Accor SA (AC.PA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Accor H1 '25 Results Conference Call. For your information, today's conference call is being recorded. [Operator Instructions] I will now hand over to Sebastien Bazin, Chairman and CEO of Accor. Please go ahead, sir.

Well, thank you. Welcome, everyone, on this H1 release. I'm here with Martine, Pierre-Loup, and I'm going to leave the floor very quickly now to Martine, and then I'll get back to you for the conclusions and for Q&A, of course. Martine, over to you.

Thank you, Sebastien, and good morning, everyone. So I'll start with the financial highlights on Slide 3. And I'm pleased to report that we've delivered another quarter and a semester of solid growth despite multiple headwinds, both from geopolitics, but also foreign exchange. Second quarter RevPAR like-for-like remained solid at plus 4.1%, and it's driven both by price and occupancy and benefiting from our geographical and segment diversification. In the first half, RevPAR was up 4.6%. NUG on a last 12-month basis reached what was an expected low point for the year at 1.9%, and this is mainly reflecting a base effect related to the conversion of the Daiwa portfolio in Japan, which took place in the second quarter of '24. Our pipeline, on the other hand, grew at a very healthy rate of 10.7% over the same period, which supports the acceleration of openings and net unit growth, which we expect in the second half. Now the euro has appreciated both rapidly and significantly since the first quarter against pretty much every currency and in particular, against the USD, and therefore, all of the USD pegged currency. Now our FX exposure is predominantly in currency which move with the U.S. dollar. And as a result of that, the erosion of the dollar has had a negative impact on our reported results as of the second quarter. Now at constant currency, group revenue increased by 5.1% in the first half. And at reported rates, revenue grew by 2.5%, reaching EUR 2.745 billion. Now we translated this solid activity into solid financial results, which demonstrates the solid discipline. Recurring EBITDA is up 13.5% (sic) [ 13.4% ] at constant currency, which is above our midterm guidance. And at reported rates, recurring EBITDA is up 9.4% to EUR 552 million in the first half. And as you can see, foreign exchange rates had a negative 4-point impact on EBITDA growth in the first half. Recurring free cash flow improved to EUR 136 million. That is a growth of 13.3% versus prior year. And finally, we keep to our shareholder return policy with EUR 503 million of cash returned to shareholders in the first half through dividend as well as the first tranche of our '25 share buyback program. Now let's turn to the second quarter RevPAR on Slide 5. I'll start with PME. PME posted a second quarter RevPAR growth of 2.9%, still largely driven by pricing for about 3 quarters and occupancy for a quarter. Occupancy reached 69% in the quarter, which is still below 2019. In Europe, North Africa, or ENA, RevPAR growth accelerated from 0.6% in the first quarter to 3.3% in the second quarter, primarily driven by France. Occupancy was the main driver, reaching 73% in the second quarter for the ENA region, which is a 2-point gain versus prior. In France, RevPAR was up in the mid-single digit, driven by Paris, which was up in the low double digits. Paris benefited from very strong tourism inflow as well as favorable comps. In June, you might remember, we had a slowdown in 2024 ahead of the Olympics game. The RevPAR in the [ province ] grew in the low single digits in the second quarter. In the U.K., the low single-digit negative momentum for RevPAR remained both in London and the regions, still reflecting a depressed economic environment. In Germany, RevPAR was down in the mid-single digit with unfavorable comps in June, which, as you may recall, hosted the UEFA football championship in June of 2024. In MEA APAC, Q2 RevPAR softened to 1.2%, and this is primarily driven by Saudi Arabia, which was negatively impacted by the timing of the Ramadan as well as some stricter entry rules for the June Hajj Pilgrimage. Now China's negative high single-digit RevPAR growth continues to weigh on the region. If you exclude China, MEA APAC region RevPAR is up 3.6% in the second quarter, primarily driven by price. In the Middle East, performance was flat overall, but highly contrasted. U.A.E. was up in the low double digits despite some cancellation due to the tensions in Iran. But Saudi Arabia, as I was just commenting, recorded negative growth for the reasons highlighted previously, timing of Ramadan and stricter entry rules for the June Hajj Pilgrimage. Turning to Southeast Asia. Southeast Asia was solid despite Thailand being negatively impacted by what was a lower inbound flow from China due to security concerns in Thailand and Indonesia, facing economic headwinds due to government budget restrictions. But the other countries in Southeast Asia, mainly Japan, Korea, Vietnam, continue to perform very well. Pacific RevPAR rebounded in the second quarter with mid-single-digit growth following what was a soft Q1, which had been impacted by the Alfred cyclone in Queensland in March. And China, as indicated, so no improvement in Q2 with still negative high single-digit RevPAR growth concentrated in the eco portfolio, which, as you might recall, is the vast majority of our portfolio in China. Turning to Americas. Americas continues to post very solid growth with Q2 RevPAR up 9.1% versus prior year driven by Brazil, which had solid pricing as well as solid corporate demand. Turning to Lux & Lifestyle. RevPAR growth was 7% in the quarter, equally driven by pricing and occupancy. Occupancy was up 2 points in the period for Lux & Lifestyle. Luxury RevPAR in the second