Accor SA (AC) Earnings Call Transcript

Welcome to the Accor Half Year 2026 Results Presentation. Today's conference will be hosted by Mr. Bazin and Martine Gerow, Group CFO. [Operator Instructions] Now I will hand the conference over to Mr. Bazin.

Well, good morning, everyone. Very happy to have you all for the first semester results. I'll do the conclusion. At the end, I'm going to let the floor to the best of us to Martine, Chief Financial Officer. She's going to guide you through the results and comments, and then we'll go straight conclusion and Q&A. But at least thank you so much, each of you to actually being on the phone with us. Martine?

Thank you, Sebastien, and good morning, ladies and gentlemen. And again, thank you for attending our earnings call for the first half. So I will kick off on the financial highlights on Page 4. So following a very strong start of the year, the situation in the Middle East has impacted our trading in the second quarter, but to note that the performance in other regions remained very solid. We activated in March a profit protection plan, which has enabled us to largely offset the impact of the conflict and deliver a very steady set of results for the first half of '26. The operating performance is contrasted across regions, but did improve throughout the quarter, adjusting for the hash calendar. Q2 RevPAR came in at minus 0.2%. Now that is a headline that match two very different situations outside the Middle East. Q2 RevPAR was up 3.3%, driven by both pricing and occupancy, which demonstrates the continued stress of demand and the attractiveness of our brands. In the Middle East, RevPAR was down 29%, driven by the UAE, which was down 67% in the quarter. Other countries, which is Egypt and Saudi Arabia namely posted positive RevPAR growth in the mid-single digits. We exited the quarter with a marked improvement in the UAE and an acceleration in other regions, notably in Europe. This drove our H1 '26 RevPAR growth to 2.2% and 4.6% excluding the Middle East. Room revenue growth was driven by both business and leisure with individual leisure travelers and business groups growing in the mid-single digits. Net unit growth was 3.2% on a last 12-month basis with limited openings in H1 and some churn in our Germany Revo portfolio as well as in China. Pipeline growth remained very healthy at 11.4% growth over the last 12 months, and supporting an acceleration of not going forward. Signings also grew at a strong pace. Moving to financials. We adapted very quickly to the geopolitical events, producing a solid set of results. M&F revenue was up 4.8% at constant currency, reaching EUR 685 million. That's a solid performance. And M&F EBITDA was up by 9.1% at constant currency, which is a 280 basis points margin improvement. Total revenue was up 3% at constant currency and 4.8% on a like-for-like basis when we adjust for some disposals in Paris Society. And total EBITDA was up by 6.5% at constant currency and 7.4% on a like-for-like basis adjusting for scope. FX had a negative 2 points impact on group revenue and 4 points on EBITDA and was concentrated in the first quarter. Based on current rate, we expect EBITDA to turn positive in the second half. Scope impacted revenue by 2 points in the first half and EBITDA by 1 point. Recurring free cash flow reached EUR 194 million. That's up 42% versus prior year. And we delivered strong shareholder return year-to-date at EUR 541 million, which equates to a 4.8% return, bringing total return to shareholders over the last 3.5 years to EUR 2.6 billion. Actually, by the end of 2026, when we factor in our second tranche of share buyback, we will have returned EUR 2.8 billion to shareholders with dividends and share buyback in the first 4 years, which puts us in line of sight of the EUR 3 billion return, which had earmarked in our Capital Market Day almost a year ahead of schedule. Let's now move on to the second quarter RevPAR for each division on Slide 5. PM&E posted a flattish RevPAR growth of 0.1%, driven by pricing. In the quarter, average rate was up 1% and occupancy rate was down 1 point at 68%, driven by the Middle East. Excluding the Middle East, RevPAR was actually