NH Hotel Group reports positive net profit

Third-quarter 2015 results presented in Madrid 

The Company's third-quarter revenue rose by 8.3%, while EBITDA jumped 25% and recurring net profit came to €4.4 million, compared to a loss of €4.8 million in 3Q14

The excellent performance in the hotel businesses in Spain, Italy and Benelux drove this momentum, which was underpinned by growth in consolidated revenue per available room (RevPAR) of 12.3%, marking acceleration from 1H15, when this metric registered growth of 9.7%

Factoring in the contribution by Hoteles Royal, which has been consolidated since March, third-quarter revenue growth rises to 12.8%, EBITDA growth to 32.9% and recurring net profit increases to €4.8 million

In 9M15, consolidated revenue rose by 10% year-on-year to €1,027.1 million, while EBITDA and recurring net profit grew by 46.7% and 74.5%, respectively

In the wake of two years of implementation of the business plan and the results of the various initiatives rolled out in that time, the Company is in a position to raise its guidance and is now targeting EBITDA of around €250 million and a reduction in leverage ratio towards 3.0 - 3.5x by 2017-2018

MADRID - NH Hotel Group presented its third-quarter results, which confirm the earnings momentum evidenced all year long. This momentum accelerated during the third quarter thanks to stronger hotel business volumes and the impact of the initiatives rolled out under the scope of the Group's five-year business plan.

Third-quarter earnings performance

Stripping out the impact of Colombian chain Hoteles Royal, acquired this year, NH's third-quarter revenue increased by 8.3% to €347.3 million, while EBITDA jumped by 25% to €38.2 million. It is worth singling out the performances of the Italian, Spanish and Benelux business units, which between them contributed an additional €12 million to Group EBITDA, up 55.4% year-on-year.

As a result, the Group has presented a positive net profit for the first time in a third quarter since 2008, namely €4.4 million, compared to a loss of nearly €5 million in 3Q14. Adding in non-recurring items, reported third-quarter net profit is €3.6 million.

The repositioning strategy and improvements implemented by the Company under the scope of its five-year business plan continue to demonstrate their potential in terms of results - delivering price growth - and service quality.

The hotel repositioning strategy (31 refurbishments complete as of the 3Q15 close, another 17 underway and a further 14 slated for works between the last quarter and the first quarter of 2016), the development of the new NH Collection brand (48 hotels rebranded and another 14 scheduled for rebranding by the end of 2015), the effort to reinforce the Group's positioning in the Meeting & Events segment by emphasising IT solutions such as 3D holographic projection technology and telepresence and interactive collaboration systems and the communication and marketing campaigns designed to increase the Group's visibility and boost guest loyalty (advertising campaigns, new website and revamped NH Rewards loyalty programme) are enabling high standards of guest satisfaction and, in turn, generating growth quarter after quarter in revenue per available room (RevPAR).

During the third quarter, consolidated RevPAR increased by 12.3%, marking acceleration with respect to the first-half, when this metric registered growth of 9.7%. This trend enables the Group to announce that it is in a position to deliver at the high end of its guidance range for the full year, which calls for annual growth in RevPAR of 10%. As in prior quarters, price growth (+10.7% in 3Q15) was the main driver of growth in RevPAR, accounting for 87% of the increase. Group occupancy, meanwhile, increased by 1.5% during the third quarter, with noteworthy growth of 8% in Spain, shaped by a strong performance in Seville and secondary cities, 7.4% in Italy, thanks to the Universal Exhibition in Milan, and 4.9% in Benelux, where the conference destinations performed better. These markets more than offset the drop in occupancy in Central Europe, affected by fewer trade fair attendees as well as the fact that the third quarter is seasonally slow, and in Latin America, where occupancy dipped due to the strategy of boosting prices in Mercosur as well as the impact of currency depreciation in Brazil, the region's main feeder market.

Hoteles Royal contributed revenue of €14.5 million, EBITDA of €2.4 million and recurring net profit of €0.4 million in the third quarter. Factoring in the contribution by Hoteles Royal, which has been consolidated since March, the Group's recurring third-quarter revenue growth rises to 12.8% (€361.8 million), EBITDA growth to 32.9% (€40.6 million) and recurring net profit increases to €4.8 million, compared to a loss of the same magnitude in 3Q14.

Nine-month earnings performance

Recurring 9M15 revenue rose 9.9% to €1,027.1 million, including the revenue of Hoteles Royal (€991.1m without this chain). Recurring EBITDA, meanwhile, climbed 46.7% higher to €97.9 million (€93.2m excluding Hoteles Royal). Lastly, recurring net profit for the nine-month period was 74.5% higher year-on-year.

Outlook for the rest of 2015

In terms of RevPAR, in the wake of the strong third-quarter performance, management now expects to end the year with growth in this key metric of around 10%. Guidance for total 2015 revenue is unchanged with respect to the original estimate due to a higher number of rooms being refurbished and stagnancy in other revenue (outsourcing of restaurant contracts, segmentation changes, etc.) Shaped by the above factors, the Company is in a position to reiterate its guidance for EBITDA growth of 25% net of non-recurring charges.

