Rezidor Hotel : Q2 Interim Report January-June 2016

Second Quarter 2016

• Like-for-like ("L/L") RevPAR for leased and managed hotels was up by 4.0%. The growth is mainly due to an increase in average room rate.
• Revenue decreased by 1.5% to MEUR 259.8 (263.8). The positive impact of the like-for-like RevPAR development has been offset by the strengthening of the Euro and the conversion of a hotel in Sweden from leased to franchise. On a L/L basis revenue increased by 4.0%.
• EBITDA amounted to MEUR 36.4 (33.6) and the EBITDA margin increased to 14.0% (12.7). In addition to the positive impact of the increase in like-for-like revenue, EBITDA is positively impacted by a good flow-through in the leased portfolio and lower costs for bad debts in the fee business.
• EBIT amounted to MEUR 22.0 (23.0) and the EBIT margin decreased to 8.5% (8.7). EBIT is negatively impacted by termination costs related to a loss making leased hotel in Norway of MEUR 2.7 as well as higher costs for depreciation and write-downs of MEUR 1.2.
• Profit for the period amounted to MEUR 16.2 (15.4).
• Basic and diluted earnings per share were EUR 0.10 (0.09) and EUR 0.09 (0.09) respectively.
• 2,565 (2,466) new rooms were contracted, 1,419 (1,202) new rooms opened and 429 (285) rooms left the system.

  Half Year 2016

• L/L RevPAR for leased and managed hotels was up by 2.7%.
• Revenue decreased by 2.8% to MEUR 466.8 (480.2). On a L/L basis revenue increased by 2.7%.
• EBITDA amounted to MEUR 27.2 (32.8) and the EBITDA margin decreased to 5.8% (6.8).
• EBIT amounted to MEUR -3.0 (10.6) and the EBIT margin decreased to -0.6% (2.2).
• Profit/loss for the period amounted to MEUR -5.4 (2.0).
• Basic and diluted earnings per share were EUR -0.03 (0.01).
• Cash flow from operating activities amounted to MEUR 16.8 (22.6).
• 4,532 (4,771) new rooms were contracted, 2,386 (1,429) new rooms opened and 732 (1,152) rooms left the system.

Comments from the CEO

Margin expansion continued despite challenging external environment

Despite the challenging external environment in some EMEA destinations, Rezidor expanded the EBITDA margin by 1.3 pp to 14.0% versus last year and continued to gain market share. Like- for-like RevPAR increased by 4.0% and good flow through was achieved, especially in the leased portfolio.

The depressed oil price continued to affect key markets like Norway, as well as markets such as Saudi Arabia, Russia and Nigeria. Belgium entered into a downturn following the terror attacks in March and France continued to be weak, as well as other important leisure destinations like Turkey. On the other hand, Sweden, Denmark, Germany and Ireland posted good performances.

Due to these uncertain conditions, we remain focused on containment of overhead costs and additional procurement savings while fully protecting the guest experience at our hotels. In line

with our commitment to high safety and security standards, we further expanded our partnership with Safehotels Alliance for independent third party certification of our properties. More than 110 Rezidor hotels across EMEA have now gained certification which will further mitigate risk for both our guests and colleagues.

Despite the difficulties in many countries, we accelerated our pipeline delivery reaching an operating portfolio of 80,000 rooms for the first time. Africa has been particularly strong in this quarter with the opening of our first hotels in Lomé, Togo, and Marrakech, Morocco. In Brussels, Belgium, we launched the world's first Radisson RED - our new lifestyle select brand that is well received in the market. New hotel signings also showed good momentum and were in line with our asset-light strategy concentrating on fee-based business.

We continue to carefully monitor the environment and pursue our long-term strategy of constantly optimising margins and growing our network.

Wolfgang M. Neumann, President & CEO

Market RevPAR Development YTD

Market RevPAR across Europe was up 2.8% (at constant exchange rates) June YTD, with improvement driven both by room rate (2.2%) and occupancy (0.7%).

The RevPAR development in the mature Western European markets, 1.1%, was mainly via room rate (0.9%). All key markets experienced positive growth, with the exceptions of France (-9.3%) and Belgium (-13.6%), both of which have been negatively impacted by terror attacks.