up 1.1%. In ENA, RevPAR was also flattish at 0.2%, driven by pricing, stable occupancy year-over-year. Our three largest countries report actually very different trends. France and the U.K. posted low single-digit RevPAR growth, while Germany was negative. Now we did note that trading improved in June in all three markets with RevPAR in the low single digit to mid-single digits. In France, in the second quarter, RevPAR was in line with the first quarter, although more driven by the provinces with strong and steady leisure demand. In the U.K., demand was also sustained, notably in London, confirming a low -- confirming sorry, a solid low single-digit RevPAR growth. In Germany, demand softened in April and May, but improved in June with a positive RevPAR in June, driven by a more supportive event calendar. In MEA APAC, Q2 RevPAR was down 1.1%, impacted by the conflict with significant decline in occupancy and rates in the UAE. Excluding Middle East, RevPAR would be up 1.9% driven by UAE, Egypt and Saudi Arabia were up in the mid-single digits. Southeast Asia remains a growth engine for the region with RevPAR in the mid-single-digit territory with notably good performance in Japan, in Vietnam and in Indonesia. Pacific slowed down somewhat versus the fourth quarter, reporting a flattish RevPAR growth due to lower international traffic and lower consumer and business confidence. In MEA, obviously, impact of the conflict. MEA was down in the low teens in the quarter. The negative performance, again, attributable to the UAE. The UAE RevPAR decreased in April in the mid-80s, but improved since the decline in June in the UAE was only in the 40s. Saudi, Egypt and Turkey continued to perform well. China stayed in low single-digit negative territory. Supply growth is leveling off. So the industry should be at or near the bottom of the cycle. But RevPAR recovery is actually highly uneven and there is clear underperformance of the mid and eco segment, which is where most of our portfolio sits in China. To note that recovery is already well in place in luxury since the fourth quarter and continuing through the second quarter with positive RevPAR growth. Americas posted mid-single-digit growth with Q2 RevPAR up 4.8%. Region remains driven by Brazil. Turning to Luxury & Lifestyle. Q2 RevPAR decreased by 1.4% led by occupancy and rent decline in the Middle East. Excluding the Middle East, Luxury & Lifestyle RevPAR would actually be up by 9.4%, which is in line with the first quarter and confirms the healthy demand for this segment bar the conflict. Luxury reported a positive RevPAR growth of 2.5%. Excluding Middle East, it would be up 9.1%. All brands, all regions, again, reporting growing RevPAR outside of the Middle East. Europe and NorAm demand were particularly robust with excellent performance in NorAm in Fairmont and Raffles. Lifestyle is a segment which is the most impacted given its larger exposure to the UAE, which weighed down on RevPAR, which is down 11.3% in the quarter. Excluding Middle East, RevPAR would be up 10.3% for Lifestyle. And within Lifestyle resorts were the most affected. Lifestyle Collective was actually only slightly down due to its large presence in the Europe and U.S. Let's now turn to Slide 6, which breaks down our portfolio and pipeline by division. PME grew its network by 2.6%. The pace of openings remained steady and pipeline grew a stellar 12.7%, reaching 28% of the PME network, which is up 3 points from prior year, and confirming again the attractiveness of our brand. PME signings grew by 10%. The sequential slowdown of the NUG results from, as I mentioned in my introduction, some churn in the Revo portfolio in Germany as well as the Accor segment in China. Where we see some hotels actually closing down due to the lower activity level, particularly in the second and third-tier cities. On the right, Luxury & Lifestyle portfolio grew by 6.8%. That's driven by Ennismore pipeline growth picking up from the first quarter at 7.4%. Now we did transfer the JO&JOE portfolio in H1, which impacted the NUG of Luxury & Lifestyle by about 1 point. So if you look at the underlying Luxury & Lifestyle growth, it's closer to 8% on an