CONSOLIDATED MANAGEMENT REPORT
8
CONSOLIDATED
MANAGEMENT REPORT
EVOLUTION OF BUSINESS AND GROUP’S SITUATION
In 2014, world economic activity grew at a steady pace (2.6%), slightly faster than the previous year (2.4%). The economies of the euro zone, the
US, the UK and Latin American countries where the Group operates its 363 hotels also grew at a similar rate, slightly higher than last year. In line
with the above, 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. Germany (1.2% vs. 1.1%), the Netherlands (1% vs. 0.8%), Spain (1.6% vs. -0.1%) and Italy (-0.5% vs. -1.2%), we can see that Italy, although still in
negative growth, improved relative to the previous year, with the situation in the other countries also improving and growth gradually speeding up,
particularly in the case of Spain.
According to the UNWTO, there were 1,138 million international tourist arrivals in 2014, a 4.7% increase from the previous year. This is the fifth year
in a row with growth above the average since the 2009 economic crisis. The UNWTO forecast for 2015 is for international tourism to increase by
3% - 4%, and to continue to contribute to the global economic recovery.
By regions, North and South America (+7%) and Asia and the Pacific (+5%) saw considerable increases, while in Europe (+4%), the Middle East (+4%)
and Africa (+2%) growth was more moderate. At the sub-regional level, North America (+8%) had the best results, followed by North-East Asia,
Southern Asia, Southern Europe and the Mediterranean, Northern Europe and the Caribbean, which grew by 7%.
Against this backdrop, the Company’s hotel business indicators reflected a positive trend. The second half of 2014 was marked by a significant
increase in prices and revenue per available room (RevPAR). In this second half of the year, prices rose faster than the occupancy rate, improving
the composition of the Group’s RevPAR.
Consequently, over the year as a whole there was a 1.7% increase in the average price and a 3.6% increase in RevPAR, thanks to the positive trend
shown by the hotel business throughout the year and the effect of the Company’s strategic plan initiatives.
In this context, the Group achieved a 76% improvement in its net results. In this period, recurring revenues rose to €1,265.1 million, €12.5 million more
than the previous year, and recurring EBITDA increased by 2.5% to €126.2 million. It should be noted that this improvement is more significant when
we take into account the loss of contributions from the hotels which left the scope of consolidation last year, and the unfavourable exchange rate. If
we discount these effects, revenue would have grown by 4.0% and EBITDA by 10.1%.
2014 was a transitional year in the five-year Strategic Plan. The plan was structured so that 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. Later, in 2017 and 2018, the Company will drive its organic growth.
One of the most notable milestones of this first year of transformation is the effective materialisation of a new value proposition by the NH Hotel
Group, focused on a new brand architecture, the flagship brands NH Collection, NH Hotels, nhow and Hesperia, and a different new look and feel
for each brand.
Meanwhile, the Group has improved the customer experience thanks to implementing a solid operational vision, including the new elements making
up the hotels’ basic product range (a €30 million investment), known as Brilliant Basics, which are already in place in the vast majority of the
establishments and which we believe are contributing to a better experience and higher average score.
Also, thanks to the relaunch of the NH Rewards loyalty programme, it now has over 4.4 million members, 31% of whom joined in the last 12 months.
The quality indicators confirm the improvement in user opinions of the Group’s hotels over 2014, particularly in the hotels where the first
transformational measures are already in place. For example, the NH Collection Eurobuilding Madrid has risen from 153rd to 10th place, and the NH
Collection Venezia Palazzo Barocci from 164th to 25th.
In the Meetings and Events segment, NH has strengthened its leadership with the introduction of a new technological initiative pursuant to which. 3D
holographic projection technology and telepresence and interactive collaboration systems are being deployed, and have been permanently installed
in some of the Group’s hotels for high-performance, high-impact meetings and events.
As part of its asset repositioning plan, NH Hotel Group invested €220 million from 2014 to 2016 to renovate or remodel its mid-range hotels with the
greatest potential for improvement. 73% of the investment went to repositioning hotels for conversion to the NH Collection brand, and the process
has been completed in some, such as the NH Berlin Mitte (Germany), NH Collection Palazzo Barocci (Italy), and NH Collection Eurobuilding and
NH Collection Abascal in Spain. As part of its expansion plans, NH Hotel Group added nine hotels to its portfolio in 2014 (four openings and five
contracts signed) and launched a joint venture with the HNA Group in China to develop a portfolio of hotels in that country with the management
contract formula.
Also, in February 2015, NH Hotel Group signed an agreement to acquire the Latin American company Hoteles Royal. The Colombian group focuses
on developing and managing city hotels. The agreement will mean the addition of 20 hotels and 2,257 rooms in Colombia, Chile and Ecuador.
Finally, the optimisation of management and organisation, especially technological systems, is making satisfactory progress. The Group’s new digital
strategy has reduced agency costs, thanks to the comprehensive redesign of the Group’s commercial website. It has also launched the website of
the new NH Collection brand.
For the financial year ending 31 December 2014
