Accor SA (AC) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Accor Q1 2023 Revenue Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Jean-Jacques Morin, Deputy CEO. Please go ahead.

Good evening, ladies and gentlemen. Very happy to be with you today for this presentation of our Q1 2023 revenue. We implemented a new organization as of January 1, 2023. So our segment activity reflects that [indiscernible]. But for reference purposes, the Q1 figures are available in the itinerary under the reporting format. Without further ado, let's move to business with Slide 3. So the highlights of the quarter is that we continue to see an acceleration of the activity in Q1 2023 versus Q4 2022. The RevPAR is up a star 57% like-for-like versus Q1 2022. We benefit from a favorable base effect as Q1 2022 was strongly affected by Anika. But despite that, the performance is remarkable. The 19% like-for-like RevPAR increase versus Q1 2019 is just a demonstration of it. So post-profit, the consumer appetite for covering is higher than ever and Accor is perfectly positioned, both in terms of the market just by being in Asia, and also the brand portfolio in brands like the lifestyle brands in our hands. Talking about net unit growth, we reached 2.9% over the last 12 months. We will detail that a little bit later. And all of that translated into a group revenue of EUR 1.139 million. That is an increase of 54%, versus Q1 2022 on a like-for-like basis. Now all this trading momentum is explained by a couple of things. Number one, a strong catch up from all Asia Pacific destinations, which have RevPAR in Q1 '23 versus Q1 '22 at 77%. Just for illustration, in Asia, flat capacity surged from 50% to 75% of the 2019 level in just 3 months. And lately, the [indiscernible] in China has been an additional CapEx. The second element on the credit momentum is the pricing power that remains remarkable. We have an average on rate, which is 20% above Q1 2022 and 27% above Q1 2019. And last but not least, as anticipated, occupancy is recurring. We see it increasing quarter-after-quarter, and it is now reaching an average 60% in Q1 2023 too. There are some this items like airline capacity and the visual insurance backlog. And that explains why occupancy is still 5% below what it used to be in Q1 2019. To move to the next page, Page 4. This is a summary of how the new segment supporting will work. On the left, you've got the premium, midscale and economy division. And it's a business model, which is led by regions. So we will report 3 geographies, mainly Europe and North Africa, in which we have been operating at ENA, Middle East, Asia Pacific, in which we operate by MEASPAC, and Americas, which is all of America, South America, and so forth. On the right part of the slide, we've got the luxury and lifestyle division, which is the business model that is run by brands. And so we will report it split between what is luxury sells and what is lifestyle. Luxury just for restaurants gathers, hassles, [indiscernible], ambulance, and Lifestyle is everything. If we now move to the numbers and the RevPAR, the analysis of RevPAR, and I am on Slide 5. We've got on the left of the slide, the Premium Midscale economy division, which posted Q1 RevPAR growth of 60% versus 2022. And you can see through the color coding that it is both driven by occupancy recovery on top of the continued strong pricing power. To go and look at the detail of the performance for each of the regions, in ENA, Europe, North Africa, the rest, result is 54%. That covers France, U.K., Germany. France and the U.K, France is about 50% of it. The U.K. is about 15% of the room revenue, and Germany is about 15% of the room revenue, again, to put some numbers around what are those various geographies. And France and the U.K tend to behave the same way, i.e., strong products and very strong capital city. Paris and London were extremely strong, and this is driven by the return of international tourism and, notably, the American tourists. Germany was lagging, but posted a strong improvement versus last year. You must remember that Q1 2022 was divested because of [indiscernible] in Germany. In MEASPAC, the Q1 RevPAR is up 69% versus 2022. MEAT, Middle East, Africa and Turkey, which is about 30% of the region, continued to post solid performance both Qatar, worldwide for cap of Q4. And this is explained notably by Saudi Arabia. There are even plans in Saudi to develop tourism over the next 10 years. We have even invested. But this time, what we see is the reopening of the country has permitted by religious image, to start again in large numbers. And just in 10 days during Ramadan, there were 9 million pilgrims. Just to put it in perspective, this is 50% of the number of children that Saudi saw in 2019. So in 10 days, this is the equivalent of current occupancy in half of the year of recovered area. So very significant flow. The Pacific continues to hold well versus the previous quarter. So Pacific is Australia and largely Australia. Southeast Asia, which is about 25% of the room revenue of the region is benefiting from the return of the reopening of international travel, and this is very soon for Burma and Indonesia. And China, which is about 15% of the whole revenue of the region is recovering post -- the lifting of the COVID policy and notably post- the Chinese New Year. So there is more upside potential with China. Moving now to America, which is dominated by South America, the RevPAR, which is up 49% versus 2019. Brazil, which is 60% of the room revenue of the region is already above pre-COVID occupancy level. So it's the only region which is a more significant figure, to translate the dynamism of the country. To move to the right part of the slide. You see the luxury lifestyle, and you see that the RevPAR growth is 50% over Q1 2022. While price was the driving force of the recovery in 2022, You see now through the blue bar that occupancy increase is pulling the performance. Both segments recovered faster than last year than the rest of the business, which explains why the recovery of lifestyle and luxury, the RevPAR of lifestyle and luxury is slightly behind the RevPAR of premium, midscale and economy. And this is because lifestyle and luxury was much stronger than premium, midscale and economy last year in