LTM basis when you adjust for that transfer. It was marginal, obviously, on PM&E, which is a larger network. There were fewer openings in the first quarter -- sorry, in the first half. They are more concentrated in the second half. Some openings in the Middle East were actually pushed to the second half. As we expected, churn was lower compared to prior year. Some notable openings of the second quarter includes Raffles Jeddah and Orient Express in Venice. Pipeline still very healthy, stands at 46% of the network. That's also up 1 point from prior year, and signings grew by 39% in volume. At group level, net unit growth reached 3.2% over the year with an active mix. Newly opened hotels will generate fee per room, which is approximately twice as high to 2x as fees generated by churn hotels over the last 12 months, as you can see on the box at the bottom of the slide. Versus last year, pipeline is up 11.4% at group level in volume and group signings in volume are up 13%. And conversions still represent more than 55% of our openings. That's quite in line with last year. Now let's turn to Slide 7 with revenue by segment. The revenue by segment and by division is actually provided as we always do in the appendix and in the press release. The group revenue reached EUR 2.76 billion in the first half. That's up 3% at constant currency, and it's up 4.8%, adjusting for the scope effect from the disposal of Paris Society tested. Again, FX and scope impacted revenue by a negative 2 points each, lowering the reporting growth to 0.6%. FX impact concentrated in Q1 and again, expect FX impact to be positive from Q2 onwards. M&F revenue growth, up 4.8% at constant currency. That's in line with the algorithm at group level. Hotel Assets and other revenue was down 5.4% at constant currency and up 0.8% adjusting for scope. Paris Society, recast restaurant activity in Dubai was highly impacted in the first month of the conflict, although trading significantly improved in the later part of the second quarter. SMDL, which is sales, marketing and distribution and loyalty revenues were up 4.7% at constant currency, which is pretty much in line with M&F revenue. And to note that our loyalty contribution was up almost 4 points in the first half year-over-year, and we reached 121 million members as of June. Turning to management and franchise revenue by segment on Slide 8, which grew at 4.8% in the first half. Q2 M&F revenue was up 1.6% at constant currency, impacted by lower incentive in the Middle East as well as flip to franchise, the point we have commented in the previous quarters. Residential fees were stable in the first half as we expected. PME, M&F revenue was up 0.7% at constant currency, slightly higher distortion related to the switch from management to franchise as we've called out before, which is about a 1 point negative impact on growth and also lower incentives due to the conflict in the Middle East. And as a result, the distortion is more pronounced in the second quarter than in the first quarter. Luxury & Lifestyle M&F revenue grew at 12% at constant currency. That's slightly above RevPAR. Q2 M&F fees were up a solid 9%. That segment is also impacted by the lower incentives in the Middle East. But we also had, as we called out, some termination fee in the first quarter, which helped offset. Now let's turn to EBITDA on Slide 9. The group EBITDA reached EUR 563 million. That's up 6.5% at constant currency and up 7.4%, adjusting for scope. We showed adaptability. We showed strong reactivity to navigate what is a challenging global environment. The reported EBITDA growth at 2.1% includes a negative FX impact of EUR 23 million, again, concentrated in Q1, and we expect FX to turn positive in the second half. As for M&F, where more detail by division are provided in the appendix, EBITDA of 9.1%, strong margin improvement resulting from the profit protection measures implemented as of March and to a lesser extent, some termination fee. We expect the full year M&F EBITDA margin improvement to be above our annual guidance of 100 basis points. Both divisions improved their M&F margins. As for Hotel Assets and other, EBITDA growth is impacted by the conflict