quarter was up 5.3% driven by both price and occupancy with very solid momentum across all the brands. And as we noticed in the first quarter, Luxury tend to overperform other segments in all geographies. Lifestyle posted an impressive 12% RevPAR growth driven by both price and occupancy with a very strong performance again in resorts in Turkey, Egypt and U.A.E. Moving on to Slide 6 on Accor network and pipeline by division, and I'll start on the left with PME. Net unit growth was 1.5% on a last 12-month basis, an expected low point due to the Q2 '24 base effect again from the opening of the Daiwa portfolio in Japan. In addition, this year, openings will be more skewed towards the second half whilst, on the other hand, churn was more front-loaded as we shared in our Q1 call. Overall, we do expect churn and openings for the PME division to be in line with prior year on a full year basis, but again, with a significant acceleration of the NUG in H2, which is supported by the pipeline. And actually, PME pipeline reached 184,000 rooms at the end of June, which is up 12% over the last 12 months. And it is worth noting that we just signed Accor's largest hotel worldwide in the U.S. with the signing of the 2,800-key Treasure Island Hotel in Las Vegas, which will be under the Handwritten brand. M&F revenue at EUR 1,200 was stable. Moving to the right. Luxury & Lifestyle Network grew by 4.3% over the last 12 months, still driven by Ennismore. As we shared with you in our first quarter call, LTM NUG for Luxury & Lifestyle is impacted by the phasing of the churn, which is predominantly in H1, actually Q1, notably in Lifestyle, and the postponement of some openings to the second half, including 2 large Rixos property in Egypt. Now it is worth noting the opening of 4 Fairmont in the second quarter of '25 as well as some Ennismores opening, Mondrian on the Gulf Coast and the Hoxton in Edinburgh. Lux & Lifestyle pipeline continues to grow at a sustained pace, plus 6.3% on an LTM basis, and it is driven by Ennismore. Overall, the pipeline for Luxury & Lifestyle is 45% of the existing network. M&F revenue per room, EUR 3,900, also stable. Amongst the notable openings planned in the second half, we have Faena opening in New York City; Delano, Miami South Beach; Mama Shelter, Zurich; and Hoxton in Dublin. So at group level, NUG again reached 1.9% over the last 12 months, which we hold as a low point, and we anticipate a strong acceleration in the second half based on what is a very robust pipeline, and conversions in the first half were 56% of our openings. Now let's move to Slide 7 and the revenue breakdown by segment. As I stated in my introduction, group revenue reached EUR 2.745 billion in the first half. That is up 2.5% on a reported basis versus prior year. And again, the reported growth is significantly impacted by FX, a very limited scope effect over the period. On a constant currency basis, revenue was up 5.1%. For Premium, Midscale & Economy, revenue was essentially flat at EUR 1.475 billion with a similar FX impact as the one for the group. Management & Franchise revenue was down 0.8%. There's a 2-point negative impact, which we had called out in our earnings call in the first quarter, which is related to the conversion of some of our management contracts to franchise contracts, and that is weighing on that line. And in addition, of course, FX is also negative for M&F revenue. Services to owners grew at a higher pace than M&F fees, reflecting improvements in both distribution and loyalty. We continue to gain share in our preferred distribution channels where our revenue intake is higher, thanks to stronger loyalty contribution. ALL, which is our loyalty program, is sustaining high single-digit growth in its membership base in the first half. Turning to Hotel Assets & Other, performance is driven by Australia and Brazil and is therefore significantly impacted by the weakening of both the real and the Australian dollar versus the euro, with a negative impact in the mid-single digit from FX in Hotel Assets & Other. For Luxury & Lifestyle, revenue was up 5.6% versus prior year to reach EUR 1.312 billion, also impacted by FX. Management & Franchise revenue was up 0.6%, with difficult comps stemming from the front-loading of the branded residence fees in H1 '24, which we had called out in our H1 '24 earnings call. Now on a full year basis, this has no impact as we expect full year residence fees to actually be slightly up versus prior year. So if you adjust for that phasing, then Luxury & Lifestyle M&F revenue growth would have been 7.5% at reported rate. Services to owners revenue primarily reimbursed costs for Luxury & Lifestyle, which are slightly down in the first half and largely due to FX. Hotel Assets & Other reflects the very strong performance of Paris Society venues as well as the acquisition of Rikas, which took place in March of 2024. Turning to Slide 8, Management & Franchise revenue. M&F revenue is essentially flat in H1, reflecting both headwinds, but also the 2-point impact on the conversion from management to franchise in PME and the high comp base last year of residential fees in Lifestyle. Starting with PME, M&F revenue was down 0.8% in the first half. ENA reflects lower RevPAR growth as well as, again, the contract conversion, which is where the impact is concentrated really in this region. MEA APAC and Americas are both significantly impacted by FX. Constant currency growth remained solid in the mid- to high single digits in both regions. Luxury & Lifestyle M&F revenue growth was 0.6%, again, 7.5%, if we adjust for the phasing of residential fees. Turning to EBITDA on Slide 9. The group's overall EBITDA reached EUR 552 million, again, up 9.4% on a reported basis and 13.4% on a constant currency basis. EBITDA growth reflects 4 