In Northern Europe, 2.9%, the growth was mainly due to improved room rate (2.6%). In the Nordics, Sweden (9.4%), Finland (9.3%) and Denmark (9.6%) all had positive developments with Norway (-3.1%) the only country below last year, with the hotel strike in April and May adding to the oil related challenge.

Eastern Europe reported the strongest RevPAR growth (13.0%), driven both by room rate (7.4%) and occupancy (5.3%). The key drivers were Russia (20.8%) and Poland (12.1%).

Trading in the Middle East and Africa continued to be negatively impacted by political turmoil and low oil price, with RevPAR 6.7 % below last year. The development by country remains mixed with South Africa (13.0%)

continuing to perform well, but with other markets significantly below last year, including the United Arab Emirates (-12.1%). Saudi Arabia (0.4%) is marginally above last year, helped by an exceptional performance in June linked to the Ramadan period.

Sources: STR Global Ltd. © 2016 - European Hotel Review - Constant Currency Edition (June 2016); Hotel | trends by Benchmarking | Alliance © 2016

Rezidor RevPAR Development Q2

L/L RevPAR for leased and managed hotels increased by 4.0% compared to last year, with average room rate the main driver as occupancy only marginally increased. L/L RevPAR for leased hotels increased by 4.4%, with the growth also mainly via average room rate.

Three of the four regions reported L/L RevPAR growth over last year with the strongest development in Eastern Europe. The only region below last year was the Middle East, Africa & Others linked to the ongoing political turbulence in some areas and the depressed oil price.

Reported RevPAR growth was -5.2%. It was negatively impacted by -7.1% due to the strengthening of the Euro and -2.1% via new openings, renovations and off-line hotels.

10%

8%

6%

4%

2%

0%

Q3 Q4 Q1 2015

Q2 Q3 Q4 Q1 Q2

2016

5%

4%

3%

2%

1%

0%

-1%

-2%

Q3 Q4 Q1 2015

Q2 Q3 Q4

Q2

2016

5%

4%

3%

2%

1%

0%

Q3 Q4 Q1 2015

Q2 Q3 Q4 Q1 Q2

2016

Rezidor Hotel Group - Interim Report January-June 2016 p. 2/22

Income Statement

Total revenue decreased by 1.5%, or MEUR 4.0, to 259.8 (263.8). The decrease is mainly due to the strengthening of the Euro versus a number of currencies (MEUR -10.3) and the conversion of a leased hotel in Sweden to franchise.

On a L/L basis revenue increased by 4.0%, which is mainly due to the favourable L/L RevPAR development. The strike in Norway in April and May is estimated to have had an impact on total revenue of ca MEUR -3.0.

The change in revenue compared to the same period last year is presented in the table below.

Total revenue decreased by 2.8%, or MEUR 13.4, to MEUR

466.8 (480.2). The decrease is mainly due to the strengthening of the Euro and the conversion of a leased hotel in Sweden to franchise.

On a L/L basis revenue increased by 2.7%.

The change in revenue compared to the same period last year is presented in the table below.

EBITDA increased by MEUR 2.8 to MEUR 36.4. The earnings were postively impacted by the increase in L/L revenue, as well as a good flow through in the leased portfolio and lower costs for bad debts in the fee business. The positive impact on EBITDA of the timing of Easter is estimated to ca MEUR 2.0.

Rent as a percentage of leased hotel revenue was 28.3% (27.4). The increase is due to that revenue has decreased in hotels, mainly in Norway and Belgium, for which the rent is fixed.

FX had a negative impact of ca MEUR 1.4 on EBITDA.

EBIT decreased by MEUR 1.0 to MEUR 22.0. The increase in EBITDA has been offset by accrued termination costs of MEUR 2.7 related to the conversion of a loss making hotel in Norway from leased to franchised, as well as higher costs for depreciation and write-downs of MEUR 1.2.

The profit for the period amounted to MEUR 16.2 compared to MEUR 15.4 last year. The positive income tax development is due to change in jurisdictional mix, exceptional items and tax treatment of certain expenses.

EBITDA decreased by MEUR 5.6 to MEUR 27.2 due to the performance in Q1, which was impacted by weak revenue development and higher costs for reservations, provisions for bad debts and central costs.