in the Middle East, combined with scope, which accounted for a negative 7 points in the first half. As for SMDL, EBITDA was up 8.3% at constant currency, benefiting also from profit protection measure with an 8% margin. And we expect SMDL EBITDA to be balanced between H1 and H2, and we expect full year margin to be above our 6% plus guidance. And finally, to note, cost of our holding are down slightly with again strong cost containment measure. Moving on to the P&L on Slide 10. In H1, we achieved an adjusted net profit of $231 million and an adjusted EPS of $0.83, flat versus prior year. Other income and expenses at a negative EUR 113 million in H1 included amongst primarily a EUR 44 million valuation adjustment on our S&D stake, which reflects the time value of the earn-out, which we expect in this transaction, and I'm sure you've all seen the press release we just issued. And EUR 37 million restructuring costs, this is mainly in the European region, and that is to support the move to a more franchise model. D&A was flat in the first half. Share of net profit of associates in the JV, minus EUR 37 million, slightly more than half of the loss related to S&D, which has reported lower capital gains on disposal and high impairment losses in the first half. Net financial expense driven primarily by a high gross debt. The cost of debt remains very reasonable. Income tax expense is flat. ETR is also flat if you adjust for nonrecurring items, which carry a significant lower taxation both in '25, and in '26. We expect the full year ETR to be broadly flat. Minority interests are down year-over-year, and this is due to the lower profits in the Middle East in Ennismore. Turning to cash flow on Slide 11. Recurring free cash flow reached EUR 194 million. That's up 42%, reflecting a 34% cash conversion, which is about 9 points above prior for our main highlights. Cash interest increased as we expected, driven by the increase in debt level, but notably an additional bond we issued in '25 with the first coupon paid in H1 of '26 as well as lower interest income. So H1 is pretty, I would say, representative of what the second half will be. Cash has decreased from EUR 121 million to EUR 85 million, mainly driven by a tighter monitoring on installments between H1 and H2, and we did accelerate refunds in France. And we expect our full year '26 cash tax to be broadly stable versus prior year. Recurring investments were below last year at EUR 93 million. We control CapEx in what is a challenging geopolitical environment. The key money was also lower in the first half. For the full year, we continue to expect an increase of the CapEx in line with the guidance provided in the CMD, probably closer to EUR 250 million for the year. Working capital is stable year-over-year. And finally, net debt, which is EUR 3.5 billion at the end of June. As a reminder, that's about EUR 400 million up from December. Main movement in H1 being recurring free cash flow, which, as you know, is seasonal and more accruing to the second half, return to shareholders and hybrid coupon. To conclude and before I turn it over to Sebastien, let me now introduce our guidance on Slide 12. RevPAR like-for-like growth is expected between 2% and 2.5%, depending on the pace of recovery in the UAE. The RevPAR guidance includes a second half scenario for the UAE, which is pretty much between where we are in June, which is around minus 40% to minus 20%. Net unit growth is expected at circa 3.5%, in line with FY '25, and it's a notch below my comments from last February, taking into account a few things: one, some delay in openings in the Middle East as well as the impact of the Revo bankruptcy and some churns in the China Eco hotel given the economic situation. That being said, as we -- as I commented before, the fee per room of the new openings is about twice the fee per room of the closures. Recurring EBITDA is expected between EUR 1.260 billion and EUR 1.285 billion. That includes a negative FX impact of EUR 10 million, and it represents an EBITDA growth year-over-year between 6% and 8%. And this concludes my opening remarks, and I will now turn over the floor to Sebastien for some closing remarks.

