NH Hotels Group said that it would move deeper into the luxury segment in addition to expanding globally.
The company’s latest strategic update saw it target Ebitda of around EUR300m in 2019, against Ebitda of EUR180m last year.
NH Hotel Group is in an ideal position to make the most of the sector’s multiple opportunities between now and 2019, said CEO Ramón Aragonés.
The company has also raised its Ebitda guidance for this year from EUR225m to EUR230m.
Aragonés told shareholders that the company planned to increase its exposure to the upper segment, expanding the portfolio of establishments operated under its NH Collection and Nhow brands. He added that the company would “take advantage of its current strengths” to expand its geographic footprint – at all times upholding strict return criteria – in both established destinations and new high-potential tourist markets.
As it looks overseas, the CEO said that NH was restructuring the entire hotel portfolio into three business units – Southern Europe, Northern Europe and America. This model, he said, would enable the company to “react swiftly to change, eliminate redundancy and implement new initiatives more easily”.
The company highlighted the expansion of the NH Collection brand from 0% to 20% of rooms between 2013 and 2017 and said that it expected the Nhow brand to grow from 1% to 4% of stays in 2019.
NH said that the first phase of its expansion plan would see it cover its existing markets in Western Europe and Latin America, looking at markets including Barcelona, Madrid, Vienna and Paris, before 2019, when it would turn to Eastern Europe, the Middle East and South Africa.
The group will continue to pursue an asset-light growth model, while selectively exiting mature markets in which, it said, it had “a lot of capital invested, taking advantage of prevailing liquidity and market appetite”.
It is also planning to roll out dynamic pricing strategies enabled by the use of big data. At the group’s Digital Transformation Day in July it called for technology or digital company, regardless of its size, whether it is a start-up or a major multinational, to send NH Hotel Group its proposals for solutions relating to the hospitality sector.
The company said the move was drive by “the vertiginous speed at which digital formats and technological innovation are advancing”. The company said it was particularly interested in the following areas of application: improving the guest experience, driving revenue growth or boosting productivity.
“We have overhauled our systems and currently boast a 100% integrated digital platform that is enabling us to adopt and adapt any technological development of importance to our business far more efficiently and speedily than before” said Rufino Pérez, COO & executive managing director of resources.
In a presentation to investors in August, the company reported that its estate was broken up into 27% Central Europe, 25% Spain, 21% Benelux, 18% Italy and 9% America. The company’s presence in Latin America amounts to 43 hotels spread across Colombia, Argentina and Mexico.
In terms of individual countries, Spain dominated the group’s performance, accounting for 25% of total group revenues in 2016. Twelve per cent of the 140 hotels in the country were owned by the group.
The group’s owned portfolio of 75 hotels has been valued at EUR1.9bn. At the strategy update, analysts raised concerns that the group’s hotel in New York had not yet been sold, despite expectations of a disposal by October or November. They were told that it was not a good time to get rid of an asset “very important and in an unbeatable location”.
The company completed a two-stage refinancing in the second quarter of 2017, extending the maturity profile and reducing gross debt and average cost of debt and, in the first half, reduced its debt by EUR20m to EUR721m.
Following the strategic update, Moody’s upgraded its outlook for the group to positive from stable. “Our decision to review the positive rating outlook follows NH Hotel Group’s decision to rationalise its operations and its repositioning,” said Maria Maslovsky, senior analyst at Moody’s. “In addition, NH has significantly extended its debt maturity profile and strengthened its liquidity.”
HA Perspective [by Katherine Doggrell]: NH’s strategic plan was met with a distinct lack of enthusiasm by the markets, with the company’s shares falling by almost 3% on the news. High on the list of concerns raised by analysts were that the recurring net profits of EUR100m (against EUR31m in 2016) targeted by 2019 leaned heavily on efficiencies and savings. Efficiencies and savings not being top of the list of likely outcomes when expanding into new territories – particularly key gateway cities.
But outside the numbers, the sentiment was welcomed. The strategy was viewed as an expansion of existing business, where the company has been upgrading its room stock, in particular in Spain, where it has been looking to ways to differentiate itself from its rivals as the country remains the most popular in the region.
Notable by its absence was mention of China, where the group has a joint venture with majority shareholder HNA Group to open 150 hotels by 2020. With HNA Group now largely in the dark at the group, failing in its efforts to overturn its ousting from the board, questions are being raised about NH’s future in the one location no global operator can afford to be without.