Accor, the Paris-based operator of about 5,300 hotels globally, said on Thursday as hotel stays surpassed pre-pandemic levels for the first time in the second quarter across all regions and brands. The internationally exposed company has seen a recovery despite the absence of Chinese and Japanese outbound travelers.

“We’ve been missing those Chinese travelers ever since,” said Sébastien Bazin, chairman and CEO of Accor, during a call with investors. “But the enormous amount of American tourism [in Europe] is certainly an indication of our industry still being blessed with two things happening, the rebound of international travelers and a very, very strong domestic leisure market.”

The group, which runs chains such as 25hours, Pullman, and Ibis, made a net profit of about $32 million (€32 million) on revenue of $1.77 billion (€1.73 billion) for the first six months of the year.

In the second quarter, Accor’s prices moved above 2019 levels in many key markets. In London, the group’s hotel prices were up 14 percent. In Paris, rates were up 11 percent. In Sydney, up 7 percent.

Strong pricing helped the company in the quarter lift its worldwide revenue per available room, a key industry metric, by 1 percent above the level it had notched in April through June of 2019. Compare that result to a 3 percent improvement over 2019 reported by Hilton on Wednesday.

“The hotels sector is getting support in particular from the excess savings built up by Western European and US consumers during the pandemic,” wrote Sabrina Blanc, a Societe Generale equity analyst, in a report. “Our main concern remains the ability of companies to pass on inflation to end customers.”

Inflation hasn’t yet weakened travel demand, Accor executives said.

“We already have the benefit of having the month of July almost behind us, in which we we have a very solid performance, which was even better than June,” Bazin said. “No worry at this stage in terms of activity, pace, geography, and that is all across the brands.”

The third quarter typically has business travel accounting for “probably 60 percent” of Accor’s business, Bazin said, and he has been questioning how demand will be this year. But he noted that major events, such as Germany’s Oktoberfest, the Paris Automotive Show, and the World Cup in Doha, are confirmed.

Accor said its marketing efforts to avoid losing travel bookings to third parties, such as online travel agencies, had worked in the first half. Direct bookings so far this year have been at the same percentage of the mix as in 2019. Direct bookings help the company and its partners avoid paying more in commissions to distribution middlemen.

Hotel development is continuing to hum along, with a target of “plus or minus 3.5 percent net room growth” for this year.

“I was yesterday with the head of development, and she told me that I guess we had an extraordinary number for July,” Bazin said. “So it’s really there only a question of rebound and countries opening.”

In the meantime, the company needs to become more asset-light by selling the remaining 7 percent of its network that it directly owns. It also continues to focus on increasing fees per room as an (undisclosed) metric rather than driving gross volumes, Bazin said.

No Company Split Immediately Foreseen, But…

When Accor announced this month it was reorganizing, splitting its leadership into two units, speculation formed that it may be preparing itself to break up.

One of the two business units would be an “economy, midscale, and premium” division for 4,816 hotels representing brands such as ibis, Novotel, Mercure, Swissôtel, Mövenpick, and Pullman.

“It’s 90 percent of our hotels,” Bazin said. “It is 85 percent of the fees, but it’s only two-thirds of the cash flow.”

The other division would be for “luxury and lifestyle.” It would get four brand collections that together have 488 hotels: Raffles & Orient Express, Fairmont, Sofitel & MGallery, and Ennismore.

“It’s probably very much equivalent to a third of the EBITDA [earnings before interest, taxes, depreciation, and amortization],” Bazin said.

Accor’s executives said there was no immediate plan for a split or major asset sale.

“In terms of eventual split, it is not today in the thinking,” Bazin said. “What is in this thinking is getting better, being clearer, being more efficient, and having probably an easier relationship with the owners. Because the owners [of the luxury properties] are in many cases absolutely different [than with the budget and mid-scale properties], with different ambitions, expectations, and way different numbers in terms of investment and dollars at risk.”

Having said that, Bazin still managed to imply that one benefit of the re-organization — besides a promised gain in efficiency plus more upskilling of the company’s luxury workforce — is that it would give the group more options for a possible split in the future.

Bazin said that “what we will do, for at least 24 months,” is to have common shared services, such as distribution software and information technology be provided as a service by the group to the units and controlled essentially at the headquarters level.

“If one day a split should could might happen, which is not something we’re thinking about today, we would have prepared the company to have that optionality in the tally,” Bazin said.

Skift Take

The impact of the strict and extended inbound Covid testing policy in the U.S. shouldn’t be underestimated, especially when it comes to larger business customers. The ripple effect is evident in Hertz’s latest results.

Matthew Parsons

The relatively late removal of the Covid test requirement for U.S. arrivals in mid-June dented car rental giant Hertz’s business travel bookings.

The company reported a strong set of second quarter results Thursday, with total revenue increasing 25 percent to $2.3 billion, and net income jumping to $940 million, versus a $169 million loss a year earlier.

However, its corporate volume was at 70 percent of 2019 levels for the quarter, with international inbound at about 40 percent.

To offset that it’s exploring how it can better leverage Egencia’s customers to capture more of the mid-market travel segment. That’s a practical move as Egencia, owned by American Express Global Business Travel, fits into the Certares family of holdings, of which Hertz is a part of, too, since its bankruptcy exit.

In June, Hertz generated more than double the revenue it generated from Amex GBT in January.

Short Burst Travel Trips

Hertz’s CEO is unfazed by the lack of progress compared to many hotel groups that are seeing a near return to their pre-pandemic levels of corporate travel sales. It’s moving in the right direction at least, seeing as Hertz was stuck at 60 percent in the first quarter.

“I’m more optimistic though about some of the data underneath that,” said Stephen Scherr, the Hertz CEO. “For example, not only are we seeing activity pick back up, we’re actually seeing the number of days of a rental start to return back to a normal period. It suggests to me that more business people are taking more short-burst travel trips. They’re not taking fewer, longer trips, they’re taking more short trips. That’s quite encouraging.”

Meanwhile, he thinks it will take a bit of time for that U.S. rule lifting to play itself out, and highlighted the momentum in Europe was greater than in the U.S., which is Hertz’s core business.

Another bright spot is contract renewal rates, which were at 97 percent, and they were “uniformly” higher, the company said.

Scherr is also prepared to explore more agency relationships in the future.

“(Amex GBT) is useful to us as a channel, because there’s a common thread between the two. But it’s an arm’s length engagement,” he said.

Other relationships already exist, but not at the same “stature” as with Amex GBT — “but there’s nothing to prevent us from pursuing multiple channels … I want to stay with Amex GBT for a little while because there’s a lot to be had there,” he added.

Scherr, who only joined in February, also said he was feeling more used to be in the driving seat. “As is always the case, you get an increasingly better feel for the business and nuances, so I feel quite comfortable now,” he said.