Martine, thank you so much. We're going to go into at least the H1 takeaways, the way we look at them. The first is you probably heard me many times, I guess, it's being confirmed probably every quarter passing for the last 3 years now. It's ability of Accor to navigate through the storms. And of course, we have storms in many different countries over the last few years and the last one has been the Middle East impact between Iran and GCC countries. I was telling the Board a couple of days ago that I guess Accor has an enormous granularity on its cost. We have an enormous control on operating metrics all over the different geographies. The CEOs, the head of business department have a total grip on what they conduct, which actually permits us to navigate, to evaluate, to actually get into action, to build buffers against countries in which we have not expected unforeseen events. And I never had seen that before in this company in terms of actually ability to get close enough to results, if not on the results, even though it's not going according to plan. And that's something which actually gives us an enormous comfort to actually be in front of you this morning. The number two, why are we able to build buffers is because we need to take actions on what we call PPP, you heard Martine, profit protection plan. It's really putting together a lot of different initiatives, a lot of different decisions impacting a lot of different people in different countries in terms of hiring freeze, travel freeze and a lot of actually investment no longer being made, not to the detriment of Accor moving forward. But that plan has been put into action early March. You've seen the results quickly up until the first semester. That plan will not let go. We're going to be continuing deploying it as long as necessary, certainly for the second semester. The third is a very different nature, which is all about loyalty partnerships. And I'm going to go in it in a minute on the next page. But it's something which is extremely important in our ability through all membership deployment, which is going at a very fast pace, as you know, probably 15 million to 20 million additional members every year, is trying to actually incorporate a lot of actually daily use of the all loyalty program, and we've signed deals and I'm going to go back to it in a minute. But it is a 15% to 20% growth per year, both on revenues and on EBITDA, which is basically a faster growth that we can build -- that the one we can benefit from, from operation, which is this 9% to 12%. And finally, very proud. You know about it because it was announced 4, 5 days ago. Extremely proud for the team to have had the ability to sign Essendi, which is a very, very large transaction, probably by far, the largest hotel transaction in Europe for the last 10 years. I think the first one -- the last one was Booster at the time we put this EUR 8 billion asset portfolio together. But that is today also one of the largest. It's still a EUR 7.5 billion hotel portfolio in which we invited in Blackstone to come in alongside Colony. So very happy, very proud for the team. It's going to give us enormous flexibility moving forward on cash deployment. On the next page, I just want to tap upon two minutes on Uber, Amex, Indigo, and I'm going to talk about H, which is Huazhu. The one on the left is a very different nature. And the one we really didn't dwell with before over the last few years, which is really going -- trying to go into enhanced travel experience. It's all about kind of actually using different car, different partnerships into your daily use. And with Uber, all the members of Uber will be able to go -- members of Accor, will be able seamlessly to go on Uber Mobility, Uber food deliveries through the app or Accor digital ecosystem from their home or from any hotel stay. So that's going to be done every day. People are going to be earning points. It's being announced with Uber in April. It is launched in H2. So you haven't seen the benefit of it yet. It is being launched at the end of August. That will be made available to all the Accor members, Uber users in France, Germany, Poland, and then we'll go not on the food yet, but on the Uber service on UAE, Saudi Arabia, Qatar and Morocco and more coming with Uber. It's -- we won the RFP against many of our peers, very happy to go hand-in-hand with Uber Group. Amex, different nature. Amex is all about Elite status match for the card members. So Centurion Amex holders will go and receive all Accor Platinum status. Amex non-Centurion Platinum Card members will be eligible to