Accor SA

PAR:AC

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, welcome to the AccorHotels third quarter revenue conference call. I now hand over to Jean-Jacques Morin, Deputy CEO. Sir, please go ahead.

[Jean-Jacques Morin]

Good evening, ladies and gentlemen. Thanks for being with us, Sébastien Valentin and myself, to review our Q3 2018 revenue numbers. Without any further delay, let's turn to Page 3 for the highlights. So 3 key highlights I would like to go through. Number one is strong revenue growth. You will see in the presentation that we saw RevPAR growth of 5.9% like-for-like systemwide, which has been supported by a good summer in Europe. Europe grew 7.1%. This RevPAR performance, combined with a sustained development of the network, translated into a total revenue increase of 7.6% on a like-for-like basis. The second point I'd like to highlight is the very sustained development. We opened -- we added 11k rooms organically to our network. This confirm this year will be at a record level, and we will detail that later on today.The third point was -- or is M&A, where, in fact, we did what we said, i.e. we completed the acquisition of Mövenpick on September 3, which represent a portfolio of 86 hotels or 21k rooms. And this has the effect of increasing our leadership in Middle East and Africa, which now accounts for 9% of our network when it was 7% before the acquisition. We also increased our presence in the luxury lifestyle segment by 2 acquisitions in the U.S.: 21c, which is a company of 8 hotels, i.e. about 1,000 rooms, and this got completed end of September; and sbe with 25 hotels and 7,000 rooms, which we closed just at the start of the quarter on October 5.Just as a side note, regarding the share buyback, which was launched on July 30, already 2/3 of the EUR 350 million envelope has been completed, and this equates to about 5.7 million shares.So moving from the highlights to our situation in term of network and pipeline, trying to give you a little bit more color by region. So what you see is, as far as the network is concerned, we had a strong flow of organic growth opening with 11,000 rooms. We had a weak churn over the quarter of only 1,000 room. And the M&A that we just mentioned added 22k, and this is mostly Mövenpick. So regarding the key openings that we did, just for your information, I would highlight Sarajevo Swissôtel and a very large Novotel in Seoul, Korea. When you deep dive a bit more on the pipeline, we passed a symbolic threshold, the threshold of 1,000 hotels with a strong addition over Q3 made of 28k rooms from new signings and 12k rooms from Mövenpick, all of that being in the luxury-upscale segment. The 184k-room pipeline that we have at the end of September represents about 27% of our existing network. And what is also remarkable is that it's getting more and more skewed towards luxury and upscale, which is now 35% of our total pipeline when it used to be 28% at the end of June 2018. So that's for the network and our hotel base. If we now move to Slide 5, I will cover the revenue for our segments. So in total, the revenue was up 22.3% on a reported basis and reached a level of EUR 1,033,000,000. If you analyze that, if you decompose that, the like-for-like is the 7.6% we already quoted. The perimeter effect is quite significant and accounts for 17%, and this is driven by Mantra and Mövenpick acquisition. And the foreign exchange remains a drag of 2.3%, i.e. about EUR 20 million, though it is a much lower level than the one that we had experienced over H1.Now if you look at the HotelServices segment, the revenue was up 9.1% like-for-like to a level of EUR 679 million, and this reflects both a strong RevPAR growth of 5.9% and also the development of the network we just went through. If you move to New Businesses, the revenue growth of New Businesses is at 27.1% on a reported basis but was down 5.8% like-for-like. This encompasses contrasted situation. If you do the analysis on a pro forma basis, i.e. if you include all the New Businesses as if they are being consolidated from July 1, 2017, the overall growth is slightly positive. Into that, you've got onefinestay and John Paul posted negative growth, following the strategic review we initiated last summer. And -- but if you exclude onefinestay and John Paul, the average growth on the rest of the business is close to 20%. If you move to the Hotel Asset, the Hotel Asset delivered 6.3% like-for-like revenue growth, and this is driven by, again, some RevPAR momentum. The reported growth at 64.1% reflects the addition of Mantra and Mövenpick, so that's why there is this difference. Moving to the holding and intercompany at EUR 20 million, you've got a number which is, as you would expect, roughly stable versus last year. So moving on to Slide 6. On Slide 6, you see the systemwide RevPAR growth, which is