The latest indication that the sector is banking on long-term robust travel demand following the pandemic is Accor’s announcement on Tuesday that it aims to open more than 1,200 hotels in the next five years, more than doubling the number of its resorts.

The largest hotel chain in Europe also announced that it will increase its 2023 core earnings forecast and return about 3 billion euros ($3.3 billion) to shareholders through dividends and share buybacks between 2023 and 2027.

Following the pandemic, the travel industry has benefited from higher costs and a resurgence in demand as people rush to travel despite rising interest rates fueling concerns about a recession and inflation eroding household purchasing power.

Due to restructuring initiatives put in place in January, Accor expects revenue per available room (RevPAR) to increase by 15% to 20% in 2023. They also anticipate core profits before interest, taxes, depreciation, and amortisation (EBITDA) of 920–960 million euros.

According to Accor, the average cost of a room in the first quarter of 2019 was 89 euros a night. After the restructuring, the average price increased by almost 19% to 106 euros.

The business, which told the media that it “didn’t communicate the elements in the same way, since we didn’t have the 2 divisions (Premium Midscale & Economy vs. Luxury & Lifestyle)”, advises against comparing these two figures.

CEO Sébastien Bazin said he anticipated rising demand in nearly all of the group’s categories and geographic areas and attributed growth to the confirmation of very broad international demand across many countries.

According to the firm, this demand was driven by “the desire to travel, the growth of the middle classes, particularly in Asia, and the appetite of younger generations for experiences.”

Nevertheless, the shares of the French-listed firm were up 0.5% at 10:42 GMT, as analysts and traders were unimpressed by the company’s upgraded 2023 outlook.

“We like the commitment to return €3bn to shareholders by 2027, which we expect the market to focus on today, and 2027 EBITDA targets imply c.12% upside to consensus if the company executes on its strategy,” Jefferies analysts said in a note.

“However, FY23 guidance is in-line of consensus at the midpoint and shy of buyside expectations, in our opinion.”

In addition, Accor stated that between 2023 and 2027, it plans to increase both its revPAR and EBITDA by 3-4% yearly.

The company intends to grow internationally, but primarily in the Middle East and Asia Pacific.

It stated in May that it intended to more than treble its footprint in Saudi Arabia by the year 2027, opening hotels among other places in Jeddah and the country’s capital, Riyadh.

As the prognosis for the industry improves, competitors including Swedish-listed Scandic, Spanish Melia Hotels, and Pandox have also announced plans to build more hotels. This is true even if consumers in the leisure sector are feeling the effects of inflation when making purchases like cruise or concert tickets.

(Adapted from Reuters.com)