Accor SA

PAR:AC

Earnings Call Transcript 2021-Q1

[Operator]

Hello, and welcome to the Accor Q1 Analyst Conference Call. My name is Lydia, and I will be your coordinator for today's event. Please note this conference is being recorded [Operator Instructions] I will now hand over to your host, Jean-Jacques Morin, General Director and Financial Director, to begin today's conference. Thank you.

[Jean-Jacques Morin]

Before we start the presentation and for the sake of clarity, the RevPAR variation that we will provide are versus Q1 2019. And this was done in order to ease the understanding of the performance and notably to avoid these effects. So we took 2019 as being a normative year. As for revenue figures, we provide both variations versus Q1 2020 and Q1 2019 in the document, so you have them as references. Without further delays, let's start with the highlights of the quarter that you will find on Page 3. So the Q1 2021 business highlights reflects, as anticipated, a context similar to Q4 2020. The RevPAR was down 64% over the quarter versus 2019. The last 12 months net organic system growth was at 1.4%, and I'll give you more detail shortly. And all of that translated into a group revenue decrease of 57% versus 2019 on a like-for-like basis to reach a level of EUR 361 million. The second element that we would like to highlight is the sensitivity. And as for sensitivity, we confirm today what was communicated during the year-end result call back in February. The EBITDA sensitivity is confirmed to be slightly below EUR 18 million per RevPAR point for the full year of 2021. And the monthly cash burn is in average over our financial year 2021, something below EUR 40 million. The last element on this highlights that we want to stress is the Accor balance sheet situation, which is very strong. And we have, as of the end of March, a liquidity of EUR 3.6 billion. You have, by the way, the key cash flow of Q1 on the slide. And you may recall that we've discussed each of them during the presentation back in February. If you move to the next page, before we deep dive into the figures, we would like to discuss with you the revised segment reporting that we will be using going forward. As part of the reset plan, we've put in place, you may recall, a delay or management organization. So we've adapted our segment reporting in line with this new organization, as is required by the IFRS 8 accounting standard. The changes are summarized on the page faced to you.So you've got Europe, which is split between South Europe, which includes France; and North Europe, which includes the U.K. and Germany. You've got Asia Pacific, which, in fact, remains essentially the same with Pacific, Southeast Asia and Greater China. You've got MEA, which is renamed in IMEAT, as it now encompasses Turkey, which was previously in Europe and India, which was previously in Asia Pacific. And then North America and South America will be reported as a combined Americas segment. Holding and Interco remain unchanged, and the Hotel Assets and other will now include the new businesses. For the sake of clarity again, we provided, under the previous reporting format for Q1 2021, plus the historical figures under the new format, all of that in appendix. So you have everything in order to build your models. Moving on to Page 5. We move now into the Q1 '21 RevPAR by geography with the segments I was just describing to you. So overall, the Q1 '21 RevPAR decreased by 64% versus Q1 '19. Q1 was affected by the emergence of the U.K. variant, which is, as you all know, significantly more transmissible. It impacted notably Europe, where the variant accounts for more than 50% of the COVID cases, and this is notably true in France and in Germany. So going a little bit more into Europe, we've got 2 different patterns, as the government reacted differently to the COVID crisis over Q1. South Europe proves to be more resilient and posted minus 63% as there was, in fact, no lockdown in France over Q1. The RevPAR was down 61% in France. The province was, just like last year, stronger, as it is driven by domestic business guests, whereas, in fact, Paris is much more international as we all know. The third lockdown in France started on April 6 and is foreseen to last until mid-May. As for Northern Europe, we have RevPAR, which is significantly worse at minus 82%. And this reflects the continued lockdown over Q1 in the U.K. and Germany. In fact, the lockdown started back in November. In both countries, the RevPAR is to the tune of 87%. The lockdown started easing in March, and the easing is planned to continue over Q2. As you may know, in the U.K. now that the pubs have reopened in the month of April, and this is supposed to continue with openings of bed and accommodation in May. So all of this dynamic is ongoing. If we move now to Asia Pacific, the RevPAR ends up being down 55% versus Q1 '19 again. Pacific was