NH HOTEL
NH HOTEL GROUP BUSINESS MODEL
NH Hotel Group is a consolidated multinational operator and one of the leading urban hotels chains in the world. At the end of 2020, the Group was present in 29 countries, operating 361 hotels and 55,371 rooms in four continents (Europe, North and South America and Africa).
The centralized business model allows NH Hotel Group to offer its guests an excellent service in its hotels across the different regions and geographical areas where it does business. The corporate head office and regional offices offer the hotels a wide range of functions such as sales, revenue management, booking, marketing, human resources, financial management and systems development.
This flexible operational and financial structure has allowed the Group to overcome the significant challenges of 2020, despite the low level of demand. Although the challenges continue in the first few months of 2021, in the first phase of recovery the Group will benefit from the brand recognition, excellent locations and strong market positioning once the recovery in Europe is underway in the medium term.
BREAKDOWN OF THE PORTFOLIO
* Corporate scope. Figures as of December 31st, 2020.
KEY FIGURES
Global economic and touristic context
During 2020, due to the economic crisis generated by the COVID-19 pandemic, world economy shrank by -3.5% compared to growth of +2.8% the previous year. (Data and estimates of the IMF’s “World Economic Outlook” January 2021).
The world economy is starting to leave behind the minimal levels it fell to during the Great Lockdown of the month of April. But as the COVID-19 pandemic continues to spread, many countries have reduced the rate of reopening and some are once again introducing partial lockdowns to protect vulnerable population groups. Although the recovery in China has been faster than expected, the long road that the world economy must travel in order to return to pre-pandemic activity levels still has many obstacles.
Thus, the European Union’s estimate for growth in worldwide economic activity in 2021 is +5.5%. More specifically, in the Eurozone the provisional growth rate for 2020 was -7.2% (+1.3% in 2019) and growth of +4.2% is forecast in 2021. The growth rates in the four countries that make up the bulk of the Group’s sales and results show negative growth in 2020: Spain (-11.1% in 2020 vs. +2.0% in 2019), Netherlands (-5.4% in 2020 vs. +1.7% in 2019), Germany (-5.4% in 2019 vs. +0.6% in 2019) and Italy (-9.2% in 2020 vs. +0.3% 2019). On the other hand, the fall in Latin America is expected to be -7.4% in 2020 (vs. +0.2% in 2019), as all the economies in the region have suffered the consequences generated by COVID-19. The uncertainty about health, mobility restrictions and economic policy, aggravated by moderate raw material prices, have led to a significant decline in economic activity in 2020 and have also affected the prospects of bouncing back quickly.
Global tourism recorded its worst year ever in 2020, with international arrivals falling by 74%, according to the latest data from the UN World Tourism Organization (UNWTO). Destinations around the world received one billion fewer international arrivals in 2020 than the previous year, due to an unprecedented slump in demand and widespread travel restrictions. By comparison, the decline during the global economic crisis in 2009 was 4%.
According to the latest UNWTO World Tourism Barometer, the slump in international travel represents an estimated loss of US$ 1.3 trillion in export earnings, more than eleven times the losses recorded during the global economic crisis of 2009.
Europe recorded a 70% decline in arrivals in 2020, despite a small and brief rebound in the summer of 2020. The region suffered the largest drop in absolute terms, with a decline of more than 500 million tourists in 2020. The Americas recorded a 69% drop in international arrivals, with slightly better results in the last quarter of the year.
Given the constant evolution of the pandemic, many countries have been reintroducing tighter travel restrictions since the beginning of the year 2021. Measures include mandatory testing, quarantines and, in some cases, complete border closures, all of which make it difficult to resume international travel. At the same time, it is hoped that the gradual arrival of vaccines against COVID-19 will help restore consumer confidence, ease travel restrictions and slowly bring travel back to normal during 2021.
EVOLUTION OF RESULTS
Turnover in 2020 totalled 536.2 million euros, showing a drop of -68.6% (+1.172 billion euros). The loss attributable to the Controlling Company was -437.2 million euros, compared to net income of 90.0 million in 2019. This fall is explained totally by the impact of COVID-19 on the business from the month of March onwards.
