NH HOTEL GROUP
NH Hotel Group is a consolidated multinational operator and one of the leading urban hotel chains in the world. The Company is present in 28 countries and operates 350 hotels and 54,374 rooms in three continents (Europe, America and Africa), of which 73% are located in Spain, Germany, Italy and Benelux in cities such as Amsterdam, Barcelona, Berlin, Bogota, Brussels, Buenos Aires, Düsseldorf, Frankfurt, London, Madrid, Mexico City, Milan, Munich, New York, Rome or Vienna.
BREAKDOWN OF THE NH HOTEL GROUP PORTFOLIO IN 2018
Figures at December 31st, 2018
In 2018, the Group has continued the significant improvement in the quality of the assets and destinations added to the portfolio, with the opening of 10 new hotels and 1,604 rooms during the year. Of particular note among these new hotels are the openings of the NH Collection Victoria La Habana in Cuba, NH Collection Madrid Gran Vía in Spain and NH Collection Marseille in France, under the upper – upscale NH Collection brand.
EVOLUTION OF THE NUMBER OF OPENINGS AND ADDITIONS
In number of rooms
In number of rooms and hotels between 1996 and 2018
Compound average annual growth: 9.8%
In 2018, the Group started to operate 10 new hotels, located in Havana, Marseille, Brussels, Monterrey, Venice, Madrid, Graz, Essen and Toulouse, with a total of 1,604 rooms.
NH Hotel Group signed agreements on 6 hotels in 2018 with 766 rooms. All agreements signed were under rental and management formulas, under the NH and NH Collection brands and in major cities (Havana, Hannover, Hamburg, Porto and Guadalajara).
In November 2018, the effective termination of all management contracts between Grupo Inversor Hesperia (GIHSA) and NH Hotel Group relating to the management of 28 hotels was formalized, due to the change in control of the Company that took place during the year. In addition, another 14 hotels left the Group during 2018.
Global economic and tourist context
In 2018, world economic activity grew at a rate of +3.7%(1), higher than the previous year (+3.5%). More specifically, in the Eurozone the provisional growth rate for 2018 was 2.1%, which is slightly lower than 2017 (+2.2%). Global growth has maintained a positive cycle of trade and investment. Furthermore, European economies continue to grow although certain signs of a slowdown have started to appear with more moderate growth rates.
In line with these figures, when the growth rates of the four countries that together make up the bulk of the Group’s sales and results are compared, it can be seen that The Netherlands (+2.8% in 2018 vs. +3.2% in 2017), Spain (+2.6% in 2018 vs. +3.1% in 2017), Germany (+1.7% in 2018 vs. +2.2% in 2017) and Italy (+1.1% in 2018 vs. +1.5% in 2017) show lower growth rates than last year. On the other hand, growth in emerging countries is expected to remain stable, although with greater divergences between the different countries. Thus, in Latin America growth of +1.0% in 2018 is expected (vs. +1.2% in 2017), affected by worse financing conditions, with Argentina suffering from a depreciated currency and having declared a hyperinflationary economy; and Mexico with slightly lower growth than expected.
According to the World Tourism Organization (“UNWTO”), in 2018, international tourist arrivals globally reached 1.4 billion, representing an increase of + 6.0% over the previous year, well above the growth rate of 3.7% in the world economy, thus consolidating the strong results for 2017 and proving to be the second strongest year since 2010. Spain has consolidated its position as world power in tourism together with France and the USA, breaking its own record with 82.6 million foreign tourists and a 1% increase in the number of international arrivals. Meanwhile, America (+3%) received 217 million international arrivals in 2018, with mixed results in all destinations.
(1) EU figures and estimates from the “European Economic Forecast – Autumn 2018”, of November 2018.
Evolution of results
In this context, the Group exceeded its objectives in 2018 thanks to a stronger positioning in the upper brand segment, the improvement in the customer experience, an increase in operational and commercial efficiency, the asset turnover strategy and the reduction in borrowings.
During 2018, value has continued to be placed on the pricing strategy, leading to greater growth by the Group in the leading cities compared to its direct competitors. In the main destinations where market measurements exist, the Group’s revenue per available room (RevPAR) has been higher than that of its direct competitors.
