- Operating expenses, excluding lease expenses, were cut by 49%, from €1.07 billion in 2019 to just €549 million in 2020.
- The Group’s flexible structure enabled it to reopen as many as 80% of its hotels in the third quarter, although that figure fell back to 60% by the end of the year due to the new restrictions imposed to curb the second wave.
- The cash shield put in place meant the Group ended the year with €346 million of available liquidity while the monthly net operating cash drain averaged €28 million.
- Net debt increased to €685 million in 2020, and no relevant debt maturities until 2023.
- “The top priority is to guarantee the Group’s sustainability as that is the only valid outcome for our professionals, guests, suppliers, creditors and shareholders”.
According to Ramón Aragonés, CEO of NH Hotel Group, “the managerial and cost control efforts made have enabled us to withstand the worst year in our history. We have taken all of the measures needed to get this far and we will continue to implement as many as are necessary to overcome the current situation. Safeguarding liquidity and controlling costs remain the cornerstones of our pandemic strategy. The top priority is to guarantee the sustainability of the Group and its brands as that is the only valid outcome for our professionals, guests, suppliers, creditors and shareholders“.
NH Group took cost control to an extreme in 2020, renegotiating leases (an effort that translated into a cumulative saving in fixed rents of €63.6 million in 2020, equivalent to a 25% reduction) and reducing staff costs (with an annual decrease of 46.7% as a consequence of the temporary labour adjustment measures and short hour arrangements and pay cuts). The Group’s flexible structure is one of its competitive advantages, that enabled to quickly reopen over 300 hotels from June in order to tap the demand from domestic travellers. As many as 80% of its establishments managed to reopen during the third quarter. Due to the impact of the second wave, which ushered in new confinements and mobility restrictions after the summer, many hotels were forced to close once again, with the percentage of hotels open falling back to 60% by the end of the year. By quarter, revenue amounted to €279 million in the first quarter, €30 million in the second quarter, €148 million in the third quarter and €82 million in the fourth.
Photo: NH Hotel Group
Occupancy across the overall portfolio, including the hotels that had to close, fell to 25% in 2020, a record low and down drastically from 71.6% in 2019. Following the widespread closures of the second quarter, occupancy recovered to 30.8% in the third quarter but fell back to 16.9% in the fourth quarter. Those scant occupancy levels also drove revenue per available room (RevPar) 72.2% lower. Cost-cutting was decisive in curtailing the impact on operating profit before lease expense with NH reporting a loss at that level of just €9.6 million in 2020.
Photo: NH Hotel Group
The Group also prioritised to reinforce and protect liquidity, keeping net operating cash outflows at a monthly average of €28 million. Thanks to that two-fold effort, the Group ended 2020 with an available liquidity of €346 million. NH ended the year with net debt of €685 million, a year-on-year increase of €507 million.
The extension of the maturity on the €236 million syndicated revolving credit facility until 2023 means the Group faces no significant debt maturities until that year. In addition, compliance with the financial covenants on that facility, and on the €250 million state-backed loan, has been waived until the December 2021 assessment.
In the financial report submitted to the market regulator, NH noted that its flexible operating structure, coupled with the cost control and financial resilience demonstrated in 2020 “are reassuring” in terms of overcoming the significant challenges of the first half of 2021, with demand still severely affected by the pandemic. Against that backdrop, the Group underscored that the stringent cost control and efficiency measures rolled out in response to the pandemic will be left in place to protect the business and capital expenditure will remain limited for all of 2021 and in the mid-term, take advantage from its high brand recognition, excellent locations and compelling market positioning once the recovery begins in earnest.
Business units
By business unit, revenue in Spain contracted by 68.7%, with Barcelona (-79.4%) and Madrid (-72.9%) affected more than the secondary cities (-63.4%). Operating expenses were cut by 48.3%, thanks above all to the efficiency measures in place since March. Revenue per available room declined by 71.5%, and occupancy fell by 62.1%.
In the Italian business unit, occupancy declined by 68.2%, while revenue contracted by 74.0%, with Rome (-77.9%) and Milan (-78.1%) similarly hit harder than the secondary cities (-71.0%). Operating expenses declined by 54.5%. In Benelux, occupancy fell by 65.9%, with Amsterdam (-77.8%) and Brussels (-73.5%) affected more severely than the secondary Dutch destinations (-62.6%). Revenue in that market decreased by 69.8%, while operating expenses were cut by half by comparison with 2019. In Central Europe, revenue was 64.5% lower and occupancy was down 61.7%. Munich and Frankfurt were the hardest hit cities, partly shaped by strong performances in 2019. Operating expenses declined by 43.1%. In the Americas, occupancy declined by 70.6% in 2020. Revenue contracted by 75.9% in Argentina, 69.3% in Colombia and Chile and 65.1% in Mexico (all in local currency terms).
About NH Hotel Group
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. In 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.
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