Q4. There is still, by the way, upside potential on occupancy. In luxury, as administration, the efficacy remains 6 points below the level of 2019. And in terms of the lifestyle division, both DSL and the results reported a similar performance in terms of RevPAR. So that's about the illustration of the RevPAR by segment. If we move to the portfolio of hotels or network, and I am on Slide 6. Again, here, you see the breakdown according to the new organization. So on the left side is the premium, midscale and economy. This is 86% of the room count and 64% of what is being traded in terms of management and franchise, 74% of the group pipeline, about 43% of the value. ENA which is Europe, North Africa is the largest network, as you would expect, and MEASPAC, the near largest as you would expect. To move on the right side of the slide, that's where you see the luxury and the lifestyle Here is only 14% of the room count, but it is 26% of the pipeline. And more importantly, it is close to 60% of the value in the pipeline, which means that what you will see over time is what we've been talking of, and we go into the details when we look at the Market Day at the end of June. You will see a mix in the business, which is going to shift towards luxury and lifestyle which, in time, will be a richer mix and a richer regeneration. Again, as a reference, the average fee traded in the luxury and lifestyle division is 3x more than the one of the premium, midscale and economy. If we talk now about luxury growth, we end up, as I said, of 2.9% over the last 12 months. Q1 is traditionally as the first quarter, the weakest quarter of the year. What you have in terms of environment is what we all know, which is a challenging economic environment with tightening of bank financing and position costs. But what I would say is we are well equipped to go into that with a couple of things. And in first class, we have a very large number of conversions, and that's helpful in those conditions. 59% of what got opened in Q1 was converted. Number two, Asia is recovering. And Asia, if you recall, was the first behind the development over the last years. And so we should see that coming into action. And then last but not least, we talk a lot about mentioning growth in tourism. We would like to talk to you in the future, it is not the number of rooms, but it's regeneration. And you will see that in occupancy yearly, the mix is getting richer which is the capability the group has to generate more fees, which in the end is the bottom line. So that's what we wanted to say on the portfolio. Moving to the revenue on the next page. I am on Slide 7. You see here the revenue which is at EUR 1.39 million in Q1 2023, up 54%. The reported growth is positively impacted by perimeter effects as we are now consolidating [indiscernible]. As you may recall, we acquired [indiscernible] since December last year. And so this is in the Hotel Assets and Other segment, and that explains the perimeter effect. As a reference, also, luxury and Lifestyle generated EUR 477 million of fees of revenue in Q1 2023, and that is about 42% of the total. In total, management and franchise, the revenue is up 77% to reach EUR 268 million. What it really means is that the incentive level is now back to the level of pre-COVID. We are at 35% of the MMS Management franchises being constituted by incentive, and that translates the strong operational performance of the hotel. The recovery is there at the hotel level and support there [indiscernible], and MMS fees are going faster than the rest are. If you move to Service to Owner, the like-for-like revenue is up 60%, so very much in line with the RevPAR growth. And moving to hotel assets, like-for-like growth is smaller at 37%. But again, this is fundamentally a base effect because you may recall that Australia was quite strong last year with recovery, notably of [indiscernible] in Q1 2022, which was summer for that part of the world, so there is a base effect here that explains why it is smaller in terms of growth, as the average of the sector. But in the end, it's good business. If we go to the next page and build down on M&S revenue, you see that it's quite magical because the like-for-like M&S growth to 71%, prem. mid. and eco. is 71% and luxury and lifestyle is71%. So everything is very much unaffected. If you go and look at the premium, midscale and economy, the variation in the regions reflects 2 things, either based or speed of recovery around COVID. So 2 examples, MEASPAC, which is showing the Asia acceleration. So Asia was hit last year and is now much less hit this year. We all know that. It was the trade impact of the world on the COVID recovery On the other hand, Americas was the first region to recover in 2022. And again, when you compare it on a like-for-like basis with number, as you would expect. Moving to luxury and lifestyle, the same type of comment supply. M&F growth is very [indiscernible] expect it's 61%. So all in the same boat. And the luxury of performance versus lifestyle is what I explained before, the fact that when people have the capability to travel again and consume, they weren't very hard on lifestyle brands. And so you have the counterpart here in terms of collective growth. So that's about the presentation of the numbers. Just a few takeaways in order to summarize where we stand. Number one, the Asian momentum definitely firming up. We are expecting it. We anticipated it, it is there. Based on the Q1 performance and our view of the business perspective, we grade the guidance that we have provided of RevPAR. We said in February that we will be somewhere between 5% to 9% we have said today that is going to be a double-digit number. If you look at another angle on how the business can be assessed, which is the balance sheet and the rating agencies, you can see that both agencies acknowledged the hunting in the business, which upgraded us from [indiscernible] i.e., we are back to investment grade of '18. And S&P rated us from outlook stable to outlook positive. And last but not least, we will set at the Capital Market Day on June 27. So it will be a good time to go into much more details, get into the discussion on the potential of development of [indiscernible] to come. With that, I close my comments, and I'll take questions.

