Accor SA (AC) Earnings Call Transcript & Summary

Good morning everyone. Thank you so much for joining the year-end release for Accor. So I'm going to start pretty short and sweet, if I may. So you have the first slide in front of you, those looking at us or looking at your screen. Four things, 4 takeaways for the group. The first is we are -- yes, we are happy with the results of the last year. We are certainly overachieving what we expected the last time we've talked in September and end of the third quarter or certainly after the end of the first semester number when we've met physically late July and August. And we still have the headwinds in so many economies, so many geographies. But yes, we are thrilled with what was achieved by the teams and by the different brands of this company. Why are we believed and happy? I think because we really delivered on what we've been promising to you, which is cost discipline. A lot of it is due to do we have the rigor, do we have the discipline? Do we have the right plan and do we have the right accountability? So the focus on the execution of the plan is something which is extremely important, has been the case for the last 3 years, will be the case for the next probably 10 years and certainly for the next 2 years until the Capital Market Day is finished by '27, which means we're going to have to do another plan way beyond '27 because, of course, it doesn't stop in '27. The third element here, which is quite interesting is we're getting stronger and stronger and stronger when it comes to signing new partnership and certainly due to the robustness of the loyalty program. All Accor is very welcomed in a numbers of geography. You probably have seen the number with over 15 million new members last year. That 15 million being 12 million the year before, it's probably going to be between 15 million and 20 million this year. So that program, the benefit of the program, the credibility and authority is immense. And that is true in all geography of this company, be it in Europe, in South America and certainly in Asia. And since you have a very beneficial partnership and loyalty program that, of course, a lot of people want to piggyback and paddle with us on those programs. So you're going to see non-RevPAR revenues increasing year after year, which is what we've been asking for and plan for the last 3 years. And finally, four, we're doing all this to make sure we have sufficient cash to be returned to the shareholders and all the cash being returned, EUR 743 million, which is 6.5% of the market cap as of the 1st of January last year is what we also promised to you at the time of the Capital Market Day. So everything is really green light, and there's probably a lot of things we're going to be sharing with you over the next 1.5 hours. So I'll turn it over to Martine on getting deeper on all the different numbers.