As far as quality indicators are concerned, NH Hotel Group focuses on measuring quality using new sources of information and surveys with an important increase both in the volume of reviews and in the assessments received. In this regard, the average score on TripAdvisor in 2018 is 8.4 which is the same as in December 2017. In addition, the average Google Reviews score is 8.5 compared to 8.3 in December 2017. These average scores show the high quality levels perceived by customers.
A notable milestone in the continuous improvement of the customer experience is the launch in 2018 of FASTPASS, a combination of three innovative services – Online Check-in, Choose Your Room and Online Check-out -, which gives customers total control over their stay. In this regard, NH Hotel Group has become the first European chain to offer these three services simultaneously.
Furthermore, the NH Rewards loyalty program has exceeded 8.6 million members (compared to 8.4 million members in 2017), 13% of which joined in 2018 and 18% of the total are active.
New selective repositioning opportunities for hotels were also identified in 2018, to be executed between 2018 and 2020 with only a part of the investment having been made in 2018. In this new phase, contributions from the owners of hotels operated under lease arrangements are also expected.
Revenue in 2018 totaled 1,613.4(1) billion euros, showing growth of +4.4% (+67.8 million euros). The income for the year attributable to the Parent Company totaled 117.8 million euros compared to 35 million euros in 2017.
Attention should be drawn to the application of IAS 29 following the declaration of Argentina as a hyperinflationary economy, which affects the result reported in the Company’s accounts.
With regard to the gross borrowings situation, this year it has been reduced from 716.9 million euros in December 2017 to 418.9 million euros in December 2018. Cash and cash equivalents as of December 31st, 2018 total 265.9 million euros (80.2 million euros as of December 31st, 2017). This cash situation is complemented with credit lines totaling 350.4 million euros at the year-end, 250 million euros of which correspond to a long-term syndicated credit facility, compared to 316.3 million euros as of December 31st, 2017.
The Company’s operational improvement has been reflected recently in the improvements in the corporate credit outlook assigned by the principal rating agencies. Thus, Fitch upgraded the corporate rating from ‘B’ to ‘B+’, maintaining a positive outlook on account of the improvement in operating performance and the leverage metrics. Furthermore, in the month of May, Moody’s moved the rating up to ‘B1’ from ‘B2’, reflecting excellent results, a significant improvement in borrowing and greater liquidity.
(1) Information on the profit before Corporate Income Tax and the Taxes paid in 2018 by country where the Group is present may be consulted in the Directors’ Report 2018.
RELEVANT CORPORATE MILESTONES
TAKEOVER BID: MINOR INTERNATIONAL
On July 10th, 2018, Minor International, one the leading hospitality and fashion and lifestyle product distribution companies in Asia Pacific, sought permission from the National Securities Market Commission in Spain (Comisión Nacional del Mercado de Valores) to launch a takeover bid for the acquisition of 100% of the shares in NH Hotel Group at a price of €6.30 per share, after dividend payment.
Once the Takeover Bid had been authorized and at the end of the acceptance period, on October 22nd, 2018 Minor International communicated that it held 369.2 million shares in NH Hotel Group representing 94.1% of the share capital.
Since then, Minor International has started to work together with NH Hotel Group on identifying opportunities to create value, taking advantage of the complementary nature of their hotel portfolios, the implementation of economies of scale with a wider customer base, and exploring new paths for development for all brands in different parts of the world.
In this regard, on February 7th, 2019, the Board of Directors of NH Hotel Group approved the formalization of a framework agreement with Minor International, the text of which seeks to establish a transparent framework for relations between the two groups, in line with the best corporate governance practices.
In particular, the agreement established the communication and exchange of information between NH Hotel Group and Minor International; the definition of the respective geographical areas and preferential market segments for the two companies with a view to avoiding overlaps and to promoting business opportunities; the establishment of a protocol for the approval of their mutual business operations with related parties; and the creation of a framework that will be able to prevent possible conflicts of interest between the two parties.
One of the first initiatives, announced during the International Tourism Fair in Madrid (FITUR) 2019, was the presentation of the imminent integration of all the hotel brands of both groups under a single corporate umbrella with presence in more than 50 countries around the world. Together, both Groups have a portfolio of over 500 hotels articulated around eight brands: NH Hotels, NH Collection, nhow, Tivoli, Anantara, Avani, Elewana and Oaks, that comprise a broad and diverse range of hotel propositions connected to the needs and desires of today’s global travelers.
