© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Hello, and welcome to the Accor 2022 Q3 results. Please note, this conference is being recorded. [Operator Instructions] I will now hand over to your host, Jean-Jacques Morin, Deputy CEO and CFO, to begin today's conference.
Good evening. Good morning, ladies and gentlemen. Very happy to be with you today for this presentation of our Q3 2022 revenue. Before we start the presentation, and as usual, for the sake of clarity, we will continue to provide RevPAR variation by region versus 2019, and we will do that up to the end of this year.
As for revenue figures, we provide both the variation versus Q3 2021 and Q3 2019 in the document. Without further ado, let's move to Slide 3, where you've got the Q3 2022 highlight. On the left, just to start with the activity dimension of it, you can see here that we've got the Q2 2022 activity, which is now well above 2019. You may recall that in Q2, we reached a level by which we were at above the level of 2019 in terms of RevPAR. And we are now 14% above the level of 2019 in Q3. And you see that throughout all geography as we will detail later on.
The second point of highlight on the activities, there was a net unit growth acceleration. We reached 2.4% over the last 12 months. And that confirms that we are on track to reach our net unit growth guidance at around 3.5% for the year 2022. These performances illustrates continued hospitality recovery. We knew summer would be good. We were expecting summer to be good. And I think 2 points I'd like to highlight here is that in September and in October, we did confirm the return of corporate and MICE. And the other element to take into account here is that there is still upside potential in Asia, notably in China and Southeast Asia because they are still in the dynamic of the overall regions trailing.
And we expect to see those benefits popping up in 2023.
So on the right side, how does that activity translate in numbers. The group revenue reaches EUR 1.149 billion, which is an increased like-for-like of 83% versus Q3 of last year and 9% above Q3 of 2019. As for EBITDA, the combination of robust summer activity as well as the benefit of the sales, marketing, distribution investment that we have discussed with you when we published H1 2022. And all of that combined with some discipline makes us confident that we will be on the high end of the EUR 610 million, EUR 640 million EBITDA range that we communicated back to you at the end of September. And STO, Service to Owner, which was subject of many discussions at the end of July will be breakeven in H2. So as we are entering in 2023, the group can leverage a supportive operational lever on top of the business recovery that I just went through, a strong pricing power and also cost inflation mitigation plan in the hotel as inflation is a subject of many, many industries today. If you move to the second page, we detail here the RevPAR over the various geography. And what you see is that the RevPAR performance is clearly driven by prices, the orange part of the graph that you've got face to you. And when you look at the RevPAR sequentially, I mean, sequentially, every region goes up and by around 10 points.
We also see some occupancy recovery. And so you see that again on the table face to you. If you go by region, in South Europe, the RevPAR of Q3 is 11% above 2019. That is a 9-point sequential improvement quarter-on-quarter. France had a strong summer period as we were expecting. And what is very visible now is the performance of Paris, which translate the fact that international guests have now returned. And that performance in Paris is lined up with the performance in [ Provence ]. There is no more dichotomy between the dynamic of the 2. In September, corporate recovery drove an occupancy level, which is now close to the pre-crisis level, 2019 level.
Northern Europe, you find about the same type of trends, 9% above 2019, 16% sequential improvement. Significant improvement from Germany, which had been trailing the rest of Europe as they went out of COVID a bit later than the other countries in Europe. And U.K. behaves like France, i.e., there is now no more differential between the [ Provence ] and London. If you move to Asia, again, here a sequential improvement to the tune of 9%. Pacific further strengthened. So Pacific is largely Australia, and it ends up 15 points above 2019 level in Q3.
Prices is very much driven -- performance, sorry, is very much driven by prices. And you see some bubbling around cities that start to recover, too. Greater China showed some improvement, but you see when you look at it period-after-period that there are still volatility as the zero-COVID strategy remains strictly applied. So on the one side, you do have some restriction easing that have been occurring, whether in Macau, in China or in Hong Kong, on the other hand, strict application of the zero-COVID creates today volatility as it has been doing for the last 2 years.