[Operator Instructions] We will now take the first question. It comes from the line of Jamie Rollo from MS.

First question, Joe, it also wonderful. Are there any signs of demand weakness at all anywhere? Number two, the double-digit RevPAR guidance is obviously a bit open-ended. Is it fair for us to assume that the bottom end of that is 10% to 14% if you keep the sort of 4% spread? But if so, what's the top end? I guess you can't answer that, but any scale would be helpful. And IMS is back to 35%, back to 2019 levels. But what should they be given the sort of mix of the groups is a bit richer now on luxury and lifestyle? What's the fair comparison? Or is that really a like-for-like full recovery?

Yes, sure. On your first point, so I can only agree with you. On your second point, yes, I mean, again, you answer yourself with the question that you asked. I cannot answer on the top hand but share to 14% is probably what we mean by double digit at this juncture. I think here, Jamie, to be fair, the dynamic as it is amazingly strong, right? So everything is staying the same. We're going to be double digit, on the upper part of double digit. And then there is all things that may happen that we don't know us. We've been surprised in this world by sales. I mean nobody could foresee what happened in the Silicon Valley Bank environment couple of weeks ago as an example. So I think at this junction, what we know in the actual is what we have. [indiscernible] So the question is how strong do you foresee H2 to be. And so to say that it is double digit to the event, to say that it is somewhere between 10% and 14% is the most probable scenario at the juncture and it can be higher than that. The last question, I think you should assume in your models 35%. It's a good number. everything being equal to the number. Right now, what you are going for you on the profitability of it is the fact that you have an occupancy rate which is lower than what you should be at a nominal level. We are still 5% in average below 2019 level. And so the profitability and boosted by the fact that you get to pricing, so the question, what I'm saying evolved is what would an upside potential would be. So at this juncture, I will assume something along with [indiscernible] and that is my answer.

We will now take the next question. It comes from the line of Jarrod Castle from UBS.

Yes, 3 from me. Firstly, your room count and your pipeline kind of reversed and kind of the full year, I know you're kind of saying focus on absolute revenue generation and mix between the classes. But any commentary on that? Is this just a timing thing and we should expect the pipeline to exceed year-end numbers and system to continue to grow? Or are you just pruning out kind of underperforming hotels? And secondly, I don't know if you will, but any comments on sensitivity to RevPAR changes at the moment? And then just lastly, with the balance sheet rating, I don't know if you can say anything in terms of current thoughts on capital to shareholders?