Thanks, Sebastien, and good morning, everyone. So I'll start with the highlights for the full year financial. For the third year in a row, Accor's performance is in line or above its midterm perspectives as announced in June of 2023. And I'm very pleased to report that we have a very strong finish in 2025 with results above actually our annual guidance. We exited 2025 with a very broad-based acceleration in RevPAR and net unit growth, which bodes well for 2026. RevPAR growth, as you can see here, was an impressive 7%. And actually, that's our best quarter in 2025 on both divisions. The performance was again mostly driven by rates over this quarter, but occupancy rates also was up 1 point year-over-year. This drove full year RevPAR growth to a very solid 4.2% that is above the high end of our midterm guidance and above the high end of our annual guidance, confirming the benefits of our geographical and segment diversification. Room revenue growth was driven both by leisure and business, which proved remarkably resilient with corporate activity actually picking up speed in the fourth quarter. NUG, net unit growth accelerated to 3.7%, which is in line with the circa 3.5% guidance with a record level of openings in the fourth quarter. Pipeline grew at the very healthy double-digit growth of 10%, with signings up 28% year-over-year, comforting us in our ability to further accelerate the growth of our network toward the higher end of our midterm guidance of 3% to 5%. Our financial performance for the full year 2025 is in line with our midterm growth algorithm. M&F management and franchise revenue was up 6% at constant currency year-over-year, with total revenue reaching EUR 5.639 billion. Recurring EBITDA grew at 13% at constant currency, reaching EUR 1.201 billion. That is above the high end of the guided range. And operating leverage with a solid 100 basis points improvement in M&F EBITDA margin. And we delivered 16% growth in adjusted EPS. Adjusted EPS is a new metric we will report on going forward and which we believe is a more consistent measure of earnings growth. It is defined as reported EPS, excluding nonrecurring items and S&D contribution, and you will find a detailed bridge between reported and adjusted in the appendix section. Recurring free cash flow reached EUR 632 million or a 53% cash conversion. And as we heard from Sebastien, we delivered yet another year of strong shareholder return at EUR 743 million, which equates to 6.5% of the market cap. That brings the total shareholder returns in the last 3 years to EUR 2.1 billion. Let's now turn to the fourth quarter RevPAR on Slide 7. PME posted a very solid RevPAR growth of 5.8%, mostly driven by pricing, as you can see here. In the quarter, rate was up 5% and occupancy was up 1 point at 68%. ENA rebounded in the fourth quarter with a RevPAR growth of 3.3%, equally driven by occupancy and rates. Our 3 biggest markets, which are France, Germany and the U.K. were all positive in the quarter. The region also benefited from the very good results of our winter sales activity, which reflects the continuous appetite for travel. In France, Paris rebounded in the fourth quarter with an excellent month of December and growth in the mid-single digit for the quarter. The province delivered growth in the low single digits. In the U.K., the rebound we observed in the third quarter was sustained in the fourth quarter with RevPAR growth in the low single digit. In Germany, RevPAR was back in positive territory in the mid-single digits after 3 quarters of negative growth. In MEA APAC, the fourth quarter was up 7.6%, bouncing back from a softer Q3. The performance is driven by rates, while occupancy decreased, although that is related to China exclusively. If we exclude China, occupancy was up 2 points and RevPAR was up 10.4% in that region. MEA continued to be a strong growth drivers with all large destinations, including Saudi, Dubai, reporting RevPAR growth in the mid-teens in the quarter. Southeast Asia is back in the mid-single-digit territory, Singapore, Japan and India posted high single-digit growth and performance in Indonesia and Thailand sequentially improved, although still negative in the fourth quarter. Singapore benefited from a positive calendar event with the F1 and Japan posted solid growth despite the lower inflows from China. Pacific continues on its strong momentum with a double-digit RevPAR growth in the fourth quarter, driven by price and occupancy. China continues to sequentially improve, but still posted negative mid-single-digit growth as our portfolio in China in PME is mostly eco, mid. Actually, we saw an almost neutral RevPAR for the full year in our luxury portfolio for China with the fourth quarter that was up 6% for the luxury. Americas posted double-digit RevPAR growth with the Q4 up 11.7%. In addition to what has been consistent supportive demand, Brazil benefited from the COP30 conference, which was held in November in Belem, where we have 8 hotels. If we turn now to Luxury & Lifestyle, RevPAR growth was 9.5%. That is the strongest quarter of the year for Luxury & Lifestyle and is driven by rate and occupancy. Rate was up 6% in the fourth quarter. Occupancy was up 4 points in the fourth quarter. Luxury continues to outperform as a segment with Q4 RevPAR up 9.4%, and all brands and regions contributed to this performance. That confirms the structurally supportive demand for the segment of the hospitality. Lifestyle also had a very strong RevPAR, up almost 10% in the quarter. Results continued to perform very well with RevPAR growth in the mid-teens and Lifestyle collective posted their strongest quarter of the year. Turning to Slide 8, which breaks down our hotel portfolio and pipeline by division. The PME grew its network by 3%. And that is a clear acceleration from 2024 and is actually at the midpoint of the CMD guidance for PME. And that results from the acceleration of opening in the