6.- GOODWILL

The balance included under this item corresponds to the net goodwill arising from the acquisition of certain companies, and breaks down as follows (thousands of euros):

	2017	2016
NH Hoteles Deutschland, GmbH y NH Hoteles Austria, GmbH	79.181	80.485
Hoteles Royal, S.A.	28.629	32.719
Others	3.874	4.532
Total	111.684	117.736

The movements in this heading of the consolidated balance sheet in 2017 and 2016 were as follows (in thousands of euros):

Company	Goodwill 31.12.16	Additions	Exchange differences	Impairment	Goodwill 31.12.17
NH Hoteles Deutschland, GmbH y NH Hoteles Austria, GmbH	80.485	-	-	(1.304)	79.181
Hoteles Royal, S.A.	32.719	-	(4.090)	-	28.629
Others	4.532	1.103	(658)	(1.103)	3.874
Total	117.736	1.103	(4.748)	(2.407)	111.684

 

Company	Goodwill 31.12.15	Exchange difference	Impairment	Goodwill 31.12.16
NH Hoteles Deutschland, GmbH y NH Hoteles Austria, GmbH	85.180	-	(4.695)	80.485
Hoteles Royal, S.A.	29.651	3.068	-	32.719
Others	3.962	570	-	4.532
Total	118.793	3.638	(4.695)	117.736

Details of the cash-generating units to which such goodwill arising on consolidation has been allocated are shown below:

	Thousands of Euros
	2017	2016
Grupo Royal CGUs	28.629	32.719
CGU 6	15.113	15.113
CGU 21	9.929	9.929
CGU 22	7.711	7.711
CGU 12	7.042	7.042
CGU 5	6.107	6.107
CGU 13	5.624	5.625
CGU 2	5.027	5.027
CGUs with goodwill allocated individually < 4€ M	26.502	28.463
	111.684	117.736

At 31 December 2017, Goodwill was subject to an impairment test which showed 2,407 thousand euros of impairment.

The basic assumptions used in the impairment test of the CGUs mentioned above are detailed below:

• After tax discount rate: 5.55% and 6.93% (6.16% and 6.49% respectively in 2016) for CGUs subject to the same risks (German and Austrian market); and for Grupo Royal CGUs, rates of 12.40% (Colombian and Ecuadorian markets) and 9.61% (Chilean market) (13.14% and 9.84% respectively in 2016).
• Terminal value growth rate (g): 2.47% and 2.25% for Germany and Austria and 3% for Grupo Royal CGUs.

Additionally, and considering the assumption implied in the preceding paragraph, the Group has conducted a sensitivity analysis of the result of the impairment test of goodwill to changes in the following situations:

NH Hoteles Deutschland, GmbH y NH Hoteles Austria, GmbH
	Average values
	Impairment test	Scenario 1	Scenario 2
Discount rate (after tax)	5,55% - 6,93%	6,55% - 7,93%	4,55% - 5,93%
Growth rate	2,47% - 2,25%	1,47% - 1,25%	3,47% - 3,25%
Occupancy rate	76,45%	75,68%	77,29%
ADR (euros)	114,0	112,9	115,2

 

Hoteles Royal, S.A.
	Valores promedios
	Test deterioro	Escenario 1	Escenario 2
Discount rate (after tax)	9,61% - 12,40%	10,61% - 13,04%	8,61% - 11,40%
Growth rate	3%	2%	4%
Occupancy rate	61,64%	59,03%	60,23%
ADR (euros)	335,7	326	332,6

“Average Daily Rate” (ADR): is the quotient of total room revenue for a specific period divided by the rooms sold in that specific period. This indicator is used to compare with companies in the sector the average prices per room of the hotels.

In the case of scenario 2, an impairment of 876 thousand euros had been recorded in 2017 in addition to that recorded at 31 December 2017 with respect to the goodwill of NH Hotels Deutschland, Gmbh and NH Hoteles Austria, GmbH, and no impairment in regard to the goodwill of Hoteles Royal, S.A.

On the other hand, scenario 1 is a negative scenario where the discount rate is raised 1 b.p. above the rate used in the test and a growth rate lower by 1 b.p., i.e. with minimum growth, and falls in occupancy and ADR of 3% which would lead to an additional impairment to that registered in 2017 for an amount of 3 million euros with respect to the goodwill of NH Hotels Deutschland, Gmbh and NH Hoteles Austria, GmbH and it would not imply any impairment in the goodwill of Group Royal CGU.