Furthermore, taking advantage of the wide brand umbrella of the two companies, an analysis is being carried out, hotel by hotel, of the potential repositioning to more premium brands of certain NH Hotel Group assets located in Europe, which have the capacity to drive their profitability under different brands than at present. Both groups are also working on the instrumentalization of the use and operation of the two companies’ brands on markets other than their natural ones, which will make it possible to accelerate their expansion around the world. Furthermore, the two groups are making progress in the development of initiatives to take advantage of economies of scale with commercial channels and suppliers.
Finally, one of the joint projects under development during the first quarter of 2019 is the transfer to NH Hotel Group of the operations of 15 hotels from the portfolio of Minor Hotels in Portugal and Brazil. As a result, NH Hotel Group will operate 17 hotels in Portugal (13 of Minor Hotels plus 4 of NH Hotel Group, three of which are already open and one which is in the pipeline). Once this operation is finalized, NH Hotel Group will have a leading position in the country with presence in Lisbon, Porto, Coimbra, Sintra, Evora and the Algarve. In turn, the companies would combine their efforts in Brazil with 3 hotels located in Bahía, São Paulo and Curitiba.
Distribution of dividends
At the General Shareholders’ Meeting held at the NH Collection Eurobuilding in Madrid in the month of June 2018, the shareholders approved the payment of an interim dividend from 2017 results for an amount of approximately 40 million euros, which represents a gross dividend of ten cents per outstanding share. For 2018, a proposed dividend of fifteen euros per share in 2019 is expected.
Asset turnover: NH Collection Amsterdam Barbizon Palace (The Netherlands)
At the beginning of 2018, an agreement was formalized with the German asset manager Deka Immobilien for the sale and subsequent leaseback of the building where the NH Collection Barbizon Palace hotel in Amsterdam is located. The operation involves the sale of the building for a gross price of 155.5 million euros (584.5 thousand euros/room), which has resulted in a capital gain net of tax of more than 55 million euros in 2018 and a net cash inflow of 122 million euros.
The sustainable lease agreement for the building with variable rent will allow the Group to keep running the hotel for an initial term of 20 years, with the option of exercising two extensions of 20 years each.
Significant reduction in the Group’s borrowings
Gross borrowing fell from 716.9 million euros in December 2017 to 418.9 million euros in December 2018. The reduction in gross borrowing in the period is basically explained by the early conversion of the convertible bond for 250 million euros in June 2018, as well as the voluntary partial redemption of bonds maturing in 2023 for 40 million euros.
The bond conversion took place by handing over to bondholders that requested early conversion (248.3 million of the total nominal value of 250 million euros), 8.6 million treasury shares and 41.9 million of newly issued shares. Bondholders who did not request conversion received 1,7 million euros in nominal value plus the corresponding accrued interest.
As a result of the change in control of the Company, in September 2018 the creditors of the Syndicated Credit Facility of 250 million euros unanimously agreed on a waiver, maintaining repayment until 2021. In addition, in line with the change in control, the Company offered to repurchase the 2023 Bond from bondholders at 101% for a total of 400 million euros. The amount requested totaled only 3.2 million euros of the total nominal value.
Furthermore, in December 2018 the Company announced the partial voluntary early redemption, for a nominal amount of 40 million euros (representing 10% of the total nominal amount issued) of its senior secured noteswith maturity in 2023. The redemption was carried out through the payment of approximately 103.76% of the nominal value of the Notes redeemed with a charge to the Company’s available cash.
Termination of management contracts with Grupo Inversor Hesperia (GIHSA)
In relation to the Framework Settlement and Overall Hotel Management Agreement formalized between NH Hotel Group and Grupo Inversor Hesperia, S.A. (“GIHSA”) concerning the management by NH Hotel Group of 28 GIHSA hotels, in September GIHSA sent a “Notice of Termination due to Takeover”, on the occasion of the public takeover bid submitted by MHG Continental Holding (Singapore) Pte. Ltd., a company wholly owned by Minor International Public Company Limited, on shares representing 100% of the capital of NH Hotel Group.
Accordingly, following the result of the takeover bid in the month of October, in which Minor International gained “Effective Control” by obtaining a stake of 94.13% of NH Hotel Group, on November 30th, 2018 the effective termination of all management contracts between the two groups was formalized, GIHSA having paid all outstanding amounts to NH Hotel Group.