fourth quarter, notably with 2 large hotel openings, the Handwritten in Las Vegas and the Ibis budget, Hadiyah Tower in Mecca. Churn also slightly -- churn also started to slightly recede towards the end of the year. MEA APAC continues to be the growth engine over the period, representing the vast majority of the openings. Pipeline grew at a stellar almost 12% rate, reaching 198,000 room, which is 29% of the PME network, and that is up 2 points from last year. And that confirms the attractiveness of the PME brands. The M&F revenue per room was stable at EUR 1,200. On the right, Luxury & Lifestyle portfolio grew by 7.5%, driven by Ennismore, which delivered yet another year of impressive 18% growth in its network, in line with the CMD guidance. Fourth quarter, again, was particularly active with more than half of the annual openings in the fourth quarter. Notable openings in Luxury & Lifestyle include the Faena and Delano in New York City, the Orient Express in Rome and the Emblem in Lucknam. The pipeline in Luxury & Lifestyle continued to grow at a sustained pace and signings grew in the mid-teens. Pipeline stands at 34 -- sorry, 43% of the network, and that's also up 2 points from prior year. And finally, the M&F revenue per room is stable at EUR 3,900. So at group level, again, NUG reached 3.7%. That's a tad above our annual guidance of circa 3.5% with record level of openings in the fourth quarter. Conversions were 58% of our opening, pretty consistent with 2024. And again, the pipeline grew 10% year-over-year with a record level of signings in volume and value. We maintained a healthy mix in our pipeline between volume and value. Our strong focus on driving higher fee per room is reflected in the 67% growth in the value pipeline as compared to 2019, which is 3x the growth of the pipeline in volume. Let's now turn to Slide 10 with the revenue by segment. The revenue by segment and by division is provided in the appendix and in the press release. The group revenue reached EUR 5.639 billion. That's up 4.5% at constant currency versus prior year, and it's a clear acceleration from the third quarter year-to-date. The reported growth at 0.6% is negatively impacted by the FX scope effect in 2025 was negligible. Management and franchise revenue grew -- growth accelerated significantly in the fourth quarter, and we closed 2025 with growth of 5.9% at constant currency, which is in line with our midterm guidance. Hotel Assets & Other revenue was up 4.6% at constant currency due to the solid performance of our leased hotel in Brazil and Turkey, but also solid F&B activity at our Paris Society and Rikas restaurant. We disposed of the festive activity of Paris Society in the third quarter, which impacted our revenue in the fourth quarter for Hotel Assets & Other. SMDL, which again stands for sales, marketing, distribution and loyalty, revenue grew by 4.4% at constant currency. And as we called out in the third quarter, and you may recall this, the growth was impacted by the accounting revenue recognition of services provided to the Olympic Games Organizing Committee, which were EBITDA neutral. If we adjust for this, then SMDL revenue in 2025 would be up at 6.7% at constant currency. Turning to Management & Franchise revenue by segment on Page 11, which grew almost 6% for the full year. And in the fourth quarter, M&F revenue growth was 16% at constant currency. And this reflects the RevPAR growth, a partial effect from the net unit growth given the phasing of openings towards the end of the year and the impact of the flip to franchise in PME, which we have again commented in previous quarters. Incentive fees are stable as a percent of M&F fee at 33% and residential fees were also stable year-over-year as expected. PME M&F revenue was up 1.9% at constant currency. In the fourth quarter, PME M&F revenue growth was a very solid 6.7% at constant currency. The distortion on a full year basis is mainly related to the switch from management to franchise contract for a portion of the contract, which again, we called out since the beginning of 2025 and had overall a negative 2% impact on PME M&F revenue and the phasing of openings, which took place again later in the year. Luxury & Lifestyle M&F revenue grew at 13% on a constant currency basis, which is in line with the growth of the RevPAR and the NUG. And the phasing of churn and openings, especially in Lifestyle, explains a slight negative distortion on the M&F growth algorithm. Now let's turn to EBITDA on Slide 12. Again, the group EBITDA reached EUR 1.201 billion. That's up 13.3% at constant currency, that is above our 11% to 12% updated guideline in October. This is above the high end of the CMD guideline as well. The reported EBITDA growth at 7.2% includes a negative FX impact of EUR 68 million, slightly above our initial estimate of EUR 60 million. As for M&F, where more detail again is provided in the appendix by division. EBITDA is up 7.4%, again, reflecting a 1 point margin improvement in line with our operating leverage target. Both divisions improved their margin, although operating leverage was strongest in Luxury & Lifestyle. PME margin was negatively impacted in the second half by a provision on outstanding receivables of Revo, which is an owner mostly in Germany that has filed for insolvency proceedings in January of this year. If we adjust for that, then CME margin would also have improved over 100 basis points, which is in line with its targeted operating leverage. As for Hotel Assets & Others, EBITDA growth mainly stems from the solid revenue growth mentioned previously and a margin improvement in our Essendi operations at Paris Society. As for SMDL, the significant growth in the SMDL EBITDA reflects the structural improvement in distribution and the growth in partnership and subscription with a margin that is in line with our guidance of being at least 6%. In 2025, subscription and partnerships actually