good at minus 45%, benefiting from eased restriction, just in time for the summer break. Our leisure destination on the Gold Coast, which is notably where Mantra is, fully benefited from this eased restriction and the good weather. In the CBD, in the Central Business Districts, with cities like Sydney and Melbourne, the situation was not as rosy. And in fact, the business was largely driven by quarantine business. If you move to Greater China. Greater China saw a blip in its recovery trend, a very nice and good recovery trend that we saw last year. And Q1 was, in fact, down to minus 43%. This was due to resurgence of the COVID in January and February at the time of Chinese New Year, in big cities like the [indiscernible] and also in the Hebei region. And the good news is that since then, the RevPAR has steadily recovered, and we were at minus 30% in March. So our performance is, in fact, very much, again, like the one of the Chinese market. Southeast Asia suffered from its strong reliance on international travel, and the RevPAR is minus 72%. In countries which are part of Southeast Asia like Thailand, Vietnam, Singapore, 80% of the business is in fact international, and so they really take the heat here. Moving now to IMEAT. The RevPAR ends up being down 51% in Q1 '21 versus Q1 '19. Dubai, where the borders and restaurants were open, saw a strong inbound of tourism and notably European tourism. That region should see a stronger H2 as the Hajj, which is the pilgrimage to Saudi, will take place in July as it will be open to immunized pilgrims. And the other important events in the region is the Expo 2020 in Dubai, which is now officially slated for October. So these are 2 elements that are going to help the second part of the year in Middle East and Africa. Now moving to the Americas. The Americas showed a slight improvement at minus 73%, but we've got a much different picture between NCAC, so North America and South America. North America improved to minus 76%. And there is a strong dynamic going on right now in the U.S. As you know, the U.S. government, since the beginning of the year, has been extremely, efficiently, putting in place their vaccination plan. And in fact, smashing it. They've been doing extremely good. And you saw that -- you see that in the numbers, with occupation rate that have steadily increased, and we see that in the hotel that we've got in North America, and I'm talking the USA. In fact, when we look at the last 4 weeks, we have seen an increase of 40% of the bookings before -- if you compare it to the previous 4 weeks. So just in the last 4 weeks, it's a 40% increase over the previous 4 weeks. So significant. South America is a different story. It was improving. Now it's not anymore improving because the country, which is essentially driven by Brazil, is plagued with various variants and variants, which are quite virulent, quite strong. And so that's not good for South America. I am moving now to the next page, which gives you a picture of our network. I told you that our net system growth was 1.4% over the last 12 months. So it's the last 12 months' metrics. And to be quoted here is the fact that as it is the last 12 months metric, you've got the effect of the very, very low Q2 2020. So in Q2 2020, we were at -- the crisis bottomed. And so the openings were very low, and that impacts the 12 months average. Despite that number, we reiterate our overall target at 3% to 4% for the year as it is what we have in our confirmed opening plans. In fact, in Q1, we opened 7,000 rooms. And 7,000 rooms is a number which is very much comparable to what we did in Q1 '20 or in Q1 '19. And complementarily to that, the churn remained very much under control, very much in line with what we had as numbers for the 2 previous years. So there is really nothing here, which is dissonant, which is different. Without surprise, Asia Pacific, and more specifically China, was the main net system growth driver, just like it has been for the last 2 years, as the country is at the forefront of the recovery of RevPAR in the world. To be more specific, Huazhu delivered 2,400 -- 2.4K room out of the 7,000 I was mentioning for the group, that is about 30% of the total. The pipeline slightly receded by 1,000 room because there was a little bit of slow signing over the quarter. The conversion accounted for 50% of the opening in Q1 '20. And again, were consistent with what we saw historically. They should remain a growth driver for financial year 2021. If we move to the next page, we'll give you a breakdown of the revenue by segment. Accor revenue reached 351 -- EUR 361 million in Q1 '20, which is down 57% on a like-for-like basis versus 2019. The variance between the reported decrease and the like-for-like is essentially explained by the sale of the Mövenpick lease portfolio, which occurred back in March 2020. As far as the Hotel Service segment is concerned, the