six operating units, this guarantee can be transferred across to the developer / operator. More ways of “filling the gaps
in the value chain” are under discussion but Shepherd is still seeking approval which he hopes to get by May. “This is a multi-faceted strategy,
not a simple franchise play. We hope to create a scale-able management model,” he said. The target in Germany is to have
200 properties by 2020, although it was stressed that quality would win out over quantity. The ultimate aim is to unseat Accor as the largest operator in the country although this was a big challenge, it was admitted.
NH back in
the black NH Hoteles is back in the black after a year of modestly improved operational fortunes and cost cutting. But the company doesn’t expect business in its core southern European markets to start lifting until the second quarter of this year.
The company declared a net profit of EUR6.2m for 2011, compared to a EUR43.2m loss in the previous year. The figures were helped
by several hotel sales, and a USD15m compensation payment from Chinese investor HNA, who pulled out of a proposed deal to buy a stake in NH during 2011. Revenues were up 7% to EUR1.43bn in 2011, while the final quarter saw revenues 5% ahead of the final quarter in 2010. The company is pinning its hopes on an improvement
in fortunes from the second quarter of 2012, in order to lift performance from a portfolio dragged down by its dominant Spanish weighting. “We also expect year-on-year
growth starting in the second quarter of the year,” said the NH statement accompanying 2011 results. “The start of the financial year has borne out this trend, with a particularly good performance in Central Europe and the Americas. Income increase (from 3% to 5%) and double-digit EBITDA improvements for the year are also expected.” One important constituent
in the company’s performance was an aggressive programme of cost cutting and efficiency improvements, which helped substantially improve the results. Gross operating profit was helped by a 6.6% reduction in overheads, headed by cost reductions of 14.4% in Spain and 15% in Italy. In 2011, like for like revpar
grew by 4.9% overall, combining a 3.1% increase in occupancy with a 1.8% increase in average prices. NH’s Americas region was the
lead performer in the portfolio, with a 7.5% advance like for like through the year. Benelux delivered a 6.2% increase. Italy and central Europe performed well, too, with 5.3% and 5% uplifts respectively. But it was in the home Spanish market that performance was weakest, and a fourth quarter decline of 3.7% in revpar brought the 2011 average down to a 2.7% rise overall. The last quarter saw positive revpar growth in all markets except Italy and Spain. Looking ahead, NH doesn’t
expect to see an uplift until the second quarter of 2012. Management are bracing themselves for a poor first quarter,
although believe it will not be as bad as in the last quarter of 2011. But year on year growth will return in the second quarter, with an overall 3-5% revenue increase predicted for 2012. “The last quarter of the year
was characterised by a worse performance with respect to 2010,” said the company. This was not unexpected, as NH’s seasonality usually delivers poor performance in December. “In addition to this, the growing uncertainty in European markets due to the sovereign debt crisis has had a negative impact on the hotel sector.” One major distraction during
2011 was the tabling of a bid from Chinese travel conglomerate HNA, which in May signed an initial intent to purchase a 20% in NH, a deal that would have injected EUR431.6m into the company. The cash would have been most welcome, while the transaction also promised to take NH into the management of Chinese hotels within HNA’s portfolio. And, as HNA also owns an
airline, the deal held out the possibility of building a pipeline of Chinese visitors to NH’s key European markets. The deal fell apart in December, as the Chinese appeared spooked by eurozone problems. “I think the Chinese looked at the situation in Europe with the financial turbulence and Spain’s debt crisis and things probably seemed horrible,” NH president Mariano Pérez Claver said recently in an interview. The other issue exercising management currently is the scale of NH’s debt. The company realised EUR16.97m from property sales during 2011, including four hotels and nine plots of land, sales that helped towards reducing net debt, which fell to EUR962.8m,
from EUR1.06bn at the end of 2010. But talks are ongoing with funders, as February was the deadline for a EUR195m payment of due on a syndicated loan, part of a EUR650m package taken out by the company in 2007. During the year there were five
new hotels added, totalling 540 rooms, all under management contracts. Two of these were in Spain, a hotel in Bratislava that will open this year, and projects in Turin and Mexico scheduled for 2013 openings. Ten hotels totalling 1,416
rooms were added, while eight hotels, totalling 1,051 rooms and all based in Europe, left the portfolio. Following some pruning, the
NH pipeline now consists of 21 projects and 2,620 rooms. All but one in Panama are leased or managed, while there are eight hotels for Spanish locations, six in Italy, five in eastern Europe and three additions in South America.
HA Perspective: NH’s forecast for revenue growth of 3% to 5% coupled with EBITDA growth in the double digits looks ambitious. Given that the company has been walking wounded for several years now, it seems extraordinary that extra profits can be squeezed out of more restructuring. It calls into question what the previous management team were doing. Since arriving a year ago as
chairman and ceo, Mariano Perez Claver has dramatically cut costs and brought in a new team, last year hiring Mikael Anderson as chief commercial officer and more recently Rafael Ros as the new head of sales. Customer service 2.0 has been
the big management brainstorm with a particular emphasis on exploiting online distribution channels. Quite how effective this
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