represented 1/3 of the EBITDA of SMDL. And as you can see here, costs for the holdings were flat year-over-year. Moving on to the P&L on Slide 13. As highlighted in my introduction, we have decided to start reporting on adjusted net income and adjusted EPS as we believe it is a more consistent measure of earnings growth over time and a detailed bridge again is provided in the appendix. Adjustment items are as follows: other income and expenses net of tax, share of profit and loss from our minority stake in Essendi and nonrecurring tax-related items. In '25, we achieved an adjusted net profit of EUR 504 million, that's up 19% year-over-year and an adjusted EPS of EUR 1.84, that's up 16% versus prior year. In '24, we benefited from a favorable timing on the payment of our hybrid coupons, which obviously impacts the 2025 EPS growth by about 8 points. The EUR 65 million charge we have for hybrid coupon in '25 is more representative of what we expect on a go-forward basis. Now let me call out the main highlights for the income statement. Other income and expense at a negative EUR 63 million included the recognition of a provision related to commitments in a joint venture and expenses related to the transformation of our tech platforms as well as restructuring costs. Share of net profit and associates reached EUR 7 million. In 2025, Essendi reported far fewer capital gains than it did in 2024 with a net profit for Essendi that stood at EUR 3 million in 2025 as opposed to EUR 184 million in 2024. Net financial expense increase is driven by a higher debt level, a moderate increase in the average cost of debt, which still stands at a reasonable 3%. And in addition, 2024 was impacted by a noncash favorable FX change of about EUR 16 million related to our U.S. balances in Egypt. Income tax expense is decreasing. Now as a reminder, 2024 was impacted by a one-off taxation, which was related to the 2023 reorganization in 2 divisions. And in '25, corporate income tax is favorably impacted by the evolution of our transfer pricing model. Now moving on to cash flow on Slide 14. Recurring free cash flow reached EUR 632 million in '25 as compared to EUR 614 million in prior year, reflecting a 53% cash conversion. Five main highlights to call out, cash interest fairly stable, although not reflecting the coupon of the September bond. In '26, we expect cash interest to be in the EUR 100 million area, driven by the increase in debt level mainly. Cash tax increased from EUR 169 million to EUR 202 million, and that is due to higher taxable profits, but also some nonrecurring remittance taxes mainly in Brazil. We expect our cash taxes to be broadly stable in 2026. Recurring investments remained under control at EUR 230 million versus EUR 221 million in '24. And this is in line with our midterm guidance, and that reflects the group's acceleration in Luxury & Lifestyle, which requires slightly higher key money to support its faster pace of development. The working capital change is a negative EUR 20 million in '25, and that is driven really by the increase in trade receivables at the end of the year due to the very strong activity in the fourth quarter of last year. If we adjust for this receivable impact, which obviously we'll collect in '25, then cash conversion actually would be close to 55%. And finally, net debt reached EUR 3.064 billion at the end of December. And as a reminder, net debt was EUR 3.1 billion at the end of June with the main movements in the second half being recurring free cash flow, share buyback, some M&A activity, mainly in Mexico and non-other recurring items, mainly tech transformation and restructuring. Zooming in on our balance sheet and shareholder return on Slide 15. We continue to have a proactive management of our liabilities. In 2025, Accor issued 2 bonds, senior bond, one in March, which is actually an 8-year bond to extend the maturity of our debt and one in September, which is a 7-year bond. And as a result, the average debt maturity increased from 3.3 years to 4 years at the end of '25 with a very well-balanced maturity profile and a reasonable cost of debt at 3%. Net debt leverage and return to shareholders are managed at a level that allows us to be consistent with our investment-grade rating as defined by rating agencies. On the right side of the slide, you have a summary of the return to shareholders since 2018. And the conjugation of a solid balance sheet and cash flow generation has enabled us to deliver steady and growing shareholder return. And again, in the last 3 years, we have returned EUR 2.1 billion to our shareholders, which includes in '25, again, a return of EUR 743 million or 6.5% of the market cap at the beginning of the year. Our policy, as you are familiar with, is to distribute an ordinary dividend equal to 50% of our recurring free cash flow, and we will, therefore, propose to the Annual General Shareholder Assembly a dividend of EUR 1.35 per share, which is an increase of 7% versus prior year. Slide 16 covers our extra financial reporting on social and environmental targets, which are included in the Chairman and CEO compensation. And we delivered on all 3 goals. We reduced our water intensity by 5%. At the end of 2025, we had 57% of our hotels which achieved an eco-label certification, and we had -- we crossed the 40% level for women at the VP or above level with a share of 41%. And to conclude on Slide 17, again, for the third year in a row, Accor's performance is in line or above its midterm perspectives announced in June of 2023, and were are also in line or above our guidance for 2025. We exited the year on a strong note and a good momentum, and that momentum is extended into 2026, given what we see in January and February, which is a solid demand. And this comforts us in our ability to deliver the growth algorithm in 2026 that will be in line with our midterm guidance. I will now turn it back to Sebastien for concluding remarks.