revenue was down 64% on a like-for-like basis. This is, again, fully in line with the 64% RevPAR drop that we had mentioned before. And just to give you more granularity, you've got M&F that I will detail on the next page and which is down 69%. And you've got the remainder, which is the service to owners, which include sales, marketing, distribution and loyalty, which is down 60%. So the revenue decline was partially mitigated by lower burn of loyalty points, in line with the drop of activity. As for Hotel Asset and other, the revenue was down by 44% on a like-for-like basis versus 2019. This segment performance is better than HotelServices, and this is due to the large Australian exposure of Hotel Assets and other. The Mantra activity benefited from leisure demand in holiday destination, as I was saying before. And to be quoted, too, is the fact that on new businesses, which is now part of that segment, you have differentiated performance, as you would expect, between the business-related travel activity, just like onefinestay, whose in fact the evolution is very much in line with what we see in our hotel business, and the digital services like D-EDGE, which are doing much better. So that's for the revenue splitted by segment. Just focusing on management and franchise revenue, and you've got it on Page 8. Two points that I would like to emphasize. First half, the Q1 '21 revenue decreased by 61% -- 69%, sorry, on the back of 64%. And this is no surprise, as you certainly recall, that there is a distortion coming from the impact of the incentive in management contract. If you go and look at it by geography, you will see that this is generally true, except for North America and North Europe, where we had some positive one-off income and notably, you've got things like termination, which are increasing. In fact, your revenue and obviously not changing the lifestyle. So this is the kind of little things that explain the small numbers that we are discussing here, because we are discussing small numbers. I'd like to conclude on some closing remarks, which are important. I mean, first half year, the results are the results, but there is no surprise. When you look at what the COVID situation is for each of the geography and the business we are in, we are in fact, performing exactly in line with that spread of geography. And in reality, looking at our performance in terms of RGI, in many, many places, we are doing better than competition. We continue to control what we can control. I mean, the RevPAR remains something difficult to forecast. Every day is another day. You've got new variants, you've got new vaccine and those vaccine gets stopped and then they get relaunched. So life continues to be interesting. But what we do is on what we control. We do it as rigorously as we can, and this is very true for the reset cost saving plan. We are progressing exactly per plan, exactly on time. 90% of the account reduction is now in place. We've reduced the level of contractor by 50% versus what we historically have been consuming. We've been -- or we are in the midst of decommissioning 20% of our IT applications. And out of the 7,000 tasks that some of you may recall, we discussed back in July, 1,000 of them are either being eliminated or reduced in frequency. So that's why we will deliver on the EUR 200 million that we had discussed back in July 2020. The third point, which is also important that I already covered, is that the group has ample liquidity. But despite having ample liquidity, we just make sure that we manage it and preserve it properly. And so that's an important point also in controlling the controllable. The last point, which is more an opening point, I think Q1 demonstrates the acceleration of several efficient vaccine rollouts throughout the world, and this is obviously an excellent news for our business. I'll take as an illustration of it, what happened this week, where the EU has been pushing forward as being agreeing a digital gain certificate initiative, so that you've got elements on the health situation of every individual, which obviously is a key element of restoring confidence and hence having people travel and consume and hence us having a very good business. They are also now disclosing or talking of herd immunity for Europe for summer, so things are moving ahead. And this bodes particularly well for a strong rebound of leisure demand, notably in Europe as summer is coming up. So Q2 shouldn't be a miracle. But from the months of June and the summer, you should see all the effects of what we've been describing in terms of the consignment being released, and then the vaccine being significantly accelerating and situation, just like the one that you've got currently in Israel, should be able to be replicated to other countries, and this is obviously the way forward. Thank you for your attention, and I'm ready to take your questions.