Yes. On the product line, your statement is obviously correct. I think you should assume the pipeline to continue to go along out. And by the way, that's what you've seen over the last year even when it was cash in. The comment on pruning is a good one, which I think what you see coming out of the crisis is to fix. I mean the environment is what it is, right? I mean, the final thing is we only it every day, it is not as easy as it used to be, if you want to buy a cash or to buy home, it's more competitor today than it used to be 12 months ago. Nothing that I'm teaching anybody on that call. But also what you see coming out of the crisis is that some hotels have not done the investment that they should be doing in order to be at the right level of the brand standard. And that is the problem because you want to ensure that you've got that quality. So as part of the number of Q1, there was a higher level of hotels that we've been exiting the network on our decision. We will say, in fact, those hotels are not to be in the portfolio because they are not at the level you will have. So it's not a lot of hotels. But nevertheless, it is something that we will for sure, and share getting out of the crisis that we monitor the quality of what we provide in hotel is paramount to the quality and the brand equity. And we are in a world into which as you've seen through the organization, we want to ensure that our brand is as good as possible. And so in summary, it will continue to grow in terms of net growth. We will show you how the value grows even faster. And we will make sure in order to ensure the venue growth faster, but we don't focus on unit, that we focus on value. So that's on the first question. On sensitivity, I have said many times, we don't give that anymore. I don't think it is relevant in the long term to reveal that much information that we see there today. And then in terms of capital return, nothing really has changed, we wait and see. We are investment grade. We wait until we have enough space to ensure that we keep in the front rate. [indiscernible] one agency out of the 2 has given us the investment grade. We think the second one will follow with the right level of performance that we are focused on delivering. And so from there on, we'll go through the discussion on what makes sense in terms of capital resale.

We will now take the next question. It comes from the line of Vicki Stern from Barclays.

Just firstly, I wanted to start coming back on that net unit growth. You touched on it in your prepared remarks, but I just wanted to dig a little bit deeper on what you're seeing. And particularly, if you've seen much of a shift really since SPB and Credit Suisse in terms of things getting tighter, obviously, that's a theme running for the U.S. quite heavily right now, but I know you obviously have very different types of owners across Europe, across Asia. So just perhaps a little bit of color on how the different geographies are playing out and what you're really seeing on the ground on the development front in signings. Related to that, you mentioned then that the sort of higher level of exits in Q1, is that then going to run through the year? And I know you don't want to give a sort of net unit growth guide, but perhaps any sort of color then on what that sort of exit pace should be if we're looking out this year? And then just finally coming back on Jamie's question. I'm not sure you answered that in terms of any kind of crack in demand anywhere that you see, I suppose, particularly curious if any softening in the booking environment in France, just given the strikes and process there.

Yes. No, there is no cracks or sensitivity. I'm exactly the same situation as the one I was when we published in Q3, and then we produced at the year-end where there were questions on how long is it going to announce the new package and by the way, what you see in France has zero effect on the numbers. If you look at the numbers of France, they are exactly the same as I can see. So there is very limited there. So I cannot see nothing at this juncture on any [indiscernible]. And in fact, it's pretty sound because not only does the pricing pursuit being strong. But on top of it, you see an improvement on the occupation rate, which at is also sound. So that's on your third question. On the grid, that is not really a plan per se to go and push exit. It's more us looking at what's happening and based on that, taking decisions. So it's not [indiscernible]. I'm not doing that. I'm just looking at what's happening. I'm looking at the performance of the hotel and the team at what the [indiscernible] can be. And we're just going to be a little more stricter post-COVID because I think that post-COVID people are in high prices, right? And the most high quality. So the last thing I want is I don't want to give you my brand. I want my luxury to be too luxury. I want my lifestyle to be too lifestyle. I want my [indiscernible] right service that you would expect from a select service type of retail. And I don't want anything deleted. So we've been probably very lucky that in France [indiscernible] from everybody, but this is not probably the stance that we are going to take for everybody. In terms of [indiscernible], no, there is nothing meaning that change from where we were in terms of financing 6 months, 9 months ago, when all of that and basically the right kind of costs in terms of capability to finance any asset, if you will. So the U.S. seeing as much does not change anything. Now we've got in our population of investors, very different populations. We've got some France, in Southern France, where this is not an issue at all as you may guess. And then to the opposite, we've got private equity for this is quite important, the capability that they've got to leverage. So depending on who is financing what also changes the answer. And I would say also that what plays for us is there is a lot of hotels which are in this on the hotel and the owners of the service and the hotels are people that have got 1, 2, 3, [indiscernible]. And when these people do that, the way often on a basis, which is a cash basis, i.e., I have done a good business in my last. I have some money that they would like to invest. I invest my cash into one of those hotels. And those people are very often also local people with strong relationship with local banks. And so I think this is not so much the affecting lately differently than the statement that I'm making here, which I could have made 9 months ago.

