8
EVOLUTION OF BUSINESS AND GROUP’S SITUATION
In 2015, world economic activity grew at a steady pace (3.1%), slightly slower than the previous year (3.3%). Compared to the year before, growth was
slightly higher in developed economies, but slower in emerging markets, due mainly to falling prices of raw materials, weaker currencies in emerging
markets and the increasing volatility of the financial markets. In line with these trends, when we compare the year-on-year growth rates of the four
countries representing most of the Group’s sales and results, we find that Germany had slightly higher growth than the year before (1.7% vs. 1.6%),
and that growth in Spain (3.1% vs. 1.4%), Italy (0.9% vs. -0.4%) and the Netherlands (2.0% vs. 1.0%) improved significantly.
According to UNWTO, there were 1.184 billion international tourist arrivals in 2015, a 4.4% increase from the year before. This is the sixth year in a row
with growth above the average since the 2009 economic crisis. The UNWTO forecast for 2016 is for international tourism to increase by 3.5% - 4.5%,
and to continue to contribute to the global economic recovery.
By region, Europe (+5%) led growth in absolute and relative terms, thanks in part to the weakness of the euro against the US dollar and other major
currencies. There were 609 million arrivals, 29 million more than in 2014. Central and Eastern Europe (+6%) recovered from the fall in arrivals of the
previous year. Northern Europe (+6%), Southern Europe and the Mediterranean (+5%) and Western Europe (+4%) also had good results, especially
in mature destinations.
International tourist arrivals in the Americas (+5%) grew by 9 million to 191 million, consolidating the excellent results of 2014. The rising dollar
stimulated outbound tourism in the USA, particularly benefiting the Caribbean and Central America, which both saw 7% growth. Results in South
America and North America (both +4%) were close to the average.
Against this backdrop, the Group’s hotel business indicators reflected a positive trend. Thanks to the favourable trend in the hotel business throughout
the year and the effect of the group’s initiatives within its strategic plan, particularly the repositioning of its brands, 2015 saw a significant increase
of +10.4% in prices and +11.0% in revenue per available room (RevPAR). Prices rose well above occupancy over the year and in all business units. The
growth in prices (+€8.20: from €78.90 to €87.10) represents 95% of the year’s growth in RevPAR.
Considering all of this, and with the addition of Hoteles Royal from 4 March, recurring revenue was €1.395 billion, showing growth of +€130m
(+10.3%). Consequently, NH met its targets in 2015, with a recurring EBITDA of €149.5m, and a positive net profit for the Group (€+0.9m) not seen
since 2011.
This second year of implementing the Strategic Plan shows the value of the price strategy, obtaining greater growth for the Group in the top cities
(+12.4%) compared to direct competitors (+7.0%) where market metrics (STR) exist, with investment in repositioning ending in Spain and Italy and
beginning in Benelux and Germany in the second half of the year.
Given the trends of 2015, the vision of the Strategic Plan has been updated, enabling us to expect EBITDA of around €250m for 2017-2018 and to
reduce leverage levels to 3.0-3.5x.
One of the most notable milestones of these two years 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 Hotel, 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 euro 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 its relaunch, the NH Rewards loyalty programme now has over 5.0 million members, 25% of whom joined in 2015.
The trend in quality indicators confirms the improvement in user ratings for the Group’s hotels throughout 2015, particularly in the hotels where the
first refurbishment work has been done.
In the Meetings and Events segment, NH has strengthened its leadership with the introduction of a new technological initiative which is unique in
the hotel business. 3D holographic projection technology and telepresence and interactive collaboration systems have been permanently installed
in some of the Group’s hotels to ensure high-performance, high-impact meetings and events.
As part of its asset repositioning plan, NH Hotel Group planned to invest 237 million euros from 2014 to 2016 to renovate or remodel its mid-range
hotels with the greatest potential for improvement. 73% of the investment was allocated to repositioning hotels for conversion to the NH Collection
brand. From the start of the plan up to December 2015, 36 hotels have been comprehensively renovated. The average increase in RevPAR in 2015
compared to the same period in 2013 (renovations in 2014) was +24.5%. The hotels in this sample are: NH Collection Eurobuilding, NH Collection
Abascal, NH Alonso Martínez, NH Collection Aránzazu, NH Madrid Atocha, NH Pamplona Iruña, NH Canciller Ayala Victoria, NH Berlin Mitte, NH
München Messe, NH München-Dornach, NH Danube City, NH Collection Palazzo Barocci and NH Firenze.
The merger of Hoteles Royal in March 2015 has added 19 hotels in Colombia, Chile and Ecuador, and a contract to open a hotel in Panama. This
CONSOLIDATED
MANAGEMENT REPORT
For the financial year ending 31 December 2015
CONSOLIDATED MANAGEMENT REPORT