ONE DAY, WHENEVER ANYONE CONTEMPLATES A TRIP TO A CITY FOR AN OVERNIGHT STAY OR MEETING, FOR BUSINESS OR PLEASURE, THEY WILL ALWAYS ASK THEMSELVES: “IS THERE AN NH HOTEL AT MY DESTINATION?”
Hotel Group wants to be the consumers’ chosen destination, offering them memorable experiences that go far beyond their expectations and make them feel special. This vision, which is shared by all the people who form part of the Company, serves as a performance and commitment guide, while at the same time endeavoring to make NH Hotel Group the best option for investors and owners who wish to grow together with the Group, with a global and flexible proposal, with highly-motivated and proud teams, efficient management tools and unique solutions.
To maximize the return for shareholders who have placed their trust in NH Hotel Group, the Company offers its investors the best management opportunities as a leading operator in both the urban and business segment.
The NH Hotel Group culture, inspired on its vision and a clear commitment to customer service, is what has set the Group apart since it started operating in the industry.
This culture has allowed the Company to evolve from a management model to a leadership one that incorporates the principles that guide the day-to-day activities of executives and employees and is reflected in the Company’s eight beliefs:
1. We are obsessed with delivering memorable experiences
2. We are proud to serve
3. We strive to be the best, even if we are not the biggest
4. We are responsible for our results
5. We care for our people. Our people care for our guests
6. We are active in the communities where we live
7. We are young-minded
8. We enjoy what we do… and we do everything with a smile
NH IS YOUR HOME ALWAYS
One day, an NH Rewards member, who was visiting Madrid had a problem during her trip and although she was not staying at any of our hotels at the time, finding she was close to the NH Collection Gran Via she decided to go there.
When she came in, the explained to Lili, Guest Relations Manager of the hotel, that she had left her cell phone in an Uber vehicle, and needed her help. Without hesitation, the Guest Relations Manager made several calls and recovered the client’s cell phone in a short time.
When you are a member of NH Rewards, any NH is your home. We will always be proud to help and serve.
AN AUTISTIC GIRL’S UNFORGETTABLE STAY AT THE NH COLLECTION MADRID EUROBUILDING
Aitlin, a 14-year-old girl from the USA diagnosed with Autism Spectrum Disorder (ASD) and with difficulties to interact and communicate, especially with strangers, traveled to Madrid with her parents.
Right from the time of her arrival at the NH Collection Eurobuilding, Aitlin showed special interest in Diego and Lucas, members of the Guest Relations team, even saying a few words in Spanish and Portuguese to them. They immediately connected with the girl and gave her lots of attention, not only offering her candy on her trips to the VIP Lounge, but also writing messages to her in Spanish, the first one on her mirror, wishing her a good night, and many more on greetings cards that they gave her every day. The night before she left, they even left a framed photo of the three of them in her room with a written message.
Aitlin was so grateful that, before leaving, she gave them a notebook with drawings and messages dedicated to them along with other affectionate gestures, that according to her parents is something normally difficult for her
The team at NH Collection Grand Hotel Krasnapolsky helped to create a truly WOW moment when one of their guests requested help in asking his girlfriend to marry him. The location for the proposal was Dam Square and the team prepared a romantic setup with balloons and candles. They fought against the Dutch wind, trying to keep the balloons still and finding a nice box for the candles, creating a “private area” on the busy Dam Square.
When the guests arrived at 8pm, everything was perfectly in place and of course the lady said YES to the proposal which was celebrated afterwards with a lovely bottle of champagne.
NH HOTEL GROUP
During 2018 NH Hotel Group has consolidated compliance with the Strategic Plan 2017-2019 based on the Company’s strengths and driving the six key levers aimed at creating value in the business.
This Plan establishes as priorities driving the revenues of NH Hotel Group, increasing its efficiency and reducing debt, and taking advantage of its strengths for new repositioning opportunities and organic growth as an additional pathway to expansion.
Throughout last year the Group has focused on brand development and segmentation, revenue management, quality and repositioning. The Company’s operational efficiency has also been enhanced and debt has been reduced significantly.
NH Hotel Group has promoted greater positioning of its hotel portfolio in the upper upscale segment, increasing the presence of the NH Collection and nhow brands.
The Company has also made progress in its digital transformation, which is based on three pillars: getting to know customers better, increasing operational efficiency and using technology as support to maintain a process of continuous innovation in all areas of value for the Company.