Thank you so much, Martine. In many ways, I'm actually wondering whether you're not more American than French, which is great in both cases. Let me just turn to the final slide, and then we're going to go to the Q&A. Five things here. Number one, we are on purpose added the word laser focused. We've made a commitment to each of you over the last few years is to really be stringent on delivering Capital Market Day KPIs. We've done it in the first 3 years, but we're going to do it again in the remaining 2 years, certainly in '26 and in 2027. The second one, which is very much linked to being able to deliver on the Capital Market Day '23-'27 plans is you need to accelerate on the net unit growth and you need to accelerate on trying to get some non-RevPAR revenues from loyalty partnerships and others. The one thing which is striking, and Martine was talking about it, the NUG has been 3.7% last year, which is roughly 50,000 rooms being open, which is kind of a record number ever for Accor. We're certainly looking for overachieving that 50,000 rooms marker, and we know where we're going. Why do we know? It's because we've been never enjoyed so much of a signing pace over the last few months of 2025. And notably, in PME. So I need to thank Jean-Jacques, who's going to come on board in a minute answering the Q&A. But the effort made by PME developers, even more so on premium and in Europe is showing an enormous momentum for the brand content and for our ability to exceed the 3.7% that we had last year. I don't want to actually forget Lux Lifestyle developers. You also have done a great job, but they had to catch up on PME more so than ever. And loyalty partnerships, we are discussing with many partners all over different geographies, and those will be strong revenues moving forward. I just want to remind some of you being with us in 2019 when we launched all at the time, I told you we had like a 6 million partnership revenues. That's multiplied by 10 as of last year. The pivot to franchise model in mature markets, this is something that consciously, we decided to go into, which is really due to 2 things. Number one, it's proven by many other operators and by us as well. But I guess you have a better margin when it comes to a franchise hotel that you do have on an operating management contract. Two, it's more resilient in terms of performances over the years. Three, which is probably very much additive, it does enable you to go faster on basically the net unit growth. You do sign a franchise hotel probably twice faster than you would do in a management contract. Mature market is important because this is where you have the sophistication of franchisees because in order to sign a franchise, you need somebody to be able to operate the hotel. So you're going to see Accor more and more certainly in Europe and in mature market go faster, stronger in the franchise model. On the fourth, we talked about it on the share buyback of EUR 450 million in '26. That's a bit larger than '25, almost the same number at '25. And fifth is Essendi, I'm sure we're going to have a question on the current discussions with Essendi, we will and we must close the Essendi transaction in '26. We're not late. Exactly at the same time last year when the question was asked, Martine and I and/or Jean-Jacques actually answered, it is a 12- to 18-month process. We are exactly in the 12 months benchmark, and we are exactly at the stage we wanted to be last year when we talked about it. So nothing to worry about. We know where we're going, but we're going to finish the job. So that's where we are. And now we're going to turn almost on the mark, 9:00 sharp to Q&A for those of you who wants to pop in. So let's open the call for Q&A, please. And I'm going to ask Jean-Jacques to come next to us. So we're going to make space for him.

