CONSOLIDATED
MANAGEMENT REPORT
GROUP PERFORMANCE ANDOUTLOOK
In 2013, world economic activity grew at a steady pace (2.4%), slightly slower than the previous year (3.2%). The economies of the euro zone, US, UK and Latin
American countries where the Group operates its 379 hotels also grew at a similar rate, although slightly slower compared to the previous year. In contrast to the
foregoing, if we compare the year-on-year growth rates of the four countries that account for the largest part of the Group’s sales and results, i.e. the German (0.4% vs
0.9%),
Dutch (0.8% vs -0.9%), Spanish (-0.2% vs 0.4%) and Italian (-0.8% vs 0.4%) economies, we can see that, except in the case of Netherland positive growth, the
other countries experienced a downturn, with a slowdown in economic growth in Germany and a contraction of the Spanish and Italian economies.
Despite this adverse business climate, according to UNWTO figures, the international tourism industry far exceeded expectations, with 52 million more
international tourists in 2013 than in the previous year. The UNWTO forecasts growth of between 4% and 4.5% in 2014, continuing to exceed the established long-
term projections.
The regions that recorded the greatest international tourismdemand were Southeast Asia (
+
10%),
Central and Eastern Europe (
+
7%),
Southern andMediterranean
Europe (
+
6%)
and North Africa (
+
6%).
In absolute terms, Europe recorded the greatest growth, receiving 29million more international tourists in 2013, reaching a total of 563 million. This increase (
+
5%)
exceeded the estimated figure for 2013 and nearly duplicated average growth for the period 2005-2012 (
+
2.5%
per year). This figure is particularly noteworthy,
considering the economic situation of the region and two consecutive years (2011 and 2012) of considerable growth.
In relative terms, the greatest growth took place in the Asian and Pacific regions (
+
6%),
where the number of international tourists increased by 14 million to 248
million.
The American region (
+
4%)
recorded an increase of six million arrivals, reaching 169 million in 2013, although the highest growth occurred in North America and
Central America (
+
4%
in both cases), while South America (
+
2%)
and the Caribbean (
+
1%)
showed a slowdown in growth compared to 2012.
Against this backdrop, the Company’s KPIs that measure the performance of its hotel business reflected a positive trend towards recovery. Proof of this progressive
upward trend is the comparable performance of revenue per available room (RevPAR), which showed steady improvement throughout the year. In the first and
second quarters, revenue decreased by -1.5% and -0.3%, respectively, while in the third and fourth quarters revenue grew by
+
1.8%
and
+
2.7%,
respectively. Overall,
the Group’s consolidated RevPAR grew 1.07% during the year.
The positive increase in occupancy in 2013, which grew
+
3.4%,
offset the total fall in average room rates, enabling the positive RevPAR achieved.
In 2013, the Group’s initiatives were focused on reducing lease costs and containing operating costs:
•
The Company has continued reducing its lease costs rather than offsetting the increases fromnegotiations of prior years and CPI reviews. In 2013, lease contracts
that contributed unrecoverable negative EBITDA were terminated and the Company continues negotiating and refinancing its lease contracts by reducing and
freezing rental charges.
•
The initiatives were focused on containing operating costs, allowing a reduction of -1.8%, despite the higher sector activity in 2013 compared to the previous year
(
increase in occupancy of
+
3.47%),
in addition to the tying effect of inflation.
As a result of the initiatives implemented, recurring EBITDA grew progressively in each quarter to a yearly total of 2.9%, reaching EUR 121.6 million.
Additionally, the Group’s consolidated net income increased
+
86.4%
compared to the previous year, reducing the losses accumulated in 2013 by EUR 252.3 million.
This reductionwas due to the net gains generated by non-recurring activity rather than the need for extraordinary provisions for impairment of assets in 2013. Excluding
non-recurring activity, the Company reduced its losses by EUR 22.8 million compared to the previous year.
The reduction in operating costs did not have an adverse effect on the product quality perceived by the end customer, who has become increasingly demanding in light of
the excess supply of hotel vacancies in certain destinations. The Group has developed aWeb tool, “Quality Focus On Line”, which is capable of managing all the opinions
posted by consumers online in relation to the quality of NH hotels and of the competition worldwide. Its visual interface is capable of providing managers with valuable
information through the different indicators analysed. It periodically tracks opinions on each NH hotel posted by consumers on the Internet and displays them visually.
More than 5,000 employees look at the tool on a monthly basis and have access to over 200,000 customer ratings. The tool analyses the results individually by hotel or
on aggregate, as well as monitoring direct competitors in detail. Likewise, the Board of Directors of the Parent Company determined that 15%of NHemployees’ variable
remuneration should depend directly on the satisfaction results obtained, reinforcing the idea that quality is one of the pillars of NHHoteles.
CONSOLIDATEDMANAGEMENT REPORT
8
For the financial year ending 31 december 2013