Gross borrowing during the year increased from 455.6 million euros in December 2019 to 998.1 million euros in December 2020. With regard to the situation of cash and cash equivalents, as of December 31st, 2020 it totalled 320.9 million euros (289.3 million euros as of December 31st, 2019). This liquidity was also supplemented with credit facilities at the year-end totalling 25.0 million euros, compared to 303.5 million euros as of December 31st, 2019, of which 250 million euros corresponded to the syndicated credit facility (drawn in full at the end of 2020).
TAX INFORMATION
The Tax Strategy for NH Hotel Group (available on https://www.nh-hoteles.es/corporate/es ) was approved by the Board of Directors on July 27th, 2015, considering that one of the pillars underpinning the entire Group’s business strategy should be avoiding or minimizing risks, including those tax related.
The strategy is based on complying with tax legislation in all the jurisdictions in which NH Hotel Group is present, applying an interpretation of such legislation that fundamentally has due regard for the spirit and purpose of the laws.
GUIDING PRINCIPLES OF THE TAX STRATEGY
• Compliance with tax legislation in all locations where we are present.
• Prevention and reduction of significant tax risks.
• Collaboration, loyalty and good faith with the Tax Administrations.
• Reporting to the Board of Directors on the main tax implications of operations.
MONITORING AND CONTROL
The Board of Directors, through the CEO and Senior Executives, drives the monitoring by the Group of the application of the principles and good practices concerning tax affairs.
Furthermore, the Board of Directors has the support of the Group’s Audit and Control Committee, which must oversee the effectiveness of the tax risk management and control systems and periodically provide the pertinent information to the Board.
The Company monitors and tracks its tax policy in compliance with the mechanisms set out in the law, in its tax policy and in the control framework approved by the Board.
Profits of NH Hotel Group and income tax paid (thousand euros), by country
Income or losses before taxes and the taxes paid per country described above are affected, in some cases, by circumstances such as the sale of assets, the exit of hotels, early depreciation of assets due to repositioning or the situation of hyperinflation in the case of Argentina. It should also be noted that the corporate income tax shown in the above table is as calculated on a settlement basis.
MILESTONES 2020
JANUARY
Award given to FAST PASS: NH Hotel Group has been appointed winner in the Digital Transformation category of the national phase of the CaixaBank Hotels & Tourism Awards 2019, The award recognizes the Company’s digitalization process, working methods and strategies as well as the implementation of innovative technologies that generate a measurable impact on the business.
BLOOMBERG GENDER & EQUALITY Index: In January 2020, NH Hotel Group is included for the first time in the Bloomberg Gender Equality Index 2020, being the only Spanish hotel company among the 325 corporations included in the index.
FEBRUARY
NH Hotel Group stockvalue rises after meetingits financial objectives for 2019: The value of NH Hotel Group shares has increased by 10.58% after reporting that the financial objectives for 2019 have been met. This means that the Group has exceeded “the objective it committed to at the start of the year of reaching recurring income of 100 million euros in 2019”.
MARCH
Anantara Villa Padierna joins The Leading Hotels of the World (LHW). NH Hotel Group confirms that Anantara Villa Padierna (Marbella) has joined LHW, to which Tivoli Avenida Liberdade (Lisbon) and Tivoli Palacio de Seteais (Sintra) already belong. This reinforces the Company’s intention to position Anantara as a luxury brand in Europe.
APRIL
The Company reacts to the health crisis:
- NH Hotel Group launches NH Response and makes hotels available to the authorities to be medicalized and to accommodate healthcare workers.
- Launch of “Feel Safe at NH”: for the purpose of continuing to offer unforgettable experiences at our hotels, guaranteeing the health and safety of our guests and team members, NH Hotel Group launched a global set of health and safety protocols under the concept “Feel Safe at NH”.
NH Hotel Group joins chef José Andrés’ #chefsforspain movement: NH Hotel Group joins the World Central Kitchen’s initiative; whose goal is to deliver more than 2 million meals. NH Hotel Group participated by making available the kitchens of the hotels Anantara Villa Padierna (Marbella), NH Collection Eurobuilding (Madrid) and NH Collection Finisterre (A Coruña) where 138,759 meals were cooked to be donated to the most vulnerable groups during the crisis.