The closure of a hotel in Brussels for renovation, re- branding and re-opening in a downturn market, has had a negative impact on EBITDA of MEUR 2.4.

Rent as a percentage of leased hotel revenue was 29.9% (29.1). The increase is due to that revenue has decreased in hotels, mainly in Norway and Belgium, for which the rent is fixed.

FX had a negative impact of ca MEUR 1.3 on EBITDA.

EBIT decreased by MEUR 13.6 to MEUR -3.0. In addition to the negative EBITDA development, EBIT is impacted by accrued termination costs of MEUR 10.6 for two leases in Norway, partly offset by MEUR 1.9 gain on sale of shares in subsidiaries.

The loss for the period amounted to MEUR 5.4 compared to a profit of MEUR 2.0 last year. The positive income tax development is due to change in jurisdictional mix, exceptional items and tax treatment of certain expenses.

EBITDAR, MEUR Rolling EBITDAR margin, %

EBITDA, MEUR Rolling EBITDA margin, %

EBIT, MEUR Rolling EBIT margin, %

120.0

100.0

80.0

60.0

40.0

20.0

0.0

Q3 Q4 Q1 2015

Q2 Q3 Q4 Q1 Q2

2016

35%

34%

33%

32%

40

30

20

10

0

-10

Q3 Q4 Q1 2015

Q2 Q3 Q4 Q1 Q2

2016

11%

10%

9%

8%

7%

6%

5%

30.0

20.0

10.0

0.0

-10.0

-20.0

-30.0

Q3 Q4 Q1

2015

6%

5%

4%

3%

2%

Q2 Q3 Q4 Q1 Q2

2016

Rezidor Hotel Group - Interim Report January-June 2016 p. 3/22

Q2 Comments by Region

L/L RevPAR increased by 0.5% as gains in average room rates offset losses in occupancy. Two of the three key countries were above last year, Sweden (17.2%) and Denmark (12.7%), with Norway (-10.3%) below linked to the continued oil related impact on the west coast and the strike in April and May.

Total revenue decreased by MEUR 4.9 (or 4.1%) compared to last year, mainly due to the weakening of the Norwegian krona and the conversion of a hotel in Gothenburg, Sweden from leased to franchised.

The increase in EBITDA of MEUR 0.3 to MEUR 15.9 is due to improved conversion, most notable during the strike in Norway.

EBIT is negatively impacted by accrued termination costs of MEUR 2.7 for a lease in Stavanger, Norway.

L/L RevPAR improved by 14.8% with the growth in both average room rate and occupancy. Russia (39.8%) remains the key driver, with the Baltics (-2.8%) impacted negatively mainly by the EU Presidency in Latvia last year.

Fee revenue increased by MEUR 0.5 (or 4.6%). The positive impact of the strong L/L RevPAR development has been partly offset by the weakening of the Ruble and other currencies in the region.

EBITDA and EBIT are, in addition to the revenue increase, impacted by lower costs for bad debts.

L/L RevPAR grew by 4.8% driven primarily via average room rate. The key drivers were Ireland (17.9%) and Germany (11.0%), with only Belgium (-11.4%) below last year linked to the ongoing impact on Brussels of the terrorist attacks in March.

Total revenue grew by MEUR 0.8 (or 0.6%) compared to last year, mainly due to the good L/L RevPAR develop- ment, partly offset by the weakening of the British Pound.

The increase in EBITDA of MEUR 1.6 is mainly due the increase in like-for-like revenue and improved conver- sion.

EBIT is negatively impacted by higher costs for write- downs of tangible assets.

L/L RevPAR decreased by 5.8% as the decline in occupancy offset an increase in average room rates. The country level performance continued to be a mix of results. South Africa (15.9%) led the growth, but with ongoing challenges in Saudi Arabia (-20.1%) and the United Arab Emirates (-12.0%).

The decrease in fee revenue of MEUR 0.4 (or 5.5%) is mainly due to the L/L RevPAR development.

EBITDA and EBIT are flat compared to last year, since the decrease in fee revenue has been offset by lower costs for bad debts.

Central costs for the quarter amounted to MEUR 12.4, which is unchanged compared to last year.

Rezidor Hotel Group - Interim Report January-June 2016 p. 4/22