points of FX headwinds and phasing effects, namely residential fees and marketing spend. Adjusting for phasing, both in marketing and residential fees, which we expect again to be broadly neutral on a full year basis, and FX, the underlying performance of EBITDA in the first half would be 8%, which is a very solid performance. As for M&F, EBITDA growth is constrained by the lack of top line growth for the reasons shared previously. Overall margin is flat as PME M&F margin improvement is offset by the high comp base again of residential fees. As for STO, the significant growth in STO, services to owners, reflects the structural improvement in distribution and loyalty EBITDA and a phasing of marketing costs, which is skewed towards H2 in 2025. Last year, we had a larger portion of our spend in H1 ahead of the Olympics. Now again, the phasing effect is neutral on a full year basis as we expect full year STO EBITDA to be in line to slightly above prior year. As for Hotel Assets & Other, the growth from Rikas and Paris Society is partially offset by PME. Now regarding Premium, Midscale & Economy, EBITDA is up by 6.7% to EUR 385 million at reported rates. As for M&F, slight EBITDA growth is reflecting a 1-point improvement in M&F margin, which is in line with our midterm perspective. As for STO, EBITDA was positive for the reasons mentioned previously, with favorable marketing phasing more benefiting PME. As for Hotel Assets & Other, EBITDA is impacted by the tropical storm in the first quarter and the disposal of Accor Vacation Club in March of last year. Regarding Luxury & Lifestyle, EBITDA is up a solid 14.3% to EUR 224 million at reported rates. As for M&F, EBITDA is down 2.4%, again, mainly due to the comps in residential fees, again, neutral on a full year basis. As for STO, EBITDA is slightly ahead of prior year. And as for Hotel Assets & Others, EBITDA mainly reflect the growth of both Rikas and Paris Society. Moving on to Slide 10. We achieved a net profit of EUR 233 million in the first half which compares to EUR 253 million in the first half of last year. If we adjust for Essendi, Essendi is the new name of AccorInvest, adjusting for Essendi contribution, which had benefited, you may recall, from gains on asset sale in the first half of '24, net profit would be up by 19% in the first half. Now let me call out the main highlights. Other income and expenses as well as D&A are essentially flat to prior year. Share of net profit/loss of equity investment was a negative EUR 19 million. This line is mainly driven by Essendi, our stake in Essendi. And as I was commenting earlier, this line saw a profit in the first half from capital gains resulting from the asset disposals of Essendi. Net financial expense, 2/3 of the increase that you see here is actually noncash and is driven by the variation in noncash FX gains and losses. This year, we recorded a small loss versus a gain last year. Cost of debt is actually stable in the first half of 2025 versus prior year same period. Income tax expense is down from prior, mainly from a baseline effect. We recognized in the first half of '24, a tax expense related to the reorganization of the group. Turning to cash flow on Slide 11. The recurring free cash flow improved to EUR 136 million, which is a 13% growth versus prior year with a slight improvement in cash conversion ratio, from 24% to 25%. Really, 4 main highlights that I will call out. Cash interest slightly decreased. It's really mostly from favorable timing. Cash tax increased from EUR 105 million to EUR 121 million this year, and that is due to higher taxable profits in foreign jurisdictions where we have net operating losses, which essentially have been extinguished. Recurring investment increased from EUR 90 million to EUR 120 million, and that is completely aligned with the strategy and the guidance we communicated during our CMD, which is to bring, over time, our annual recurring investments up to EUR 300 million, and that is to support the network growth in Luxury & Lifestyle, which tends to call for high [ cumulative ] in PME. The working capital improvement from prior year reflects the continued improvement and control of our cash collection. And I do remind you that our working capital change is seasonal in nature and therefore, negative in the first half and positive in the second half. Finally, net debt reached EUR 3.094 billion (sic) [ EUR 3.096 billion ] at the end of June 2024. As a reminder, net debt was EUR 2.5 billion at the end of December last year. And the main movements in the first half are really the recurring free cash flow, the return to shareholders and the reimbursement of the outstanding hybrid, which was refinanced in the second half of last year. Finally, let me now introduce our guidance for 2025 on Page 12. RevPAR like-for-like growth is expected in line with our midterm guidance, between 3% and 4%. It reflects the solid start of the year, but also in the second half, the negative comp base of the Olympics, which will impact the third quarter, which, as you may recall, we expect to be our weakest quarter. Net unit growth is expected at around 3.5%. That is a robust acceleration versus the first half. Given the high volatility of FX, we have decided to provide a recurring EBITDA growth guidance at constant currency, which is expected between 9% and 10%, in line with CMD perspective. Assuming the forecast by Bloomberg for the second half, which has the U.S. dollar at 1.17 against the euro, our reported full year 2025 EBITDA growth will be negatively impacted by about EUR 5.6 million, which implies a stronger FX headwind in the second half, given again where the dollar closed in the second quarter. And this concludes my opening remarks, and I will now turn the floor over to Sebastien for closing remarks.

