with Uber, all the members of Uber will be able to go members of Accor Sa will be able seamlessly to go on Uber mobility, Uber food deliveries through the all our core digital ecosystem, from their home or from any hotel stay. So that's gonna be done every day. People are gonna be earning points. It's being announced

23:30 with Uber in April. It is launched in h two, so you haven't seen the benefit of it yet. It is being launched at the end of August. That will be made available to all the Accor members, Uber users in France, Germany, Poland, and then we'll go, not on the food yet, but on the Uber service on UAE, Saudi Arabia, Qatar, and Morocco. And more coming with Uber. It's, we won the RFP against many of our peers. Very happy to

24:02 go hand in hand with Uber Group. Amex, different nature. Amex is all about elite status match for the card members. So Centurion Amex holders will go and receive all our core platinum status. Amex non centurion platinum card members will be eligible to gold status that also is launched in h two. So you haven't seen the benefit of it yet. It was signed in May, and that's gonna be displayed in 12

24:34 countries, Australia, Austria, Canada, France, Germany, Hong Kong, Italy, Japan, Mexico, Singapore, UK, and New Zealand. And that's also is going to improve a lot of actually daily daily usage between Amex Group and Accor. And the third, IndiGo, I'll talk about India in a minute. IndiGo, we are going hand to hand with IndiGo airline as you know, which is the largest airline carrier in

25:01 India, which is probably today 64% to 65% market share with well over 400 airplanes in India. And that's going within the domestic Indian travelers, within the Indian traveling outside of India, mostly to Southeast Asia to Middle East and to Africa.

25:20 Edgeworth Edgeworth is huge. Edgeworth, know of our partnership, very trusting one with Chairman Shishi, the founder and CEO and larger shareholder of what is today the second largest hotel group in China, likely to be the first hotel group in China in a few years because of their pace of growth. We decided to put together their three ten million members with our 115,000,000 members on trying to get reciprocity, not only on burning and earning points, but we actually went

25:53 one step further on web distribution. So starting in August again, we're gonna have all the Stagenburger Hotel, Intercity, basically all the Edgewood acquisitions outside of China, mostly from Deutsche Hospitality acquired in 2019. All of those going to be available on all.com platform. As a reciprocity, you're gonna have the Accor premium and luxury hotels at Pullman, M Galleries, Sofitel brands in China, 130 of them will be available

26:26 directly on H World booking channels. So that also gonna be launched in H two, and that encompasses China, Europe, and The Middle East. So it's just a confirmation of our ability to sign global deals and to be able to confirm the pace of 15% to 20% growth in partnership and EBITDA coming from loyalty members. On H2 priorities,

26:54 the first one you could not be surprised is whatever we've done rightly, let's continue and let's do it even better if we could, which is the profit protection plan, the discipline, the rigor that I guess Accor has been conducting over the last few years has to remain, has to be the main focus and has to be basically our compass to move forward because the context is not going get better in terms of actually challenging environment, and we have actually very little control on geopolitical events, so we might as well actually control what we do internally. The number two is

27:27 go for the growth. We shuffle your own organization and I'm talking about India here. Some of you know we are restructuring a lot of different holdings we had in India into one common vehicle with our partner Indigo Airline, which is actually the mother company of Indigo Airline called Interglobe. And that is in the making. It should be finished by the first quarter of twenty twenty seven. We have changed the CEO

27:54 of India. A woman is coming from Marriott, Randju. She's extraordinary. She came six months ago. Pace of growth signing within only nine months have tripled the pace of signing and growth we had over the last few years. And in both direction, which is very comforting, certainly on Fairmont, Raffles, Sofitel on the luxury side, but it's also actually going much faster for Ibis, Novotel, and Mercury. So a lot to talk about in India, and we'll be able to actually give you a better granularity coming next time with meet with me in March or February for the year end result. Number three,

28:34 yes, we should be extremely focused and disciplined on cash allocation. So there's no better use of cash to today. Strength accelerating the pace of share buyback. We finished the first tranche, we are already starting to launch a second tranche of $225,000,000 and we are confirming to you that the first day we get cash in from Blackstone Colony on the buyout of our 30% of Ascendi, confirming to you that this additional 500,000,000 share buyback will proceed day after closing, which is likely to be at the end of this year. And four is just to confirm, we're still spending a lot of time at the management level, at the board level on entertaining final decision or whether or not an any small listing is appropriate, which is also a game changer in terms of

29:30 accelerating the pace of any small growth visibility, credibility, and probably ability to penetrate great markets such as America. So that's where we are on the on my kind of actually comments to you. Why don't we leave floor now to many of you with your questions? Thank you.

