Morgan Stanley Leisure & Hotels: Back to School: Summer Review and Best Ideas
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Abstract
Morgan Stanley maintains an Attractive view on European leisure and hotels. Summer travel demand proved broadly strong, yet profitability diverged sharply by geography, capacity, customer mix and self-help programs. The MSCI Europe Travel & Leisure index rose just 3% year-to-date versus 10% for MSCI Europe, but has rebounded 11% since the Middle East conflict, beating the market's 3%. Accor (ACCP.PA) is upgraded to Overweight and named Top Pick, with its target lifted from €51.00 to €55.00; Entain, Compass, Carnival and IAG are also favored. JD Wetherspoon (JDW.L) is cut to Underweight even as its target rises from 650p to 800p; Cirsa is cut to Equal-weight with its target trimmed from €18.40 to €17.60, and FDJ UNITED's target falls from €26.00 to €24.00. The firm stays cautious on Sodexo, Scandic, Playtech and Wizz Air. Valuation gaps anchor the thesis: Compass trades at a ~10% P/E discount to Aramark versus a historical 65% premium, while its EBIT margin remains 20bps below FY19's 7.6% despite nearly 60% higher revenue; Sodexo's discount to Compass has narrowed to 10% against a 45% historical average. Cruise forward pricing is bifurcated—Carnival and Norwegian sit below 2024–25 levels, while Royal Caribbean's forward curve trails 2025.