MAY
NH Hotel Group, one of the strongest hotel brands in the world: NH Hotel Group is one of the most valuable hotels brands in Spain according to the latest Top 50 Brands report by Brand Finance. The Company holds its position in 27th place and is the 5th strongest hotel brand in the world.
NH Hotel Group strengthens its liquidity with the signing of a syndicated loan of 250 million euros: The agreement, reached within the legal framework established by the Spanish government to mitigate the economic impact of COVID-19, has been guaranteed by the Spanish Official Credit Institute (ICO) to finance the operational needs of the Company.
JUNE
NH Hotel Group starts to reopen hotels:
After being closed for several months, NH Hotel Group starts to open its hotels in all the territories where it operates.
JULY
Approval of the Human Rights Policy and update of the Environmental Policy: The Board of Directors of NH Hotel Group approves the Human Rights Policy, and the renewal of the Environmental and Energy Policy. This milestone is part of the Company’s commitment to improve its sustainable performance and of the latest Corporate Governance recommendations which insist on reinforcing policies such as CSR, Human Rights, Environment.
Appointment on the Management Committee: Luis Martínez Jurado was appointed new CFO, reporting to Ramón Aragonés, CEO, therefore joining the Management Committee, following the voluntary departure of Beatriz Puente, who decided to undertake a new professional challenge.
OCTOBER
NH Hotel Group signs the extension of the duration of its revolving credit agreement in the amount of €236 million until march 2023 with an ESG-linked clause: NH Hotel Group has signed with all the financial institutions involved the extension until March 2023 of the duration of the syndicated credit facility, whose original maturity was September 2021. On the other hand, NH Hotel Group’s commitment to sustainability performance and evolution, together with its participation in the 2019 Corporate Sustainability Assessment (CSA) carried out by the sustainable investment agency SAM, has enabled it to obtain the sustainable financing rating for this syndicated credit line for an amount of 236 million euros.
Board Appointment: The Board of Directors of NH Hotel Group has resolved and appointed Rufino Pérez as a new Executive Director. The appointment was made following a prior favourable report issued by the Nominations, Remuneration and Corporate Governance Committee. In his new duties, he retains the role of Chief Operations Officer and Global Transformation Leader.
HYBRID MEETINGS by NH: As the world evolves and faces a new reality, NH Hotel Group has improved its meetings and events services with modernized hybrid meeting solutions thanks to technology. Wi-Fi bandwidth has been improved to guarantee better connection when sharing content in real time with all attendees. As the needs of the sector change, how and what the Company offers has evolved to adapt to new ways of working.
NOVEMBER
NH Hotel Group, one of the most sustainable hotel chains in the world: NH Hotel Group has been recognized by SAM, the prestigious specialist in rating investment in sustainability, among the top 3 most sustainable companies in the world in its sector. This recognition is testament to our leadership in sustainability within the industry and confirms the ambition shared with Minor International, a member of the Dow Jones Sustainability Index, which monitors the economic, social and environmental performance of the leading sustainability companies in the world.
OUR VISION AND CULTURE
OUR VISION
One day, whenever anyone contemplates a trip to a city for an overnight stay of a meeting, for business or pleasure, they will always ask themselves: “is there an NH Hotel at my destination?”.
NH Hotel Group places its focus on the guest; they are at the centre of all decisions. This approach allows us to evolve towards a vision oriented towards a culture of service, attention to detail at all times and corporate values that promote sustainability, innovation and responsibility, based on people.
NH Hotel Group wants to be consumers’ chosen destination, offering them memorable experiences that exceed their expectations and making them feel special. This vision, which is shared by all the people who make up the Company, serves as a performance and commitment guide, while at the same time seeking to make NH Hotel Group the best option for investors and owners who wish to grow with us, our global and flexible proposal, 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.
OUR CULTURE
The NH Hotel Group culture, inspired on its vision and on a clear commitment to customer service, is what has set the Company apart since it started operating in the industry.