That's really helpful. Just a quick follow-up. Are you able to give the percentage that's under construction within your pipeline. This is quite helpful to know right now.

Yes. I mean, 60% is conversion. So the rest is [indiscernible].

And sorry, just the proportion that's actually under construction, on the ground.

Ah sorry, we do not provide that.

We will now take the next question. It comes from the line of Leo Carrington from Citi.

Could I ask, firstly, Accor has obviously been participating in some discussion in the French press around issues with shortage of flights from China to deliver tourists. I know it would be hard to quantify. Did you have a sense of the incremental points of occupancy or RevPAR that your portfolio could benefit from with better air lift? And then second question, you mentioned obviously the split credit rating with the latest updates. Is there any sort of implication for capital return that we should bear in mind from this.

On the split capital, operating, [indiscernible], I'd say maybe in more detail or more clear way. We first want to be in different way. So we're not going to do anything until we have a status with SMP, but they are getting us to invest in them. They upgraded us from an outlook which was stable to an outlook which was positive. And withstanding the fees, let us see what's happening in 2023. We've always that question now that people have on what's going to happen in 2023 for many, many weeks. I think what we are delivering numbers right now as of the first quarter and what we can see for the rest of the year should make people now and not uncomfortable that this is going to be a strong year for the hotel business around the world and notably for us. So I think that's where we are with the rating. Once we get that, and we need to ensure that we don't lose it. And so we'll do what we take to achieve the share of the investment grade rating and be able to do share back dividend with shareholders. That's how we will deal with that. And again, bear with me, we do not tell along those lines on the capital market business because shareholder return is a cost question of any strategy for business not only in our business. And so we really can't give you more of that. But that's why we are on this one. In terms of the China side, I can see that the pace quite thoroughly because I was aware of the issue, but we really consider that has been a very important one. What happened is the following; Some businesses in France have been same as part of a discussion that occurred between government, the Chinese government and the French government that it would be good if things are done in order to promote travelling opening between France and China. And the reasoning here is simple. Chinese population has been a provider of good business to France, the client, they go to travel, and so we see the dilatory. And so it's all good business. And so that's the only thing that this data is pushing, i.e. very way by which now that the Zero COVID has been lifted that you can accelerate the liberation of capacity between China and France. In terms of figures, it's relatively limited because what you discussed is as about 2 million to 3 million to 4 million of Chinese travelers that are coming into France. Most of the effect of the release of the COVID policy in China is helping in Asia. Where I see the effect of the release and increasing the capacity of flight in my business is in Asia. And by the way, that's why the Asia number are strong. And that's also why I'm saying that the number will become stronger because just in 12 months, the level of capacity installed in China [indiscernible], small number will supply better. So I think that's what the scenario is. I hope that was clear. If not, please ask again.

We will now take the next question. It comes from the line of Richard Clarke from Bernstein.

Jean-Jacques, 3, if I may. Just the first one, just thinking about the shape of the year ahead. Obviously, you've kind of given the double-digit guide and you said you're not seeing any cracks in demand, but will the Middle East fall off in Q2 because you're losing the impact from the pilgrimages? And then you see a reacceleration in Q3 and Q4 from the Rugby World Cup? Is that the way we should think about the year? Or are those effects reasonably small? And then the second question, I guess, we've seen a few announcements about how the luxury and lifestyle business is not really going to be an homogenous business, but each brand is going to have its own headquarters and its own CEO. And just the level of additional cost that's going into that division to have all of those different brands, Fairmont, Raffles having their own sort of separate presence and separate management teams is, again, is that material, anything to pull out? And then the third question is obviously sort of on this call mentioned you don't think unit growth is necessarily the right KPI. You've said in the past in lifestyle kind of F&B it can be, but just as enforced as room revenue, but the release is still RevPAR and unit growth numbers. So is there any way you can sort of have different metrics that maybe help us follow what you're saying in terms of value creation from the unit portfolio or showing some of that non-room revenues within the luxury and lifestyle, any plans to change the way we think about those segments?

