Morgan Stanley Resumes Accor Coverage With 'Equal-Weight' Rating, Citing Growth Headwinds

Morgan Stanley has resumed coverage of European hotel operator Accor SA with an “equal-weight” rating and a €51 price target. The bank's analysis suggests a balanced investment case, acknowledging that while the company's strategic shift to an asset-light model is largely complete, it faces several headwinds that could temper growth.

The price target implies approximately 10% upside from Accor’s July 24 closing price. According to Morgan Stanley, the risk-reward profile is evenly distributed, with its bull case scenario at €70 offering 52% potential upside, while its bear case sees the stock falling 25% to €35.

A Balanced Outlook

Morgan Stanley noted that Accor's shares trade at a significant discount to peers, at approximately 16 times price-to-earnings and 11 times EV/EBITDA for 2027, representing a 25% discount to other asset-light hotel groups. However, the bank believes this valuation gap is unlikely to close in the near term.

Analysts cited several challenges facing the company:

• Slowing RevPAR: Revenue per available room (RevPAR) is no longer outperforming, with second-quarter growth estimated to be flat. The company's Middle East exposure, at roughly 10% of sales, is about double that of global peers and is being impacted by the ongoing regional situation.
• Subpar Growth: Net unit growth is forecast at 3.5%-4%, which lags most global competitors, particularly in the Premium, Midscale & Economy segments in Europe.
• Operating Leverage: Accor retains more operating leverage than its peers, with 20% of its EBITDA derived from leases and other structures. Additionally, one-third of its Managed & Franchised revenue comes from more volatile incentive fees.

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Asset-Light Transition Nears Completion

The neutral rating comes as Accor finalizes its business model transformation. The recently confirmed €975 million disposal of its stake in Essendi effectively completes the company's transition to an asset-light operator, where it focuses on managing and franchising hotels rather than owning the properties.

Following this shift, Accor’s Managed & Franchised division now generates 80% of EBITDA at a high margin of 66%. The company is also set to return €1 billion to shareholders over the next 12 months, putting it on track to exceed its 2023-27 cash return target.

Earnings Expectations

Looking ahead to Accor's first-half results on July 30, Morgan Stanley forecasts RevPAR growth of 2.6% and group EBITDA of €558 million, a 1.2% year-over-year increase. The bank expects Accor to guide for full-year 2026 EBITDA between €1.25 billion and €1.28 billion, which would require an acceleration in growth in the second half of the year to meet consensus estimates.