the 5.9% in total to be compared to 5.1% in H1. And what is remarkable is that you got growth over all region and growth over all segment. The year-to-date RevPAR growth is now at 5.4%. We've seen continued improvement in pricing power above -- over the past quarter driven by growing demand across the world, and this is particularly true in the luxury segment in Europe, thanks to a strong summer season and some positive one-off I will cover a bit later in this presentation. And in Middle East and Africa, where we took advantage of our leading position in Mecca and during the Hajj, we built an opportunity pricing strategy. If you now deep dive a bit more on that RevPAR and focus on Europe and Asia-Pacific, which constitute about 75% of our business, you see acceleration in Europe. So Europe is close to 50% of the network of the business. France was particularly strong, 8.3% over the quarter, and Paris at 16.5% and helped by a great summer season but also the golf Ryder's Cup, which took place in September. And so Paris reaching a RevPAR of close to 21% and 85% occupancy. Germany was a good 3.7% with some good sales in Berlin and Hamburg, good calendar. The U.K. was again positive at 3.4% and again a very strong performance in London with RevPAR at 5.8%, and the occupancy has been hovering around record high level, above 90% for now some time. Spain is a negative 1.4% over the quarter, and that translate the situation we are all aware of in Catalonia, which accounts for about 30% of our Spanish network. If you move to Asia-Pacific, the RevPAR growth was a tad softer in Q3. If you look into a bit more geography analysis, Australia had a growth, which was 0.6%, so close to 0, which remained consistent with what we had seen in H1. In fact, the reason are the same, which is some of our supply in key cities and growing uncertainty around the election that will take place in Q1 of next year, Q1 2019. The second point I would highlight is China, which showed a positive 6% growth in RevPAR over Q3. That remains a good number despite challenging comps.Now moving to HotelService, the management and franchise portion of HotelService, and I am on Slide 8. So you see the same trading condition I've been highlighting since the beginning of the call. The M&F revenue is up 8.5% on a like-for-like basis with a RevPAR growth of 5.9%. The 2% to 3% gap between revenue and RevPAR is consistent across regions, except for Middle East and Africa. So for Europe, it means 10% -- 10.2% revenue growth with a RevPAR growth of 7.1%. For Asia-Pacific, it translates into 6.1% like-for-like revenue growth with a RevPAR growth of 3.1%, which translates the strong development that we've seen in that region for many, many quarters. In NCAC, the revenue is 7.1% growth like-for-like for a RevPAR of 4.6%, and that is boosted by the opening of the Fairmont Austin since March 2018 and also the great performance that we've seen in our Canadian Fairmont, which have been triggering incentive fees. And if you move now to South America, the revenue is up 13.4%, and this is above the RevPAR growth of 11.2%. Good news is that in Brazil, the RevPAR is up 10.1% with São Paulo, which come back to a normalized level. I mean, occupancy is at now 65%, which is already coming back to a better situation. We still have the disconnect of Rio, which continues to be plagued by oversupply and the political economic situation of -- that we know of. Moving to Middle East and Africa, the revenue is up 1.5% when the RevPAR is up 5.4%. So the RevPAR growth is driven by the Hajj, as we have discussed before. And the gap between the revenue and the RevPAR is coming from 4 properties in Ivory Coast, where we are underperforming, the environment is difficult, and also some of the closing that you may recall we saw in Q1 in Middle East and Africa, which are eating our revenue line.So the last comment that I would make on that slide, which is the right part of the slide where you see the segment contribution, and you see that luxury continues to grow and is up 2 points versus last year but much more when you look at what it was in 2016 before we acquired FRHI.So moving to the last slide, which is the financial rating 2018 outlook and as a wrap-up. So as we expected in July, the RevPAR trends across the portfolio remain solid with 31k rooms organically opened year-to-date. We do confirm our target to reach another record of organic development in financial year 2018. Despite tougher comp, the RevPAR growth is expected to be strong for the full year. And so based on all these elements, we now grow our guidance between EUR 700 million to EUR 720 million, which, as you may recall, is the high end of the range we had disclosed to you last July.So this is what we wanted to tell you about the performance of AccorHotels for Q3, and the floor is now yours for question.