The alignment of the Company’s culture with its strategy is key for sustainable growth. This culture has allowed the Company to evolve from a management model to a leadership one that incorporates the beliefs that guide the day-to-day activities of all employees, and which are:
- We are obsessed with delivering memorable experiences
- We are proud to serve
- We strive to be the best, even if we are not the biggest/strong>
- We are responsible for our results
- We care for our people, our people care for our guests
- We are active in the communities where we live
- We are young-minded
- We enjoy what we do… and we do everything with a smile!
As a reflection of our Company values…
THE HOTEL NH VENTAS IN MADRID HONOURS MARCELA ON HER 93rd BIRTHDAY
During the hard months of lockdown, NH Hotel Group joined the initiative in which hundreds of establishments lit up their facades with hearts to convey a message of unity, solidarity, raise the spirits of citizens in general and honour healthcare and essential service professionals who are work towards ending the coronavirus pandemic.
Marcela, a resident of the neighbourhood where the NH Ventas hotel is located, looked out her window every night during the strict lockdown to see the messages of support projected on the hotel’s façade. Knowing that this daily moment cheered her up greatly, her granddaughter Laura wrote to the hotel thanking them for this gesture and telling them that it would soon be her grandmother’s birthday. When that day came, the NH Ventas lit up its exterior with special messages, lights and songs to celebrate Marcela’s 93rd anniversary. A surprise that birthday lady and her family will never forget
NH HOTEL GROUP STRATEGY
COVID-19 has caused a drastic fall in demand linked to the mobility restriction measures, which has led to a focus on efficiency. In 2021, once the Company has better visibility of the recovery in demand, a long-term strategic planning process will be undertaken.
The Company’s excellent performance in recent years (pre-COVID-19) has been the result of a complete transformation of the Group.
In the first phase of this transformation, which began in 2014, the strategic plan focused on brand segmentation, portfolio optimisation, strong investments in repositioning and systems and a renewed pricing strategy. This brought NH Hotel Group to a second phase, which started in 2017, and was based on the Company’s strengths and on boosting the key levers in value creation for the business.
This Plan prioritised driving the Company’s revenues and increasing its efficiency, while leveraging its strengths for new repositioning opportunities and organic expansion as a further avenue for growth.
With the entrance of Minor International as shareholder, a new phase of opportunities opened up through the creation of a global hotel platform with presence in seven continents.
Thus, began a new phase in which additional opportunities arose:
- The possibility of increasing the customer base, attracting the growing Asian demand to European markets.
- Economies of scale with commercial partners, travel agencies and suppliers.
- The capacity to use a broader range of brands in new territories, i.e., take NH brands to Minor territories and vice versa.
- Access to the luxury segment with new rebranding opportunities and the opening and formalization of contracts for new hotels within this segment.
- Integration of Tivoli operations in Europe under NH management. • Having the best teams, promoting the exchange of talent.
Key strategic initiatives in 2020
1. NH HOTEL GROUP CONSOLIDATES ITS STRATEGIC COMMITMENT TO THE LUXURY SEGMENT
In 2020, NH Hotel Group has consolidated its strategic commitment to the luxury segment through an agreement with Covivio, one of the main hotel investment funds in Europe, to operate eight leading establishments located mainly in Rome, Florence, Venice, Nice, Prague and Budapest.
Thanks to this operation, NH Hotel Group has strengthened its leadership in Italy and boosted its strong position in the competitive markets of France and Eastern Europe. At the same time, this agreement represents a huge milestone in the shared ambition with MINOR of continuing to bring the Anantara Hotels & Resorts luxury brand closer to Europe.
In addition, Anantara Villa Padierna’s inclusion in The Leading Hotels of the World (LHW), a collection to which Tivoli Avenida Liberdade (Lisbon) and Tivoli Palacio de Seteais (Sintra) already belonged, allows Anantara to position itself as a luxury brand in Europe and go hand in hand with the best partner to introduce itself in key feeder markets in this segment.
2. EXPANSION AND PORTFOLIO OPTIMIZATION PLAN
Due to COVID-19, certain openings that had been originally scheduled for 2020 have been postponed. Nonetheless, during the year, the Group opened 11 new hotels with 1,966 rooms to be added to the portfolio and signed a 394-room hotel in Copenhagen, which is expected to open in the last quarter of 2021.