29:52 Ladies and gentlemen, if you wish to ask a question, please dial 5 on your telephone keypad. The next question comes from Jayna Mystery from Barclays. Please go ahead.

30:09 Good morning, Sebastian. Good morning, Martine. Three questions, if I may. The first question is on net unit growth. I know you're guiding to 3.5%, which is slightly short of what you communicated at full year results. Could you quantify the drivers of how much is coming from Revo? How much is from The Middle East? How much is from China? And then how much of that should shift into next year? And are you still confident in hitting this 4.7% nug next year?

30:42 My second question is around cost savings. Would you mind quantifying how much in cost savings you've delivered in H1? And how much you expect to deliver for the full year? And should we expect these costs to come back next year or are these permanent savings? And then very lastly, I know you mentioned your Middle East scenarios in H2, but could you just give us a bit more commentary on how you expect the recovery to pan out and kind of what you're seeing on the ground in The UAE? Thank you very much. Martin, why don't you go and then I'll have to comment on the Good release at the good morning, Jenna. So sure. So on on net trading growth, Revo is about 40 basis points, in fact, in our in our in our guidance. So that's basically the bulk of, you know, the the gap versus what we had, you know, signaled in in February.

31:47 Middle East, yes, we have delays from h one to h two, but, you know, NS on on net unit growth, and there's a bit and there's a bit from China, and in China, it's really hotels are actually closing down as opposed to as opposed to switching to another to another brand. On cost savings, so profit protection plan, it's 40,000,000 in the first half. The full year amount frankly will depend on the pace of recovery in the in The UAE. But, you know, if it doesn't recover, we're looking for, you know, 70,000,000 as as as a full year amount. In terms of the recovery in The UAE, and and those caused by the way, and I'll, you know, I'll give the same answer they gave last year when we also had a profit protection plan to cover some of the FX impact.

32:42 The cost won't come back unless the revenue comes back, And, you know, probably not all of it will actually come back next year. And in terms of sorry, I didn't answer your your question on the nug. So rep impact, the pace of openings, actually, we we expect to be up double digit growth in our openings this year, and therefore we're in the signings as you've seen the pipelines are very strong, so we expect definitely to be above 4% in 2027, and you know, closer towards the higher end of our our guidance, but more on that when we actually come to that next year. In terms of recovery, pace of recovery, look, The UAE in in June was, you know, minus 40, minus 45. You know, April was actually minus 80, so you can already see the pace of recovery.

33:31 And the way you should think about the the guidance if if we stay where we are in June, which is, you know, call it minus 40% for the second half, then basically that gets you to the low end of the guidance both in RevPAR and in EBITDA, assuming again some, you know, further perfect profit protection plan. If we assume some recovery in The Middle East from where we are in June, not full recovery, but, you know, give or take half. So, you know, mine around minus 20% for the second half and progressively, then, you know, you'd be at the midpoint. So the one thing, Jenna, to add on on The Middle East, which is worth noting. The the the booking notice when people go to Middle East today is seven days. And, of course, people wanna know better on the environment.

34:18 But it's being in the past kind of actually fifteen days. So the way we look at it is, as you know, the months of June, July, and August have been always extremely low in terms of activity because of the heat. We we need greater visibility in terms of peace being put together, agreement in between different countries. Probably by the October 10, the end of September, that's plenty enough for us to have a very robust months of November and December. So that's really where we should be having a greater granularity and better read would be basically at the end of September and early October. Until then, it doesn't change much. The sooner, the better, of course. But we have that ability to basically wait until that date.