gold status. That also is launched in H2. So you haven't seen the benefit of it yet. It was signed in May, and that's going to be displayed in 12 countries, Australia, Austria, Canada, France, Germany, Hong Kong, Italy, Japan, Mexico, Singapore, U.K. and New Zealand. And that also is going to improve a lot of actually daily usage between Amex Group and Accor. And the third, IndiGo, I'll talk about India in a minute. IndiGo, we are going hand-to-hand with IndiGo Airlines, as you know, which is the largest airline carrier in India, which is probably today 64% to 65% market share with well over 400 airplanes in India. And that's going within the domestic Indian travelers within the Indian traveling outside of India, mostly to Southeast Asia, to Middle East and to Africa. H World is huge. H World, you know of our partnership, a very trusting one with Chairman Ji Qi, the Founder and CEO and largest shareholder of what is today the second largest hotel group in China, likely to be the first hotel group in China in a few years because of the pace of growth. We decided to put together their 310 million members with our 115 million members on trying to get reciprocity, not only on and earning points, but we actually went one step further on web distribution. So starting in August again. We're going to have all the Steigenberger hotel, intercity, basically all the H World acquisitions outside of China, are mostly from Deutsche Hospitality acquired in 2019. All of those are going to be available on all.com platform. As a reciprocity, you're going to have the Accor Premium and luxury hotels, Pullman, MGallery, Sofitel brand in China, 130 of them will be available directly on H World booking channels. So that also going to be launched in H2, and that encompasses China, Europe and the Middle East. So it's just a confirmation of our ability to sign global deals and to be able to confirm the pace of 15% to 20% growth in partnerships and EBITDA coming from loyalty members. On H2 priorities, -- the first one, you could not be surprised, it's whatever we've done rightly, let's continue and let's do it even better if we could, which is the profit protection plan, the discipline, the rigor that I guess, Accor has been conducting over the last few years has to remain. It has to be the main focus and has to be basically our compass to move forward because the context is not going to get better in terms of actually challenging environment, and we have actually very little control on geopolitical events. So we might as well actually control what we do internally. The number two is go for the growth, reshuffle your own organization, and I'm talking about India here. Some of you know we are restructuring a lot of different holdings we had in India into one common vehicle with our partner, Indigo Airlines, which is actually the mother company of IndiGo Airlines called InterGlobe. That is in the making. It should be finished by the first quarter of 2027. We have changed the CEO of India. A woman is coming from Marriott, Ranju, she is extraordinary. She came 6 months ago. Pace of growth signing within only 9 months have tripled the pace of signing and growth we had over the last few years. And in both directions, which she is very confident, certainly on Fairmont, Raffles, Sofitel on the luxury side, but it's also actually growing much faster for ibis, Novotel and Mercure. So a lot to talk about in India, and we'll be able to actually give you better granularity coming next time we meet with me in March or February for the year-end results. Number three, yes, we should be extremely focused, disciplined on cash allocation. So there's no better use of cash today, accelerating the pace of share buyback. We finished the first tranche. We are already starting to launch the second tranche of EUR 225 million, and we are confirming to you that the first day we get cash in from Blackstone Colony on the buyout of our 30% of Essendi, confirming to you that this additional EUR 500 million share buyback will proceed day after closing, which is likely to be at the end of this year. And four is just to confirm, we're still spending a lot of time at the management level, at the Board level on entertaining a final decision or whether or not any small listing is appropriate, which is also a game changer in terms of accelerating the pace of any small growth visibility, credibility and probably ability to penetrate great markets such as America. So that's where we are on the -- on my kind of actually comments to you. Why don't we leave floor now to many of you with your questions. Thank you.