Evolution of the portfolio between 1996 and 2020
CONTINUOUS GROWTH
In number of rooms and hotels between 1996 and 2020. The evolution of the portfolio is shown in the graph below:
3. COMERCIAL EVOLUTION MODEL: BOOSTING BUSINESS
The commercial strategy, based on the Customer Centric philosophy, is built on experience, specialization and the close relationship that has been generated with customers over the years, to offer a service of the highest quality. With this, the Company will manage to improve its capacity to evaluate the actual opportunity cost at each time, impacting on its global strategy and the acceleration of its growth.
Since 2018 projects have been led for the optimisation and commercial development of the Company through the digitalization of processes and new business approaches such as the acquisition and loyalty of B2B customers, which have represented an important new demand channel. Along these lines, NH Hotel Group continues with its digital transformation project in the B2B area, with the aim of increasing profitability and generating additional demand.
Boosting Business is an opportunity to accelerate the Company’s business capacity which will guide the evolution for adaptation towards both future and present customers. It is focused on creating new digital tools, boosting growth and strengthening the connection with customers. Adapting the service to the digital era to create new processes, ways of working and identifying development opportunities will make it possible to improve efficiency and offer a much more personalized and quality experience in line with the new needs of customers.
“For NH Hotel Group, being in the right place at the right time is key”
The creation of an optimal model to allow for the development of synergies (cross-selling) with Minor Hotels to promote more transversal action plans, adapted to each market, drives the growth of NH Hotel Group in both new and traditional markets, increasing demand and reducing seasonality.
Thus, the cohesion between the culture of service that characterises NH Hotel Group and the step towards digitalization increases the capacity to identify new opportunities and drives growth as professionals, as leaders and as an organisation.
From the start of the pandemic, we have analysed the different scenarios of government and/or local restrictions in the different countries in which NH Hotel Group operates, monitoring their evolution and adapting constantly to the timelines or phases of the restrictions.
Our main goal has always been to maintain flexibility both in individual and group bookings, adapting to the circumstances of force majeure in each country.
4. TRANSFORMATION PLAN
NH Hotel Group continues to believe in innovation and in 2020, despite being a very difficult year, it has maintained the Company’s Digital Transformation Project as one of the initiatives of the Strategic Plan in order to bring efficiency to processes and systems, increase the capacity of differentiation compared to competitors and customer perception, and continue improving the Company’s basic processes.
One of the Company’s great achievements has been to centralise all its properties and functions in a single integrated system. This allows NH Hotel Group to have a 100% integrated digital platform: NH Digital Core Platform. A pioneering technological solution in the sector that has made it possible to integrate the systems of all the Group’s hotels and which has become the foundation on which NH Hotel Group can extend its knowledge of customers, maximise its efficiency and innovate on a large scale in all its areas of value. In 2020, this has also facilitated the development and integration of functionalities to increase the safety of our employees and guests, as well as allowing us to continue working as normal in such uncertain times. Access to our systems has not experienced any problems from any location and both the Central Booking service and each of the employees of NH have been able to work normally, from the very first day of lockdown, whether from home or at the hotel.
We can also highlight that this integrated platform gives us enormous flexibility to obtain the necessary information to make decisions, such as, the advisability of opening or closing hotels, with no technical challenge or additional project needed. It is simply straightforward and immediate. This provides us with great efficiency as a Company, focusing on what is really important, such as analysis, making decisions and executing them.
Among the main benefits attention should be drawn to the improvement in the customer experience in a global setting such as the present, the optimisation and reduction in operating costs, the in-depth analysis of data – which has allowed the Company to generate new sources of revenues –, greater agility in responding to market changes and, especially, the important boost given to the innovation culture within the organization.
At NH Hotel Group we consider digitalization to be a key tool to offer an extraordinary experience, but always as an accompaniment to the work of our employees who, proud to serve, are the ones who really make a difference. They are the soul of NH Hotel Group and digitalization is a facilitator; and the fact that they go hand in hand is what guarantees the success of our business model.