Yes. I mean, these are all good questions. On the net unit growth, which is a very typical one -- bear with me a couple of months, June is 2 months. And so we'll be able to give you all kinds of details on that and try to reconcile what we're trying to do, which is not anymore what we are seeing in numbers, and that's the impact of the CMD. So that's on [indiscernible]. On the cost structure, you should not expect the synergy of any size on the organization of these 2 divisions. We've been working it in such a way that we have a whole detail plan in order to ensure that the synergy, they are extremely limited. Again, we show that in the presentation for June. But all the plan has been built on the hand up of some competencies at the same time that you work out some optimization on the rest of the business in order to ensure that this is kind of a neutral thing because, on the contrary, it would make no sense to go and do anything of significance around what you are saying. And on the tax, we talk about Saudi Arabia and the [indiscernible]. I mean, first half, there is analogy called the edge, which you may be aware of, or you may not be aware of, which is going to offer some time in June July, which is a very important event in the life their population, and we foresee a huge number of people that are going to meter because they've not been able to do it because of COVID. And so we can still foresee on that at point some do activity in the list as an example, I'm trying to remember the question that you asked. By the way, I would also say that [indiscernible] by the Saudi government in order to develop their international tourism. This is not for the current year. It's going to take some time to have the tenant plans. But we talked about, I think, $100 billion being put forward for the next 10 years in order to grow the business in Saudi Arabia. We are extremely well positioned in the East Africa. We've got the high level of connection in Saudi, in Qatar, in Dubai, because of the presence of the group because of the work we've done because of our investor portfolio today, we've got Saudi, we've got Qatar, you know, as some of our core anchor investors. So I think there is a lot of impact in the end. This is not for this year, but I'm trying to say here that there is more potential. And after that, the description that you made, yes, we will benefit from the hook-up in France is 30% of the business of the regroup. And so here, there is going to be a very strong activity here on the [indiscernible], the Olympic Games next year [indiscernible] or because of the Dubai International convention. So if I look at the level of convention that is coming up, not only are they confirmed that they are concerned with the payment. So again, look hard as I can talk.

We will go to the next question. One moment, please. Next question comes from the line of Jaina Mistry from Jefferies.

Can you hear me? Great. I've got 3 questions. The first question is on the balance sheet. We've discussed buybacks quite a bit today, but I wondered, are there gaps in your portfolio, gaps in your operational expertise or in your wider hospitality platform where you think there is scope for potential M&A and a sale, are you seeing targets coming on to the market? Second question is around business versus leisure. And in particular, what's your view on the recovery of business travel this year, where you got to in Q1? And how do you see the profile of recovery between small businesses and larger corporates? And then my last question is on China. Could you talk about the RevPAR recovery that you cleaned in China and then also the outlook for the year? Could you talk to the visibility on forward bookings and whether you think China RevPAR could reach 2019 levels at year-end?

Yes. Let's start with the last one, which is China. China, we probably are versus last year at the same time with the RevPAR, which is between 60% to 70% depending on whether you're talking power brand, or you're talking lifestyle and luxury. So like it simple. 60% plus is what we've got as a start on the Q1 '20. If you look at it versus Q1 2019, which is probably not 11, you're probably a negative 10%, 10% and 15% on China. So that's kind of giving you an idea of RevPAR. And you see here that China has not recovered to the level of the rest of the business because the rest of the business is a positive 19% versus 2019. And again, no surprise here. What's happening in China is that in China, domestic activity is very close to the level of 2019 already in Q1. So we are probably 90% to 100% level in our hotel versus what we were seeing in 2019. That has not recovered, its international because it's complicated. It's limited to a few weeks to travel to China as a tourist. It was open, I think, like months, 12 months, 15 months ago of our business, and it got opened that 1 month ago for Tourism for not every country, by the way, around the world. So we have that part of the business, which is missed in China. But the domestic is already there and you know about the economy. So I think that's the answer on China. In terms of the business and the small versus large group, what I would say is that you're not going to recover the business level by the end of this year fully to level of 2019 because you still have nature of business, which is linked to international covering, but you don't leave to the level of what was 2019. Now I will add to that a complexity, which I'm sure you can understand, which is getting [indiscernible] to distinguish between REC's business and leisure because you've got leisure and you've got people that are now expanding their fees quite systematically 1 or 2 more days to say oriented and so on and so forth. So we still are in the best of our ability to track those. But I think this business lean is kind of missing up the analysis that we may be able to do that. And as far as the balance sheet is concerned, we've got 43 brands. We've got everything we need. Today, what we need to do is we need to basically use those brands and make the best of it, which is why we are reorganizing with the 2 focuses between premium, midscale and economy, what made a cost years ago and what is what we been doing lately with the acquisition of Fairmont and later on, the acquisition of minor, which is moving into a deal of scale of luxury and lifestyle. We have extremely strong positioning because we clearly are #1 on lifestyle. And depending on what ranked number 2 or number 3 on luxury. So I think what we got here is to basically get the fruits of one. So there is no lack, nothing missing in the current portfolio. So today, in the call, there was some money put aside it probably will go first to shareholders.

