• Nordic operators report growth

Radisson Hotel Group used its third-quarter results to hail the success of its five-year plan, reporting “all-time-high Ebitda”.

Elsewhere in the Scandinavian region, Pandox said that it had seen a “stable” quarter, and it would focus on extensions and renovations in its estate as some markets started to look “a little slower”.

Federico J. González, president & CEO, Radisson Hotel Group, described the quarter as “outstanding and reassuring”. He said: “Outstanding because we report an all-time high Q3 Ebitda, confirming the step change at operating level. Reassuring because the work performed in the five-year operating plan update confirms the potential of all the initiatives in the plan and because of the very good progress in Q3 delivering on all the 2018 initiatives.”

The company reported a 16.9% increase in Ebitda to EUR40.2m, with like-for-like revpar up 8.9%, its highest growth since Q3 2010. Like-for- rose by 7.1% to EUR16.8m, with Radisson reiterating its full-year revenue guidance of 4% to 4.5%, as González said that during the fourth quarter, the company was expected to have higher operating costs – mainly through restructurings – than previous quarters, which he said was in line with the five-year operating plan.

The plan, launched in January, aimed to deliver revenue growth of 6% to 7% on an annual basis. The Ebitda margin is expected to reach 13% to 15% by the end of 2022, from 8% in 2016. Strategies included taking on leases in strategic locations and increasing marketing and IT spend.

The group said that revpar growth was driven largely by rate. The CEO credited performance on the new revenue management system, the new room type structure in place in 200 hotels, the new public pricing structure and the segmentation strategy “with a clean-up of low profitable business”. In addition, the World Cup had a positive impact in the beginning of the quarter in Russia.

All four regions reported revpar growth over last year, with the strongest developments in Eastern Europe and the Nordics.

In August Jin Jiang International Holdings acquired HNA Group’s 51.15% stake in Radisson Holdings, in addition to an additional 18.5% stake in Radisson Hospitality that HNA Sweden had pledged and transferred to a lender as security for a loan. Under Swedish rules, the consortium must launch a mandatory public tender offer for the remaining outstanding shares in the listed company, once its purchase is completed.

At Pandox, the company also reported strong growth in the Nordic regions, with additional supply in markets such as Stockholm now described as more “modest” than in previous quarters, meaning that revpar in the city increased by 4%.

The company reported a 32% increase on the year in Ebitda, to SKr806m (EUR77.50m), with Revenue from Property Management up 37.5% to SKr810m.

Anders Nissen, CEO, described the third quarter as “stable overall, but growth was uneven and did not fully reach Pandox’s expectations, mainly due to a weaker September. Despite expectations of sustained, positive underlying demand, the combination of new capacity in key markets, negative renovation effects in Pandox’s portfolio and challenging comparative figures, mean that growth in comparable portfolios is likely to be lower in the fourth quarter than in the third quarter”.

In the UK, where the group acquired Jurys Inn at the end of December last year, the group said that, while the overall supply situation was well-balanced in the UK regions, more new capacity was expected in cities such as Manchester, Glasgow and Belfast, which, it said, may lower revpar growth in the short term. The company added: “All of these cities are, however, large destinations and attractive hotel markets with good underlying demand.”

Looking at Jurys Inn, Nissen told us: “We’re taking market share – we have high quality hotels where we are more focused on revenue management and we are seeing growth in rate.” Nissen confirmed that the group had no plans to take the brand overseas.

The group has continued to invest in the UK and, since the end of the period, entered into agreement for the acquisition of Radisson Blu Glasgow, for GBP39m. The hotel is operated under a management contract with Radisson Hospitality Group and Pandox will take over operations at the site.

The group has also acquired the 312-room Midland Manchester, with a total transaction value of approximately GBP115m. The hotel will be operated by Fattal under a 35-year revenue-based lease agreement where, Pandox said, the tenant had a “far-reaching responsibility for maintenance, repair and investments in the property”.

At the end of the quarter, 18% of the group’s market value was in the UK.

