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Morningstar | Accor's 2019 RevPAR Guidance Remains Aggressive, In Our View, Amid Signs of Cyclical-Driven Slowing

We don't plan any material change to our Accor EUR 41 valuation after it posted first quarter revPAR growth of 1.6%, near our 2019 1.5% forecast. We see Accor shares as slightly undervalued and think investors looking for hotelier exposure should review narrow-moat Wyndham Hotels that trades at a larger margin of safety to our $72 fair value estimate, while offering an industry leading presence in the economy and midscale segments.

We see signs of a cyclically driven slowing in Accor's first-quarter results. Total revPAR growth of 1.6% (6.9% lift on a two-year stacked basis), represented a slowdown from the 6.1% increase (up 12.3%) the metric posted in the previous quarter. Also, Accor's European market (47% and 20% of existing and pipeline rooms, respectively) reported 3.3% revPAR growth (7.9% lift on a two-year stacked basis), down from the 7.9% increase (up 14.6%) seen in the previous quarter. Further, APAC (30% and 50% and existing and pipeline rooms, respectively), also saw revPAR slow to a 0.6% decline (up 4.7% on a two-year stacked basis) from the 4% increase (up 10.2%) posted last quarter, as Chinese outbound travel slowed, and Australia continued to deal with industry oversupply. Finally, Accor said its North American (5% and 3% of existing and pipeline rooms, respectively) revPAR grew 1% after adjusting for calendar and renovation, which we view as anemic. Despite this slowing, Accor maintained guidance for 3% revPAR growth in 2019, which we still see as aggressive, especially as year-ago comparisons remain challenging through this year. As a result, we plan to maintain our 1.5% 2019 revPAR forecast.

While we see signs of a cyclically driven slowdown, we think Accor's brand advantage (source of its narrow moat) is intact, supported by its 200,000 room pipeline, which represents 28% of its existing units. As a result, we continue to believe that Accor will see around 4.5% net unit growth in 2019, above the long-term U.S. industry supply growth average of 2%, and at the higher end of Accor's 2019 target range of 2%-5%.