A successful comeback. That's Accor's stock market record for the year. In 2024, the stock was the best performer on the CAC40 (+36%), having rejoined the index in March to replace Alstom. In September 2020, in the midst of the Covid crisis, Accor exited the CAC...replaced by Alstom.

And yet, this is a stock about which very little is said. It's probably a business that's never been talked about. Accor is one of the world's largest hotel groups, with over 5,600 hotels in 110 countries. From entry-level (F1 and Ibis in its various incarnations) to luxury and lifestyle (Orient-Express, Fairmont, Sofitel, Mama Shelter), mid-range (Novotel, Mercure, Adagio) and premium (Grand Mercure, Swissôtel, Pullman), the group's 45 brands provide a presence in all segments. A fairly balanced presence, with around a third of rooms in the economy segment, a third in the mid-range and a third in the premium, luxury and lifestyle segments.

But like most of its major competitors, Accor has adopted an "asset light" model, meaning that it does not own the walls of its hotels. At Accor, this move was driven by the investment fund Colony Capital, from which current CEO Sébastien Bazin hails, and took shape in the mid-2010s. For hotel groups, not owning the hotels means that their business is much less capital-intensive, freeing up resources to finance brand development.

A growth sector

The hotel industry is benefiting from a structural growth trend: the development of tourism, which now accounts for around 3% of global GDP (including air traffic). This activity has seen impressive growth over the last few decades, from around 25 million international tourists in the 1950s to 1.3 billion in 2023. The pandemic may have brought things to a halt, but the recovery has been strong, and the figures for 2024 should exceed 2019's records. France, already the world's leading tourist destination, is set to pass the 100 million visitor mark in 2024.

This trend is set to continue in the years ahead, thanks in particular to Asia, where a middle class continues to emerge, boosting demand for travel. In 2025, the International Air Transport Association (IATA) predicts a record number of passengers on aircraft: 5.2 billion, up 6.7% on 2024. Passengers who will obviously need to be accommodated.

The quest for experience

Accor 's broad brand portfolio enables it to adapt to consumer needs. This strategy is summed up in this passage from the latest annual report: "Each brand aims to respond as effectively as possible to individual desires, which may change, evolve or intersect. In a world where experience is king, where change is habitual and personalization has become the norm, an extremely varied brand portfolio also makes it possible to provide regionalized or globalized responses according to needs". The usual annual report bullshit, you may say.

Of course. But the notion of experience is key. As we've seen for almost two years now, luxury goods are in trouble (even if Richemont's recent publication is perhaps a sign of stabilization). Sellers of bags, watches and jewelry, as well as wines and spirits, are all experiencing declining sales. Only ultra-luxury is faring well. Companies such as Hermès or Ferrari have such a small product range and such a price-insensitive clientele that their pricing power (the ability to pass on price increases) seems infinite.

But consumers are always ready to pay for experiences. Today's world is no longer that of Jacques Séguéla and his Rolex, but of the Instagram post where people share their experiences to show how great their lives are. Brands in all sectors have understood this and are now capitalizing on this aspect.

This is exactly what Accor is doing in its luxury and lifestyle division. Premium experiences at premium prices. The Orient-Express brand, with its trains and soon its 2 hotels (in Rome and Venice) and its sailboat, is a perfect example. As a result, this division, which accounts for less than 10% of hotels, generates 25% of sales. And Accor intends to develop it further. Looking in detail at the pipeline (development projects launched), Accor plans to open 268 hotels in this division, representing an increase of around 50%.

A price everyone can agree on?

By 2025, demand for travel should remain at a high level, translating into increased revenues for the sector. This is what Bank of America said in a recent note: "We do not see the end of the travel cycle in 2025. We see no sign of Americans losing their appetite for European vacations, which is good for transatlantic airfares and RevPAR for European hotels".

As a result, Accor is one of the U.S. bank's favorite stocks, due to its ability to capture this demand and its favorable return-to-shareholder policy. In fact, most analysts are Buy on the stock, and the average price target has been steadily raised over the past 2 years.

Accor 's recent stock market performance (+65% over the last 2 years) is remarkable, but the Covid crisis caused the stock to plummet. Since the beginning of 2020, the share price has risen by just 15%, while earnings per share have risen by 43% over the same period. With a forward PE of 19, the stock is, in terms of valuation, on a pre-pandemic low. And net income is expected to rise by 11% in 2025 and 2026. Thus, the current valuation coupled with the earnings outlook allow us to be relatively optimistic for the future.