[Foreign Language], Martine. So on the last 2 slides, 2 to 3 takeaways for the first semester of 2025. What is important for, me and obviously, for you, is validation of the robustness of the business model, the transformation done, the segmentation in between PME, on one side, Luxury Lifestyle on the other side, through ownership of all the CEOs of both divisions, they are performing well. They're basically doing maximum on confirming operating leverage between revenues to EBITDA and, of course, a successful model when it comes to diversification of geographies and trying to get the growth wherever it exists on this planet. Because of the segmentation, because of the management ownership and thanks to the diversification of geography, we have shown a solid result for H1 despite a EUR 21 million cost of currency impact. The third element, which we talked a little bit about it, but you're going to be hearing us talking much more about it, is the loyalty program, which is stronger and stronger every trimester passing since we've launched 4 years ago, ALL. We passed the 100 million new member a couple of months ago. We said to you last year, I guess, we had 11 million-plus new members in 2024. I do expect that, I guess, we're going to do even better in 2025 in terms of new member. It is very attractive and solid with a greater numbers of partnership, and you've seen that into the STO number in terms of contribution to profit. And finally, it is our compass or our North Star, we're never going to let go from our commitment on achieving the CMD target as promised to ourselves and promised to many of you. When it comes to H2, we clearly are looking at the impact of currency. I know we've talked quite a bit about it, and we just cannot do nothing about it. So we are reentering a very stringent operational and financial discipline, trying to mitigate whatever we can from the foreign exchange into contribution to profit. We're going to be accelerating the opening and the development. Martine talked to you about the 10.7% growth in pipeline. That's never been better in terms of signing pace in all different segments and across all geographies and certainly back strong in Europe when it comes to the premium segment. Three, we are really deep in the process when it comes to Essendi, which is, as you may know, the new name for AccorInvest. The vendor due diligence is almost finished. We're probably 90% there. We're talking 4,000 documents into the data room. And of course, we have interested parties looking at all that immense data room vendor due diligence, and we expect to be on time when it comes to receiving letters of interest and offers in the second semester of 2025. And finally, let's finish orderly the share buyback program of EUR 240 million for the H2 and probably starting as early as next Monday. Well, that's what it is. I can't wait to go deeper with many of you when it comes to Q&A, and let's do it now.