[Operator]

[Operator Instructions] We have a question from Julien Richer from Kepler.

[Julien Richer, Equity Research Analyst]

Two questions for me, please. The first one on the New Business performance. If we can have an update and especially talking maybe a little bit more on the strategic review that is currently ongoing and a basic question on RevPAR. What kind of trend do you expect for the end of this year and if we can have maybe your first view regarding 2019 given what we are seeing in terms of political tension recently?

[Jean-Jacques Morin]

On the New Businesses, you all remember that we took a writeoff on private rental and John Paul at the end of June, so that's why that's part of this exercise that we are going through on where to move. Our strategic intent has not changed. We want to move ahead with private rental. We want to move ahead with John Paul, which is conceptually. And at this stage, it's too early to tell you what our solution is, but that's what I would say on that point. The other thing that I would like to highlight, Julien, is that despite being small numbers, you know this is important for us. And the portion that is not John Paul and private rental is, in fact, performing extremely well, which is why I made the comment that if you have to just look at that cluster of business, the growth level that you see on that cluster of business, Q3 to Q3, would be close to 20%. So just also to put a little bit things in perspective around what's happening. In terms of the RevPAR for Q4, it should be more than 4% and 5-ish kind of thing. So that's where we see, in fact, the numbers for the full year. Again, the comps are a little bit more tough in Q4, and we know what the world is around us. Foreign exchange may fluctuate, things may happen with Brexit, so there is these things that obviously we do not control. But everything being equal, you have a strong underlying business, strong underlying business. And for 2019, it's frankly too early.

[Operator]

Your next question is from Lena Thakkar from HSBC.

[Lena Thakkar, Analyst]

Just firstly, on Australia, obviously there's the issue of overcapacity. I was just wondering if you could give a bit more color around, is that capacity still rising. And also how much of your pipeline is exposed to Australia? And then secondly, just in terms of the cash that's still available to you to spend, I'm not sure if you can make any comments on the type of assets you're looking at and what's appealing in terms of where you might spend that and time horizon?

[Jean-Jacques Morin]

Yes. Okay. In Australia, I think the problem of Australia and the supply of Australia is that it really depends on where you discuss. And what is happening there is that it's mostly Sydney and Melbourne, which are the places which are affected by a supply-versus-demand equation, which is unfavorable. If you have to go in the Gold Coast, you don't have the same situation. Now Sydney and Melbourne are a very significant part of where we do business, so that's, I think, what you see. And yes, people have been adding capacity over the last years in Sydney and Melbourne, hence the situation that you see. The other thing which is not neglectable is the fact that there is election. And so the financial district is basically again in that mood where they wait a little bit before taking some decision, and that has been impacting, in fact, some of the business mood in Australia. But all of that is just essentially temporary because once it will be decided, there is no reason for why it would not come back. And I think that's on Sydney where we are. In terms of the usage of cash, yes, there is some more potential based on the proceed that we received from the Booster operation to grow and execute marginally additional transaction. The current -- you see very well in the typology of what we've done where we're spending the money, and you should expect, everything being equal, the same kind of strategic direction. It's exactly the [ montage ] type of acquisition where you become even more dense, 1.3% that you already own very well. So that's where we want to go.

[Lena Thakkar, Analyst]

And just going back to that pipeline point, I don't know how much of the pipeline is exposed to Australia. But would that be something that potentially doesn't crystallize? And therefore, I don't know if you can give a number around that.

[Jean-Jacques Morin]

Yes. The pipeline number in Australia, which we don't give, it's 6,000 rooms, just to put things in perspective. So -- and it's -- frankly, it's way too early to think that some of this pipeline would potentially be never coming onboard. Frankly, it's way too early, way, way too early. The situation is just a transition.

