NH Hotel Group doubles its pace of growth in Q3
NH posts recurring net profit growth of 11.5% in 9M14
04 NOVEMBER 2014, MADRID, SPAIN
b.NH reinforced its capital structure and significantly topped its disposal proceeds target for the year with the sale of Sotogrande (retaining the international assets).
Madrid, 3 November 2014 - Today NH Hotel Group presented its results for the third quarter of 2014 which were shaped by extraordinary growth in revenue per available room (RevPAR). This metric rose by 5.4% in the third quarter, doubling the second-quarter figure, driven by the strong momentum observed in the hotel business throughout the year, coupled with the fruits of the strategic initiatives being rolled out by the Company under the framework of its business plan.
The strategic measures designed to stimulate revenue had a significant positive impact on the RevPAR mix this quarter, with the growth in average rates outpacing the rise in occupancy (+2.8% vs. +2.4%, respectively) for the first time this year.
LTM trend in the main hotel business metrics by quarter:
Reported third-quarter revenue rose by 3% (+€320.6 million) despite the adverse impact of exchange rate trends (-€4.4 million) and the deconsolidation of hotels which either no longer belong to the Group or are now operated under different regimes (-€3.3 million). Stripping out these non-recurring items, third-quarter revenue would have increased by 5.5%.
Operating expenses in this period increased 3,1%, in part due to the implicit costs of the strategic plan’s roll out but mainly because of the activity ’s growth and the reinforcement of operations, sales, web, revenue management and marketing teams.
The income increase of the third-quarter has opened the way for growth in gross operating profit (+2.7%) for the first time this year to €100.7 million.
Meanwhile, the Company managed to reduce its overall lease expenditure by 2.9%, thanks to rent renegotiations with numerous hotel owners and strategic exits from non-performing leases, offsetting the impact of rent increases negotiated in prior years and inflation adjustments. As a result, recurring Group EBITDA jumped 16.2% higher year-on-year in the third quarter, to €33.5 million.
Recurring net profit, meanwhile, rose by 15.1% in the third quarter, putting 9M14 bottom-line growth by this measure at 11.5%. Reported consolidated net profit for the nine-month period is distorted by the impact of the sale of the NH Grand Hotel Krasnapolsky in 2013, a property which the Company continues to operate under a management contract.
Looking to the last quarter, management is in a position to reiterate its guidance which calls for RevPAR growth of between 3% and 5% and growth in recurring EBITDA (adjusted for the hotels sales closed in 2013) of between 5% and 10%.
Consolidated Income statement
Significant progress on the 5-year business plan:
NH Hotel Group is making solid progress on the various lines of initiative contemplated in its business plan. The measures designed to improve guest service and the guest experience and perception of NH are yielding excellent results:
The signage of 56 hotels has already been replaced with the objective of reaching 122 by the end of the year.
Hotel business performance by Business Unit in 3Q14
Spain was the best-performing Business Unit in terms of like-for-like RevPAR in the third quarter (+8.8%), underpinned by significant growth in the ADR (+6.5%), which was, moreover, far higher than in recent quarters (74% of RevPAR growth was accounted for by the ADR), as well as growth in the occupancy rate (+2.2%) in line with that of prior quarters.
Madrid, backed up by the recovery in demand for this market, continued to display the momentum already observed in 1H14, posting an excellent performance, particularly in terms of pricing. In contrast to Barcelona, which was relatively weaker, other major Spanish city destinations such as Valencia and Seville continued to show signs of strong growth, driven mainly by occupancy rates, even if accompanied by modest growth in rates. Like-for-like revenue in this market rose by 7.4% year-on-year in the third quarter and the outlook for the last quarter is encouraging.
Italy, meanwhile, experienced another strong quarter, with RevPAR up 7.9%; 58% of this growth was accounted for by ADR growth. August is worth highlighting as it was a strong month as a whole. Milan market stands out for ADR growth of 7.6% for the quarter, while the Rome business staged a recovery, outperforming the market by 4.6% in terms of RevPAR growth. Like-for-like revenue in this Business Unit rose by 5.6% year-on-year and the outlook for the rest of the year remains similarly positive.
The Benelux Business Unit was the weakest in Europe during the third quarter, with RevPAR coming in broadly flat year-on-year (-0.2%). The reason for this underperformance lies with an adverse trend in RevPAR in September (-6.2%), shaped by conventions held in Amsterdam and Brussels in September 2013 which did not recur this year. It is worth highlighting, however, the fact that NH’s Amsterdam business outperformed the market in terms of ADR during August and September, with an increase of 1.3% in RevPAR. Like-for-like revenue narrowed by 1.1% during the third quarter. The outlook is for more of the same in October due to the lack of major events in the meetings segment this year. However, management expects a strong performance in Amsterdam in November and December thanks to price adjustments underway.
Central Europe: Like-for-like RevPAR rose by 7.8% in this market in 3Q14, 54% of which driven by ADR growth, which was much higher than in prior quarters, as well as growth in the occupancy rate, which was also up this quarter. Berlin and Frankfurt stand out, having registered RevPAR growth of over 10%, as do the Swiss and Austrian hotels, which also performed well in the third quarter, with both posting growth of 9.2%. In Frankfurt, NH outperformed the market on ADR by 1.6%, while the Hamburg business outperformed the market by 1%, again on price.
Third-quarter RevPAR growth drove like-for-like revenue expansion of 6.0% and the outlook for the last quarter is encouraging for most destinations.
In constant-currency terms, the Americas Business Unitregistered region-wide like-for-like RevPAR growth of 24.0% in the third quarter, due mainly to the growth in the ADR of a noteworthy 20.2%. In current values, however, like-for-like third-quarter revenue declined by 1.0% in the region due to weakness in the Argentine currency and the knock-on effect in neighbouring countries.
By market, Mexico performed well (+12.4%), particularly in terms of the constant-currency ADR (+8.9%). The outlook is for continued growth in the last quarter, supported more by growth in rates than in occupancy.
In Mercosur, Argentina stands out, having registered growth in its ADR of 38.6% in constant-currency terms. The expectation is that occupancy levels will rebound to pre-World Cup levels in the fourth quarter with average rates continuing to exhibit strong growth.
Other significant developments in Q3 2014
Letter of intent for the incorporation of a hotel management companyin China
At the end of September, NH Hotel Group signed a letter of intent with HNA for the joint development and management in the years to come of a significant portfolio of HNA and third-party hotels in the middle and upper-middle segments of the Chinese market.
The idea is that the new company, to be named HNA-NH Hotel Management Joint Venture Company, will initially assume management of six of the Chinese group’s hotels, encompassing 1,312 rooms, which are operated under various HNA trademarks.
Sale of Sotogrande
In October the Company has reached an agreement to sell its interest in the assets of the developer behind the exclusive Cadiz resort for €225 million; it is retaining the international assets - Cap Cana, Sotocaribe and Donnafugata Golf Resort & SPA. This transaction reinforces NH’s capital structure and implies disposal proceeds significantly in excess of guidance for 2014.
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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.