[Operator Instructions] the next question comes from Jaina Mistry from Barclays.

Three questions, if I may. The first question is on net unit growth. I know you're guiding to 3.5%, which is slightly short of what you communicated at the full year results. Could you quantify the drivers of how much is coming from Revo? How much is from the Middle East? How much is from China? And then how much of that should shift into next year? And are you still confident in hitting the 4.7% NUG next year? My second question is around cost savings. Would you mind quantifying how much in cost savings you delivered in H1? And how much you expect to deliver for the full year? And should we expect these costs to come back next year? Or are these permanent savings? And then very lastly, I know you mentioned your Middle East scenarios in H2. But could you just give us a bit more commentary on how you expect the recovery to pan out and kind of what you're seeing on the ground in the UAE?

Martine, why don't you go and then I'll have a comment on at the end.

Good Morning Jaina. So sure. So on net shedding growth, Revo is about 40 basis points, in fact, in our guidance. So that's basically the bulk of the gap versus what we had signaled in February. Middle East, yes, we have delays from H1 to H2, but on net unit growth and there's a bit from China. And in China, it's really hotels that are actually closing down as opposed to switching to another brand. On cost savings, so profit protection plan, it's EUR 40 million in the first half. The full year amount, frankly, will depend on the pace of recovery in the UAE. But if it doesn't recover, we're looking for EUR 70 million as a full year amount. In terms of the recovery in the UAE, and those costs, by the way, and I'll give the same answer I gave last year when we also had a profit protection plan to cover some of the FX impact. The cost won't come back unless the revenue comes back and probably not all of it will actually come back next year. And in terms of -- sorry, because I didn't answer your question on the NUG. So [indiscernible] impact, the pace of openings, actually, we expect to be up double-digit growth in our openings this year. And therefore, we are -- and the signings, as you've seen, the pipelines are very strong. So we expect definitely to be above 4% in 2027 and closer towards the higher end of our guidance, but more on that when we actually come to that next year. In terms of recovery, pace of recovery, look, the UAE in June was minus 40%, minus 45%. April was actually minus 80%. So you can already see the pace of recovery. And the way you should think about the guidance is if we stay where we are in June, which is, call it, minus 40% for the second half, then basically, that gets you to the low end of the guidance, both in RevPAR and in EBITDA, assuming again, some further profit protection plan. If we assume some recovery in the Middle East from where we are in June, not full recovery, but give or take half, so around minus 20% for the second half and progressively, then you'd be at the midpoint.

The one thing, Jaina, to add on the Middle East, which is worth noting, the booking notice when people go to Middle East today is 7 days. And of course, people want to know better on the environment. But it's been in the past kind of actually 15 days. So the way we look at it is, as you know, the months of June, July and August have been always extremely low in terms of activity because of the heat. We need greater visibility in terms of peace being put together agreement between different countries, probably by the 10th of October, the end of September, that's plenty enough for us to have a very robust month of November and December. So that's really where we should be having a greater granularity and better read will be basically at the end of September and early October. Until then, it doesn't change much. The sooner, the better, of course. But we have that ability to basically wait until that date.

The next question comes from Jamie Rollo from Morgan Stanley.

Three questions as well, please. First, starting with M&F second quarter revenue. Just can we talk a little bit about the gap between the constant currency revenue growth and the sum of net unit growth and RevPAR because obviously, you've got the drop in incentive fees. So could you please quantify that? But also you talked about some additional termination fees. I thought those were Q2, but Martine, maybe you said Q1. But again, if you could quantify both those two numbers, IMF and termination fees, just the sort of change year-on-year. Secondly, on SMDL, so yes, looking at a more even split this year, but that would still imply about EUR 112 million of EBITDA, so up 20% or so year-on-year. What is the partnership income, please, behind that? So what really accrues to Accor? And when do you see the margins going back to 6%, if ever? And then finally, on Ennismore, thank you for giving us the first half EBITDA of EUR 84 million. It would be helpful to get the year-on-year change. I know your minorities have halved, but obviously, that's amplified by leverage and so on. So just be helpful to get what the EBITDA was for Ennismore. And also when -- in terms of timing, when do you think we might hear more about the New York listing process?

Sure. So on M&F revenue, the termination fee was in the first quarter, so it doesn't impact the second quarter algo. The second quarter algo is fundamentally reflects the activity. It's stronger in the Luxury & Lifestyle division because you have basically stronger network growth, but also Fairmont and Raffles performed extremely well in the North America, which helped compensate the impact of incentives. Therefore, incentives impact are actually lower for Luxury & Lifestyle than it is for PME and PME, it's basically about 1 point of flip to franchise and give or take, 2 points on the incentives. So for the quarter, give or take, about 1 point on flip to franchise and 2 points on -- on SMDL revenue, you're right, it's about -- it is balanced. Therefore, your number is correct. What's driving that is essentially the distribution and the partnership revenue. What we said on partnership and subscription EBITDA because we're really looking at both is that our expectation was that, that EBITDA would double by basically 2029, 2030. Currently, it's around $50 million if you take the two together on a full year basis. So that gives you an estimation. Look, we gave a guidance of 6% plus for SMDL because we want to make sure that we keep a balance between growing our profits and reinvesting in the business. So the 6% plus guidance is still appropriate. Obviously, in the years where we have a more challenging situation, we also activate leverage in that segment. And Ennismore EBITDA is EUR 84 million in the first half. But I think your question was how does it compare to the first half of 2025. It's actually slightly down a couple of points.

