Overview
Morgan Stanley has reshuffled its European travel and leisure favorites, naming hotel operator Accor SA as a new Top Pick while keeping International Consolidated Airlines Group (IAG) on the list. The bank upgraded Accor to an "overweight" rating from "equal-weight" and raised its price target to €55 from €51. It left IAG at "overweight" with an unchanged €5.80 target. For both names the broker sees about 18% upside to the target price.
Accor: upgrade and rationale
In its note, Morgan Stanley said investors should look beyond short-term disruption in the Middle East and focus on a projected 2027 inflection for RevPAR, net unit growth, Accor's fee algorithm and the company's capacity to return cash to shareholders. The broker expects the current buyback to finish by October and outlined a subsequent sequence of distributions that together would exceed €1 billion.
The bank's distribution timetable for Accor includes an Essendi-funded buyback of €0.5 billion, a further free cash flow-funded buyback of €0.4 billion and a €0.3 billion dividend. Taken together, Morgan Stanley said these programs would push total shareholder distributions to more than €1 billion, or roughly 10% of Accor's market capitalization.
IAG: retained top pick
Morgan Stanley retained IAG as a Top Pick, acknowledging softer near-term PRASK and lower fuel recapture but remaining constructive on the airline group for medium- to long-term margin and earnings-mix improvement. The broker highlighted British Airways’ turnaround, ongoing cost discipline excluding fuel, and IAG's loyalty business as key levers that should lift margins over time.
On balance-sheet metrics and cash generation, Morgan Stanley pointed to low leverage underpinning attractive free cash flow yields of 10%, 11% and 12% for fiscal years 2026, 2027 and 2028, respectively. The firm also expects roughly €2 billion in shareholder returns in fiscal 2026. Additional support for earnings visibility identified by the broker includes resilient Atlantic demand, tight widebody capacity and limited exposure to the Asia-Pacific region.
Broader positioning
Alongside the Top Picks, Morgan Stanley's broader call favored companies such as Entain, Compass and Carnival while urging caution on JD Wetherspoon, Sodexo, Scandic, Playtech and Wizz Air.
Market context and metrics cited
The new Accor price target of €55 represents an increase from €51 and implies about 18% potential upside. IAG's unchanged €5.80 target similarly implies roughly 18% upside. For Accor, the expected distribution programs combine buybacks and a dividend that Morgan Stanley quantifies as exceeding €1 billion total, or near 10% of market capitalization. For IAG, the broker's projections for free cash flow yields are 10% in fiscal 2026, 11% in fiscal 2027 and 12% in fiscal 2028, along with around €2 billion in shareholder returns for fiscal 2026.
Conclusion
Morgan Stanley's updated stance places Accor alongside IAG as favored exposures within its Europe travel and leisure coverage, on the basis of expected RevPAR recovery, structured cash returns and cash-flow resilience in the airline group's case. The broker’s projections and planned distribution programs are central to its overweight calls for both companies.