[Operator Instructions] We'll take our first question from Jamie Rollo from Morgan Stanley.

Three questions, if I may. First of all, just on the implied second half guidance, RevPAR obviously has slowed down to, it looks like, 1.5% to 3.5%. You flagged the Olympics. But are you factoring in any other slowdown there outside of sporting events? And also the EBITDA guidance, also quite a sharp slowdown to sort of 5% to 7% constant currency. Some of that looks to be RevPAR, some of it looks to be services to owners, where I think you said similar to last year, so that implies minimal profit in the second half, if I'm right. So could you talk a bit about that sort of second half slowdown, please? Secondly, on the net unit growth guidance of 3.5% from 1.9% at Q2, how much of that is coming from the portfolio deals and some of the conversion brands like, you mentioned, Treasury Island? Should we expect a similar fee contribution to the rooms contribution on those, please? And then just finally, on currency, are we correct to calculate a sort of rule of thumb that 1% on your basket of currencies is around EUR 12 million to EBITDA. And with the dollar now back up to 1.15, not 1.17, is the EUR 60 million headwind a bit too big?

I like it, Jamie, when you start with 3 questions and you end up with 6. So let me actually turn it to Martine on most of it, and then I'll interject on some.

So with respect to RevPAR, you're right, the second half is softer than the first half. Most of that is really the Olympics Games, which impacts ENA, France in particular, and therefore, the third quarter. It's really mostly the Olympics in the third quarter, and that's where you'll see the impact of that slower RevPAR in the second half. With respect to EBITDA, you're right, the second half will be softer than the first half. And this really related to the STO line. We actually expect the performance in M&F at constant currency to be improved, particularly in Lux & Lifestyle, right? But it's really the services to owners that will drive that slower growth in EBITDA in the second half. And as I shared with you on a full year basis, we do expect STO to be in line, if not slightly above last year. And it's really driven by the phasing of our marketing spend. Last year, we had a phasing of the spend that was ahead of the Olympics. This year, we've actually concentrated our spend more in the second half also to support demand. On net unit growth, actually, all of the contracts that we have in the pipeline and that will open in the second half at a similar level of fee contribution. We don't have portfolio deals per se with lower M&F fee per room. So you should not expect dilution from that. We're very focused on maintaining, if not increasing fee per room. And on currency, actually, we have provided on Slide 17, a currency sensitivity as well as the expected currency impact. And you're absolutely right, your sum is very, very spot on.

