The Rezidor Hotel Group
Board of Directors’ Report
Annual Report 2011
10
and North Africa offset the positive effects from the RevPAR increase. The increase in total revenue was instead mainly attributable to the many new hotels taken into operation, with a substantial contribution coming from the leased hotels. A few hotels leaving the system had a negative impact on revenue, but this was offset by positive FX effects from the weakened EUR. Due to lower variable salaries this year and some extraordinary pension adjustments last year, personnel costs came in below that of last year in the like-for-like hotels. Also other expenses in these hotels were lower than last year as 2010 saw some extra costs for repair and maintenance. The new leased hotels taken into operation also contributed to increase profit at EBITDAR level, although at a lower margin as they were in their ramp-up phase, offsetting some of the margin improvement from the like-for-like hotels. Central costs increased by MEUR 8.7, mainly as a result of the strengthened corporate organisation and redundancy costs. In addition, MEUR 3.0 outside the normal marketing fund was spent on extra sales and marketing activities for the Park Inn by Radisson brand. The comparison to last year was also negatively impacted by the MEUR 2.5 reversal in 2010 of an accrual related to Rezidor’s former loyalty programme. This was only partly offset by the contribution from additional high margin fee business and MEUR 2.9 less in pre-opening expenses. Consequently, despite a MEUR 20.5 increase in EBITDAR, the EBITDAR margin came in 50 bps below that of last year. Rental expenses increased by MEUR 17.3, almost entirely coming from the new leased hotels, offsetting the effect from leased hotels
MEUR
Jan–Dec 2011
Jan–Dec 2010
Revenue
864.2
785.7
EBITDAR
274.6
254.1
EBITDA
35.1
31.5
EBIT
–7.7
3.9
Profit/loss after Tax
–11.9
–2.7
EBITDAR Margin %
31.8%
32.3%
4.1%
4.0%
–0.9%
0.5%
EBITDA Margin % EBIT Margin %
leaving the system. However, as a percent of leased hotel revenue, rental expenses noted a minor decline, reflecting the fixed rent structure in ROWE and the fact that a couple of hotels have reached their contractual cap on fixed rent, thereby switching to a lower variable rent. In addition, costs for shortfall guarantees for management contracts went down by MEUR 5.2 due to improved performance and the fact that some hotels have reached their contractual cap on the guarantees. The EBITDA margin therefore noted a modest increase of 10 bps to last year and EBITDA grew by MEUR 3.6. Fixed assets of MEUR 11.6 were written down during the year, compared to the MEUR 0.5 in net expense from write-downs and reversal of write-downs recognised in 2010. These write-downs were related to leased hotels in ROWE, mainly in the UK, and were primarily the result of lowered market growth expectations following the financial uncertainty and a review of the hotel portfolio as a result of an intensified asset management focus. Last year’s results were positively impacted by the capital gain of MEUR 3.9 from the sale of the Regent business, compared to a modest capital gain this year of MEUR 0.4 from the sale of one of the lease contracts in the Nordics. The net financial expenses were lower than in the same period last year, mainly due to substantial negative exchange differences last year and a one-off financial income of MEUR 0.6 in Q1 this year. The tax line benefitted from the MEUR 11.7 capitalisation of deferred tax assets in the third quarter following a review of the likelihood to utilise tax losses carry forward in one country. However, due to the revised market growth expectations, MEUR 8.5 of the deferred tax assets in the UK were written down in the forth quarter. Together with the effect of not recognising any deferred tax income on a majority of the write-downs of fixed assets, this gave rise to the high effective tax rate for the year. The Nordics In the Nordics, like-for-like RevPAR improved by 2.8% with moderate growth in both occupancy (+1.5%) and AHR (+1.3%). The biggest occupancy growth was noted in the first quarter and continued, albeit at slower
pace, in the second quarter with slight declines in the third and forth quarter, partially a result of renovations, lower business group and flight delay volumes. The AHR development was relatively stable throughout the year. Denmark like-for-like RevPAR led the way in the Nordics with a growth of 7.0% driven almost equally by AHR and occupancy. In Sweden (+2.0%) and Norway (+1.6%), the growth was primarily coming from AHR. Leased hotel revenue grew by MEUR 55.3. Revenue in like-for-like hotels noted a weak development due to the relatively modest RevPAR growth, further negatively impacted by the fact that a couple of leased hotel underwent major renovations during the year. In addition, F&B revenue decreased due to a softened demand for conferences. The growth in leased hotel revenue was instead coming from the new leased hotels and was moreover positively impacted by FX due to the weakened EUR. One leased hotel also left the system during the year, leading to a modest revenue loss. The impact from the weak revenue development in like-for-like leased hotels was compensated by substantially lower costs in these hotels. This was mainly due to some exceptionally high costs last year for variable salaries, repair and maintenance and to pension adjustments. The new hotels developed according to plan, but were still in their rampup phase during the year with margins below those of the like-for-like hotels. However, due to the lower costs this year and the positive impact from one loss-making hotel leaving the system, both EBITDA and the EBITDA margin for the segment noted an increase. Fee revenue from managed and franchised hotels grew as a result of the RevPAR increase and higher incentive fees from a profit sharing arrangement. EBITDA for managed and franchised hotels increased as consequence. The margins were in line with those of last year. Rest of Western Europe Rest of Western Europe noted an increase of 6.1% in like-for-like RevPAR, driven by both a higher occupancy (+2.9%) and AHR (+3.1%). Like in the Nordics, occupancy witnessed the strongest development in H1 and slowed as the year progressed, but unlike the Nordics, all four quarters noted a growth. AHR development followed a similar pattern as occupancy. The strongest performing regions