• Growth in the third-quarter ADR outpaced growth in the occupancy rate (+2.8% vs. +2.4% respectively) for the first time this year, improving the composition of RevPAR, which rose by twice as much as in 2Q14 (+5.4%)

• All the Business Units, except Benelux, which was broadly flat year-on-year, registered higher than expected growth, with Spain standing out thanks to ADR growth significantly in excess of that reported in 1H14

• Recurring gross operating profit (GOP) rose by 2.7% year-on-year in the third quarter, compared growth in recurring EBITDA and net profit of 16.2% and 15.1%, respectively

• The steady progress being made on executing the business plan is evident in significantly higher guest satisfaction readings. NH's guests are applauding the launch of the Group's premium brand, NH Collection; the new operational promise; the refurbishment work carried out; and the implementation of new elements to improve their experience


• Other significant developments this quarter:

a. The Company signed a letter of intent with HNA for the development and management of hotel assets in China

b. NH reinforced its capital structure and significantly topped its disposal proceeds target for the year with the sale of Sotogrande (retaining the international assets).


Today NH Hotel Group presented its results for the third quarter of 2014 which were shaped by extraordinary growth in revenue per available room (RevPAR). This metric rose by 5.4% in the third quarter, doubling the second-quarter figure, driven by the strong momentum observed in the hotel business throughout the year, coupled with the fruits of the strategic initiatives being rolled out by the Company under the framework of its business plan.

The strategic measures designed to stimulate revenue had a significant positive impact on the RevPAR mix this quarter, with the growth in average rates outpacing the rise in occupancy (+2.8% vs. +2.4%, respectively) for the first time this year.

LTM trend in the main hotel business metrics by quarter:

Reported third-quarter revenue rose by 3% (+€320.6 million) despite the adverse impact of exchange rate trends (-€4.4 million) and the deconsolidation of hotels which either no longer belong to the Group or are now operated under different regimes (-€3.3 million). Stripping out these non-recurring items, third-quarter revenue would have increased by 5.5%.

Operating expenses in this period increased 3,1%, in part due to the implicit costs of the strategic plan's roll out but mainly because of the activity 's growth and the reinforcement of operations, sales, web, revenue management and marketing teams.

The income increase of the third-quarter has opened the way for growth in gross operating profit (+2.7%) for the first time this year to €100.7 million.

Meanwhile, the Company managed to reduce its overall lease expenditure by 2.9%, thanks to rent renegotiations with numerous hotel owners and strategic exits from non-performing leases, offsetting the impact of rent increases negotiated in prior years and inflation adjustments. As a result, recurring Group EBITDA jumped 16.2% higher year-on-year in the third quarter, to €33.5 million.

Recurring net profit, meanwhile, rose by 15.1% in the third quarter, putting 9M14 bottom-line growth by this measure at 11.5%. Reported consolidated net profit for the nine-month period is distorted by the impact of the sale of the NH Grand Hotel Krasnapolsky in 2013, a property which the Company continues to operate under a management contract.

Looking to the last quarter, management is in a position to reiterate its guidance which calls for RevPAR growth of between 3% and 5% and growth in recurring EBITDA (adjusted for the hotels sales closed in 2013) of between 5% and 10%.

Consolidated Income statement


Significant progress on the 5-year business plan:

NH Hotel Group is making solid progress on the various lines of initiative contemplated in its business plan. The measures designed to improve guest service and the guest experience and perception of NH are yielding excellent results:



• Repositioning plan: The Company continues with its plans for refurbishing 41 hotels in 2014.

It is worth highlighting the positive impact already evident at the refurbished hotels (the NH Collection Palazzo Barocci in Venice, the NH Firenze in Florence, the NH Berlin Mitte in the German capital and the NH Alonso Martínez, NH Collection Eurobuilding and NH Collection Abascal in Madrid): RevPAR at these hotels is tracking 26.1% higher on average since they were reopened.

The signage of 56 hotels has already been replaced with the objective of reaching 122 by the end of the year.

• Branding: In September the Company launched a marketing campaign in Spain and Italy designed to communicate the core components of the new guest pledge, the chain's so-called Brilliant Basics (high-spec LED TVs, new beds, showers and hairdryers and updated amenity kits). The Company is in the midst of launching the NH Collection branding campaign and is marketing a programme targeted specifically at small and medium enterprises and self-employed professionals dubbed "NH Hotel Group Business".

Meanwhile, the loyalty programme "NH Hotel Group Rewards" has reached the 4 million members mark, with one-quarter of these members joining in the last 12 months. In parallel, the Company continues to reinforce its position in the meetings and events segment by emphasising investment in the latest technology solutions for enhancing connectivity, with the next-generation holographic telepresence and video-conferencing systems standing out.

• Pricing and Revenue Management: The B2C Pricing project, which will enable the Company to configure new pricing architecture by destination and room category with a view to driving price growth, has already been implemented at 54% of the chain's hotels (mainly in Spain, Benelux and parts of Latin America). Initial results point to an upward trend in room revenue and rates. This project is scheduled for full deployment by December 2014.

• IT: The migration of the back office in Central Europe was completed in October, bringing the number of Business Units using the new systems to three (along with Spain and Benelux). The Italian Unit is scheduled to migrate in January. Front-office migration is ongoing in Spain and was launched in Benelux at the end of October. As for the integration of the new website, the Italian and Dutch domains were added in early September, as scheduled, while the German, Spanish and ".com" domains are due go live in November, as is the "nhcollection" domain. The current focus is on making the website more user-friendly and increasing conversion ratios by simplifying the booking process.