We will now take the next question. It comes from the line of Andre Juillard from Deutsche Bank.

Most of them were already answered, but I just wanted to come back on the RevPAR trend. And I wondered if you could explain us a little bit more the difference between the RevPAR growth between on one side, premium mid-scale economy up 60% and luxury lifestyle, 50% and especially on lifestyle, what is the explanation for a growth of only? I know that it's already high, but only 33%.

Yes. I mean [indiscernible] and so just let me try to be a bit more specific on, although, when you were discussing the results in 2022, you may recall we had a slide that we are showing that the RevPAR of lifestyle was probably 15% to 20% higher than the rest of the business. You can call we have decided by that when we need the decision. And what can happen there is that lifestyle is a good part of the business, which around culinary and around food and beverage. And hence, when people have the opportunity to get out of COVID restrictions, they could not have international, but they could travel within their community. And so we have some diners with funds that have not been seeing. [indiscernible] And an intent and notably in places like Miami, where we got some very strong [indiscernible]. So that created a strong base on that side. And you find that today when you compare the current business with the business at that point in time, it has recover faster. And that is fundamentally the reason. You add to that the fact that on the other part, which is luxury in Fairmont, Fairmont is very much North American. It's very much Canadian and North America. And so it recovered faster than lifestyle, and recovered faster than places like the Germany or the Pacific. I'm answering that again, it has a smaller benefit, but still a benefit. So it has really nothing to do with the performance in sales of the debt. It is really to do with the fact that there is a differential recovery. By the way, just look at the dedication that our American peers4 has done over the last 2 days, and you see that very lifestyle is much, much better.

We will now take the next question -- it comes from the line of Ali Naqvi from HSBC.

If I could just ask regarding the occupancy and how the reasons are recovering. When do you expect occupancy to start closing the graph to 2019 levels? And is there anything to say with how occupancy is trending at the start of the quarter versus the end of the quarter? Secondly, in terms of the guidance increase that you're expecting, how much of this is going to be driven by price, a recovery in occupancy over the course of the year, or a change in the, let's call it, international travel recovery records into region travel recovery over the course of the year?

Yes. I mean in terms of occupancy, we used to be average at 65% in Q1 2019. We are in Q1 '22 at 47%, and we end up the Q1 23 at 50%. And so you can see that there is a clear acceleration of the recovery in 2023, which, by the way, was also kind of prevalent last year because the gap last year in Q4 was to the tune of 7 points [ as you can see ] on the right. And so the 7 points versus 2019 has become 5 points in 2023, Q1, Q4 versus 2019 on points Q1 versus 2019 pipeline. So you can see that the gap is closing. I believe it's going to take some time, and I don't think that we're going to be back to the level of the capacity of 2019 before the end of this year, beginning of next year. Because again, part of the limits our capability comes down to free travel. There is a lot of recovery in freedom of traveling, but you are not in every region back to 100%. In fact, there is the number of contain the world where we are at 200% in terms of travel capability and I'm looking the airline as an example. So my hunch is beginning of 2024. After that, on what is going to drive going forward, I cannot answer that particular question as well, but I'll speak a little. What has been really most of the restart economy last year was price. You can see today on last time on luxury, that it is 50-50. You can see that on management and economy that it is more 70-30. So I think you're going to find out that this is going to continue, i.e., the 50-50, financially, is going to move to something like 30-20 by year end, and in terms of capital and economy. We follow the run of the lifestyle and luxury recovery of pricing versus occupancy. So we had a potential recovery and pricing being less of a contributor to the RevPAR growth.

