Rezidor Hotel : Q2 Interim Report January-June 2017

Second Quarter 2017

• Like-for-like ("L/L") RevPAR for leased and managed hotels was up by 4.0%. The growth is due to increase in both occupancy and average room rate.
• Revenue decreased by 2.2% to MEUR 254.1 (259.8). The decrease is mainly due to the exit of four leased hotels last year, the temporary closure of one leased hotel for renovation and the strengthening of the Euro, partly offset by positive L/L RevPAR development and the re-opening of two leased hotels after renovation. On a L/L basis revenue increased by 2.6%.
• EBITDA amounted to MEUR 28.4 (36.4) and the EBITDA margin decreased to 11.2% (14.0). EBITDA is negatively impacted by higher central costs of MEUR 4.6 (mainly of a one-off nature) and higher bad debt costs of MEUR 1.2, as well as softer conversion in the lease L/L portfolio.
• EBIT amounted to MEUR 6.3 (22.0) and the EBIT margin decreased to 2.5% (8.5). In addition to the negative EBITDA development, EBIT is impacted by MEUR 8.6 higher costs for write-downs of fixed assets.
• Profit/loss for the period amounted to MEUR 3.6 (16.2).
• Basic and diluted earnings per share was EUR 0.02 (0.10) and EUR 0.02 (0.09) respectively.
• 1,666 (2,565) rooms were contracted, 1,397 (1,419) rooms opened and 1,314 (429) rooms left the system.

• On May 4, the Board of Directors appointed Federico González-Tejera as President & CEO of the Rezidor Hotel Group, succeeding Wolfgang M. Neumann who has resigned as CEO. Neumann will remain on the Board as a non-executive director.

  Half year 2017

• L/L RevPAR for leased and managed hotels was up by 5.4%.
• Revenue increased by 2.1% to MEUR 476.6 (466.8). On a L/L basis revenue increased by 5.4%.
• EBITDA amounted to MEUR 30.9 (27.2) and the EBITDA margin increased to 6.5% (5.8).
• EBIT amounted to MEUR -1.9 (-3.0) and the EBIT margin increased to -0.4% (-0.6).
• Profit/loss for the period amounted to MEUR -4.0 (-5.4).
• Basic and diluted earnings per share was EUR -0.02 (-0.03).
• Cash flow from operating activities amounted to MEUR 24.1 (16.8).
• 4,844 (4,532) rooms were contracted, 2,322 (2,386) rooms opened and 2,199 (732) rooms left the system.

Comments from the CEO

Launch of works on 5-year strategy plan under new executive leadership

During the second quarter of 2017, Rezidor's positive RevPAR performance from the first quarter continued. Overall RevPAR was up 4%, driven by solid business in most European countries. However, as expected and already mentioned in our Q1 report, the timing of Easter had a negative impact on our results. We have also recognised costs of a one-off nature, which has led to that we deliver results below last year.

Q2 also saw a change in executive management at Rezidor: At the Annual General Meeting in April, the company's new Board of Directors was elected and is chaired by our new majority owner HNA Tourism Group. In May, I took over the position as President & Chief Executive Officer. I am energized by the potential of the company, and excited to build on Rezidor's achievements to further strengthen the group's

profile and profitability.

We have started to work on a comprehensive and holistic 5-year strategy plan that will be presented to the Board in October 2017 for a launch in January 2018. The plan analysis covers our operations and asset management, brands and products, commercial and IT areas, talent and culture. It is also aligned with our partner Carlson to capture global revenue and brand opportunities, in order to reach our joint target of becoming one of the world's leading hotel companies by constantly adding value for our guests, owners, team members and shareholders.

At this preliminary stage, the opportunities going forward look significant. Following the Board's approval of the 5-year plan, we intend to share the core components with the investor relations community at an Investor Day in Q4 2017.

Federico González-Tejera, President & CEO

Market RevPAR Development YTD

Market RevPAR across Europe was up 6.4% (at constant exchange rates) June year to date, with the improvement driven both by occupancy (2.8%) and room rates (3.5%).

The RevPAR development in the mature Western European markets, 3.1%, was mainly via occupancy (2.5%). All key markets experienced growth, led by Belgium (11.3%), which had been negatively impacted by terrorist attacks last year.

In Northern Europe, 6.8%, the growth was mainly due to improved room rates (4.8%). In the Nordics, Finland (9.7%), Norway (8.5%), Denmark (5.0%) and Sweden (4.2%) all had positive developments.