35:08 Thank you very much. The next question comes from Jamie Rollo from Morgan Stanley. Please go ahead. Great. Thanks. Good morning, everyone. Three questions as well, please. First, starting with M and F second quarter revenue. Just can we talk a little bit about the gap between the constant currency revenue growth and sum of net unit growth and RevPAR? Because obviously, you've got the drop in incentive fees. So could you please quantify that? But also you talked about some additional termination fees. I thought those were Q2, but Martin maybe you said Q1. But again, could you quantify both those two numbers IMS and termination fees, just to sort of change year on year?

35:54 Secondly, on SMDL, so yes, looking at a more even split this year, but that would still imply about 112,000,000 of EBITDA, so up 20% also year on year. What is the partnership income, please, behind that? So what really accrues to Accor? And when do you see the margins going back to 6%, if ever? And then finally, on Elephant, thank you for giving us the first half EBITDA of €84,000,000 It will be helpful to get the year on year change. I know your minorities have halved, but obviously, that's amplified by leverage and so on. So just be helpful to get what the EBITDA was for Ennis Moore? And also when in terms of timing, when do you think we might hear more about the New York listing process?

36:42 Thank you. Sure. So on m and f revenue, the termination fee was in the first quarter, so it doesn't impact the second quarter algo. The second quarter algo is, you know, fundamentally reflects the the the activity. It's it's stronger in the luxury and lifestyle division because you have basically, you know, stronger network growth, but also Fairmont and Raffles performed extremely well in the North America, which helped compensate the impact of incentives. Therefore, you know, incentives impact is actually lower for luxury and lifestyle than it is for for PME. In PME, it's basically about one point of flip to franchise and give or take two points on the on the incentives.

37:35 So for the quarter, you know, give or take about one point on flip to franchise and two points on incentive. On on SMDL revenue, you're right. It's about that's it it, you know, it is balanced. Therefore, your number is, you know, is is correct. What's driving that is essentially the distribution and the partnership partnership revenue. What we said on on partnership and subscription EBITDA, because we're really looking at both, is that, you know, our expectation was that that EBITDA would, you know, double by basically 20, you know, 29, twenty thirty. Currently, it's around 50,000,000 if we take the two together on a full year basis. So that gives you a it gives you an estimation.

38:23 Look, you know, we gave a guidance of 6% plus for SMDL because we wanna make sure that, you know, we keep a balance between growing our profits and reinvesting in the business. So the 6% plus guidance is still, you know, still still appropriate. Obviously, in the years where we have a more challenging situation, you know, we we we also activate levers in that in that segment. And and it's more EBITDA is 84,000,000 in the first half. But I think your question was how does it compare to the first half of twenty twenty five? It's actually slightly down a couple of points. On the Thank on the timing of the the initial decision, it's way before the end of the year. So we probably should make a decision by the end of the third quarter and then to decide to go or no go on the potential listing of any small.

39:28 And you're right to say, which is of no surprise to any of you listening to us, that if we were to list any small, you're correct. It will be listed in America. Thank you very much. The next question comes from Leo Carrington from Citi. Please go ahead. Good morning. Thank you. Could I ask firstly on some more details on the composition of the pipeline signings in H1, both in terms of the region and also PME versus Luxury and Lifestyle? And would it be fair to assume, given the very high level of your pipeline growth, does this indicate more new builds, ground up hotels moving into the pipeline as you sign them rather than conversions?

40:25 And then second final question, I mean, very curious to see that positive and healthy gap between fees from additions well ahead of those from churned hotels. Can this gap be sustained as the PME churn normalizes down as the China closures slow down or or do the two converge eventually? Thank you. So on the on the composition of the the pipeline, I mean, if we look at, you know, if we look at PME, the pipeline is still, you know, the number one region is still near back, but you have to remember that in in the back, it's mostly Saudi Arabia and Egypt.

41:19 There's a very low share of our product lines that's actually in The UAE, both for PME and and luxury and lifestyle, so primarily KSA and in Egypt. And then we have, you know, our steel pipeline in in China and Asia, and and and Europe and North Africa. So European region for and the pipeline is actually more skewed toward premium and mid scale than an eco. For luxury and lifestyle, you know, pretty much the same thing. It's, you know, again, Mayapac. The Americas region is stronger from a pipeline perspective for luxury and lifestyle than for than for PME, but Mayapac is still the the largest region when it comes to pipeline and it's true for growth. I mean, actually, you know, we haven't seen a slowdown in in signing in The Middle East. I mean, that that but again, you know, mostly KSA and and Egypt.

