On behalf of the Board of Directors of NH Hotel Group, which I have the responsibility and honour of presiding, I am pleased to provide you with an account of the brightest year in our company’s history. 2018 was marked by record figures across several of our income statement headings and by outperformance of our deleveraging target. The far-reaching improvement in our financial and business positioning meant that our group attracted the interest of leading international players all year long. As you know, in 2018, Minor International led that charge and their interest crystallised in the acquisition of a significant shareholding in the company in the wake of the corresponding takeover offer. That milestone ushers our company into a new era which promises to be even more ambitious and global than the one we leave behind. Our aspiration is to continue to gain prominence and earn the recognition of our existing and future customers.

Throughout 2018, a year replete with changes and opportunities that are already beginning to materialise, the Board of Directors carried out an intense and all-important institutional effort. During the year we stepped up our oversight and compliance work as the company’s directors and supervisors with the sole aim of safeguarding the company’s interests and representing its entire spectrum of shareholders. In doing so, we were supported by the unwavering support and dedication of a team of executives and professionals who are doing an excellent job. The team is indeed the key asset at this company which has been growing constantly for the last four years. Now, alongside Minor International, that pace of growth will accelerate in the upcoming years.

I would like to highlight the alignment and harmony between the Board of Directors and Management Committee of NH Hotel Group as one of our key success factors in recent years. The work of our Chief Executive Officer, Ramón Aragonés, the nexus between our shareholders and our management team, has unquestionably been decisive in shaping the Company’s results during this period. Here I am referring to the segmentation and reinforced positioning of our brands, the improvements made to our product and the enhancement of our guest experience. Also to the optimisation of the hotel portfolio and the improvement in operational efficiencies, the implementation of advanced management systems and tools and the systematic reduction of our financial debt.

The Group has met the ambitious targets laid down in the roadmap devised in the autumn of 2017 rigorously and promptly. We committed to unlocking the company’s value and making sure all of these improvements translated to our earnings and share price performance and our shareholder remuneration. The facts speak for themselves, as is evident in the delivery of our policy to pay out a stable and gradually growing dividend. When we set that policy, we decided on an interim dividend from 2018 profits of 15 cents per share. That motion has already been presented by the Board of Directors for approval in the 2019 Annual General Meeting.

The successful performance of the entire NH Hotel Group team during the past year is the reason for the international interest received, which ultimately materialised in the acquisition of 94.1% of the Company by Minor International.

I would like to take this opportunity to praise Minor International for the transparency, seriousness and accessibility it showed the regulators and all of NH Hotel Group’s shareholders throughout that whole process. I would also like to thank the Board of Directors for its work during that time. Our directors duly upheld their responsibilities to all of the Company’s shareholders and their fiduciary duties under Spain’s Corporate Enterprises Act at all times, activating all the safeguards in place in order to maximise shareholder value while pursuing best practices in the corporate governance arena in defence of the Company’s interests.

The initial months of collaboration with Minor International have provided an exciting taste of all that we can build together from a far more global position, leveraging the complementary nature of the two groups’ hotel businesses. Those synergies are set to allow us to grow and compete on a firmer footing and create value for our customers all around the world.

In 2019 we have already begun to work on articulating a five-year business plan to unlock the synergies and advantages of our respective international positions. Greater access to regions and customers, the ability to tap economies of scale and the scope for lifting the profitability of certain hotels by rebranding them, are just a few of the initiatives we expect will accelerate growth of both groups. Against this backdrop, in February 2019, the Board of Directors of NH Hotel Group approved a framework governance agreement (with the proprietary directors representing Minor International abstaining from that vote) in order to establish a transparent relationship between the two firms. That agreement includes mechanisms for preventing and resolving potential conflicts of interest and handling related-party transactions and establishes an orderly system for the exchange of information. It also sets out the scope of intervention of the respective hotel businesses by identifying a series of preferential geographic business markets and it includes a reciprocal brand licensing agreement.

We are, in sum, on the verge of a new era, filled with opportunities and challenges, in which the nearly 18,000 of us who make up NH Hotel Group have an excellent chance to continue to innovate, scale new heights and dive into new destinations, now alongside Minor International. We are at an ideal time for boosting our growth, while maintaining the same values, excellent quality and commitment to corporate responsibility that have earned us the trust of millions of customers all over the world.

Many thanks.