• Support functions: Having brought Central Europe on board after Spain and Benelux, three Business Units have now fully implemented the shared services centre. Implementation at the remaining business units is scheduled between the end of this year and the beginning of 2015.

• Asset sales and portfolio optimization: By the September close, disposal proceeds stood at €62 million, mainly thanks the sale and leaseback of the NH Amsterdam Centre. In October the Company announced the sale of its 97% interest in Sotogrande for €225 million (excluding the international business which is being kept by NH), thereby significantly topping initial guidance for disposal proceeds of €125 million in 2014. The agreement will enable NH to hold on to core and highly profitable hotels, with the attendant positive impact on Group EBITDA. The original portfolio optimization plan contemplated exits from 44 hotels between 2013 and 2014: by the September close, the Company had exited 28; it has decided to stick with 13 of the earmarked properties, having negotiated better terms and/or investment commitments with their owners. The plan is to exit the remaining three hotels during the last quarter of this year.

Hotel business performance by Business Unit in 3Q14

Spain was the best-performing Business Unit in terms of like-for-like RevPAR in the third quarter (+8.8%), underpinned by significant growth in the ADR (+6.5%), which was, moreover, far higher than in recent quarters (74% of RevPAR growth was accounted for by the ADR), as well as growth in the occupancy rate (+2.2%) in line with that of prior quarters.

Madrid, backed up by the recovery in demand for this market, continued to display the momentum already observed in 1H14, posting an excellent performance, particularly in terms of pricing. In contrast to Barcelona, which was relatively weaker, other major Spanish city destinations such as Valencia and Seville continued to show signs of strong growth, driven mainly by occupancy rates, even if accompanied by modest growth in rates. Like-for-like revenue in this market rose by 7.4% year-on-year in the third quarter and the outlook for the last quarter is encouraging.

Italy, meanwhile, experienced another strong quarter, with RevPAR up 7.9%; 58% of this growth was accounted for by ADR growth. August is worth highlighting as it was a strong month as a whole. Milan market stands out for ADR growth of 7.6% for the quarter, while the Rome business staged a recovery, outperforming the market by 4.6% in terms of RevPAR growth. Like-for-like revenue in this Business Unit rose by 5.6% year-on-year and the outlook for the rest of the year remains similarly positive.

The Benelux Business Unit was the weakest in Europe during the third quarter, with RevPAR coming in broadly flat year-on-year (-0.2%). The reason for this underperformance lies with an adverse trend in RevPAR in September (-6.2%), shaped by conventions held in Amsterdam and Brussels in September 2013 which did not recur this year. It is worth highlighting, however, the fact that NH's Amsterdam business outperformed the market in terms of ADR during August and September, with an increase of 1.3% in RevPAR. Like-for-like revenue narrowed by 1.1% during the third quarter. The outlook is for more of the same in October due to the lack of major events in the meetings segment this year. However, management expects a strong performance in Amsterdam in November and December thanks to price adjustments underway.

Central Europe: Like-for-like RevPAR rose by 7.8% in this market in 3Q14, 54% of which driven by ADR growth, which was much higher than in prior quarters, as well as growth in the occupancy rate, which was also up this quarter. Berlin and Frankfurt stand out, having registered RevPAR growth of over 10%, as do the Swiss and Austrian hotels, which also performed well in the third quarter, with both posting growth of 9.2%. In Frankfurt, NH outperformed the market on ADR by 1.6%, while the Hamburg business outperformed the market by 1%, again on price.

Third-quarter RevPAR growth drove like-for-like revenue expansion of 6.0% and the outlook for the last quarter is encouraging for most destinations.

In constant-currency terms, the Americas Business Unit registered region-wide like-for-like RevPAR growth of 24.0% in the third quarter, due mainly to the growth in the ADR of a noteworthy 20.2%. In current values, however, like-for-like third-quarter revenue declined by 1.0% in the region due to weakness in the Argentine currency and the knock-on effect in neighbouring countries.

By market, Mexico performed well (+12.4%), particularly in terms of the constant-currency ADR (+8.9%). The outlook is for continued growth in the last quarter, supported more by growth in rates than in occupancy.

In Mercosur, Argentina stands out, having registered growth in its ADR of 38.6% in constant-currency terms. The expectation is that occupancy levels will rebound to pre-World Cup levels in the fourth quarter with average rates continuing to exhibit strong growth.

Other significant developments in 3Q14

Letter of intent for the incorporation of a hotel management company in China

At the end of September, NH Hotel Group signed a letter of intent with HNA for the joint development and management in the years to come of a significant portfolio of HNA and third-party hotels in the middle and upper-middle segments of the Chinese market.

The idea is that the new company, to be named HNA-NH Hotel Management Joint Venture Company, will initially assume management of six of the Chinese group's hotels, encompassing 1,312 rooms, which are operated under various HNA trademarks.

Sale of Sotogrande

In October the Company has reached an agreement to sell its interest in the assets of the developer behind the exclusive Cadiz resort for €225 million; it is retaining the international assets - Cap Cana, Sotocaribe and Donnafugata Golf Resort & SPA. This transaction reinforces NH's capital structure and implies disposal proceeds significantly in excess of guidance for 2014.

About NH Hotel Group
NH Hotel Group (www.nh-hotels.com) is Europe's third-ranked business hotel chain. It operates close to 400 hotels with almost 60,000 rooms in 28 markets across Europe, the Americas and Africa, including top city destinations such as Amsterdam, Barcelona, Berlin, Bogota, Brussels, Buenos Aires, Düsseldorf, Frankfurt, London, Madrid, Mexico City, Milan, Munich, New York, Rome and Vienna.

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