Southeast Asia reported recovery versus Q2 of about 10 points. So 10 points of improvement sequentially to end up at a negative RevPAR versus 2019 of minus 21%. Hence, the point I made that there is potential both in China, but also in Southeast Asia of further recovery, everything being equal. In IMEA, which include India, Middle East, Turkey, their Q3 RevPAR is 68% above 2019, a significant job, which is boosted by a very strong summer in Turkey, boosted on top of that by the inflation that you've got in Turkey. UAE was 17% up in Q3. And you will see a continued good performance from UAE in Q4 as the FIFA will now take place in Qatar over the second part of Q4, the second part of the year.
Saudi Arabia is still negative at minus 14% below 2019. And then you've got some seasonality because as usual of the religious calendar of Saudi. When you move to America, the Q3 RevPAR is 12% above 2019, and that is a 7% sequential improvement again versus Q2. So same dynamic here. Brazil's performance is buoyant. They are the only region which has an occupancy rate today, which is above the level of 2019. So they have recovered the occupancy of the pre-crisis level.
North America reported a stable RevPAR above 2019 level with good pricing power. So that's about the region view of the RevPAR. If we now move to the second lever, which is the net unit growth. The last 12 months net unit growth is now at 2.4%. That means that the Q3 that we just closed is the best ever in terms of opening in the group. The acceleration is driven by 3 factors. I mean, first off, Asia. Asia is a key driver in the net unit growth for the group has been, continues to be. And so the activity rebound during summer was largely due to China.
The second reason is still very strong and will continue to be a very strong number of conversion. We are now year-to-date at the conversion rate on properties of 50% of the opening, so much, much bigger number than anybody in the industry. Reason 3 is that we had some one-offs in terms of churn in H1. You may recall the Covivio portfolio we have discussed. And we are now back to a normalized level of churn at around 2%, 2% plus, and that also explains the number that you see for the end of September.
So all of that together, we confirm the guidance at around 3.5% net unit growth for 2022. What is also a point we would like to make today is that the people on the ground, the developer on the ground, see asset owner showing appetite for the positive long-term prospect of our hospitality industry. And this, notably when you compare them with other real estate investment classes. And so despite some tough interest rate environment, we see the prospect in terms of development very solid. All of that drive the pipeline to remain stable at around 212,000 rooms with an Asia Pacific, which as customary, is about half of the pipeline and Upscale and Luxury, which is getting an always larger share of the pipeline, it's now accounting for a little bit more than 40% of the pipeline.
Just as a reference, it was about 1/4 of the pipeline 4 years ago, 25%. If we now move to the revenue, and I am on Page 6. You can see here the breakdown by segment, the segment reporting. So in global, Accor revenue is up 9% to the tune of EUR 1.149 billion. The like-for-like increase versus Q3 2021 is 83%. If you are to look at the same figure in reported figure, it would be even bigger because of the strength of the USD versus most of the currency in the world, you will be to the tune of 95%.
If you look at the segment of HotelServices, revenue is up 9%, again, and you are 84% above Q3 2021. That reflects the RevPAR rebound. And I'll detail the M&F fees in the next slide. As for Service to Owner, we reached a level of EUR 566 million, which is up 8% versus Q3 2019. So very much what you would expect. Moving to Hotel Assets & Other. The revenue is up 6% versus Q3 2019 or 76% versus Q3 2021. Same rationale that the one that we had described back in H1 and Australia, which is about 50% of that segment, which is doing very well and notably because of the strong leisure demand in coastal areas. And as I was mentioning before, recovers period-after-period in Australian City -- in the large Australian City, which have been trailing in terms of performance as they depend on corporate demand. And on the other side, Brazil, which is having, as I mentioned before, buoyant activity this year, and so is also helping the growth on Hotel Assets. If you move to the deep dive on M&F revenue, you can see here that versus Q3 2019, M&F revenue is above 2019 level. The incentives continue to kick back. You had many questions over time. And now the incentive would come back, and I am very happy to confirm what we had said before. i.e., that we will be for the full year somewhere between 30% to 35%. You may recall, 35% was kind of the number for 2019 kind of the reference number for history. So as business is coming back because we've got good pricing in the hotels, you've got a good bottom line at the hotel level, which kicks back to us in terms of incentives. Versus Q3 2021, again, a strong rebound as you would expect, the revenue growth is 93%. So very, very steep recovery since Q2 of this year.