Optimizing the portfolio is another of the strategic lines the Group has undertaken in 2018, through initiatives aimed at intensifying the profitability of its portfolio. Accordingly, growth operations have been carried out with a low capital commitment, together with the selective departure of hotels in mature markets with a lot of invested capital.
The solid generation of operating cash during the year and the contribution through asset turnover have enabled the Company to consolidate a significant cash position during the year. All of this, together with the early conversion of the convertible bond for €250 million in June 2018 have made it possible to reduce the Group’s net financial debt significantly, down to €170.7 million at the end of 2018.
Furthermore, work has also been done during the year on defining the new Strategic Plan 2019-2023, subject to approval by the Company’s Board of Directors in order to guarantee implementation in 2019.
Key strategic initiatives in 2018
The NH Collection and nhow brands
In 2018, the Company has continued to invest in the refurbishment and improvement of its portfolio with the opening of the NH Collection Gran Vía in Spain, NH Collection Marseille in France and by obtaining the fifth star in two establishments of its NH Collection brand, located in the cities of Milan and Florence: the NH Collection Milano President and the NH Collection Firenze Porta Rossa.
Similarly, the signing of projects for this brand in Merida (Mexico), Antwerp (Belgium), Milan (Italy), Murano (Italy) and Santander (Spain), among others, will continue to increase the number of NH Collection hotels. There are currently 75 hotels operating with this brand and other projects in Chile, Belgium, Italy, Spain, Mexico and Germany in the pipeline.
For its part, the nhow brand continues to grow and become consolidated. Since summer 2018, the city of Marseille is home to the first nhow hotel in France. Located on a cliff by the sea on one of the Mediterranean’s most beautiful bays, the building that houses the new nhow Marseille has been completely refurbished by Marseille-based architects and representatives of SHPB (Société Hôtelière du Palm Beach), Claire Fatosme and Christian Lefèvre, and by the Italian architect Teresa Sapey. The hotel, which has 150 rooms including a 130m2 nhow Penthouse suite, completes the range of services offered with three bars, a restaurant, a spa, a pool, 14 meeting rooms with a capacity for more than 400 people and a 322-seat auditorium.
Furthermore, an event held in September 2018 in The Netherlands offered the opportunity to gain first impressions of the interior design of the future nhow Amsterdam RAI, which is scheduled for opening in early 2020. With 650 rooms on 25 floors and a height of 91 meters, the nhow Amsterdam RAI will be the biggest newly-built hotel in the Benelux region. NH Hotel Group is working on the project with its partner, the real estate developer COD, hand in hand with the world renowned architecture firm OMA, founded by Rem Koolhaas.
Also in 2018, NH Hotel Group has chosen two of the most cosmopolitan destinations in Europe, Brussels and Rome, to continue with the expansion of the nhow brand. In this regard, the Company has agreed on the conversion of the current NH Brussels Bloom (Belgium) and NH Collection Roma Vittorio Veneto (Italy) to the nhow brand.
The future nhow hotel in Brussels, located in a privileged building owned by Pandox (leading European hotel property company), will open its 305 rooms following their refurbishment with a design concept that will inspire the creativity of its visitors and break the frontiers between an art gallery and a hotel.
Meanwhile in Italy, the Group will add its second nhow hotel in the country after the conversion of the current NH Collection Roma Vittorio Veneto to the nhow brand in early 2020 and its 199 rooms and communal areas will reinterpret the grandeur and legacy of the imperial city and its excesses, from a modern and disruptive perspective.
The conversion of these two hotels is added to the portfolio of hotels already open and ongoing projects in the nhow brand, which has a total of 11 hotels in Europe and Latin America.
Relaunch of the NH Rewards program
In 2018 NH Hotel Group has relaunched its NH Rewards loyalty program with a renewed image and a much more attractive and generous range of rewards to acknowledge and repay the loyalty of its regular customers on each stay. This makes NH Rewards, which currently has more than eight and a half million members, one of the most generous loyalty programs in the hotel industry.
The new NH Rewards program favors simplicity and focuses its strategy on rewarding customers in a much more generous points system. The percentage of points that customers accumulate for the money spent on their stay is now almost double, while point redemption continues with the transparent arrangement that is easy to understand where one point equals one euro.