42:14 With regard to your question on new build conversion, no, I mean the, you know, the mix of conversion is 55%. That's pretty steady with where we've been, you know, we've been between fifty and sixty percent and frankly, we don't intend or we don't sorry, we don't expect that mix to to to to change the and I'm sorry. Could you repeat your last question, Luke? I'm not sure I got that. China is the different between the change being of a lower fee level versus additional rooms being signed of a Oh, okay. Fee stream. And how is China? Is China is gonna get better? Are gonna get worse? Just on China minutes since I'm actually Huazhu kind of actually expert. It's too strong, but at least very close to situation. Huazhu is opening well above 2,000 hotel a year now, and they're closing 500 to 600 hotels. So they actually, every year passing, they're cleaning their own network, and we are impacted because of this. A lot of the ibisu's development seven, eight years ago with us having basically closing certainly in secondary tertiary cities. It doesn't occur into primary cities within China, but chairman Shishi is really looking for a better product in those different cities at the expense of an older product, which is fine. All of that is done in total coordination with us. So you are absolutely correct. Whatever we lose out of those IBIS closing in China on tertiary cities, it's very, very low fee stream for us.

43:47 And we are much better off for him to open a better product in that same city of a greater quality. So which is why we're not we don't have any business sector, which is also why and some of you sound like a broken record here, but I've been really putting a lot of sensibility to each of you on the fee per room on the net unit growth is one thing, but what matters to me 10 times more is what is the absolute level of fees that we get every year compared to the year before. And I can confirm to you 2026, we're gonna much better absolute fee stream from all the hotel we opened this year versus the hotel we've opened last year and the year before. So, yes, nug and the churn sounds to be probably heavy, but all of that, if not 80% of that, is volunteering both on accepting what's being done in China and finishing the job, as we said to you, on the pure project, which is the detractors of many of our brands closing.

44:46 Rivo, clearly, that we that was not in the plan, and we have to accept it. That's an unforeseen event. But, yes, I'm encouraging initial view to look at the fees per hotel being opened versus the fees per hotel being closed, and that should should give you an enormous comfort. Thank you, Sebastian. Thank you, Martin. The next question comes from Kate Shao from Bofa. Please go ahead. Thank you very much for taking my questions. First question, can you just a follow-up to an earlier question on signings. Martin, can you give some color on signings growth? Was it you mentioned it was strong. Was it above or below that 10 or 11% pipeline growth lately?

45:32 Just want to get a sense of latest signings growth there, especially in The Middle East region. Second question, free cash flow recurring free cash flow conversion. Obviously, that's down quite a bit in the first half. How should we think about it for the full year? Would you say probably around the same level of conversion for the full year from EBITDA? And my third question, Sebastian, I wanted to ask you, obviously, on the SNG transaction. What, in your mind, is the next focus of the asset light and simplification journey? Anything else you can kind of point to for us to understand what's the next focus for you? Yeah. Thanks for your question, Keisha. So on signings at group level, they're up 13%.

46:17 So that's two points above the pipeline growth. And, you know, there's there's the signs are pretty much in the, you know, in the regions where the pipeline is, and again, no slowdown in the in The Middle East. With respect to free cash flow, you have to our free cash flow is seasonal. So when you actually look at the cash flow conversion in the first half, was 34%. So yes, it is less than the full year cash conversion, but it's actually up nine points from last year. Last year was 25%. So so, you know, it's just seasonality in our cash flow, you know, on on a on a full year basis, know, we we're probably gonna be slightly, you know, where we were last year just because we have a bit higher CapEx, but still good, you know, still very strong cash flow generation, and I will let Sebastian answer the question on Kate, I was I almost wanted to say a job is done in terms of ascendee being closed. It's we're gonna be less than one and a half percent asset light.

47:23 There's mantra is probably what we need to clean up, but we've done two third of the job over the last couple of years. We still have some small lease obligation in Australia, and we're tackling it. Not an easy environment today, but not an impactful at a group level, but we need to finish that last third. The rest that we have like a very performing lease on Cairo, a very big sofiendelle, and I'm very happy to keep it as it is. And it's probably what you're gonna be noticing as probably the greatest exposure to leases happens to be Paris Society on the restaurant angle, which is very, very profitable for us. And on the management model, we're going on we on the restaurant model, we're going more and more on management contract, but those are the much lesser profitability in terms of EBITDA contribution.