Looking at potential further acquisitions across the estate, Nissen told Hotel Analyst: “We’re out there sniffing around, but it’s not super-hot at the moment, we’re revaluing the market, increasing our focus on everything we have acquired in the past couple of years.

“We plan to do a couple of extensions, do more investment than we have before, it’s time to do that, certainly combined with some of the markets being a little slower.”

HA Perspective [by Katherine Doggrell]: As befits Autumn in the northern hemisphere, this results season is leaning towards commentary on the potential cooldown of the market and, whereas at IHG there were concerns that they might have started their take-off run too late to escape the growing storm, the likes of Pandox are already at the stage where they are solidifying its position to weather the rough.

At this point it is unclear as to whether this storm will involve a few lightening strikes from Brexit or will be a general cooling across the US and Europe. The view from many talking to us is that it would be pleasant to know what the final deal looks like, but the shock has already been felt. Far greater is the concern over a potential Corbyn government, but with that as unknowable as what’s really under JC’s beard, it’s not factored into forecasts. Nissen retained his faith with the UK regional market seeing long-term gain over a short-term smattering of over supply. What will make a Brexit difference is any potential change to visa regimes – this is less likely to hit the regional UK.

At Radisson Hospitality, it looks to be calm sailing, at least in terms of ownership as, with HNA Group having retreated and Jin Jiang installed, it seems likely that the remaining investors will have lost faith with the idea of a higher price and will look to exit the whole kerfuffle. What Jin Jiang will do is unclear, but their focus is expected to be cleaning up the US business.

Additional comment [by Andrew Sangster]: Is Radisson about to become a global major through the back door? If its new owner Jin Jiang decides to consolidate its interests into one, then Jin Jiang would be second only to Marriott in terms of global room count.

The deal seeing Jin Jiang taking on HNA’s stake in Radisson AB and buying the US company Radisson Inc is expected to close shortly. The transaction is opaque but market rumours suggest the price has been fixed at what HNA paid for the business.

While adding up the room counts of Jin Jiang, which also owns Louvre, with Radisson totals almost 870,000, it seems a distant prospect at this point for the companies to be brought under the same management team.

What is expected to happen is that there will be sharing of data, particularly through the loyalty schemes. There are around 120 million members in the Jin Jiang scheme which gives Radisson a clear opportunity in the world’s biggest outbound market of China.

Elie Younes, chief development officer at Radisson AB, said at a media breakfast hosted in London that he also expects Jin Jiang to be supportive of Radisson’s growth ambitions, as the Chinese hotelier has been with its Louvre acquisition.

Radisson AB, the Stockholm-listed entity that controls most of EMEA for the Radisson brand family and was formerly known as Rezidor, is on quite a clip, not only recording its best ever Q3 EBITDA numbers but also signing hotels at a faster rate with 32 hotels in the YTD 2018 against 19 properties in the same period in 2017. This has been helped by since, having tidied-up most of its problem leases, the company now feels emboldened to take on new ones. Younes spoke of his desire to “change the skyline” with new signings.

Radisson AB has identified 60 cities where leases and management contracts with guarantees are being sought. This includes a number of provincial locations in its focus market of Germany, Italy and the UK. The list encompasses places like Cologne, Brighton and Bologna. Among the new projects are a leased property for a Radisson Red in Liverpool, due to open in Q3 2020, a leased Radisson Blu in Prague, due to open in Q1 next year, and a managed Radisson Blu in Casablanca opening in Q3 next year.

The Radisson brand portfolio now encompasses the Radisson Collection (the previous name of Quorvus has been binned), Radisson Blu, Radisson (which introduces a new Scandi-style for Radisson in EMEA and will create even more confusion for guests that have stayed in US Radissons) and Radisson RED. Also in the brand family are Park Plaza, the midscale offer Park Inn, Country Inns & Suites and Prizeotel.

Radisson AB has a master franchise agreement for Radisson Blu, Park Inn, Radisson RED and Radisson Collection in EMEA. It directly holds a 49% stake in Prizeotel.

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