The points earned by customers can be redeemed in exchange for free stays and discounts every day of the year, with no exceptions, in all the NH Hotel Group’s brands (NH Hotels, NH Collection and nhow).
The new NH Rewards program offers additional rewards right from the time the customer registers, at which time he or she receives a gift of five welcome points which will lead to a direct discount from their very next stay. Furthermore, for each reservation the guest makes through the Company’s webpage, or if they choose the premium brands NH Collection or nhow, he or she will obtain extra points which are added to the points already earned depending on the card level. With the new NH Rewards program, a client can accumulate enough points for a free night approximately every 10 stays.
TRANSFORMATION PLAN: NH HOTEL GROUP AT THE FOREFRONT OF INNOVATION
2018 has ended as a very important year in the Company’s Digital Transformation Project, one of the most important initiatives of the Strategic Plan to bring efficiency to processes and systems by increasing the capacity to set ourselves apart from the competition, and in continuing to improve the Company’s basic processes.
One of the Company’s great achievements in this regard has been the centralization in a single integrated system of all its properties and functions. NH Hotel Group currently has a 100% integrated digital platform (NH Digital Core Platform), a pioneering technological solution in the industry that has allowed it to integrate all the systems of all the Group’s hotels, and which has become the cornerstone for NH to extend its knowledge of customers, maximize its efficiency and innovate on a large scale in all its value areas.
The main benefits of this transformation process include the improvement in the customer experience in a global environment such as the present; the optimization and reduction of operating costs; a more in-depth analysis of data, which has enabled the Company to generate new sources of revenues; more agility in responding to market changes; and more importantly, the cultivation of an innovation culture within the organization.
In 2018, the 19 key projects included in the plan reached a global consolidated fulfilment of 115%, notably:
1. Advanced M&E pricing: Quotation tool
This tool provides for a strategy focused on M&E customers with a total revenue management vision that offers ad-hoc quotations at an excellent speed and, therefore, an increase in customer satisfaction levels.
Group quotations are also provided more efficiently and effectively, obtaining all the information on a single integrated platform and adapting better to the customer’s needs.
NH Hotel Group has recently launched FASTPASS, the combination of three innovative services – Online Check-in, Choose Your Room and Online Check-out – which gives customers total control over their stay, making NH the first European urban hotel chain to offer all three services simultaneously and placing it at the forefront of state-of-the-art hotel technology.
48 hours before arriving at the hotel, the customer receives an e-mail granting access to Online Check-in where the customer can provide all his or her details in advance, up until noon of the arrival date. As a result, upon getting to the hotel, all the customer has to do is pick up the key to his or her room. During the Online Check-in process, the customer also benefits from the Choose your Room service that lets him or her consult all available rooms and chose the one best suited to his or her taste and needs (views, bathroom setup, type of bed, etc.). From 6 p.m. on the day before departure, the guest has the possibility of paying for any expenses incurred as well as completing an Online Check-out in order to leave the hotel without having to go through the reception desk.
3. Artificial Intelligence: CRO virtual agent
In 2018, a virtual agent has joined the Central Reservation Office to minimize waiting time for customers, thus also improving their experience. This virtual agent will be trained with basic information on the hotels, timetables, distances and any other type of information our guests may need. It can also cancel previous bookings if requested to do so.
A project has recently been developed for the automation of reservations that come in through the email channel of the Company’s CRO, thus avoiding manual interaction and offering a 24-hour service. This helps achieve efficiency through the improvement in customer response service levels and guarantees the necessary quality levels due to the elimination of errors caused by manual processes. This technology will be implemented in other areas soon.
5. Optimization of contract creation
NH Hotel Group currently has more than 2 million contracts uploaded on TMS, of which 70% are contracts negotiated by companies. Upload requests are currently made manually, involving a slow and often inefficient process. A tool has now been developed that will let the high number of negotiated contracts in the Company be managed more efficiently. Account managers can upload their requests directly on SAP (instead of manually, as now) ensuring an optimized process with shorter service levels and considerably reducing billing incidents.
6. Advanced CRM
In 2018 NH Hotel Group has worked in more depth on advanced CRM techniques, building a 360° view of its customers that helps improve the Company’s knowledge of them and adjust this way campaigns to their tastes, needs and preferences.
The Company’s 360° view database collects and analyzes information through the different points of contact with customers such as the website, the Customer Service Center or the hotels. This information not only makes it possible to create segmentations in different categories, but also to establish behavior prediction models and thus improve offers, propose personalized services and improve the value proposal of the NH Rewards loyalty program.
