European Hotels
SECTOR REVIEW
Cautious overall, but bullish on Accor
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Summary: On a FY08E P/E of 15.6x, the European lodging sector looks
inexpensive, as it currently trades 10% below its historical average. However,
we believe risks to earnings are still on the downside and we therefore
remain cautious. Hoteliers have two months of visibility on bookings at best.
We favour Accor (Outperform) for its Vouchers division, its exposure to the
more defensive economy segment and its ongoing restructuring. We also
maintain our Neutral ratings on InterContinental Hotels Group (IHG),
Millennium and Copthorne (M&C) and Rezidor.
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Downgrading our estimates and target prices: We reduce our RevPAR
assumptions and EPS estimates (with the exception of Accor, which we
addressed previously) to reflect our economists’ view of a higher risk of a
recession in the US and a soft landing in Europe. Our EPS estimates are
now 5–8% below consensus in FY08E–09E.
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Accor is our key pick: Outperform,