NH tops market expectations with 76-percent bottom-line improvement

NH Hotel Group reported bottom-line improvement of 76 percent during year one following the implementation of its business plan. This set of earnings tops the market's expectations in a year marked by investments and the rollout of initiatives designed to transform the Group, including the launch of a new value proposition and price strategy, hotel repositioning and system upgrades.

During this period, recurring revenue rose €12.5 million ($13.96 million) to €1.265,1 billion ($1.400,5 million) in 2014, while recurring earnings before interest, taxes, depreciation and amortization (EBITDA) climbed 2.5 percent higher year-on-year to €126.2 million ($140.9 million). This growth is noteworthy considering the lack of contribution by hotels that were excluded from the consolidation scope last year and the adverse impact on earnings of exchange rate trends. When excluding these factors, revenue growth would have been 4.0 percent and EBITDA growth, 10.1 percent.

Operations expenses rose slightly, in line with the growth in business volumes. Shaped by wage increases negotiated under collective bargaining agreements in Central Europe and the costs related to implementation of the business plan, specifically the reinforcement of the Group's operating equipment, salesforces, website, revenue management tools and marketing efforts. Meanwhile, the Company managed to reduce overall lease expenditure by 2.1 percent, thanks to lease renegotiations, mainly in Spain and Italy, and strategic exits from non-performing leases, offsetting the impact of rent increases negotiated in prior years and inflation adjustments.

The hotel business performance was shaped by significant growth in the average daily rate (ADR) and revenue per available room (RevPAR) in the second half of the year. Prices rose faster than occupancy throughout the second half, enhancing the Group's RevPAR mix. Note that the revenue growth sustained in the fourth quarter was driven mainly by ADR growth, with this metric up a notable approximately 5 percent in November and December.

In all NH Hotels, the ADR increased by 1.7 percent in 2014, while RevPAR growth came in at 3.6%, driven by the strong momentum observed in the hotel business throughout the year, coupled with the fruits of the strategic initiatives rolled out by the Company under the umbrella of its business plan.

Trends in the main hotel business metrics of NH Hotel Group by quarter:

Recurring net profit (attributable to equity holders of the parent) rose by 47.3 percent, while consolidated net profit, which includes the Group's non-recurring activities, jumped 76 percent. As a result, the Group's net loss narrowed from €39.8 million ($44.5 million) in 2013 to €9.6 million (10.7 million) last year.

Business momentum, coupled with strong progress on all the initiatives being implemented by the Group under the umbrella of its business plan, paints a bright picture for 2015: current guidance points to EBITDA growth of around 25 percent this year, fuelled by RevPAR growth of over 5 percent.