48:22 Margin is obviously better, but EBITDA contribution. So Pear Society through any small will continue probably doing half and half between signing leases and management control management contract. I'll give you a very small example, which is very, very telling. GG, which is one of the most robust brand in restaurant, we signed a lease in Bodrum, actually at the Mandarin Hotel where they've been looking after having GG in their own premises. It's an extraordinary success for the last month and a half and for the summer. And you're talking millions of EBITDA compared to maybe 100 of thousand of euros had we done a management contract. So it's it's rewarding. It's done in a very controlled manner. We don't take much risk on basically what we sign in, but it is part of the any small food and beverage model, and we should not be departing from it.

49:23 Thank you. The next question comes from Jared Castle from UBS. Please go ahead. Good morning, everyone. Also three from me. There was a $44,000,000 write down in the P and L linked to Ascendi on the earn out. And just thinking forward, I mean, it's just is this a one off? Or I guess, assumptions changed? I know you mentioned that it's time, value or money, if you can just give a bit more color around that write off. And then also, really good control and I think decent cash conversion. But one of the items you mentioned is you're pretty tight on your investments. And you also mentioned key money.

50:10 I'm just wondering what's going on with key money. It seems like you don't have to spend as much or which is a bit surprising given your findings and your pipeline growth. So is there any color on key money, please? And then maybe one for you, Sebastian. I guess pre COVID, you undertook an agreement with Air France on loyalty point sharing, etcetera, and you're obviously expanding a lot of partnerships. I just want to get some color from you in terms of how you think that's gone and the opportunity for more signings like this. Thanks. Sure. Thanks for your question. So on S and so so basically, we put this stake as as an asset held for sale. When we do that, you know, we need to basically put the assets at at fair value.

50:59 And that means taking the earn out, so taking a view on the potential earn out and taking the NPV of that earn out. And fundamentally, you should, you know, the way you you should think about that 44,000,000, it is the time value of that earn out. So, you know, when when that earn out is paid, essentially, you know, that that 44,000,000, you know, is is a non cash item. In terms of the and it's a one off. In terms of the CapEx, so the reason, you know, the reason there's not a ton of key money in the first half is just because we haven't had a lot of openings in the first half. Typically, you know, they're more skewed to the second half. We haven't seen anything, you know, we haven't seen pressure on key money per se, and we're still within exactly the trajectory we had at the CMD, which is Accor's CapEx will grow from 200 to 300,000,000 between '23 and '27, and, you know, '26 will obviously be there for up from '20 up from '25 due to key money, but it's more related to the to the pace of openings than the actual, you know, key money per per asset.

52:13 And I'll let Sebastian. So on the it's right. It's it's going better than we expected when it comes to when we signed with Air France on flying blue. We have now this double dipping in between the two companies on earning miles when they stay at an Accor hotel, and we earned all points when you fly with Air France scale, and it's the volume is better than we expected, and the price is actually very profitable for Accor. The what we're doing with the airline industry is we're going actually further ahead on two fronts, which is interesting. The first front, which we started seven years ago with Qantas in Australia is on Accor being participant on what I talked about, which is enhancing the travel experience. So, Qantas, we signed with them. Accor on a white label is fully responsible for managing the first class business class laundries of Pointer's all over the world. We are doing it and we are conducting the same kind of analysis with a lot of actually Emirates carrier.

53:17 So are we with US carrier looking at us for their first class landers, which Accor could be the the service operator. And on the elite match status, we're also progressing on many of those airlines on giving cross benefit, only earning point and burning, but actually on status match. So it's I think on a scale of 10, we already we only have three or four, and we you're gonna see visible action and initiative being confirmed to you likely in the next twelve months of significance. So that has to do with the display of the 115,000,000 of Accor in so many geographies and so many hubs. So and Uber is also part of it because since you can actually have your airline partnership, and then when you get to the airport, you can through the old.com get to Uber services.

