Further, in the urban sector there is a general lack of visibility regarding customer reservations. Except in specific cases, reservations are beingmade at increasingly short
notice, making it complicated to make any kind of forecast for the year.
In 2014, excluding effects arising from disposals of hotels, growth in RevPAR is estimated between
+
3%
and
+
5%,
with greater weight in the second half of the year due
to the implementation of a series of revenue initiatives under the strategic plan. Improved recurring EBITDA of between
+
5%
and
+
10%
compared to 2013 is expected.
The approval of the five-year strategic plan underpins a substantial change in the Group’s business model. The first three years are focused on developing and
implementing the new value proposition and the new business model, strong investment in asset repositioning and a limited impact of the expansion plan. Subsequently,
in 2017 and 2018, the Company will drive its organic growth.
In the plan, the Company has defined a vision: firstly, that in the future, whenever a consumer visits a city for business or leisure, he or she will previously verify the
existence of anNHhotel in the destination city; secondly, the company aspires to pool its resources in order to become themost attractive investment option; and, thirdly,
the Company aspires to obtain a return on investment of between 10% and 15% and, ultimately, to achieve a debt to EBITDA ratio of between 3 and 4 times. To achieve
this vision, the priorities established are as follows:
•
New brand architecture and experience
,
new price positioning strategy and increased investment in marketing.
•
Repositioning plan
:
EUR 200-220 million, an investment that will allow
portfolio segmentation
and product renewal to increase its value proposition and
achieve maximum potential ADR from our hotels.
•
Sale of owned assets that are not in line with NH’s new product or strategy and sale of additional assets to finance the repositioning plan.
•
Reduction in intermediation costs,
increasing direct online sales
(
website and mobile applications) and reducing indirect channel costs.
•
Sales strategy
(
channels)
and pricing strategy
(
price–value)
and market-based performance management
.
The new customer loyalty programme has been
launchedwith the objective of increasing direct sales and the newmarketing campaignwill commence in April. The higher marketing costs will be offset by savings
in intermediated sales fees. The new commercial website will be launched at the end of July.
•
Cost-efficiency
,
optimising the support and purchasing functions and continuing with the
lease adjustment plan
and renegotiation thereof.
•
Organic development to reinforce the Company’s presence in Europe and Latin America
.
OVERVIEWOF NHRISK POLICY
NH’s operations are mainly focussed on the hotel industry and particularly on urban hotels, which are characterised by a relatively high level of operational leverage
that may require high levels of investment in fixed assets, especially real estate. These have a lengthy economic cycle, whichmakes it necessary to finance investments
mainly through financial borrowing. The Group’s policy has always been to maintain financial orthodoxy by attempting to ensure that solvency ratios always remain
high.
The management of the risks to which NH Hoteles is exposed in the course of its operations is one of the basic pillars of its actions. Risk management is geared
to preserving the value of assets and consequently the investment of the Company’s shareholders. Minimising risks and optimising management of such risks by
analysing the corresponding risk maps are among the objectives of the Group’s Management.
Financial risk management is centralised at the Corporate Finance Division. The necessary procedures exist to control exposure to interest and exchange rate
variations and credit and liquidity risks on the basis of the Group’s financial position and structure and economic environment variables.
The size of NH Hoteles and its high levels of penetration and brand recognition enable to Group to gain access to a larger number of expansion opportunities in a
more selective fashion with the above-mentioned greater emphasis on the rate of return and less or no need for investment, always attempting to minimise the risk
inherent to the industry in which the Group operates. The industry is characterised by an activity that is sensitive to economic cycles and therefore to exposure to
price change risk, which the Group has always managed by offsetting it with occupancy.
The Group’s credit risk can mainly be attributed to commercial debts. The amounts are shown net of any provisions for insolvencies and the risk is very low as the
customer portfolio is spread among a large number of agencies and companies. Furthermore, part of the accounts receivable are guaranteed through insurance
policies, surety, guarantees and advance payments made by tour operators.
Concerning interest rate risks, the Group is exposed to fluctuations in the interest rates of its financial assets and liabilities, which may have an adverse effect on its
results and cash flows. In order to mitigate the effect of these fluctuations, the Group maintains the policy of contracting a series of financial instruments, interest rate
swaps and collars (a combination of swaps and options), to ensure that approximately 30% of its net debt has been hedged against extreme interest rate variations.
Information on derivative financial instruments held by the Group at 31 December 2013, as well as on the policies applied to such instruments, is set out in Note 19
of the Consolidated Annual Report. In any event, in November 2013 the group refinanced syndicated debt and completed equity swaps totalling EUR 700 million,
of which EUR 500 million, or 71%, was offset by issuing bonds (see breakdown and types in Note 17 Debt). As a result of this refinancing, 68% of the Group’s net
financial debt is indexed to fixed interest rates.
The Group has subsidiaries in several countries with operating currencies other than the euro, the Group’s currency of reference. The operating results and financial
position of these subsidiaries (mainly located inMexico and Argentina) are booked in their corresponding currencies and converted later at the applicable exchange
rate for their inclusion in the financial statements. In 2013, the euro was fluctuating against other major currencies and this affected sales, equity and cash flows. In
order to ensure such risks are mitigated as much as possible the Group takes out debt in the same currency as the investment, always taking into account that the
income generated in geographic areas with currencies other than the euro remains below 8% of total income.
Regarding liquidity risks, Grupo NH has a suitable debt maturity calendar, which is set out in Note 17 of the Consolidated Annual Report for 2013.
At31December2013thelevelofconsolidatednetborrowings,inaccordancewiththedefinitionofthesyndicatedloan,hadincreasedtoEUR745million,representing
a decrease of EUR 245 million in the Group’s level of borrowings compared to 2012 year-end, due to the capital increase and divestment plan implemented in 2013.
CONSOLIDATEDMANAGEMENT REPORT
13