We had EUR 11 million, not EUR 12 million?

We did EUR 11 million, so you're very close, Jamie. And if the dollar -- again, the EUR 60 million impact that we've given is based on the dollar at 1.17 for the second half. If the dollar improves from that level, then you should have a lower FX impact than the EUR 60 million we called out.

We will take our next question from Muneeba Kayani from Bank of America.

Can you talk a little bit around incentive fees and how you're thinking about that for your guidance for this year? Then secondly, just on this new Treasure Island in Vegas, can you touch about how you're thinking about the U.S. at this point and kind of your strategy there? Would you be looking at more of these? And what was it about this specific transaction that was attractive for you? And thirdly, to your point around loyalty, hearing a lot more in your comments today on that. So it's clearly reflecting the launch of that program. What do you have ahead? How should we be thinking about it in terms of EBITDA contribution in the next 2 years?

I'll take the first question and then turn it over to Sebastien. So on incentive fees, it's actually quite stable as a percent of our M&F fees as is the margin in hotels.

When it comes to Treasure Island in U.S., the deal actually happened quite fast in between the owner of that property and ourselves. It was actually meant -- it was built upon one thing which is validated and very interesting. Las Vegas, as you know, is very much U.S.-centric in terms of demand. And it's a very large property, and that ownership wanted to diversify from the domestic U.S. gamblers and visitors and wanted to attract the greater European, Asian populations or Middle Eastern, for that matter, and actually turn to Accor by saying, "You guys have the best distribution, the best network and the best presence away from America. Can you bring me that additional customers that I do not enjoy today at all?" So it's a diversification of demand for himself. Two, basically getting associated with Accor Live Limitless, the ALL program, where he wanted to get the partnership and the benefit from all of his customers to enjoy the double points being earned on the ALL program because some of the U.S. domestic demand is actually also traveling abroad, and he wanted to get another benefit for them; and three, trying to get a better direct distribution and moving away from the OTAs, which he was a little bit too dependent from. So it's both loyalty, distribution and geography of demand. And it's interesting because that kind of demand did not exist a couple of years ago, 3 years ago. Handwritten was actually not even created a couple of years ago. So that soft brand permits to basically be attached and connected to many properties, many large properties in the U.S. and outside of the U.S. And people are looking today even more so deeply on the benefit of ALL, which is actually in many ways, very similar to Bonvoy outside of America. So we're going to continue going to go deeper in the U.S. We're going to be extremely disciplined because we don't have the market share that our competitors have in the U.S. But you're going to see more of those transactions likely in some targeted cities where we can contribute European demand. And two, you're going to see, of course, an acceleration of any small expansion through its 18-portfolio brand. And we've talked to you about Delano reopening in Miami. We've talked about Faena opening in New York. And there is some, which I can't talk to you about now, but likely to be confirmed and signed in the next few weeks, many of them being in Americas. So Americas is clearly a priority for us. Americas at large because that includes Mexico, in which also we are enlarging our footprint. So it is what it is.

And just on loyalty and how do we think about it in EBITDA contribution?