[Operator]

[Operator Instructions] We have our first question from Bilal Aziz of UBS.

[Bilal Aziz, Associate Director and Equity Research Analyst]

Just 3 from my side, please. Can you firstly let us know what level of incentive fees you actually booked into the quarter, please? And then just the second one on the net systems growth. You still plan an ambition to get to 3% to 4% for the year. Perhaps you could just talk us through the building blocks for that between conversions, gross additions and removals, please? And very finally, you've given clear guidance on the EUR 70 million cost savings you expect for this year. What's the phasing of that in the first half versus the second half? And any government help you also expect in the first half, please?

[Jean-Jacques Morin]

Yes. Okay. On the incentives, the level of incentive that was booked in Q1 is very much in line with the level of incentive that you booked over the full year of 2020. So about 15% of the management and franchise fees that we've been recognizing. So just to -- and that, again, should grow with time, but as it's a function of RevPAR recovering, as you know. On net system growth, yes, the point I was trying to make on net system growth is that the numbers of openings and the numbers of hotel being churned is in fact no different in Q1 this year than it was in Q1 last year, which was more or less a normal Q1 and which was, again, the same number in Q1 2019. So really, we are on the same kind of numbers. As we are looking at a 12-month average, and as you've got Q2, which is very weak, the number is low. But if we look at what we've got, for the rest of the year and to answer some of your specific points, the churn, which is assumed, is not much different than the churn that we've been experiencing over last year, which again was very much consistent with the churn that we've been experiencing over the last previous years. So we don't see that changing. By the way, just a statistic on this one. If you look at the number of companies which are in disarray, i.e. going to bankruptcy and the statistics, I'm just going to use statistics that came out this week from the French government. In fact, you see that still in 2021, the level of companies being -- having problem is, in fact, extremely low. 2020 was extremely low. 2021 is extremely low. So I think that kind of explains also why you -- the churn can be forecasted just like we are forecasting it. In terms of the percentage of rooms that could be coming from conversion, I think 40% is probably a good number, a good basis. That's again what we've done historically. What it doesn't comprehend is the fact that, in some cases, you may be able to get some kind of a hump coming from 1 chain of hotel with who you would conclude conversion to our brands. But today, this is not -- this is not, in fact, what I'm telling you. And as far as the EUR 70 million cost reduction plan, a large part of it is already there when we discussed the portion which is people. I told you that 90% of the people that were to be dismissed are dismissed, the portion which is not yet to that point is the French element of the population as the rule in France are, in fact, more sophisticated. It takes more time. It takes more negotiation. And this is exactly what we are doing now. And by the way, again, here, it's exactly what we had anticipated. So it just takes more time but we'll get there. And then it's back-ended also because of the fact that some of the savings you see when you really are able, for example, to put in place a new application. So when I talk about reducing the number of computer application that we've got in the group, in order to get to that point, you first need to rationalize the number of applications that you've got. So instead of having 3 systems in the company, I've got only 1 system. But in order to get to 1 system, I need to do some work. And when that work is finished, then I get the savings. So that's why the savings are naturally back-ended in that process. I think that's the answer to your question, Aziz.

[Operator]

Moving on to our next caller. We have Richard Clarke of Bernstein.

[Richard J. Clarke, Research Analyst]

Three, if I may. Not wanting to pat you on the back too much, but I noticed your luxury and upscale pricing in Europe is flat year-on-year or versus 2019, I would assume. I'm just wondering how much of a decision that has been made to keep pricing stable? And maybe what that can make us think about pricing on the other side of the pandemic. Can we can expect sort of price stability throughout? Second question, something we haven't heard about for a while is the Heartist fund. You sort of said that you're seeing reasonable stability, reasonable lack of churn, but just how much has been paid out from the Heartist fund and how much support you're giving? And then just wanted to check because I think, in your release, it says that the second tranche was expected -- this is a core invest. The second tranche was expected to be proposed on the first of March, and that it will be held on the first of March. I'm just wondering what the status is with the core investors, that second tranche being approved? And are you confident that now a core investor is now stable given that capital increase?

[Jean-Jacques Morin]

Yes. I mean, I'll take them in reverse order because I remember better what I heard last. In terms of AccorInvest, the amount that you've got on the page on the highlight, which is EUR 154 million, is the full amount. That's the full capital injection. And you're right, it was done in 2 times. It was done first in January, and then there was a second injection that was done in March, that was done. And that's the full injection that we will do. And the banks have been complementing the capital restructuring, I should say the liability restructuring of AccorInvest. And so we are all done with that as of the end of March. So there is nothing more to do on AccorInvest. On Heartist, what we have been allocating out of the EUR 70 million is EUR 24 million. So we've been using EUR 24 million of the EUR 70 million envelope. And most of it is, in fact, going to employees. 95% plus of it is going to employees who are in financial distress. And by the way, just to also give you an idea, we talk about 70,000 people that benefited from the fund. So it really covered a lot of the people that are working throughout our hotels and have really suffered from having no more job and not being in countries like the U.K. or France, where you have a social net. And so that has been working very, very well for those people who are really in disarray. And on your first question, on -- it's a little bit difficult to do an analysis today on pricing because most of the luxury hotels, as you surely know, are closed. So you've got some basis, but the basis is probably not very relevant. What we've been giving as instruction is that we really would like, as much as possible, that people don't go into price war because we've learned from previous crisis and nobody wins at the end. I think I've said that consistently each of the call that we've got. But that's clearly the pricing strategy that we've been providing to all our teams. It's difficult today to necessarily do the analysis. I'll give you an example. I mean, you look at luxury in Singapore. I mean today, the hotel, which are in Singapore are used for quarantine. So you've got a beautiful occupation rate, 80% plus, but it is essentially quarantine business. And the quarantine rate that you've got has not much to do with the rates that you would get when you would do normal business. Make a long story short. I'm not saying that we are making less money on those hotels because you don't provide either the same type of services. But the nature of what you transact, i.e., the pricing and the services attached to it, the distribution attached to it, has nothing comparable. So summary, the instruction is clearly post that crisis to not go for price war. I think on this one, that we will be surprised by the speed at which when things come back, how fast and strong they come back. And so there is a, in my view, a good probability that when it reopens, you will have a demand supply issue and notably on leisure that people are probably not sizing properly.