If you go to the last slide, which is some takeaways here, I mean, the RevPAR above 2019. You know the levers, which is corporate event, Asian market, pricing power. I went through that. Net unit growth, we don't see that changing. There is demand on the ground, and so we'll continue to fill up the pipeline with demand. EBITDA at the end -- at the high end, sorry, of the guidance. And the last point I would like to make is on the business profile of Accor. Business profile of Accor is today more resilient than ever.
We continue on the asset-light, the couple of milestones that we are still missing. So we just, as you probably so announced the sale, the disposal of the Sequana headquarter in Paris, and we think we will close the transaction between now and year-end. The variability of our cost base has been worked upon during the COVID crisis. It was one of the themes that we worked on during the RESET project. And so that's definitely helping going forward. And there is a lot of talk around inflation here, and we just would like to say a couple of words for what concerns Accor.
First off, inflation is not the same, depending on where you are in the world. The inflation that you face in Europe is not the inflation that you're facing in places like Brazil or places like Middle East and Africa. Middle East and Africa is, in fact, getting a lot of benefits coming from their capability to sell petrol and gas instead of Russia. And Brazil is, in fact, not depending on the rest of the world, neither for commodities, nor for gas, neither for food. And so 2 examples of [ large ] regions in our portfolio where the situation that you see is not the situation that you've got in Europe.
So I think this natural aging of us being in many, many places in the world is paying off. It didn't really pay off when there was a pandemic, but this is not a pandemic that we face here. And the other element that I would like to say is, by the way, Europe is 50% franchised. So whatever may be the effect of inflation to the bottom line of the hotel, Europe is the place in the world where you've got the largest percentage of franchise business versus any other regions. We are in average at 30%. Europe is at 50%. So there is also here some kind of a hedging coming from the nature of the business that we do in Europe.
And then there is the work that we've been doing with our procurement teams in order to hedge the cost of energy by buying in advance. So basically getting some term contracts on energy purchases, which is most definitely going to help us in 2023. And last but not least, we are obviously putting all kinds of measures in the hotel in order to reduce consumption, everything being equal. So a lot of things that make us confident. And now we will weather inflation going forward if it was to continue.
I think that's the positive note I wanted -- we wanted to give for this Q3 result, and the floor is now yours.
[Operator Instructions] The first question comes from the line of Vicki Stern from Barclays.
Thanks for the color there on sort of different profiles, different geographies and so on in terms of how to think about inflation. As you sort of weave that in and are looking into next year, if you could just help us a little bit on how to think about the cost outlook in aggregate for your owners and how that should sort of weave its way into incentive fees, perhaps any sort of sensitivity you could give us, obviously, with some of those numbers, at least in Europe being rather high?
Secondly, just on marketing costs into next year, again, how should we be thinking about the sort of higher marketing spend in the first half? Is that something that should recur at least into H1 next year? Or sort of over that EUR 40 million or so should come out? And then finally, on cash returns, just again, now how you're thinking about the right leverage for the group, obviously, in a world where interest rates are rising. I guess you might have thought February would be the time to think about renewing some share buybacks. Is that still the right way of thinking about it?
Yes. I'll take -- I mean the first one I'll take is Sales, Marketing, Distribution & Loyalty. I had said back in H1 2022 when we explained to you that we had over [indiscernible]. And hence, there was a deficit underlying in our segment reporting, which is called STO, Service to Owner, which includes Sales, Marketing, Distribution & Loyalty, most of it is Sales, Marketing, Distribution & Loyalty. And I have told you that we would be back to what is "the normal situation," i.e., breakeven by 2023. Where we are today is we are at breakeven in H2 of 2022, so faster than what I had said. And for next year, the way to think about it is that you're going to be positive on that line. So I think that's the answer on SMDL.