54:10 All of that comes together between the airspace and when you actually get on the floor. That's that's where we are. But it's a it's a big priority for us because as some of you Jamie talked about is that partnership revenues doesn't cost Accor much, and it's extremely rewarding part of SMB and EBITDA, and that permits to get that 50% to 20% growth a year. And there's no reason why we should not be accelerating on those. Great. Thank you. The next question comes from Alex Brignoll from Rothschild and Co Redburn. Please go ahead. Good morning. Thank you. I'll go for three as well then. Two relatively simple ones and then one which is an opinion one really. On China, you obviously had talked about higher churn rates and then churn coming down just for the overall portfolio. How do we think about the churn in China within that? Is this a sort of pull forward of churn that had you broadly expected with Wazoo? Or is this just sort of different to the cadence of churn that you had talked about historically?

55:21 On Enismore, could you just reiterate, I think, Martin, that you've told me directly in the past that you would never go below a controlling interest in Ennismore. Could you just talk about what the options are potentially with an IPO? And then the third one is owner costs, something I've had an interest in for a while, but it seems like Marriott's let the cat out of the bag a little bit on economic balance between franchisors and franchisees with their credit card deal. Could you just talk a little bit about your relationship with your owners, the fees that you're paying? You obviously make materially less credit card fees than Marriott does, but also the fees that they pay for the administration of marketing funds and loyalty funds and how those relationships are going? Thank you.

56:11 Yeah. On on on China, it's I should have said it earlier. You make me think of it, Alex. It's let's not underestimate the impact of the real estate crisis in India in China. Most of the wealth of families in China happen to be in real estate. And that real estate has been going south for the last two and a half years, which is why you have an enormous GDP slowdown. And since those guys have less wealth, they travel less and the most impacted segment is the lower economic segment and lower mid scale, which is why IBIS is kind of actually going from tertiary cities to actually capital cities in which there is more wealth. So when you're gonna see a recovery, when and if you're gonna see a recovery on the real estate depending economy, you probably gonna have a lesser churn in IVs segment within China. However, I really believe that EdgeWorld will continue basically improving their own network with better quality premises as opposed to the one open twelve or fifteen years ago. So it's still gonna be significant, but as I told you and I again, I'm I'm so draconian on this one. It is fine.

57:23 Absolutely fine. It has no financial impact on us of significance, if they were to close more Ibiza's hotel in China. As long as the Ibiza brand continue to be open with a better fee stream, it's fine. This I know it bugs you on the net unique growth percentage, but please deep go deep into it, dive in, and then you understand that, yes, it is very much non material at the Accor level. On any small, it's can't say too much. One is because this has not been made. What I can actually confirm to you, which is very, very true, is there's no scenario in which Accor will go underneath 51% of any small. We have today 60%.

58:08 If we were to do a transaction, that diamond has to be preserved within the Accor consolidated EBITDA. It is the fastest growth EBITDA machine of Accor. It is impacted by The Middle East this year. But Middle East has been super, super robust for the last ten years and will be very robust for the next ten years. So we're very happy of the Middle East footprint both from Accor and for AnySmoil. So it is it is a vital crucial subsidiary of Accor, and we should preserve that control of the growth and lot of decision making of any small. So and on the owners cost, we have absolutely no debate whatsoever on the relationship on who gets what, on everything is fully transparent, we have so called marketing fund, Everything is done. We have a very, very good relationship with the largest fund sizing association in Europe.

59:04 Actually, better and better every year passing. I went with them two weeks ago in a big form. The one thing I'm gonna talk about, and it's surprising enough, none of you asked a question so far, because that is part of the ongoing discussion for the last six months with the owners is AI. Is what they're looking at our core as a guide, as a as basically the curator, the orchestrator is how could we at core level, incorporate AI automation within the premises of theirs? Can we actually help them reduce their costs? Likely 15 to 30% over the next twelve to eighteen months. How could we actually have a better personalized itinerary journey knowledge database of the old members, not old members?

59:51 How could we actually deliver a better service? How could our core incorporate AI on anything which is PMS, CIS, CRM? Those are the bulk, if not two third of our conversation as it should be with our owners over the last twelve months, and would be probably 90 of our conversation next twelve months. Has nothing to do with who gets what on the fees. It's how could we be better both for them on both for for them on the margin and net in their pocket, and for us as a better orchestrated distributor. So and that's really the and it's a very open and constructive discussion, because there's a lot of savings to be made and a lot of actually RevPAR to begin. That's that's the relationship it stands.