[Operator]

[Operator Instructions] Our next caller is Vicki Stern of Barclays.

[Victoria Jane Lee Stern, MD & Equity Analyst]

Firstly just on the drop-through guidance. Obviously, you're reiterating the guidance at a little bit below EUR 18 million for 1% RevPAR. And just curious given that Australia seems to be recovering, and I guess that's pretty significant given that you've got the least exposure there with Mantra. I mean should that continue? Is there potential upside to that guidance? Or you think that's somewhat baked into the EUR 18 million or tad below EUR 18 million that you've already given? Second question is just around the strong summer, just to sort of drill you down a little bit more on, I guess, the impossible. Because based on what you're seeing today, I mean, you gave us some color, I think, there for the U.S. in terms of sort of increase in activity in the last 4 weeks. Just curious what you're actually seeing elsewhere in the world in terms of any actual concrete booking data or anything you can hang your hat on in terms of giving you that confidence on the recovery. And then just finally, back on the cost cuts. Again, really a reminder on whether you think you're going to hang on to or retain all of the 60% of cost savings that are expected to fall within SMDL, i.e. will that division end up sort of printing once things are fully recovered, more than EUR 100 million of EBITDA? Or are you planning on investing and reinvesting some of that back in? And if so, what in?

[Jean-Jacques Morin]

Yes. I'll do it again, reverse. So on -- you answered the point rightfully, in fact Vicki, we're going to invest. We're going to reinvest, in fact, investments in anything that we can do on sales, marketing, distribution, loyalty. I mean, it's very critical. As you know, and we launched that plan, which goes call all. We didn't reap the benefit of it because of the COVID crisis kind of stopping us as we were implementing. So there is more work to be done here. There is some things that we can do, for example, around management of the customer data and then pursuing some of the marketing campaign to get things better known. So we're going to invest, and you will find the benefit of it then into development and into management and franchise margin as the people will even further appreciate, in fact, and recognize our brand. So again, we are not there. I'm going to lose money on SMDL this year. So I have some time here before I get to a level where this becomes my problem, and it's a nice problem to have. The visibility is a real issue. In fact, the visibility since Q4 has worsened, if you can believe it. I used to be able to know 40% of -- 40% of the business was done in the last week. So meaning, next week, I'll do 40% of what my business will be next week in the week. It's today 60%. So in fact, the data is just going the wrong way in terms of week on the books and capability for anybody to see where this thing is going. So then you can ask me, so why are you confident? On the basis of data, which I have in my hands, on bookings, I have no data, right? But what I can see is I can see how people react when things open. And I was -- when New Zealand and Australia opened their corridor in the month, suddenly the volume multiplied by 10x. So again, the basis is small, but it just tells you that as soon as they can, then people suddenly are flowing into it. And we've seen that this summer in Europe. We've seen that in Australia. We've seen that -- in fact, in [indiscernible], the numbers have been just amazing. In fact, we got our best month ever in Miami for some of our SLS properties, best numbers ever in terms of food and beverage. And so what I'm trying to say here is that I know there is pent-up demand. This pent-up demand is supported by the fact that people are putting money aside to unbelievable amounts. I think just for France, I know the French number better. The people have been putting aside EUR 170 billion last year more than what they typically do. So because they don't know -- they don't know how to spend. And so I think there is a lot of macro elements that tells you that things will be there. Now do I know exactly how it translates in terms of numbers and stuff? That's very, very difficult exercise. I don't know. So long answer, but I think it's a critical answer because on the one hand, I want to give you the confidence that I have myself in what I see as macro driver. On the other hand, I don't have micro data that supports those billings. So it's a little bit of a no quorum situation. And in terms of Mantra, the numbers are in the EUR 18 million that I provided. So it will fluctuate. But I think I kind of said before that the hotel asset element in the EUR 18 million is to the tune of EUR 3 million to EUR 4 million. So that will fluctuate a bit, but that's already baked in.

