NH Hotel Group is supported by its flexible cost structure, and faces the second half of 2020 with nearly €600 million of liquidity
Hoofddorp, 4 August 2020. NH Hotel Group presented its first-half earnings today: a set of results marked by an unprecedented global backdrop due to the Covid-19 pandemic and the closure of most of the hotel capacity during April and May.
Ramón Aragonés, CEO of NH Hotel Group, said that “the appropriate operational and financial transformation of the Company in recent years, coupled with the contingency measures rolled out and the effort made to strength liquidity during the period, has enabled NH Hotel Group to get through the harshest months of the health crisis, resume its business activities and look to the second half of the year from a more solid position, despite the difficult and uncertain environment”.
During the months of April and May, 95% of the hotels were closed, in compliance with the various national states of emergency, and those kept open were for charitable purposes or to accommodate essential workers. Due to the lockdown and travel restrictions, the second quarter was the most affected, with demand contracting drastically.
In June, after several months of widespread closures, the company reopened the bulk of its European hotels. That process has been crucially enabled by the effort made by NH Hotel Group in recent years to make its cost structure more flexible, as that has meant that a significant number of hotels have been able to reopen despite low demand. More specifically, doing so has been possible because the incremental fixed cost of reopening a hotel is low, as most of the costs associated with the resumption of activity are variable or outsourced.
The reopening process is taking place gradually, based on demand and with a focus on maximising profitability. By the end of June, 60% of the Group's worldwide hotels were open and by the end of July, that figure had risen to 70%. The recovery is initially being fuelled by domestic demand, as mobility remains low -limiting international demand-, and the B2C segment, which accounts for 60-70% of the company's business. It is expected that corporate clients and business groups will recover more slowly due to the macroeconomic environment and the social distancing requirements restricting the size of events, subject to developments on the scientific front with respect to how to end the health crisis.
Framed by the Feel Safe at NH concept and in collaboration with SGS (a global leader in inspection, analysis and certification), the Group has revised all of its procedures and made nearly 700 adjustments to its operating standards in order to protect the health and safety of its guests and employees as it proceeds to reopen its hotels.
The resumption of business activities has enabled NH Hotel Group to start to generate revenue once again in June, a trend that has accelerated in July as more hotels have opened. In Europe occupancy at the hotels in operation has increased from 31% in June to an estimated 40-45% by the end of July.
Financial Results H1 2020 plan As soon as the prevailing uncertainty began at the end of February, NH Hotel Group started to work on a far-reaching contingency plan designed to adapt the business and ensure its sustainability, all with a focus on cost minimisation. As a result, the company managed to cut operating expenses (excluding leases) in the second quarter, by 59% including rent savings. To ensure that the cost base remains minimized, the company has extended its furlough schemes until the third quarter. In tandem it is keeping its marketing expenses down and the improved conditions negotiated with its suppliers. It also aims to increase rent savings further during the second half of the year.
Recurring reported Group EBITDA(1) in the first semester falls to -€33.8 million and the bottom line, to -€218.5 million.
Despite the recent resumption of activity, first-half revenue declined by 62.4% to €309.3 million (1H19: €821.5 million) due to the severe impact of the pandemic in the second quarter, in which revenue amounted to just €30 million (virtually nil in April and May).
Despite the unexpected events related with the health crisis, the Company has a solid liquidity position of close to €600 million (€326 million of cash and €271 million of undrawn credit lines) at the June close without short term debt maturities, notwithstanding the cash consumed by the business during the period and the capex investment for the end of 2019 and in the months prior to the lockdown.
NH Hotel Group is a consolidated multinational player and a benchmark urban hotel operator in Europe and the Americas, where it runs more than 360 hotels. Since 2019, the Company is working with Minor Hotels on integrating all of its hotel trademarks under a single corporate umbrella brand with a presence in over 50 countries worldwide. A portfolio of over 500 hotels has been articulated around eight brands - NH Hotels, NH Collection, nhow, Tivoli, Anantara, Avani, Elewana and Oaks - to forge a broad and diverse range of hotel propositions in touch with the needs and desires of today's world travellers.