Morgan Stanley Taps Accor, IAG as Top European Travel Picks on Shareholder Return Prospects

Morgan Stanley has designated hotel operator Accor and British Airways-owner IAG as its two "Top Picks" in the European travel and leisure sector, citing expectations for significant cash returns to shareholders and fundamental business strength. In a recent research note, the investment bank upgraded Accor to "overweight" while reaffirming its positive view on IAG.

Accor Upgraded on Cash Return Outlook

Morgan Stanley raised its rating on Accor SA to “overweight” from “equal-weight,” adding the hotel group as a new Top Pick. The bank also increased its price target on the stock to €55 from €51, implying an 18% upside from current levels.

Analysts at the firm stated they expect investors to look past near-term disruption in the Middle East and focus on a potential 2027 inflection point for key metrics like revenue per available room (RevPAR), net unit growth, and cash returns. Morgan Stanley highlighted a significant pipeline of shareholder distributions totaling more than €1 billion, or about 10% of the company's market capitalization. This includes:

• A current buyback program set to complete by October.
• A subsequent €0.5 billion Essendi-funded program.
• A further €0.4 billion buyback funded by free cash flow (FCF).
• A €0.3 billion dividend.

IAG Retains Top Pick Status

Ad

International Airlines Group (IAG) retained its “overweight” rating and Top Pick status with an unchanged price target of €5.80, which also suggests an 18% upside. Morgan Stanley remains positive on the airline conglomerate despite softer near-term trends in passenger revenue per available seat kilometer (PRASK) and lower fuel cost recapture.

The bank pointed to several factors supporting its medium- to long-term thesis, including the ongoing turnaround at British Airways, disciplined cost control outside of fuel, and the strength of IAG's loyalty business. The note also cited the company's low leverage, which supports projected free cash flow yields of 10%, 11%, and 12% for fiscal years 2026, 2027, and 2028, respectively. Morgan Stanley anticipates approximately €2 billion in shareholder returns for fiscal 2026.

Broader Sector View

The calls on Accor and IAG were part of a wider review of the European travel and leisure industry. In the same note, Morgan Stanley expressed a favorable view on Entain, Compass Group, and Carnival. Conversely, the bank advised caution on JD Wetherspoon, Sodexo, Scandic, Playtech, and Wizz Air.