We will now take the next question from Jaafar Mestari from BNP Paribas Exane.

So 2 for me, please. Firstly, if I look at how you've reported this first set of revenue numbers with the 2 divisions, it looks like every dollar of revenue is going into 1 of the 2 divisions. You've allocated everything if I'm judging from the first table. This means the other assets and the digital. So just a question on this. Is this just a reporting exercise that you make a decision on what belongs were? Or will you also expect you to articulate fundamental reasons why it's better for one hand, they keep being the Luxury division, why the edge offer to independent hotels benefits from being in community luxury? Or is it just allocation? Related to that, very personally, moving on to your role. Can you tell us speak about your plans for the next couple of months? Are you starting from a blank page there, except in terms of the efficiencies? Is there going to be a lot to review? Or do you move roles with basically a list that's already made or things that we didn't quite make it to the reset plan, but you know the group CFO give you know exactly where to go and extend you do very well what wasn't delivered in the last few years and it's left to deliver?

Yes. I've been a year with the company. So do I have some views I certainly do. Do I have the power to make those views become reality. Yes, yes, some power. But as usual, the power somebody is in a function in the support function has been the CFO. So I think moving into operation will be one way for me to test the ideas with the management team and make sure that we've got agreements on what is the right place to move it. But yes, I do have some views. Now I'm doing it in a very structured manner, i.e., we have spent the last 3 months working on the strategy and making some strategy work sharp, the right way with a high help of people remember to come up that it makes sense were down to. And so that's what we will show you when we are together at the Capital Market Day. So I don't really want to go into the levels today in that call. But if it's both days issue. It is what is in my stomach. But I have also with the process, which is a much more rational process by getting people to work together for the last 3 months and get to a strategy that we will detail in 2 months. So that's what our decisions. So I think I know ultimately. And then on the first point, yes, again, I don't want to say any question that the CMDB what we tried to do is allocate all the businesses on after the other. So for example, [indiscernible], that's right. [indiscernible], which is not in the EBITDA, but is an important part. It's obviously in economy and premium. So I think what we'll do is we'll show you for each of the business lines that you know, where they are in the Capital Market Day, that most of them are either in the one side or in the other one. There is only a few of them that it was making sense to keep in sales marketing distribution and volatility because they are more sales market-inspired by sent like, for example, the edge, which is our internal CRS solution is obviously something that pertains to sales marketing. The 2 other examples that I provided just like just a point on [indiscernible] only on one side. So I hope I answered your question and really again show you in details at the same. And after that, sorry, just to be complete. At the hotel level, it's either one or the other one. So that's easy. And then there is an allocation exercise that will be done in a sensor the value component of hotels to the various [indiscernible] some of the fees in the customers to they are there to allocate because they are collected at the hotel level happens to know exactly where they happen. What is not difficult to add it is the cost base. And so that's the size that we will show you when you show the EBITDA for each of the key decisions.

Just one more, sir. It comes from the line of Alex Brignall from Redburn.

Can you hear me this time? Fantastic. I have one more question just on the pipeline. We talked about the net unit growth. But on the pipeline, it's obviously gone down, and Q1 is always a strange quarter, but maybe you could just help us to understand because it's not like you opened a lot of the rooms in the pipeline. I think that was 4,400. So within the pipeline itself, have you had a sort of dividing out process as part of your divisional mix or just a very light quarter in terms of signings and how might that evolve?

I mean it's a little bit of both. I mean, it was not a stellar quarter by any means. It's a Q1 quarter. And so it is a quarter which was not a strong quarter in terms of as one. And on top of that, we've done a little bit of active churning, I would say. And so that's why the pipeline is getting down in Q1 in the [indiscernible] And again, the assumption that you should take is only the pipeline is not going to go down for the rest of the year. It is a snapshot picture taken at the end of March. We don't believe of something which is taken in the end of March.

There are no further questions from the lines. Please continue.

Thank you very much for your questions. I will talk again in different capacities. I'll see you at the end of June on the business. And I really look forward to that and answering all the questions that you've been asking and that I have not answered fully today. Thank you.

That does conclude our conference for today. Thank you for participating. You may now disconnect.