[Victoria Jane Lee Stern, MD & Equity Analyst]

Very helpful. Just -- sorry, a follow-up on that first answer. I mean, any sense as to sort of how much of that might get reinvested in terms of the SMDL cost savings. I appreciate you're a long way off printing profit there yet. But obviously, it's a potentially quite large number.

[Jean-Jacques Morin]

Yes. No, I mean, it's -- we are 1.5 to 2 years ahead of the time at which I would like to give an answer on this one. So just give me the benefit of landing and delivering and then I'll give you more granularity. But again, we will not keep a significant amount of profitability on that line because that makes no sense.

[Operator]

Moving on to our next caller, we have Jamie Rollo of Morgan Stanley.

[Jamie David William Rollo, Managing Director]

A couple of questions, please. First, just on the liquidity number. I think the year-end liquidity was EUR 4.3 billion. Please correct me if it's not that. And then you gave us the numbers on Slide 3 about the investments spend and so on, about EUR 500 million, which suggests there's a sort of cash outflow of about EUR 200 million. So that will imply about cash burn of about EUR 80 million a month. I'm just wondering what that is missing, perhaps the starting point is drawn on liquidity. And then the second question is, I'm quite surprised about another change in the disclosure, I'm sure it's as frustrating for you as it is for us. But if you could please explain why exactly it's done again, because it does make it very hard to track the business. And specifically, within the numbers, what is Australia now as a percent of revenue in the new hotel assets and other line? And also within Australia, please, could you give us the split of guests between domestic and international? Clearly, it's all domestic now, but historically, at least, what's the split, please?

[Jean-Jacques Morin]

Yes. I mean, the numbers between domestic and international. I mean, the Australia is 8,000 kilometers away from any place. So it's 85% plus domestic. It's essentially a country where the business is domestic. So I think that's the answer on Australia. There is a lot of Australian people that go visit the rest of the world, so you've got that flow. Granted that Australia is not either a country where you've got billions of people. I don't have it in -- it's 40 million something, so it's not a huge country. But it's essentially domestic, short answer. In terms of the liquidity, I'll take the question on liquidity. As usual, Jamie, you're a machine, because your computation is relatively close to reality. And so the cash burn, if you compute it this way, is proper. And it is a bit higher than the number that I provided of EUR 40 million. And so the reason for why you've got that is because, again, the EUR 40 million is the number for the full year. So you will have the EUR 40 million over the full year. In the numbers that you've got in Q1, you've got a huge working capital effect, which you won't have in the rest of the year. And notably because in Q1, you pay bonuses. Because in Q1, you pay some of the lenders that you didn't pay at the end of the previous year and not because we did not want it to pay because the contract structure this way, like pages, for example, is an example of that. Because also, you've got some tax effect and we got a huge tax credit in Australia, very significant tax credit because they enacted the law by which you can recover some of past losses. And I'm talking something like EUR 25 million, just to calibrate. So all of the elements make that the working capital is retreating. You may recall, more generally, that H1 working capital for the group is always a negative number. But that over the full year, you come back to more or less a number which is close to 0. So that's why -- but your computation is right, Jamie. And the weight of Australia in Hotel Asset is about 60% of the Hotel Assets and other. So I'm talking revenue, 60%.

[Jamie David William Rollo, Managing Director]

Yes. Okay. Sorry, is that current revenue? Or was that pre pandemic revenue?

[Jean-Jacques Morin]

No, no, no. That's current. That's current. That's current.

[Jamie David William Rollo, Managing Director]

Okay. And just on the cash burn. So it's obviously gone from a EUR 40 million outflow in the second half last year to roughly EUR 80 million in Q1. But clearly, your guidance is implying it will be much better than EUR 40 million for the rest of the year. So it's a fully number EUR 40 million, yes. So we're looking at something of a EUR 20 million or EUR 30 million range, are we, towards the end of the year?

[Jean-Jacques Morin]

Yes. Yes. Exactly. Yes. Yes, you have like in every company, working capital that follows the pattern by which you do pay the bills that you incur. So there is definitely here a pattern, which is not a new pattern. So that's also why the guidance is full year guidance, because if you are to provide guidances which are by quarter, you would have some tricky numbers.