Loyalty, I'm old being in this business now and certainly at Accor. We, in January, February 2020, was actually in Berlin. We've launched the new program, which we called ALL, Accor Live Limitless formerly was called Accor Le Club Hotel. That program, Accor Le Club Hotel, was launched in 2005, which is exactly 20 years after the launch of similar loyalty programs done by Marriott, Hilton in 1985. So we've been late 20 years. So it's about catching up on time. And at that time, it was a EUR 50 million program. Now it's already EUR 100 million in a matter of 5 years. And we said at that time, we should be going from EUR 6 million revenues from partnership attached to the loyalty program in 2020 and targeting for EUR 100 million in partnership revenues, and then you transform 30%, 40% of that in EBITDA. So I won't be more precise yet on the numbers, but I can confirm to you that, I guess, we're going to be reaching that over EUR 100 million revenues in the next 18 months. So it is really a matter of getting those revenues. So those are 75 different partnerships, and we're probably going to be crossing over 100 different partnerships in the world, and each of them have EBITDA contribution to the extent of 25% to 40% margin. It depends on geography. So we're still far from the EUR 1 billion revenues from Bonvoy or Hilton Rewards that they have in America. But at least we are doing so much better than the minuscule EUR 6 million in 2020.

We will move to our next question from Jarrod Castle from UBS.

Three for me as well. You obviously announced the second tranche of your buyback, the EUR 240 million, which, I mean, you had given us some good guidance in February. Did it cross your mind maybe to do a bit more than that? So just kind of how you're thinking as we move on? Obviously, your net debt is a little bit higher as well. And then in the past, you've also spoken about unlocking value for Luxury & Lifestyle. Any thoughts there at the moment? And then lastly, I think you sold one of your nightclubs. Is there anything more to sell when we look into the second half of the year?

The second tranche on the EUR 240 million, and you're absolutely correct, is exactly what we have been announcing 4 months ago by doing EUR 440 million, of which we've done the first couple of hundred million, and we're just finishing the job, give us the benefit of another quarter and actually a better understanding of where we stand in terms of activities. We don't plan at this stage to enhance the EUR 440 million share buyback, but it is a constant discussion being held at the Board level in terms of actually capital allocation. So it's not a no, but it's not planned as of this minute. On unlocking Luxury & Lifestyle, only confirming what I've said to you in the first quarter that we are spending a very large amount of time on how to accelerate further Ennismore in the U.S. and in many different growth geographies because we believe we are probably a couple of years ahead of any of our competitors when it comes to the depth and the growth and EBITDA of Ennismore as an entity. It needs to shine better. It needs to grow faster. It needs probably to have a different currency in order to attract higher level of partnerships. So we haven't launched anything as of yet, but we do spend a fair amount of time with the Ennismore shareholders and Ennismore management team on how to really respond to what we want to do when it comes to an accelerated expansion in many geographies and mostly in U.S. for that matter. So too soon to disclose anything, but a continuation of reflections and development process. When it comes to nightclub, yes, we sold it. That was part of Ennismore actually. That was sold, and it was sold only because it was not EBITDA contributing. It required a lot of different personnel. And it was better to be put under entrepreneur ownership. And it was enhancing the margins of Paris Society, which owned the nightclub at the time. So by actually eliminating 120-plus employees who were actually involved with nightclub, it is a further boost and a margin expansion without any EBITDA disruption. But there's nothing of notice that I could disclose to you at this minute. But anything of that sort, which is limited EBITDA contribution where we don't need to remain as the shareholders, yes, we are diving into any rocks that we can actually turn.

We will move to our next question from Leo Carrington from Citi.

If I could also ask 3 questions. First is a follow-up on the point you've been making around the U.S.A. Has anything changed about the appeal of this market? Is it that Accor's brands and loyalty program is simply stronger, hence, Treasure Island? Or is there something about owners in the U.S. looking at Lifestyle in particular, let's say, and your brands that's, I suppose, new to the market? So just more about what's changed about that market for you would be really interesting. Secondly, I mean, you've mentioned the RevPAR outlook and away from the sort of Olympics comps, can you just give us some more color in terms of what's happening across the key categories of corporates, leisure travelers and groups? And then lastly, just a quick modeling question on the H2 Essendi contribution. Should we be expecting an H2 profit?