In terms of inflation, there is 2 ways by which inflation impacts the account of Accor. There is one which is the inflation at the headquarter level. You know the people that work here, and we kind of discussed it a bit in -- at the end of H2. There are some IT costs, for example, there are some people cost. And there is the portion of my revenue enhance my profit that is incentive and that I earn through fees from the hotel because of what I explained on the fact that not everybody is impacted the same way by what's happening in the world.
If you do a complicated model, what you find out aggregating the various geography and their own peculiarity is that if we are able to increase versus 2022 or pricing by 5%, there is no effect whatsoever with the current elements that we have on inflation on the account of the group, neither on the headquarter cost base inflation or the incentive, which should pops into the M&F revenue. So that's kind of giving you the sensitivity.
And frankly, I was very happy by that result, which means that we've been working well on a series of dimension. So that's a super macro level. Obviously, it's not a call about income here and will detail the results and the income in -- by the end of the year, but I wanted to give you that kind of sensitivity to help for you model going forward.
In terms of cash return, I think, mechanically, because the EBITDA is a positive number, you know that the recurring free cash flow will be a positive number. And so there will be a mechanical -- dividend mechanical in the policy. We said that there is a mechanical computation by which 50% of the recurring free cash flow is an ordinary dividend. And so as we will generate recurring free cash flow this year, there will be a proposal by the management team to do a dividend for the result of 2022 in 2023.
On top of that, you had another question, which is a potential share buyback. And so we will talk about that when it is time. But for sure, what you can remember here is that there will be a dividend in 2023 coming from the performance of 2022.
Can I just follow up on the inflation point? That's really helpful with the 5%. Just on your own direct cost to sort of break up the parts, would you still be factoring in something like about the same sort of increase as we've seen this year, maybe EUR 50 million into next year? Or has that changed?
No. I mean if you recall what I said in H1, I kind of said that we want for an average inflation, everything being compounded for 2022 of 5%. I think something around 5%, 5% plus is a good number for the cost base with what we know the world is heading towards, probably a little bit more, I would say, closer to 7%. I think that's what I would use at this stage in the discussion. And remember what I said, and I was explaining why there was a deficit too is what matters here is how much of that inflation on the cost base you are able to find back through an increase of prices in the top line.
And what is super comforting here is when you look at the performance of Q3, our average pricing has been 23% above 2019. So there is pricing power because everybody is facing the same thing. So that's why I wanted to reassess and reaffirm that it's not only a question of the cost base, but it's also a question of the fees and your capability to earn more fees through the inflation in the pricing that needs to be accounted for. Hence, the sensitivity I gave you on the 5%. Does that make sense?
Very helpful. Yes.
The next question comes from the line of Jarrod Castle of UBS.
I'm interested just to get your views. You've done 2.4% net unit growth. We've had both Hilton and IHG come out [ with this ]. How do you see the industry growth at the moment in some of your core markets, firstly? Secondly, just looking at 3Q, obviously, incredible room rates you're getting at the moment. Occupancy is still a little bit further to go. But is this intentional, I mean, in terms of revenue management? So I guess what is holding occupancy back. Is this something besides revenue management holding it back, i.e., could it be business travel or lack of staff?
And then just lastly, you've upped the guidance to the top end of the range. Is this very much on the revenue side or also somewhat on the cost side in terms of towards the EUR 640 million of EBITDA?
Yes. I mean on the EBITDA guidance, I'll start with the last one because I clearly remember it. On the EBITDA, the summer, we had said the summer would be strong. I mean the summer was just gorgeous. I mean the level of activity that we had of summer and the pricing level that we had on summer was just stunning. And I call it summer because it was summer in the northern [ hemisphere ], but it was not summer in every part of the world. Latin America was not summer. Nevertheless, I was just mentioning that we never had such a high occupancy rate in Brazil than we had since 2019. We are above 2019 level.