[Jamie David William Rollo, Managing Director]

And on the disclosure point, what's the real reason for changing it again?

[Jean-Jacques Morin]

Changing what exactly, Jamie? Sorry.

[Jamie David William Rollo, Managing Director]

The regional disclosure.

[Jean-Jacques Morin]

Because there is a rule that I did not decide, which is called IFRS 8, which tells you that essentially the way you should explain your numbers to the rest of the world, should be linked to the way you are organized as a company and the way you manage the company. And you may recall, we used to have a given number of regions, and we've changed that to [indiscernible]. And so we simplified, in fact, the structure by taking off some consolidation level and the consolidation level were namely Europe and Asia. And because of that, we now have, in fact, more people that we follow in terms of knowing how the business is going. And that's what we called being closer between the headquarter to the ground on what's happening on the business. And so as we change that, we've got to adapt, in fact, of reporting because the way we manage the company and the numbers are reported internally are, in fact, different. And by the way, just to again, calibrate one thing, Europe is 50% of the business. So in fact, when we were reporting before Europe, Europe was -- there was a Director of Europe, but Europe was just half of the group. Today, what you've got is you got something which is much more balanced for each of the regions, which are created. And doing it this way, taking into account how domestic, in fact, the recovery is currently, as we have all seen, is in fact making a ton of sense. So besides the element that you are saving the cost of a consolidation layer, which was the Singapore headquarter or the Paris headquarter, you are also, more importantly, closer, in fact, to the action and then more prompt at taking the right decision locally. Because a lot of the business, as you know, will be local business initially.

[Operator]

[Operator Instructions] Our next question comes from Stuart Gordon of Berenberg.

[Stuart John Gordon]

Just a couple for me. You obviously talk about this significant summer rebound. Can I just clarify, when do you think that starts in terms of the vaccination program? So at what point, particularly in Europe, do you think that will start? And the second thing is, you've obviously talked about Australia. I think you also mentioned Israel and the recoveries we've seen there. I think Australia is still down somewhere north of 40% versus 2019. Israel had a fantastic March and yet, that's still down 66% versus March 2019. Is that the sort of magnitude that you think a strong rebound will be reflected in RevPAR numbers versus 2019 towards the back half of the year?

[Jean-Jacques Morin]

Yes. The important point about the vaccination is that it allows stopping confinement. What we really need to get out of is a mode into which people are confined and hence, cannot consume in bar, restaurant, and as you know, it's very complicated for anybody to go in a hotel if you can get served for dinners, beside the fact that you are afraid of getting the disease. So that's why the vaccination is so critical. And that's also why I think summer will be different because, if everything goes per plan, and again, I'll make the proviso that I am not a scientist. I don't know what variant can come up. I have learned one thing in this crisis, which is that you always get surprised. And one day, we are told that the vaccine is to be stopped. And the next day, we are told that it start again. So there is a lot of things that I don't master. But the one thing that I can -- I know, and that I see is that as soon as you've got confidence and the confidence can be through vaccination. It can also be through identification of people getting the anti [indiscernible] in their blood that proves that despite getting the vaccination, they are protected. They've got the cells that protect them because they got the disease already. It can also be by some tests, called the PCR, that they went through and can prove that within a given period of time, they are sound. It's a series of things. But we need to go through that, so that you reach a point where, again, people have confidence that they can go into places and not get ill. And so that's this phenomenon here. So how do I quantify it? And how I am sure? The numbers that you quote, in fact, there is a progression here, which it will go, and it will improve, but it won't change from the one day to the next one. Counted that we are at minus 60%, I can see, if the governments go per what they say they want to go do. And we have the means, which are the means that the people have today financially and the willingness that they've got that any analysis that you can gather, would tell you pent up demand, Google AdWords, all of that, you read it as I read it, I think there is here a strong element for rebound over summer. Will it materialize? I don't know for sure. But is there good elements when you are a rational person to think that it should? Yes.

[Operator]

At this time, we have no further questions. [Operator Instructions] And with that, I'll return the conference over to your speakers.

[Jean-Jacques Morin]

Okay. Thank you very much for your attention. Thank you for the time. And we -- we'll talk to you in July. And at that point in time, we'll know better on how everybody has been behaving and how good we are doing, okay? Thank you. Bye-bye.

[Operator]

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