Sure. When it comes to -- I'll leave it to Martine on the RevPAR outlook, and I'll go back on Essendi. Leo, what I've been telling on the U.S., there's one significant element. We've been going to NYU large hotel conference every year. We, of course, attend ALIS in Los Angeles. For the last couple of years, probably because of the size of the portfolio today of Accor, which is 48 brands, we've never seen so many entry calls from owners in America, including [ sovereign fund ]. In asking whether they can get a pitch from Ennismore, from Sofitel, from Fairmont, Handwritten was not expected, and that was a phone call we received. There is an enormous envy from hotel ownership in U.S. to probably diversify away from what is today 85% U.S.-centric brands organization. And they are looking for something which is different, maybe in some ways more unique, maybe European flavor, but something different. That never existed 5 or 6 years ago. And that sentiment exists all over the different geographies. The one thing we have to be very careful when we receive those phone calls, and of course, we also pitch and we go and try to seduce as many owners as we could, is not to overpromise because of the lack of scale in America, there's things we simply cannot promise in terms of domestic distribution capacity. But it's really a response to a very new environment and the seduction of Accor branch, which probably did not exist before, or actually maybe we do a better job in reaching out. And certainly having opened the office in New York on Fifth Avenue was a great marker in terms of ability to finally meet and basically charm ownership as opposed to receive them into a lobby of a Novotel on Times Square or a Sofitel lobby on 43rd Street. So it's a major move in terms of the way we present ourselves. And it's probably a focus for us on trying to get the best margin where it is, which happens to be in America in terms of fee contribution. So it's probably a combination of both. On Essendi, I'll give it to Martine.

On the Essendi, so yes, we do expect to have a positive contribution from Essendi from gains on sales. So that share of net profit loss of equity investments will turn positive on a full year basis, but it will be a much smaller contribution than it was last year. On your question on color on RevPAR across segments, so what we saw in the second quarter is actually quite similar to what we observed in the first quarter, which is business essentially flattish and the growth is really coming from leisure, which continues to be very solid. And this is true for both individual business traveler as well as group business travel.

We will take our next question from Alex Brignall from Rothschild & Co Redburn.

I'll just ask 2, give us some time back. So on Essendi, I appreciate what you can say it's going to be limited by the process, but you had made comments around the valuation that actually kind of been trending upwards a little bit as we went into the process. Could you give us anything that you can in terms of what people you've been talking at have looked in terms of valuation? Does it look broadly in line with what you had signed, posted before the process started officially? And then secondly, you've talked a lot about how net unit growth would trough in Q2 and then start to accelerate as churn falls and then grow again into 2026. Could you talk a little bit about how that NUG number will look? But obviously more important is revenue, so how fee per room progression will look in 2026 based on the pipeline of things that you expect to bring through.

On the Essendi, way too soon, Alex. Nothing have been articulated, nothing could actually be articulated in terms of valuation by any prospects since they just entered the event of the diligence a couple of weeks ago. So they have to do their own homework and they have to come up with the risk and opportunities. So we'll have certainly a much better insight by, probably, I would say, October, November of this year. But they need a solid 90 days to do the homework before we can actually stipulate anything. So on the NUG, I'll give it to you, Martine.

So yes, so you're right, absolutely, Alex. The NUG trough is in the second quarter, and we do expect an acceleration in the second half. I'm not going to comment on what we see in 2026. But as you know, our CMD guidance is in between 3% and 5%, and we do expect our net unit growth to increase over time. In terms of the fee per room, we do expect that fee per room -- very disciplined on that fee per room and therefore, in the signings that we do, and we expect the M&F fee per room to slightly improve over time. But you have to remember that whilst what we sign is of a higher value in terms of fee per room and what we churn is actually of a lower value in fee per room, given the size of the network, it takes a while before it actually shows up in the revenue line, but stable at a minimum.