[Operator]

The next question comes from Jamie Rollo from Morgan Stanley.

[Jamie David William Rollo, Managing Director]

First question, just on your EBITDA guidance, is that still a EUR 25 million loss for New Businesses this year? Secondly, on record year for openings, is that gross number of rooms? or is that percentage net gross? If you can just give us the numbers there. What can we expect during the Capital Markets Day on agenda? And finally, how much of the pipeline growth was the Mövenpick pipeline that you acquired in the first quarter?

[Jean-Jacques Morin]

So the definition for the addition is gross. On the agenda, you will have many people that will present. In fact, you'll have a presentation on development. You'll have a presentation on digital. You'll have obviously a presentation by Chris Cahill with the Deputy CEO on brands and stuff on that, so it's going to be a very well-used several hours to go through that. It's more than a morning, so I think that's what I can say on that. And the Mövenpick pipeline acquired is 12k rooms.

[Jamie David William Rollo, Managing Director]

And on the Capital Markets Day, dividend policy, capital structure as well?

[Jean-Jacques Morin]

Oh, yes, sure. That's a given, yes, yes. Sorry. I should have said that.

[Jamie David William Rollo, Managing Director]

Sorry. And New Business losses, EUR 25 million?

[Jean-Jacques Morin]

Yes, yes, yes. Keep that number, yes. Keep that number.

[Operator]

The next question is from Tim Ramskill from Crédit Suisse.

[Timothy Ramskill, Research Analyst]

The first question for me, and I do apologize in advance for being a bit of a broken record on this one. But if you look at the performance of the fees, just the fees or revenues within HotelServices, we've had 5.9% RevPAR growth. And mixed through the system, a lot of the growth I know has come from acquisition effects, but it is up more than 13% year-over-year at the end of the quarter, certainly. And yet the overall like-for-like revenue growth is 8.5%, which kind of, again, sort of there seems to be quite a large unexplained gap. I know we've talked in the past about some refurbishment activity. I just wondered if you could update us on your thoughts on what drove that in Q3, please.

[Jean-Jacques Morin]

Yes. I mean, the issue with the revenue of HotelService nowadays, as you certainly know, Tim, is that you now have the "Service to Owners" in that column, which, in IFRS 15, means that you've got all the reimbursed cost putting up as revenue and putting up as cost for the same amount. And so the issue there is that you've got a huge amount. And in our case, it's probably in the -- to the tune of EUR 800 million in the 1 given year that come in these stocks. In fact, the true base, which is your M&F revenue base, and the fact that we are focusing and really detailing out the performance is ongoing by doing it on the M&F, which, by the way, is what all the competition is doing, to my knowledge. And so that's, I think, what is impacting the discussion that you are highlighting.

[Timothy Ramskill, Research Analyst]

Sorry to cut you off. It's just that, that is -- it was the M&F I was talking about, so that's up 8.5%. RevPAR is up maybe 6%, and the system is maybe 13% larger. So why the like-for-like fees only growing at 8.5% when the other -- the drivers of revenue are heading towards a near 20% year-over-year increase? There's a very big difference there. It's a major mix effect to think about. This is something that IHG has given a lot more detail on, so it's just, as I say, very difficult to square it away.

[Jean-Jacques Morin]

Listen, I am -- what I would propose is the following: I'll -- we'll take your discussion offline and go through that, if you will, the IHG way. But the way you should look at the revenue growth is that the revenue growth is the same of the RevPAR and the system growth, right? The RevPAR growth is to the tune of 3%, 4%, 5%, 5% this year, was 4% last year, was 1% the year before. And to that, you add the system growth, which is coming from development, which is somewhere around 5%, slightly less than 5% currently. And as you may recall, we've been assuming a target of 5%. So if you add up the 4%, 5% and the 5% on system, you should expect, in fact, your fees to grow to the tune of around 8%, 9%, 10%, 11% depending after that on a few things that may happen, which are timing and some cancellation and stuff that is the life of any hotel company. So that's the macro equation. So what I would propose is that we take your question offline, but this is the equation that you should expect.

