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Amidst the recovery of the tourism industry post-pandemic, hotel groups are experiencing a positive outlook. Accor recently announced its expansion plans, with the intention of opening more than 1,200 hotels over the next five years. Despite the current high cost of living, people are eager to travel, resulting in Accor’s shares surging over 40% this year.
Accor currently manages nearly 5,500 hotels, the majority of which are owned by others. They either operate these hotels for a fee or the owners pay to operate under the franchise. Accor’s growth primarily comes from converting existing hotels to its brands rather than constructing new ones.
InterContinental Hotels Group, a larger British rival, plans to add 1,900 hotels to its existing portfolio of over 6,000 premises. Smaller groups like Melia hotels in Spain have also announced their modest growth plans.
Despite the optimistic outlook, it begs the question of whether the industry is overestimating its potential. However, statistics show that the global industry revenue per available room, a key measure of demand, has recovered from $50.7 in 2021 to $73.9 in the previous year. Although revpar remains below the 2019 level of $79.7, there is room for further growth if unforeseen events do not disrupt the industry.
Accor has recently set an ebitda target of €920mn to €960mn for 2023, compared to €675mn in the previous year. Its shares have performed well lately despite a tumultuous decade. While Accor’s strategy has caused frustration among investors, the company has become more streamlined under the leadership of CEO Sébastien Bazin.
Accor’s stock is currently undervalued compared to its competitors. With a forward enterprise value to ebitda multiple of 10.7 times, it lags behind the pre-Covid average of 11.6 times. This presents an opportunity for investors to capitalize on the recovery of the tourism industry following the pandemic.
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