On the timing of the Ennismore decision, it's way before the end of the year. So we probably should make a decision by the end of the third quarter and then to decide to go or no go on the potential listing of Ennismore and you're right to say, which is of no surprise to any of you listening to us that if we were to list Ennismore, you're correct, it will be listed in America.

The next question comes from Leo Carrington from Citi.

Could I ask firstly on the -- some more details on the composition of the pipeline signings in H1, both in terms of the region and also PME versus Luxury & Lifestyle? And would it be fair to assume given the very high level of your pipeline growth, does this indicate more new build ground-up hotels moving into the pipeline as you sign them rather than conversions? And second, Final question. I mean very curious to see that positive and healthy gap between fees from additions well ahead of those from churn hotels. Can this gap be sustained as the PME churn normalizes down as the China closures slow down? Or does the two converge eventually?

So on the composition of the pipeline, I mean, basically, if we look at PME, the pipeline is still -- #1 region is still MEA APAC, but you have to remember that in MEA APAC, Saudi Arabia and Egypt, there's a very low share of our product that's actually in the UAE, both for PM&E and Luxury & Lifestyle, so primarily KSA and Egypt. And then we have our sales pipeline in China and Asia and Europe and North Africa. So European region for -- and the pipeline is actually more skewed towards premium and mid-scale than Eco. For Luxury & Lifestyle, pretty much the same thing. It's, again, MEA APAC. The Americas region is stronger from a pipeline perspective for Luxury & Lifestyle than for PM&E, but MEA APAC is still the largest region when it comes to pipeline, and it's true for growth. I mean actually, we haven't seen a slowdown in signing in the Middle East. I mean -- but again, mostly KSA and Egypt. With regards to your question on new build conversion, no, I mean, the mix of conversion is 55%. That's pretty steady with where we've been. We've been between 50% and 60%. And frankly, we don't intend -- or we don't -- sorry, we don't expect that mix to change the -- and I'm sorry, can you repeat your last question, I'm not sure I got that.

China, difference between the churn being of a lower fee level versus additional rooms being signed on the fee stream. And how is China? Is it China is going to get better, going to get worse? Just on China minute since I'm actually -- Huazhu kind of actually expert. It's too strong, but actually it's very close to the situation. Huazhu is opening well above 2,000 hotels a year now, and they're closing 500 to 600 hotels. So they're actually every year passing, they're cleaning their own network, and we are impacted because of this. A lot of the ibis is developed 7, 8 years ago with us having basically closing certainly in secondary tertiary cities. It doesn't occur into primary cities within China. But Chairman Ji Qi is really looking for a better product in those different cities at the expense of an older product, which is fine. All of that is done in total coordination with us. So you are absolutely correct. Whatever we lose out of those ibis closing in China on tertiary cities, it's very, very low fee stream for us. And we are much better off for him to open a better product in that [ sense ] of a greater quality. So which is why we're not -- we don't have any visiting factor, which is also why -- and some of you -- I sound like a broken record here, but I've been really putting a lot of sensibility to each of you on the fee per room on the net unit growth is one thing. But what matters to me 10x more is what is the absolute level of fees that we get every year compared to the year before. And I can confirm to you, 2026, we've got a much better absolute fee stream from all the hotel we opened this year versus the hotel we've opened last year and the year before. So yes, NUG and the churn sounds to be probably heavy. But all of that, if not 80% of that is volunteering both on accepting what's being done in China and finishing the job, as we said to you, on the pure project, which is the detractors of many of our brands closing. Revo clearly that's we -- that was not in the plan, and we have to accept it. That's an unforeseen event. But yes, I'm encouraging each of you to look at the fees per hotel being opened versus the fees per hotel being closed, and that should give you an enormous comfort.