So I think here, demand has been extremely strong. And that's also why we are confident that's going to help making us on the other part of the fork. On the other hand, also, Jarrod, as I was explaining in H2 -- in H1, I know it didn't necessarily was well perceived. But we did let, in fact, a lot of costs go in H1 because H1 was made of 2 very different quarters. On the one side, you've got a quarter where your RevPAR is minus 25%. And on the other side, Q2, your RevPAR is 0%.
So when you add up the thing, it's 10%, except that it is very, very different. The one thing we did not wanted to miss was the rebound. So I did let go everybody to do whatever it takes to not miss that rebound. We don't need to go that far today because we've again reached a much more normalized level. And hence, the short answer to your question is top line is better, and we put back some, I would say, framework discipline on our metric and plan on distribution, sales and marketing. And so that's also helping STO to be back to breakeven because STO was minus EUR 90 million in H1, if you recall. So a very significant improvement on STO.
And it has also been -- sorry, helping drive the top line that you saw in the [indiscernible] because the RevPAR of Q3 is just a very, very, very good number. You had a question also on what we see in terms of development. I think today, Europe has been over the crisis behaving quite well really. I think if you look at the spread by geography, Europe has never been a very strong element of the absolute development, but it has been a steady element of the development. And so in Europe because of the conversion and all of that, we see a continued demand, strong demand, and that is not going to change.
The element which is [indiscernible] is 2 ways. One is Middle East and the other one is Asia. Middle East has already recovered. And in fact, the demand in Middle East, this is very, very true for Luxury and Ennismore is very strong. And I was mentioning to you the mix that you have on Luxury and Lifestyle versus the rest of our portfolio. A large part of that is driven by the demand that exists in those markets and it's pushing us on -- pushing us forward and increasing that level of activity.
The [indiscernible] the element which is tougher has been tougher, is Asia. The reason for why, in fact, the numbers were weaker for the last 2 years was Asia because Asia was basically closed. And so if you disclose why open a room, right? And it is, by the way, still trailing the rest of the world in terms of activity. Hence, in my view, this is a situation which is going to correct itself through next year and the coming months. And hence, the potential of the region, which, if you recall, was the largest driver of net unit growth and pipeline in history.
And the fact that I mentioned the pipeline in Asia being 50% of the total. That portion is the one that we still have to model and understand. It has been very well over the second part of the year. You can see Southeast Asia also coming back. And we need now to see how China and Southeast Asia will be [indiscernible] and that's going to make the difference.
Great. Any comments on industry unit growth, sorry?
Industry unit growth, that's just unit -- net unit growth?
Yes, exactly. Just [indiscernible].
Yes. That's [indiscernible] which is the net unit growth -- sorry, the one from Europe is steady. The one from Asia will recover and is recovering. And China is a question mark. And the one from Middle East has already recovered and is very much slanted towards, in fact, Luxury and Lifestyle.
The next question comes from the line of Leo Carrington from Citi.
I just ask 3 questions. One, a quick follow-up. In terms of the pipeline evolution, the activity in Lifestyle and Luxury, do you see the same trends that you're seeing in Middle East begin to spill over into other regions, which you think? Or is there a very pronounced regional mix right now?
Secondly, in terms of the -- and perhaps I just collapse my last 2 questions together. I mean, in terms of the pricing power, do you see similar trends for your business customers and midweek demand as you do the weekends? How do you see the pricing power in that amongst your sort of business room -- for your business room nights? And then how do you see this evolving into November and December? What do you think the longevity of this pricing power can prove to be through the rest of Q4?
Yes. On -- just on the longevity. If I just look at the results of October because we already are very much advanced in the month of October. And I have also a very good view on November because it's tomorrow. We see the same kind of trends, i.e., a very strong pricing power in our hands. As you know, the difficulty of the industry is to project it much further because of the way people booked. So beyond the 2 months' time, I don't have a lot of backlog, which is coming in, in advance and hence, the judgment is much tougher, but we don't see today any slowing down.