Eastern Europe reported the strongest RevPAR growth (11.0%), with room rate (5.5%) and occupancy (5.2%) both driving the growth. All key markets experienced growth, led by Lithuania (15.8%) and Estonia (15.2%).

Trading in the Middle East and Africa was above last year (0.6%), as gains in Africa (Northern 41.9% and Southern 4.6%) off-set the ongoing challenges in the Middle East (-4.6%). The development by country remains mixed,

with a number of markets significantly below last year (e.g. Saudi Arabia -11.9% and Qatar -11.4%), but others continuing to recover (e.g. Egypt 104.0% and Tunisia 19.7%).

Sources: STR Global Ltd. © 2017 - European Hotel Review - Constant Currency Edition (June 2017); Hotel | trends by Benchmarking | Alliance © 2017

Rezidor RevPAR Development Q2

L/L RevPAR for leased and managed hotels increased by 4.0% compared to last year, driven both by occupancy and average room rates. L/L RevPAR for leased hotels increased by 4.5%, with the growth also via a combination of occupancy and average room rates.

Three out of four regions reported L/L RevPAR growth over last year, with the strongest development in the Nordics and Eastern Europe. Middle East, Africa & Others remains the challenge.

Reported RevPAR growth was 2.4%, as the negative impact of FX and new openings was only partially offset by hotel exits.

10%

8%

6%

4%

2%

0%

Q3 Q4 Q1 2016

Q2 Q3 Q4 Q1 Q2

2017

6%

5%

4%

3%

2%

1%

0%

-1%

-2%

Q3 Q4

2016

Q2 Q3 Q4 Q1 Q2

2017

5%

4%

3%

2%

1%

0%

Q3 Q4 Q1 2016

Q2 Q3 Q4 Q1 Q2

2017

Rezidor Hotel Group - Interim Report January-June 2017 p. 2/23

Income Statement

Revenue decreased by MEUR 5.7 to MEUR 254.1. The decrease is mainly due to the exit of four leased hotels last year, the temporary closure of one leased hotel for renovation and the strengthening of the Euro, partly offset by positive L/L RevPAR development and the re- opening of two leased hotels after renovation.

On a L/L basis revenue increased by 2.6% due to the positive L/L RevPAR development, however partly offset by a decrease in the M&E business.

Revenue increased by MEUR 9.8 to MEUR 476.6. The increase is mainly due to positive development in the L/L portfolio (both in the leased business and in the fee business) and the re-opening of two hotels after renovation, partly offset by the exit of four leased hotels last year and the temporary closure of one leased hotel for renovation.

On a L/L basis revenue increased by 5.4% due to the positive L/L RevPAR development.

EBITDA decreased by MEUR 8.0 to MEUR 28.4. EBITDA is negatively impacted by higher central costs of MEUR 4.6 and higher bad debt costs of MEUR 1.2, as well as softer conversion in the lease L/L portfolio. Bad debt costs as a percentage of fee revenue amounts to 4.4% (1.2).

The increase in central costs is mainly due to costs incurred in connection with the resignation of the former CEO and higher variable salaries (release of accrual of MEUR 3.0 last year). The timing of Easter is estimated to have impacted EBITDA with ca MEUR -2.

Rent as a percentage of leased hotel revenue decreased from 28.3 to 27.9%, mainly due exits of hotels and a renegotiated rent agreement last year.

EBIT decreased by MEUR 15.7 to MEUR 6.3, mainly due to the decrease in EBITDA and MEUR 8.6 higher costs for write-downs of fixed assets, partly offset by MEUR 1.6 lower costs for termination of lease contracts.

Profit/loss for the period decreased by MEUR 12.6 to MEUR 3.6.

EBITDA increased by MEUR 3.7 to MEUR 30.9. The positive impact of the revenue increase is partly offset by higher central costs of MEUR 6.7 and higher costs for bad debts of MEUR 1.3. The increase in central costs is mainly due to costs incurred in connection with the resignation of the former CEO, higher variable salaries and financial advisor fees incurred in connection with the public offer on the shares of the company.

Rent as a percentage of leased hotel revenue decreased from 29.9 to 28.9%, mainly due to exits of hotels and a renegotiated rent agreement last year.

EBIT improved by MEUR 1.1 to MEUR -1.9. The improvement is due to the EBITDA development and MEUR 9.6 lower costs for termination of lease contracts, partly offset by higher costs for write-downs of fixed assets of MEUR 8.4 and depreciation of MEUR 1.8. In addition, EBIT was last year impacted by MEUR 1.9 gain on sale of shares in subsidiaries.