[Operator Instructions] The next question comes from Jaina Mistry from Barclays.

Three questions from me, if I may. Number one, on Essendi, you just mentioned it now. I mean the book value is roughly EUR 850 million. Your net profit from Essendi was significantly down. How should we think about disposal proceeds? Is that book value roughly the right [Technical Difficulty] potential proceeds this year? My second question is around net unit growth. [Technical Difficulty] acceleration in '26 and '27. Can you just give us some more visibility there? [Technical Difficulty] and then, very roughly, just on EPS, there was one-off [Audio Gap] consensus for 2026 in terms of EPS is on EUR 2.34. Martine, is that a level where you're comfortable with that or do you think it needs to be moderated?

Thank you so much for your question. We're going to go -- actually there's 3 of us. I'm going to start with Essendi, then JJ is going to add something because JJ is the front runner when it comes to the negotiations. It's -- your question is super pertinent and the confirmation is yes. The current state of discussion with that lead investor makes us believe that, I guess, we are basically right around the mark on the EUR 843 million book value for Essendi. So we are exactly where we wanted to be. As I said to you, we just want to finish the job, and I'm going to ask Jean-Jacques to actually probably define better what it means by finishing the job.

So finishing the job. We had the same question about the time line about 1 year ago, and we mentioned at a point in time that this is what it would take us 12 to 18 months. It's -- the answer I gave when I gave that time line 1 year ago, and you guys were asking why does it take so much time is that it's a very complex transaction because of the very nature of the people that we are faced with, sophisticated investor, you may recall who they are, funds from large countries. And it does take time to align everybody, but it is the process that we exactly went through during the booster in 2018. So a complex transaction, but in line with the parameter that we were anticipating the discussions to take in terms of the discussions, but also the time line. So no surprise here. No surprise.

On the net unit growth, it's really -- and I'm going to split again between Jean-Jacques and myself. It is -- answer is also yes, we are confident in achieving the 4.7% in 2027. So we're going to gradually go from the 3.7% net unit growth last year to 4.7% in a couple of years from today. Why are we so confident? Because we know what we signed, and we have well above 1,200 hotels being signed today, well above 250,000 rooms being signed. We know where they are. We know who are the owners, the counterparties. We know the brand, of course. We know the pace. So -- and we also know that there is a churn, the churn is going to be reduced from the 22,000 rooms probably to a lesser number every year passing because the cleanup of all those detractors hotels that we had on luxury and on premium is mostly behind us. We probably have another 1.5 years to also clean up what was meant to be clean. So it goes well on both fronts, better signing, better pace, greater numbers of room and lesser number of churn. And again, I don't know whether you want to add something on PME.

Just maybe a couple of illustration. I mean the brands have not been as strong as they are today. And this is the work that all the team has done since the Capital Market Day to push again the brand equity to the level it had to be. We never got such a high level of RPS reputation score, which we improved by about 1 point per year. And so it translates the strength of the brands. And you see that in the number of the NUG, the signing this year has never been as high, whether in units or in value. And just an illustration, too, you may recall that we said we're going to push premium. Premium today has doubled in terms of what it represents in the signing or in the opening versus what it was to be in 2019. And this is 2025, but it was also in 2024 and was also in 2023. So focus does pay off, and you see that in the number. And this is why we've got the confidence that Sebastien has been sharing with all of you on the net unit growth and how we're going to progress.

Martine, can you take the...

Yes, I'll take it. Hi, Jaina. And just to complement on the net unit growth. So our algorithm midterm is 4% to 5%. And again, given the strength of the signings, the brands, the diversification, we're confident in our ability to move towards that high end of the range. We will obviously communicate our '26 guidance as we do usually always in the -- with the first half results. And all I can say that 2026 net will start with a four-handle.