So it's something to be monitored that we monitor daily, but you would a have very good RevPAR in the month of October, in the month of November, in the month of December, and this is going to be supported still by a very nice pricing power. In terms of, by the way, your other question, which is a very good one, we see a rebalancing between the weekend and the week. And all of that comes from what has been happening with the COVID with people now working differently. And so people staying [ inherently ] longer and coming, for example, over the weekend to do their week into a given place for work and not coming anymore for just 1 day during the work week. And so there is this so-called mixing between business and leisure, which has been kind of smoothing, in fact, effects that were existing before the differences between weekend and the rest of the week. And so this is continuing. And I don't see why it would fundamentally change. You see more and more people coming back to the office, but you will never see something which is going to be back to the level people used to work in 2019. Some industry are still very, very much working offline and notably anything related to technology.
In terms of Lifestyle and Luxury, I insist on Middle East because that's the portion which has been buoyant. And again, remember, Middle East and Africa in our world has been the region that came back up from COVID, the fastest. And so that's also probably part of the reason. But we do see a lot of leads in Asia. We have, for example, some Lifestyle hotel now in Australia, Mondrian. We have also some openings in Paris, again, Mondrian as an example, [ Hoxton ]. And so you see some of those brands kicking in, not only in Middle East and Africa, but it is true that it is very much today in Middle East and Africa. I mean, you've got a series of -- like, for example, in December, we will open Mondrian in Singapore. We have [indiscernible] Paris, which is probably going to open now in October.
And you've got [indiscernible] that we are signing in [indiscernible]. So there is a couple of things here that are going in that direction. I think the one point I didn't make to go -- to the previous question that I should highlight is, remember, the number of rooms that you open is one element of the equation. But what really matters is the fee that you generate. And so when you look at what we call Lifestyle and Premium, it's probably today 70% of the pipeline, right? And that 70%, that's Lifestyle [indiscernible]. And that 70% is the valuation in fees. So I just told you that it was 40% in volume, but it is 70% plus in fees. And I think that's the portion that you need to take into account in how you may judge, how we develop the business going forward because there is a mix change.
I mean we went through creating that Lifestyle platform. We went through the acquisition of more blocks and premium kind of brands over the last 3, 4 years. I mean, it started with Fairmont, but it has continued with Movenpick. It has continued with other brands like 25hours and so on and so forth. And so that is going to help in the future because it means that your pipeline is getting richer. So just the 3.5% or whatever does not necessarily translate.
If I do all my openings in China, it is not going to do the same thing to my bottom line that if I do all my openings in a nice SLS in Dubai. And so I want to reinsist on that because you may not see the same trend in every of the people in this industry. Is that making sense?
Yes, that's very clear.
The next question comes from the line of Andre Juillard of Deutsche Bank.
Congratulations for this strong publication. Two questions, if I may. First one was on ADR. Do you have any visibility on 2023? Any negotiations with corporates or [indiscernible] OTAs, which could give us some flavor about what is going on? I know that's difficult. But any information would be welcome.
And the second part -- or the second question, sorry, would be on the EUR 200 million saving plan. Could you give us an update on that side? And which part you could confirm because correct me if I'm wrong, but during the H1 results, you were saying that part of this saving would be impacted by inflation. So any information would be welcome.
Yes. On the corporate discussion, I think the one thing which is, in my view, extremely positive, is that all the discussions that we have, people do take the argument of inflation in the discussion. So there is no rejection from anybody that inflation cannot be part of the discussion. And by the way, it kind of makes sense economically, but they are taking it. So to me, that's a very positive thing. And that's also why with what I have in my hands, I feel comfortable about the ADR going into 2023.
After that, Andre, on the commitment of volumes, there is never really any firm commitment on volumes. I mean it's mostly [ envelopes ]. And so it's not as if any of those things are like casting concrete, if you will. But on the pricing, on the other hand, it's a good thing that we are able to keep the same kind of rates and adjust them for inflation.