[Timothy Ramskill, Research Analyst]

Okay. And then the second question -- well, that would be great, we'll do that. And then the second question is just in terms of the incremental acquisition contribution to Hotel Assets, can you just remind us there, just in terms of what sits within -- what has been added to that line in terms of the Mövenpick and the Mantra businesses exactly?

[Jean-Jacques Morin]

Yes. In terms of the revenue for Mantra, which we discussed in the quarter is EUR 123 million -- EUR 120 million for Mantra. And then you've got, in fact, a portion of it, which goes in services, and that's to the tune of EUR 2 million to EUR 3 million. And the rest is in the Hotel Asset part of segmentation. In term of Mövenpick, the number, obviously smaller because we only have 1 month, sorry, of activity. And the number in HotelAsset is to the tune of EUR 20 million, and in HotelServices is something, I think, like EUR 2 million or EUR 3 million.

[Operator]

The next question is from Richard Clarke from Bernstein.

[Richard J. Clarke, Research Analyst]

Yes. Just following up on 2 of Tim's questions there actually. Just wondering the rationale for putting so much of Mantra and Mövenpick in Hotel Assets given that they were sort of billed as asset-light purchases. And why are those revenues sitting in -- within the asset-light portion -- the asset-heavy portion? And then secondly, also probably relinked to Tim's question. You're talking about a 10.2% like-for-like growth in Europe, but the actual revenue growth has only been 4.5%. I know the pound has got to have some impact there, but that seems too big. So are you closing rooms or something in Europe? What's leading to that negative impact there? And maybe you can just talk about the 2 business you've bought and what like-for-like growth are you inheriting given that you're talking about some of the issues in Australia, how is Mantra performing? And what's going to be the impact to when that starts getting included in the like-for-like growth?

[Jean-Jacques Morin]

Yes. In term of your first question, in Mantra, you may recall that there are some leases. When we purchased the company, there are some leases. And so one of the things that we are -- because when you buy a company, you are hardly finding a company which is only a management company. So Mantra was exactly that type, sorry. And so one of the things that we are working on is figuring out what to do with the leases, how to carve them out potentially from Accor hotel, but again, with no pressure on time, i.e. I am not a forced seller. So that's part of the explanation for why Hotel Asset is high. It shouldn't be in the long run for that portion of the business. And then the other answer to your question is that we've got part of the business in Mantra, which is so-called Strata. You may recall the management letting right part of the business. And when we did reclassification and the new segment reporting back in Q1 of 2018, we said that we would classify Strata as being part of Hotel Asset because, in Strata, you own some of the common part of the properties, and that's the business model of the management letting right. So this is why you've got a portion of it which is sitting in Hotel Asset and will sit in Hotel Asset for some time. And by the way, it's a business which is very peculiar to how you deal with hotels, and it's something that exists, to my knowledge, only in Australia. And we have, historically, in fact, that business of Strata in our books for now many, many years with the acquisition of Mirvac many years ago. So it's [ seemingly ] a market practice, if I can say it this way.

[Sébastien M. Bazin, Chairman & CEO]

Richard, on your -- this is Sébastien here. On your question on Europe, the gap between the 4.5% published and the like-for-like is predominantly the Turkish lira, which has come down significantly. There is a big impact. You can see that on the appendix. So it's a bit of sterling but predominantly Turkish lira.

[Richard J. Clarke, Research Analyst]

Okay. And the last question with the like-for-like performance, out of the acquisitions you've made, is Mantra seeing similar trends to what you're seeing in your kind of core Australia business?