And just on the EPS and whether you're happy with consensus EUR 2.34.

Your question was with RevPAR, right? Or was that on...

No, EPS...

EPS. Well, let me answer. So all I'll say on EPS and adjusted EPS is that we want that algorithm from RevPAR, net unit growth, revenue, EBITDA to also cascade all the way through adjusted EPS. So our expectation is that adjusted EPS will grow at double-digit rate in 2026.

The next question comes from Jamie Rollo from [ MS ].

I have 3 questions, please. First on the fourth quarter, very strong revenues [Technical Difficulty] Lifestyle up 33%. That looks pretty good versus RevPAR and NUG. Just wanted to confirm whether there's already some one-off moving that income line there that could reverse out next year. Similarly, from the managed franchise switch, [Technical Difficulty] some nonrecurring items. [Audio Gap] net interest line on foreign exchange [Audio Gap]. So any guidance on the P&L impact or even on those lines would be very helpful.

So it's precisely because you cannot reach -- Pierre-Loup is actually in the room here that I guess you're calling us online on all different questions. So Pierre-Loup, you're the lucky guy. Martine, you're not lucky.

Yes. So Jamie, first of all, good to hear you. So on your first question on Lifestyle in the fourth quarter for M&F revenue, we do have stronger residence fees in the fourth quarter in Lifestyle. But -- so we will have some -- obviously some impact in the fourth quarter of '26 as a result. But if you look at Luxury & Lifestyle M&F revenue, the growth rate in the fourth quarter is still double digit, excluding that impact. With respect to -- I think what was your question? We had a question on franchise, right? So no, we expect the impact from the flip to franchise to decrease in 2026. It should be more in the 1% area as opposed to 2% this year. And I forgot your first question. Sorry about that.

Net interest line.

Net interest line, right, in the P&L. So in 2025, we actually have -- we have an impairment related to a convertible obligation we had with one of our investments. That's a one-off that will not recur in 2026. So I expect the '26 interest cost in the P&L to be less -- to be lower than 2025.

And just Jamie, an important point on M&F. You should expect M&F to continue to decrease because we're moving to franchise. What you should also expect is that the profitability of M&F continue to increase, and we've demonstrated that over the last 2 years since the Capital Market Day, increasing, in fact, the profitability by about 100 basis points per year. And you should expect that the flip to franchise does not change anything on the commitment that we've got on EBITDA in the regions concerned because fundamentally, it's less of top line, but it is a better profitability. And we're going to make sure that in the end, the EBITDA volume, which is generated remains something which is within the parameter of the Capital Market Day. I think it's an important point. So it's going to gradually continue to decrease. It's totally mechanical, as you know.

And just to complement on Jean-Jacques' answer, and you saw that actually this year, M&F revenue was up 6% at constant currency, and that is despite the 2-point impact on the flip to franchise in PME. So because we have a good RevPAR and the NUG is accelerating, obviously, M&F revenue overall will continue to grow and will continue to be in the CMD guidance, which we gave in 2023, which is a growth of 6% to 10%.

The next question comes from Nikunj Kaushal from Redburn.

It's Alex Brignall. Just quickly on Essendi, thank you for the detail you've given. And it relates to Jamie's question there. [Technical Difficulty] could you possibly give us some indication of what [Technical Difficulty]?

JJ, do you want to...

I think I'll just repeat what I went through with Jaime, which is that you should expect the EBITDA, which is generated by the regions like ENA, which is the most impacted regions to be well in line with the Capital Market Day guidance. So you're going to get lower top line, you're going to get lower cost base and you're going to get net-net an increase in volume because the franchise is an easier way to develop as we all know, and with much more resilience over time in terms of its performance. And that's going to generate a bottom line, which is consistent with what we had committed to because remember that the flip to franchise was, in fact, part of the Capital Market Day hypothesis and elements that we provided in those days. So all of that, again, was in the plan, is in the plan, which stay in the plan.

You want to go on the loyalty fees?

I can take that one.