• NH plans massive investment push

NH Hoteles is to refloat its property development wing Sotogrande to raise cash to fund an ambitious new growth strategy.
   The Spanish hotelier wants to pump Eu1.7bn into hotel investments over the next three years during which it plans to double hotel EBITDA.
   The growth plan, which will require an investment of Eu500m in equity, will see 18,000 new rooms added by 2009, with the focus on Germany, Italy and other Eastern European markets.
   The big opportunity NH sees is in consolidating the mid-market in Europe. Its presentation said that the mid-market was the largest segment, and offered potential due to the fragmented European hotel market and the growth in the European middle class.
   The focus needed to be on branded hotels. There are 292 brands servicing the market and yet only 28% of the market was branded compared to 70% in the US.
   The capital being deployed to gain market share would mostly be in Italy (up to 25%), Germany (up to 30%) and Benelux (up to 20%). Eastern Europe, especially Poland, may see up to 15% of the total of Eu1.7bn.
   Spain will be restricted to a 15% share at most in an attempt to maintain market share and resorts would see just 2% with this focused on extending the presence in the Caribbean.
   The investment hurdles being set include a 10% ROCE and the delivery of hotel GOPs above 35%. Spend per room is expected to be between Eu100,000 and Eu200,000.
   NH currently owns 97.72% of Sotogrande, having bought out the minorities last year. It is now to sell up to 49%, however, to raise up to Eu450m for growth.
   The company is also to undertake a rights issue of Eu250m to fund the Jolly acquisition which will make it the biggest branded operator in Italy.
   Meanwhile, Hesperia, the smaller Spanish chain that holds 23.5% of NH, has completed a rights issue worth Eu100m to fund the acquisition of its stake in NH.
   And separately, Occidental Hoteles, the chain that NH had talks to acquire last year (negotiations also entered by Sol Melia and Barcelo), is to see 90% of its shares put up for sale through Goldman Sachs.

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