[Jean-Jacques Morin]

Yes. Mantra is good for them that a portion of their business is resort and is on the same as Gold Coast that I was alluding to before, hence the fact that I was making that comment because I knew somebody would ask the question. And the situation that I was describing for Sydney and Melbourne is not the situation that you see on the Gold Coast. This being said, we just acquired the company a couple of months ago. We're just in the midst of integrating it, we're just in the midst of solidifying the synergy and the pipeline and all the things. And so I think you will have a better view -- or we will have, sorry, a better view on the Mantra in the coming weeks. And the other thing which makes the analysis a little bit tougher is the fact that our summer is the winter of Australia, and so it's the weakest part of the year. So the point of comparison is not a very relevant comparison either. So for all these reasons, I think we'll get back to you when we publish the result at year end on where are we with Mantra.

[Richard J. Clarke, Research Analyst]

Just maybe just a quick follow-up to the very first question there. Now that Hotel Assets is about 1/3 of your business, 1/3 of your revenue, up from more like 1/5 at the half year results, are you going to provide some extra disclosure on that business because we're just getting a like-for-like number. We don't get that regional breakdown or anything else in that. Will we expect some further disclosure on that segment?

[Jean-Jacques Morin]

Not really, not at this juncture. In fact, we looked at -- when we decided to do all the new segments and the revamping of our external communication, we looked in very much detail to what the competition is doing, which is why I was also saying that everybody focuses on M&F by region in order to explain the activity which is what makes sense. And so at this juncture, we've not decided to change what we provide you on HotelAsset.

[Operator]

The next question is from Jarrod Castle from UBS.

[Jarrod Castle]

Some -- a number for me. Firstly, just coming back to New Business, obviously you're doing your strategic review. But do you have any initial thoughts on, one, what's gone wrong there? And two, just related to that, was there any deferred consideration, either for onefinestay or John Paul, which won't be paid out? The second topic is just on the pace of buybacks. Should we be thinking somewhere between EUR 100 million and EUR 125 million being spent per month? Or will it operate faster or slower going forward? And then lastly, just on China, any comments in terms of what you're currently seeing in that market?

[Jean-Jacques Morin]

Okay. Deferred comp is not something that we want to discuss publicly. In terms of buyback, what you've seen is something which is relatively linear if you look at the numbers as they have been coming up. And so you should think of it as something which continue to be relatively early now. In terms of China, I mean, you read the newspaper as I read the newspaper on the China situation and the relationship that they've got with the U.S. is something which is complex. We talk about big stakes. And there is, as you guys also know, some credit in China that went quite fast and is impacting in fact -- is impacting the way the Chinese consumer is behaving. I'm not going to teach you anything on the call by saying that. At this juncture, you saw the RevPAR that we experienced. It's a good number, and there is no sign of significance that we can see that would tell us differently, but it is something that needs to be looked after, clearly. I would lie if I were to say something different and any business would lie if they were to say something different. In terms of the New Businesses, what went wrong, it's a mixture of a bunch of things, but I think we probably prefer to look at it going forward than looking backward. If you want to look backward and you really want an answer, so that I don't look like somebody who doesn't answer questions, it's the usual story about New Businesses being integrated in a company and as probably being too greedy at what we try to do with that company and integrating them too fastly and pushing them to go into too many geographies and too many directions. I think I would summarize it like that. So what we are doing now is making sure that we refocus on where we make money and what we manage well, which is why you see the negative revenue of Q3. That's how I would summarize it.

[Operator]

We have a question from Jaafar Mestari from Exane BNP Paribas.

[Jaafar Mestari, Analyst]

I've got 3 quick questions, please. The first one on the EBITDA guidance, if I just want to play devil's advocate. When you gave the guidance in July, it was a range because you needed more color on some RevPAR on the date of the M&A deals actually closing, et cetera. Now we've had a very strong summer. Main deals have closed on time. What's a reason the midpoint of your guidance range only moves up EUR 5 million? Is there anything negative we should be aware of compared to your thinking in July? And then just on the Hotel Assets, thanks for the revenue color from acquisitions, so above EUR 120 million nonorganic revenue from Mantra and Mövenpick. Just directionally, I know this is not a results release. Are these assets broadly in line with the Hotel Assets EBITDA margins of 17%? Or is there any mix effect we should be aware of there? And then lastly on -- just on the consolidation. I'm not trying to get much into detail. But similar to how you used to have AccorInvest managed by HotelServices and revenue contribution in both divisions and then eliminations, what's the reason, it looks like the new assets are either in one or the other, and there is not a formal management fee on those assets that flows through the HotelServices P&L.