In line with this, through automization of opinion surveys, customers’ opinions are sought regularly which means that areas for improvement can be identified readily and the improvements implemented.
Furthermore, during 2018 work has been done on the creation of the Digital Evolution Roadmap for the next five years, the pillars of which are asset management, brand value perception, the commercial function and operational excellence. Thus, this Digital Evolution Roadmap will be aligned with the Company’s Strategic Plan and will make it possible to define the projects required to meet the strategic goals of each area.
Expansion and Portfolio Optimization Strategy
In 2018, the Group has continued the significant improvement in the quality of the assets and destinations added to the portfolio, with the opening of 10 new hotels and 1,604 rooms during the year.
Of particular note among these new hotels are the openings of the NH Collection Madrid Gran Vía (Spain) and NH Collection Marseille (France), under the upper – upscale NH Collection brand.
NH Hotel Group has an extensive, representative and diversified portfolio of 350 hotels operated under lease, management and ownership regimes, in the case of the latter with an estimated asset value of €2,062 billion at December 2018.
The profound transformation the Company has carried out, particularly the portfolio optimization strategy implemented between 2013 and 2018 has helped to double NH Hotel Group’s operating profit in this period, despite the fact that it currently operates a similar number of rooms to six years ago. This has been possible thanks to the fact that the Company has managed to offset successfully the departure of non-strategic assets with the addition of new hotels analyzed under criteria of maximizing the return and medium and long-term sustainability, as well as by reaching agreements on assets in the existing portfolio aimed at operating them under more flexible and beneficial conditions.
The favorable results of the portfolio optimization and repositioning process, the latter involving significant investments to bring the portfolio into line with the Company’s new standards, and the increased weight of rooms under the upper – upscale brands, have resulted in an increase in demand from investors and hotel owners interested in analyzing joint growth opportunities and benefitting from the model and flexibility that the Group offers as an international operator.
In 2018, the Group has continued with the significant improvement in the quality of the hotels and destinations to be added to the portfolio, with the signing of 4 hotels (645 rooms) in Europe and Latin America, and the opening of 10 new hotels (1,600 rooms) during the year.
In relation to the Group’s commitment to the nhow brand, attention should be drawn to the seven iconic hotels that NH Hotel Group plans to open in forthcoming years in the cities of London, Amsterdam, Brussels, Frankfurt, Rome, Lima and Santiago de Chile.
Following the acquisition of 94.1% of the share capital of NH Hotel Group by Minor International in the last quarter of 2018, the two companies have started to work on defining a new strategic five-year plan aimed at taking advantage of the complementary nature of their respective hotel portfolios, the implementation of economies of scale with a wider customer base and exploring pathways for development for all their brands in different parts of the world.
In 2018 the Company has consolidated the commercial strategy by leading, among others, the following notable projects:
Automated pricing: Through its automated pricing strategy, NH Hotel Group ensures that it reacts instantly to changes in market demand. As well as optimizing revenues, this initiative reduces the manual work of the revenue manager considerably.
Revenue optimization in all segments: by applying open pricing in all segments (corporate, leisure and groups) NH Hotel Group makes sure that the price applied is right according to demand for that day. For customers or segments with a guaranteed discount, this strategy assures that the percentage to be discounted is adapted to demand This way, the customer receives the best offer and the Company ensures that it optimizes its revenues through the ADR.
Pricing strategy for Food and Beverage services: this project seeks to increase revenues from Food and Beverage services in the establishments of NH Hotel Group through better optimization and organization of these elements.
Furthermore, NH Hotel Group has embarked on a digital transformation project in the B2B area, in order to increase profitability and generate additional demand. During the year, a small migration of channels started, which will help to offer a faster and higher quality service to its customers, specifically through its direct online channel, which is aimed at companies, agencies and event organizers and has contributed in 2018 an ADR which is 4 percentage points higher than the average for the remaining channels, making this channel the most profitable one in the Company.
Thus, by offering a digital brand identity, a differentiated value proposition, a renewed user experience and a robust operating model focused on the market and customer needs, the Group seeks to foster migration from traditional channels such as Hotels, CRO and GSO to this digital channel, which will entail collateral benefits of generating additional demand and greater profitability of sales.