Profit/loss for the period increased by MEUR 1.4 to MEUR -4.0.

EBITDAR, MEUR Rolling EBITDAR margin, %

EBITDA, MEUR Rolling EBITDA margin, %

EBIT, MEUR Rolling EBIT margin, %

120.0

100.0

35% 40

30

34%

12%

10%

30.0 6%

20.0 5%

40.0

20.0

0.0

Q3 Q4 Q1 2016

Q2 Q3 Q4 Q1 Q2

2017

32%

31%

0

-10

-20

Q3 Q4 Q1 2016

Q2 Q3 Q4 Q1 Q2

2017

4% -10.0

2% -20.0

0% -30.0

Q3 Q4 Q1 2016

2%

1%

0%

Q2 Q3 Q4 Q1 Q2

2017

Rezidor Hotel Group - Interim Report January-June 2017 p. 3/23

Q2 Comments by Region

EBIT decreased by MEUR 6.1 to MEUR 7.0, impacted by MEUR 2.4 higher costs for write-downs of fixed assets, as well as costs for termination of lease contracts of MEUR 1.0 and higher depreciation costs.

L/L RevPAR increased by 7.2% via both occupancy and average room rates, with Norway (17.1%) and Denmark (3.8%) above last year, but Sweden below (-3.7%). The strike in Norway last year in April and May benefitted the RevPAR performance for this year, however partly offset by the negative impact of timing of Easter.

Revenue decreased by MEUR 8.7 to MEUR 104.6. The decrease is mainly due to the exit of four hotels, the closure of one hotel for renovation and the weakening of the Swedish krona, partly offset by strong L/L RevPAR development. The timing of Easter is estimated to have impacted revenue negatively with ca MEUR 4.

EBITDA decreased by MEUR 0.3 to MEUR 15.6. Adjusted for the negative impact from the timing of Easter of ca MEUR -2, EBITDA improved by ca MEUR 1.7, although impacted by softer conversion.

EBIT decreased by MEUR 3.0 to MEUR 5.5, impacted by MEUR 5.6 higher costs for write-downs of tangible assets, partly offset by MEUR 2.7 lower costs for termination of lease contracts.

L/L RevPAR improved by 7.2% via both average room rates and occupancy. Ukraine (16.2%) and the Baltics (10.0%) led the growth, with Turkey (7.3%) continuing to recover from the negative impact of the terrorist attacks, attempted coup and unrest in the neighbouring countries.

Revenue increased by MEUR 0.2 to MEUR 11.5. The increase is due to the strong L/L RevPAR development, partly offset by less fee revenue related to terminated agreements.

The decrease in EBITDA margin of 5.7 percentage points is mainly due to higher bad debt costs.

L/L RevPAR grew by 3.1%, mainly via average room rates. The gains were primarily driven by the United Kingdom (10.0%) and Ireland (5.5%), with all other key countries above last year with the exception of Germany (-0.9%) and France (-7.8%). France benefitted from the UEFA championship last June and the leisure segment is still negatively impacted by the attack in Nice in July last year.

Revenue increased by MEUR 2.7 to MEUR 131.0. The increase is mainly due to the L/L RevPAR development and the re-opening of two leased hotels after renovation, partly offset by the weakening of the British pound and lower fee revenue.

EBITDA decreased by MEUR 1.9 to MEUR 18.2. The decrease is mainly due to softer conversion in the lease L/L portfolio and lower fee revenue, partly offset by positive impact of the two re-opened hotels.

L/L RevPAR decreased marginally (-0.2%) as gains in occupancy were off-set by losses in average room rates. All three key countries were below last year: Saudi Arabia (-14.0%) as the low oil price continues to have an impact, South Africa (-6.3%) with challenges in corporate segments and United Arab Emirates (-5.3%) linked to the increase in supply.

Revenue increased by MEUR 0.1 to MEUR 7.0.

EBITDA decreased by MEUR 0.7 to MEUR 3.1. The decrease is mainly due to share of loss in associates of MEUR 0.5 and higher bad debt costs.

EBIT decreased by MEUR 1.4 to MEUR 2.4, impacted by costs for write-downs of intangible assets of MEUR 0.7.

Central costs for the quarter amounted to MEUR 17.0, an increase compared to last year of MEUR 4.6, which is mainly due to costs incurred in connection with the resignation of the former CEO and higher variable salaries.

Rezidor Hotel Group - Interim Report January-June 2017 p. 4/23