Expansion: The Company multiplies its growth by two

Between January and 2015, the Company has signed 11 hotels with 1,793 rooms, more than twice the figure for all of 2014. The new hotels are located in Europe (three in Italy, one in Austria, one in Belgium, one in the Netherlands and one in Spain) and Latin America (one in Argentina, one in Chile, one in Mexico and one in Panama).

During this time, the Group has opened 25 hotels with 2,575 rooms as a result of the acquisition of Hoteles Royal coupled with organic growth. Hoteles Royal has enabled the Company to consolidate a solid presence in Colombia, Chile and Ecuador, adding 20 hotels to its portfolio. The other hotels opened during the three quarters correspond to five hotel openings in Europe (Italy (3), Belgium and Portugal), as well as the taking over of management of a training centre for BBVA in Madrid, Spain.

2013- 2018 Strategic Plan Update

After two years of plan implementation (launched in late 2013) and based on the results obtained from the various initiatives, the updated overview allows to indicate higher levels of sustainable EBITDA, around €250M and reduce leverage to 3.0-3.5x within the time horizon of the strategic plan (2017-2018):

· Asset sales:

In addition to the sale of non-strategic assets contained in the 5-year plan (9 hotels / approx. €45M net cash) other divestments (approx. €60-100M net cash) are included within the company’s asset rotation strategy over the course of the next 18 months in certain cities, with a limited impact on EBITDA (approx. €5-7M annually).

Like-for-like hotel business performance by market
(3Q15: like-for-like hotel data + hotels under refurbishment)

Spain presented substantial 3Q15 RevPAR growth of 14.2% year-on-year, underpinned by growth in rates and occupancy of 6.1% and 7.6%, respectively, with Seville and secondary cities staging an excellence performance during the reporting period. The outlook for the fourth quarter is promising, shaped by targeted double-digit RevPAR, in line with the third-quarter performance.

Italy was the Group's best-performing market, marked by growth in RevPAR of 29.2% between July and September, in turn shaped by a growth of 19% in the ADR and of 8.6% in occupancy. The Milan market was the star performer, thanks mainly to Expo 2015, the Universal Exhibition being hosted by this city, in which the Company operates 12 hotels and 2,222 rooms. The outlook for the fourth quarter is bright: management is targeting double-digit RevPAR growth despite the fact that the Expo finished at the end of October.

Benelux posted RevPAR growth of 14.1%, driven mainly by ADR growth of 9.5%. In this business unit the cities of Amsterdam and Brussels performed particularly well. RevPAR is expected to stage slower growth in the fourth quarter on account primarily of programmed refurbishment work.

Central Europe saw its RevPAR decline by 1.5% in the third quarter due to fewer visitors to Munich's Octoberfest and the IAA trade fair Frankfurt, a strategic shift in segmentation towards more profitable rates which will demonstrate their full potential during the high season and the relatively later start of the brand and product repositioning effort which will benefit this business unit in the near future. This market is expected to perform well in the fourth quarter.

In the Americas, regionwide third-quarter RevPAR growth was 7.8%, driven primarily by ADR growth of a substantial 16.4%. Looking to the fourth quarter, regional RevPAR is expected to register growth in trendline with the results evidenced all year long.

About NH Hotel Group

NH Hotel Group (www.nh-hotels.com) is Europe's third-ranked business hotel chain. It operates close to 400 hotels with almost 60,000 rooms in 29 markets across Europe, the Americas and Africa, including top city destinations such as Amsterdam, Barcelona, Berlin, Bogota, Brussels, Buenos Aires, Düsseldorf, Frankfurt, London, Madrid, Mexico City, Milan, Munich, New York, Rome and Vienna.

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About NH Hotel Group

Over NH Hotel Group

NH Hotel Group is beursgenoteerd in Spanje met bijna 400 hotels in 30 landen in Europa, Afrika en Noord- en Zuid-Amerika. Onder de NH Hotel Group vallen de 3- en 4-sterren urban NH Hotels, de NH Collection flagship hotels, de nhow designhotels en de Hesperia vakantieresorts. Wereldwijd staan meer dan 20.000 medewerkers dag en nacht klaar om de beste service tegen de beste prijs te leveren voor de jaarlijks ruim 16 miljoen gasten. De hotels van NH Hotel Group zijn bekroond met de Zoover Award voor Beste Hotelketen 2014, 2015 en 2016. Kijk voor meer informatie op www.nh-hotels.com en www.nh-collection.com.

About NH Hotel Group

NH Hotel Group is listed on the IBEX 35 stock exchange of Madrid and has nearly 400 hotels in 30 countries in Europe, Africa and North- and South-America. The portfolio of the NH Hotel Group includes the 3- and 4- star urban NH Hotels, the NH Collection flagship hotels, the nhow designhotels and the Hesperia holiday resorts. Worldwide more than 20.000 employees work day and night to deliver the best service for the best price to the 16 million guests the hotel chain welcomes yearly. The hotels of NH Hotel Group have been rewarded with the Zoover Award for Best Hotel Chain of 2014, 2015 and 2016. For more information, visit www.nh-hotels.com and www.nh-collection.com.

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