For your other point about RESET, as I've been saying, like a [indiscernible] machine. We have done all the actions, and we have done all the severance of many people unfortunately, and it has costed us a lot of money, and it was a painful path of any manager of life, and it is not only people, but it is in our business, a lot of people. And so the EUR 200 million versus 2019 are basically done. There is a little bit still that we've got to do between now and year-end. And you know there is a little reminder that we'll only kick in, in the P&L in 2023, something to the tune of EUR 20 million. But EUR 180 million of it will be the exit run rate of 2022.
What I was saying when we went through the H1 discussion is that because of the 5% of inflation that I mentioned. And if you do very simple math on the basis of EUR 1.3 billion of cost base, which was our cost base back in 2019. So you just do something where you put a bit of inflation in 2021, 5% in 2022. You find out that half of the EUR 200 million would be eaten by the inflation on the cost base. And so going forward, the big question is, am I able to get the 5% I was mentioning on average room rate? And hence, offsetting in the fees that I collect, the increase that I see on the cost base in the future. So that's really where we are on RESET in macro terms.
So the saving and the plans have been done, and they have been very much helping us, weathering all the bad news that happened during this year in terms of the inflation and turbulences in the world. And I don't think we're going to need as much of it going forward because I think we're going to be able to continue to increase the pricing.
Okay. So if I understand well, the fact that prices are strongly up, thanks to inflation -- partly thanks to inflation. Means that we should have a positive effect of more or less EUR 200 million on the cost base?
Yes. We will have a portion of the EUR 200 million because of it, absolutely. I'm guessing to just make -- to make it clear, let's keep something that everybody will be able to remember [indiscernible] million because I'm considering that there is a portion of what I have, which is going to be lost through inflation because of what happened this year, but there is a net benefit to be modeled coming from RESET going forward.
The next question comes from Alex Brignall of Redburn.
First one is on the profitability of the STO business. You previously talked about a potential mid- to long-term EBITDA contribution. You're obviously running ahead in terms of timing, but I wonder whether the cost savings that you've taken out has changed the long-term hopes or expectations on the contribution of that piece?
And then just a second quick one, that there might not be a good answer too, but just on disposals, obviously, the trading conditions are much improved. Is there anything further to say on the assets that you have intentions on disposing?
What -- sorry, just on the asset to make sure I catch your question properly. What assets are you discussing in terms of disposal?
For any of the remaining leases and then, of course, the Hotel Assets, which or AccorInvest [indiscernible].
Yes. Okay. I got you, I got you, I got you. I mean, the Sequana will obviously help the net debt position of the company because it's a great transaction in terms of internal rate of return. I mean it was a good transaction. And hence, it will help. In fact, the liquidity and the net debt position of the -- we have been mentioning EUR 465 million of selling price in the press release. And so you've got [indiscernible] of about EUR 300 million.
So you can see here that there is a net effect, which is a positive one. And the internal rate of return that you may have if you do a classical computation is a double-digit way, double-digit kind of return. So again, here, we may not do everything perfectly right all the time, but this one was a very good transaction in the prospect. So that's on Sequana.
After that, what is left? What is left is 2 big things. One is AccorInvest. And AccorInvest, performance is improving, as you may have seen in the press, and as you would expect, taken into account what I just explained on what's happening in the European market in the [indiscernible]. And so that one is a complicated transaction. We have anyway [ lockup ] up to 2023, complicated because it's a big number. And so this one, when it comes, will be a significant effect again in terms of cash in the company.
And then the other one that we've got to continue working on is [ Mantra ]. On [ Mantra ], we do a little bit of work as we progress -- sorry, we have been worked as we've been progressing. And what I mean by that is leases are leading animals, and so they come to hand. And when they came to hand, you can either renew them, transfer them or basically not do anything with them. And so the liability that we started with 4 years ago on [ Mantra ], which was to the tune of about EUR 300 million of debt on the balance sheet has been reduced by EUR 100 million.
