• Nordic pressure drives diversity

An increase in supply in some Nordic markets has caused concern for the region’s operators, which are looking outside their domestic portfolios for balance.

The drive to expand has seen Pandox buy Jurys Inn, while Rezidor Hotel Group was due to further outline its new five-year strategy, which will see closer alignment with the former Carlson Hotels.

At Pandox, the company said that, looking ahead, the underlying trend was stable but that it expected “a more uneven market growth due to capacity increases in some of the company’s key markets”. In the Nordics revpar in Stockholm fell by 3%, due to the increase in hotel capacity of around 6% during the year, while revpar fell by 7% in Copenhagen, on strong comparables.

CEO Anders Nissen told Hotel Analyst: “Copenhagen will have a dip which will start this year, because of too much capacity. We have left all out operations, we rent out all our hotels and we have spent our money in other markets – we haven’t invested in new hotels. Copenhagen is a great market, it is very dynamic, there is a great new arena, it is a fantastic leisure destination. I’m not worried, but there will be two and a half years which will not be as good as the last two and a half years.”

The company described “the new world of Pandox” in a presentation to analysts, following last year’s acquisition of Jurys Inn, which added 20 hotels in the UK. Nissen said: “2017 was the year when Pandox established itself as a fully-fledged European player through a combination of substantial acquisitions and a strong underlying earnings trend. Pandox has now raised its business position to a new level, with access to larger, more dynamic and a greater number of hotel markets.”

Nissen said that the Jury’s Inn deal was progressing as planned, with the decision over retaining the brand “a Fattal decision. We are talking with David (Fattal, founder & CEO). This is a hotel chain where I see a lot of opportunities, they have great potential with rate – it’s very rare that you have a hotel in the upper middle segment where they are in the city centre, where they have a premium.

“When I’m talking to people in London they say that the regions are a difficult market, but it has been strong over the past 10 years. In the regions it is the same as in Scandinavia and Germany – when you have strong hotels in the regional market, you don’t see many new hotels coming into the market. But in London there is always a lot of new capacity coming into market. Over the next 18 months we see the regions have the potential to do a lot better than London, because of capacity – many of these hotels have 85% occupancy.”

The group reported a 29% increase in Ebitda for the fourth quarter, to SKr597m (USD73m).

At Scandic Hotel Group the picture was similar, reporting lower occupancy in Stockholm, which combined with high costs affected results negatively in Sweden in the quarter. For the quarter, the group saw a 27% fall in adjusted Ebitda, to SKr333m.

The company has been looking to growth in Germany, adding a hotel in Frankfurt under lease to the pipeline. At the end of 2017, the group had 18 hotels with almost 6,000 rooms in the pipeline and reported that the acquisition of the Finnish hotel company Restel was completed in December, giving Scandic the market-leading position in Finland.

Even Frydenberg, president & CEO, said: “We have taken measures to improve cost-efficiency in Sweden combined with increased sales efforts. We are convinced that the increased capacity in Stockholm will be absorbed by the market over time.”

At Rezidor Hotel Group the company reported a 6.4% fall in like-for-like revpar in the fourth quarter in Sweden, impacted by renovations as well as softening of demand in Stockholm. The company will use the IHIF in Berlin to outline its plans for its five-year operating plan – a strategy which is aligned with its partner Radisson Hospitality (former Carlson Hotels).

During the year the company added 24 new hotels with more than 7,400 rooms to its pipeline. Elie Younes, EVP & CDO, The Rezidor Hotel Group. “While we continued our expansion in emerging markets, notably in Africa and the Middle East, we slowly adjusted our strategy throughout the year by adding new hotels in key European gateway cities like Geneva and Venice where Radisson Blu remains the largest upper upscale brand.”

He added: “Our five-year plan focuses on organic growth that is balanced between emerging and mature markets, the launch of our new brand architecture, a shift from asset-light to asset-right in our business model and a promise to become more relevant to our owners.”

HA Perspective [by Katherine Doggrell]: If you make it to the second week of your MBA and no-one has said: “Don’t put all your eggs in one basket” then it’s time to call the bursar and get a refund. But it’s one thing to say and another to do, particularly when markets such as Stockholm have been such golden eggs.

So onwards to the UK for Pandox and, for Scandic, Germany. Mature markets which are currently performing well and come with the usual challenges of entering mature markets. Scandic now has a team on the ground in Germany to make its case and Pandox is making its acquaintance with its latest purchase in the UK, which may or may not retain its name (given Nissen’s wish to cut the confusion around ‘Inn’ and its lack of traction in Europe, we think ‘not’).

Where these companies may have the edge on expansion is their enthusiasm for leases. They are joined in this by Rezidor, which has also announced a volte face into leases, more details pending at IHIF. As Nissen told us: “We see a lease renaissance everywhere in Europe”. What this means for the global brands will become clearer as the trend spreads.

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