Alfredo Fernández Agras
Chairman of NH Hotel Group



I am particularly pleased to be able to tell you about NH Hotel Group’s extraordinary performance in 2018, a year in which we posted record earnings and laid the foundations for becoming a leading global group alongside Minor International. That firm’s faith in the company’s management team and the enthusiasm we share about the prospect of creating a benchmark hotel platform with a presence in over 50 countries, represents a unique opportunity in the sector to create shared value for our shareholders, customers and employees.

In recent years, NH Hotel Group has been readying itself for growth. It has got rid of everything that was weighing it down and maximised everything that adds value and sets it apart from the other players, thus consolidating a privileged strategic position in the industry. 2018 reflected the tremendous hard work that went into that entire process. A process of modernisation, operational and financial optimisation, system upgrades and cultural transformation that has enabled us to boost our profits and build a unique positioning in the global hotel sector.

Since we embarked on the project, we have reoriented our strategy towards the far more productive segment at the higher end of the market and our universe of brands has become among the most recognised in the urban and business travel segments in Europe and Latin America.

Our sales and marketing strategy has enabled us to outperform our direct competitors in terms of revenue per available room, underpinned by higher perceived quality on the part of our guests. Centralisation of all of our properties and divisions into a single integrated system, coupled with the implementation of new revenue management tools, is enabling us to better predict demand and in turn adjust our average daily rate dynamically in response.

Elsewhere, in 2018, we continued to rationalise our portfolio, repositioning our hotels and analysing opportunities for enhancing it.

As a result, our premium segment brands (NH Collection y nhow) continued to gain market share. By year-end these brands had doubled their presence to account for nearly one-quarter of the total portfolio with average daily rates 40% above that of the NH Hotels brand in the case of the NH Collection hotels.

We made progress on our international expansion, signing up new hotels to a pipeline that currently comprises nearly 30 hotels under development, including seven iconic hotels under the nhow brand, which are expected to open their doors in the years to come. At the start of the year we also took advantage of the unique positioning of the NH Collection Amsterdam Barbizon Palace to unlock its value through a sale-and-leaseback agreement. That operation made a significant contribution to the group’s ability to top its deleveraging guidance for the year without jeopardising its EBITDA guidance.

Elsewhere, we managed to position ourselves at the forefront of the sector in terms of digital transformation and guest experience. Specifically, we rolled out a pioneering guest experience known as FASTPASS, a combination of three innovative services – Check-in Online, Choose Your Room and Check-out Online – that give guests total control over their stays. In fact, NH Hotel Group was the first European chain to offer these three services simultaneously.

In 2018, the Company also relaunched its NH Rewards loyalty programme with a new look and far more attractive and generous reward scheme. At year-end, that scheme boasted over 8.6 million members.

All of those measures had a very favourable impact on the group’s results. We posted year-on-year growth in revenue (€1,613 millions), thanks to a strong business performance in Europe, which more than offset the adverse effect of currency movements in Latin America and the hotels being refurbished during the year. Our EBITDA (€265 millions) was higher, thanks to topline growth coupled with cost contention. And we doubled our recurring net profit, evidencing the improved business momentum as well as the reduction in financial expenses.

In parallel, we topped our deleveraging guidance for the year, reducing net debt by €484 million to end 2018 at €171 million. Between 2015 and year-end, the group’s recurring net debt has been cut down from 5.6 times EBITDA to just 0.6 times. Our deleveraging is the result of rigorously following a cautious corporate financing strategy which we intensified last year with the early conversion of €250 million of convertible bonds in June 2018 and the partial prepayment in December of €40 million of bonds originally due in 2023. It is worth highlighting the group’s strong cash position at year-end of €266 million.

In short, we have completed a year of record numbers. Going forward, we aim to continue to outdo ourselves alongside Minor International, with whom we see a tremendous opportunity for the company to take a qualitative leap in its global positioning. The combined portfolio of our group and Minor International’s hotel division ranks us among the top 20 players in the world.

Since early 2019, we have been working together to formulate a new five-year business plan designed to make the most of the complementary nature of both of our hotel portfolios, leverage economies of scale over a wider customer base and explore avenues for developing all of our brands in several regions.

All of us comprising NH Hotel Group face thus an enthralling new professional challenge. An endeavour throughout which we will maintain our commitment to responsibility and sustainability and in which the hard work and enthusiasm of the entire team will prove, once again, the key to our continued success.

Lastly, I would like to express my gratitude to everyone who, in one way or another, make it possible for us to continue to grow and generate value, and particularly to Minor International for their vote of confidence. I am convinced that together we will become one of the sector’s most dynamic and promising global players.

Many thanks,

Ramón Aragonés
Chief Executive Officer