So we've been working on it, but there are still some leases that we need to continue find ways of getting out. The amount that you can expect from the sale of a lease is not a lot of money. As much as [ AccorInvest ] and Sequana are providing large bucket of money, a lease, as you surely know, doesn't provide a lot of cash outlay when you sell it. But the benefit that you get is the reduction in net debt on your balance sheet, and more importantly, the [ visibility ] and the capability of reduce the [ variability of your result ].
Today, the results of Australia are good also because the leases in Australia are turning around. So we were hit in 2020, 2021, significantly by the leverage of the leases in Australia. Today, it's the opposite situation. Hence, the fact that I've been mentioning several times that Hotel Assets profitability was, in fact, very good since 2021. So I think that's kind of the answer to your -- after that, there is not a lot that you need to add. There's a couple of hotels that we still own, but not a lot. There is maybe less than 5, 6 that we still have owning like 1 in Egypt, 1 in Mauritius, but not a lot. So this is not a significant amount. That's a long answer, but it is an important subject.
The next question comes from the line of Ali Naqvi of HSBC.
Just in terms of the pace of signings, how would they compare versus 2019? And what is the sort of view in terms of going forward? Are any of your regions more or less exposed to developers due to macroeconomic environment or anything that could potentially slow that down? And then the conversion level, obviously, this year has been pretty high. How do you think about that for the next year?
I think the conversion level is most definitely an argument, a positive that we have a lever that we have many other players because our conversion level is to the tune of 50%, what I said earlier year-to-date. It has been in history more like 40%. So we are seeing more conversion this year than we were seeing in 2018, 2019. And by the way, it makes a lot of sense taken into account what we know on the environment -- of the economical environment, but also all the disruption that you got through supply chain because building some hotels, it's quite difficult to finish a hotel if you don't [ have beds ], for example. So it's a full thing that you need to sell.
And so from time to time, supply chain can reserve for you a couple of nice surprises. I make some kind of [indiscernible] out of it, but this is the daily life of people on the field. So we've been seeing good conversion. And I think you will see continued good conversions. Because of the environment in which we are entering, getting financing is not easy and converting property is one way to resolve potentially for an asset owner, some of the financial issues that they may face. And so I think you're not going to see the rate of conversion slowdown in the future, and it helps us develop better.
We are probably also in development in the same vein, think more about franchised versus managed because it is faster as the cycle time to go and develop a franchised hotel, which is a very standard contract versus a managed hotel that requires more complexities in the negotiation because of the larger added value that you may have. And so again, it depends what type of hotel, it depends what kind of location, it depends on many parameters. But that may be from Midscale and Economy, a lever that we're going to use going forward more.
And on the signing -- on your question on the absolute level, we are behind 2019 in terms of signing. The signing level -- the absolute signing level that you've got in the life 12 months is probably to the tune of 70% to 80% of what we used to do in 2019, rough numbers. And again, no surprise here as we are seeing an acceleration of the signing in the second part of the year. So the same way the net unit growth will continue to ramp up, the same way you will see the signing last 12 months number continue to ramp up mechanically. Does that answer your question, sir?
Yes.
We currently have no more questions on the line. [Operator Instructions] The next question comes from the line of Andre Juillard of Deutsche Bank.
Sorry, just a follow-up one about conversion. Do you see any portfolio coming to your brands compared to initial trend, which were more focused on individual assets, which will be a good sign on the attractiveness of your brands?
Yes, there are some discussions. I think I had mentioned to you, I believe, when we did the H1 publication that the [indiscernible] portfolio in Australia was going to come because I had the question of how are you going to figure out in H2, which is so much stronger than the H1. And so part of the answer there is one big conversion, which has been the [indiscernible] portfolio in Australia. So that's a good example.
Now I must say that's the only one of significance that we had in the period of year-to-date. But there is a lot of little things ongoing. There is no large portfolio conversion that we are negotiating today. But these things come up and back. And I think in all cases, there is a lot of smaller ones that are happening, notably in Asia.
Okay. Listen, I think we are done. So thank you very much for the listening, and we'll look forward to see you in February for the year-end results. Thank you.
Thank you for joining today's call. You may now disconnect.