Significant projects in 2020
1. Mobile Guest Service
Digitalization of hotel information and services on a Progressive Web App (PWA) that can be accessed from any of a guests’ device (cell phone, tablet, laptop), offering them the possibility of having all of the hotel’s information at hand: from information on the hotel’s facilities and hours, to the possibility of ordering room service, booking a table at the restaurant, requesting additional amenities, etc. An initiative that, in addition to supporting the Feel Safe at NH plan by eliminating interactions and guaranteeing information during their stay, generates benefits in terms of sustainability due to the digitalization of all the information.
2. Housekeeping Mobility App
NH Hotel Group has continued to implement and improve a Housekeeping app that optimises management of the department, as well as the check-in process. As soon as a room is clean and ready, the hotel’s housekeeping staff can confirm this in real time using the app, translating into an optimisation of the check-in process and an improvement in the guest’s experience, as they can have access to the room earlier. This also represents an improvement as it allows employees to manage room cleaning in an optimal and safer way; not forgetting the reduction in the use of paper and the resulting positive environmental impact. In 2020, 50 hotels have already been working with this app.
3. Tablets at the reception desks
NH Hotel Group has launched a pilot in several hotels to include terminals in reception areas, promoting a new check-in and check-out process accompanied by a tablet that allows customers to check their bill or even sign consents without the need for paper. A more efficient and sustainable process, which also allows a digitally stored record of customer signatures and consents. All in all, a project that will improve guest experience and the check-in and check-out processes.
4. Dedica integration
NH Hotel Group has integrated the Dedica hotels into its portfolio, completing the implementation of NH systems and processes in them. The time given for the integration has been very short (a month and a half to implement, train and provide support to 7 hotels) but this has been possible due to our integrated platform and our internal knowledge network (NH Experts) which is operative in all countries, allowing us to provide straightforward, fast and very effective support in integration projects.
5. Robotics
NH Hotel Group applies robotic technology in different areas of the Company, to automate repetitive and labour-intensive processes that have little added value. This year the focus has been on uploading contracts and negotiated prices, as well as customer registration for companies that have filled in a form at the hotel. The robotization of these processes increases productivity and efficiency by reducing manual errors and costs. This technology is also being applied to optimise basic processes in reception, automating repetitive tasks so that more time can be dedicated to guests and improving their experience.
6. Registration Form
In 2020, a digitalization project has been completed for guest registration forms that greatly simplifies the check-in process. Instead of three documents (welcome card, signed registration form and NH Rewards leaflet), there is now just one registration document that complies with the legal requisites of all countries and presents a new and attractive design that can be personalized for each brand. This is a simple way to speed up and automate the registration process, so that employees can offer better attention and a better experience for guests by reducing check-in times.
7. Digitalisation of reports
This year a project has been launched to digitalise the Company’s emergency and safety reports. This entails improving our environment impact by considerably reducing the number of daily printouts and by optimising hotel managers’ control and supervision processes.
8. B2B CRM
Thanks to this project, two main objectives are being achieved. On the one hand, it provides the sales force with a tool for monitoring commercial activity: managing visits, emails or any other type of contact with customers, thus being able to identify opportunities and monitor the main business metrics associated with customer activity. On the other hand, it can be used as a solution for managing the demand for event and group services in hotels, using matching learning to analyse the service quotation requests received by email. This makes it possible to assign each of the requests to a group of sales agents specialised in each business segment. This solution is integrated with the group and event booking management tool, providing point-to-point management of the process, from the event/ group quotation request, through booking and follow-up, to invoicing and collection.
5. SUSTAINABLE BUSINESS
he Sustainable Business pillar is an essential lever in NH Hotel Group’s business strategy that allows us to move towards a more responsible and sustainable hotel model that generates wealth for society.
To be recognized as a world leader in excellence and sustainability is the Company’s ambition; and it is part of our Vision for 2021. To achieve it, NH Hotel Group takes a holistic view of sustainable business, and takes an integrated approach to ESG, thanks to its pillars which are NH ROOM4People, NH ROOM4Planet and NH ROOM4 Responsible Shared Success, all of them framed under the premise of corporate governance and a citizenship mindset.
NH Hotel Group’s commitments in this field and the improvement it has shown this year, have led it to receive the Bronze Class recognition in the Sustainability Yearbook 2021 – published by S&P Global, as well as the title of Industry Mover for obtaining the greatest improvement in its evaluation with respect to the previous year.