1:00:40 Brilliant. Thank you very much. The next question comes from Simon Lechepre from Jefferies. Please go ahead. Good morning. I've got three as well, please. First of all, on hotel asset and others, could you quantify the revenue performance of Paris, Societe and Eureka for H1? And how much cost savings came to offset this this revenue drop? Secondly, on branded residencies, if you can give us an update. I think total fees last year were around 50,000,000. So how much do you expect for this year? And also, how should we think about next year? Is there any delay in construction and openings on the back of the conflict given the Middle East exposure there?

1:01:26 And lastly, coming back on your question on the NURGAN, looking at Luxury and Lifestyle, I think it was up 7.2% in H1, 7.5% last year. So quite impressive, but still slightly short of your medium term target of 8% to 10%. So can you explain where is the gap coming from? And also, you can give us some color on the churn versus the the growth openings in luxury and lifestyle. Thank you. Sure. So hey. Good morning, Simon. So on on and other, if you look at the, you know, at at the first half results and most of the and, you know, the impact is really in Paris society and recast business. I mean, basically, the way you should think about it is there's about a 10,000,000 EBITDA impact on h one from in hotel assets and other, and that's basically the impact on the on the restaurant business. And that's net of the, you know, profit protection plan, obviously.

1:02:33 Residents, you know, branded residents should be a bit, you know, a bit lower in terms of fee this year because we're gonna have some, you know, potentially some some delays in the in the openings going into next year. But we're still, you know, we're still very optimistic about this, you know, this business. We're not seeing cancellations really of projects and what we are doing very, very actively is actually diversifying the portfolio of branded residencies and moving to European and US and and Mexican markets. And so we were, you know, quite comfortable with the fact that we will continue to grow our fees in branded residencies. On the on the lux lifestyle, on the pace of growth of six six and a half to seven and half percent versus eight and ten. It's it's mostly due to and Fairmont, and it depend on the year.

1:03:30 Fairmont was actually good last year. It's actually much lower this year. It's it is 8% if you exclude the JoAnjo transfer. So I guess close enough to date and 10. But it's it varies depending on the year. I I'll give you an example. Fairmont, Raffles, bit slower today in terms of opening, but it's gonna be much faster in the next twelve to eighteen months. We've been signing big raffles fair amount in Paris, in Le Cuomo, in Courchevel, and many great places in in Daijaipur and other in India. So and sofit then has a great pipeline in some of since the brand has been totally reestablished by Mood Bay and Soyuz and Galleries. So it's a it is not as robust for the years '26, '25, '26, probably because they spend more time in basically looking after the detractors.

1:04:21 Basically, trying to get a lot of the hotel being redeveloped and normally being spent at. Nothing to worry about. The lux lifestyle are on the dot in terms of the lifestyle is on the dot on what they need to do. I'm just saying something which sounds evident to you is we have to be auto cognizant, I guess. The guys and the management level of any small, They have to face the Middle East crisis, and they have to work their ass off on whether Anysmall could be public that looks that basically implies a lot of different filings in terms of actually administration, bureaucracy, disclosure, and so forth. Yes. They're trying to do everything at the same time, but I guess let let's actually not be asking too much of them. They cannot be on the road developing the same time they actually with us on trying to get the best decision ever. So nothing to worry about, and we're gonna be between the eight and the 10 certainly moving forward. And we are today the 8.2 with Joe and Joe not having been transferred.

1:05:23 Voila. So I don't know whether we probably should have a last question because then we need to get going. Maybe there was no last question then. As a reminder, if you wish to ask a question, please dial 5 on your telephone keypad. Well, again, so it's well, I I shouldn't have said what I said because you have no further question. I'm, again, very thankful for you connecting. We were gonna go on a road. That was Jean Jacques, which is right across the table for me. Martin and the team, very much looking forward to meet some of you in the next four or five days, and we keep fighting.

1:06:09 We keep fighting, and we're gonna end up where we need to be to be on the mark for the UN numbers.