Despite the slowdown in trading, Rezidor last week said it was confident of hitting its EBITDA margin target of 12% thanks to the ongoing shift in its business model.
The company said visibility was short – two months at best – and the 7% to 8% revpar growth it had enjoyed in the first half was likely to slow but it would not fall into negative territory.
The first half EBITDA margin was 9.4%, up from 8.7% in the year before. The switch away from leased hotels, which have a lower margin (9.3% in 2008) towards managed and franchised, which have a much higher margin (61.7% in 2008) will drive the improved overall EBITDA margin.
At the end of 2002, leased hotels were 29% of the portfolio but by the end of the first half this year, the proportion had shrunk to 25% as more managed and franchise hotels were added.
In the 20,000 strong pipeline, just 16% of the hotels are leased, 81% managed and 3% franchised. The achievement of an average 12% EBITDA margin will take two to three years, said the company.
Chief development officer Puneet Chhatwal said that signings had continued at record levels with 31 contracts with 7,142 rooms in the first half against 28 with 4,605 rooms a year earlier.
The company now has the second largest pipeline in Europe, after InterContinental, according to numbers from Lodging Econometrics presented by the company. And Rezidor has the biggest pipeline of upscale projects in Europe with 44, on these numbers.
In terms of existing rooms, Rezidor's Radisson SAS brand is number two in Europe after Hilton, with 36,000 and 25,000 rooms respectively.
The shift towards a more fee-based business model was a hedge against turbulence, claimed Rezidor. But it is exposed to the cut back in flights currently being imposed by airlines as it is one of the biggest airport operators with 27 hotels and nearly 7,500 rooms.
A consumer slowdown will also hit its growing resort portfolio which currently stands at 32 hotels and 8,000 rooms. This year it has signed contracts in Morocco, Ukraine, Norway and Turkey.
During the six months to the end of June revenue was up 7.5% to Eu398.8m. EBITDA was Eu37.3m and profit after tax was Eu14.7m. Like-for-like revpar was up 7.9%.