[Jean-Jacques Morin]

Okay. Let me take the last one. Nothing has changed there, so it's the same process; i.e. you do have management fees flowing between HotelService and HotelServices. We certainly would never change that. I think the one thing where this is not the case yet is the lease portion of Mantra because we wait until we find a solution for those leases. And at the same time, we would implement a management contract between the HotelService part of Mantra and the lease part of Mantra. So that's something which is work in progress. But on the principle, what you -- what we've done over the last many years is exactly what we want to do between the 2 divisions. And again, remember, the intent of AccorHotels because -- since we are talking about that again, the intent of AccorHotels is to be an asset-light company. So there is a timing on everything. You know that the largest part of what we've had in Hotel Asset is Orbis and so what we never will want to be is in a position where we are forced seller. So we want to have the flexibility of doing the right deal at the right time, and so that's an important element on how those -- these segments will evolve over time. And the other thing that I will say, which I have said but repeat for the sake of clarity, is when you do some deals, unfortunately the company, as they form themselves, are a sum of management and asset components, typical ways of developing a hotel, as you know. And so we inherit asset when some of the deals are concluded, and then we need to work on those. I think that's an important point. To your second question, which was on the performance, you have rough cut the same kind of numbers as the one that we had on AccorInvest and what we used to publish between the one which are leased, the one which are owned and the one which are on valuable leases, so you have about the same type of profitability. In terms of guidance, so on the EBITDA guidance, I mean, one element which is different, Jaafar, is the fact that the currency has been playing the wrong way. From the time that we did the guidance back in summer to the time that we do it now, everything being equal, we probably lose EUR 5 million. And so that's one of the reasons for why we are looking at the guidance the way we are looking at the guidance. Now God knows where the currency will be at hereon, and maybe we'll have good surprise.

[Operator]

The next question comes from Bruno de La Rochebrochard from Bryan Garnier.

[Bruno de La Rochebrochard, Equity Research Analyst]

First one, what should be the contribution in quarter 4 of sbe and 21c, if you can speak between service and Hotel Assets? And a quick follow-up on acquisition, what's the remaining cash available for acquisition after sbe and 21c from the disposal of AccorInvest?

[Jean-Jacques Morin]

On sbe, it is less consolidated, so you won't see an impact on the consolidated EBITDA. And 21c is very, very small, because, again, you talk about 8 hotels. So it's a very small number, so it's not going to change your model. On the remaining cash available for this, in fact, you have all the elements to do the computation. The only question that you have on that computation is how much cash do you keep in order to give you more or less flex around the rating that you want to pursue. And so what we said is that we wanted to remain in this [ ranking ], obviously, and keep a little bit of prefer. So there is some more flexibility to do more bids, as I have seen -- as I have said before, but it's not billions. The other thing that I would say that I've said before but I'll say it again for the sake of clarity is that the other thing about the business model that we are entering is that it's a very cash-generative business model. And so we are going to replenish, in fact, the treasury -- the cash, sorry, account as we go. And so the question will then become what is the cash allocation that we do around the money which are available. So it's not now, but it is one of the capital allocation discussion that we will have to go through every year. I think on this one, what I would say is that we've got a Capital Market Day in about 1 month, and capital allocation and the balance sheet and all of those dividend type of discussions are going to be part of that. So we will give you more detail then.

[Operator]

We have no further questions for the moment. [Operator Instructions]

[Jean-Jacques Morin]

Okay. So ladies and gentlemen, thank you for your attention, your questions. And we look forward to talk to you in Paris during our Capital Market Day on the 27th of November. Bye-bye, everybody.

[Operator]

Ladies and gentlemen, this conclude today's conference. Thank you all for your participation. You may now disconnect.