NH HOTEL GROUP, S.A. (hereinafter the Parent Company) was incorporated as a public limited company in Spain on 23 December 1881 under the trade name “Material para Ferrocarriles y Construcciones, S.A.”, which was subsequently changed to “Material y Construcciones, S.A.” (MACOSA) and later to “Corporación Arco, S.A.”

In 1992, Corporación Arco, S.A. took over Corporación Financiera Reunida, S.A. (COFIR), while at the same time adopting the trade name of the company taken over and amending its corporate purpose to the new activity of the Parent Company, which focused on the management of its shareholding portfolio.

During 1998, Corporación Financiera Reunida, S.A. (COFIR) merged with Grupo Catalán, S.L. and its subsidiaries and Gestión NH, S.A. through the absorption of these companies by the former. Subsequently, Corporación Financiera Reunida, S.A. (COFIR) took over NH Hoteles, S.A., adopted its trade name and broadened its corporate purpose to allow for the direct performance of hotel activities, activities in which it had already been engaged indirectly through its subsidiaries.

Information on these mergers can be found in the financial statements of the years in which said transactions took place.

The General Shareholders’ Meeting of 21 June 2014 agreed to change the company’s name from “NH Hoteles, S.A.” to “NH Hotel Group, S.A.”

The Parent Company heads up a group of subsidiary companies which, together with NH Hotel Group, S,A., make up the NH Hotel Group (hereinafter, the “Group” – see Appendices I and II) which is dedicated to running hotels, on its own, either owning or leasing the hotels, or via third parties, with management, offering a wide range of functions from its corporate head office and regional offices.

On 11 June 2018, MHG Continental Holding (Singapore) Pte Ltd made a public offer to acquire 100% of the shares making up NH Hotel Group, S.A.’s company capital, the result of which was that Minor International Public Company Limited (“MINT”) acquired shares representing 94.13% of the share capital of NH Hotel Group, S.A., via its wholly owned subsidiary, MHG Continental Holding (Singapore) Pte. Ltd.

At the end of the financial year, the Group was operating hotels in 30 countries, with 353 hotels and 55,063 rooms, of which around 72% are located in Spain, Germany, Italy and the Benelux countries.

NH Hotel Group, S.A. has its registered address at Calle Santa Engracia, 120 – 7th floor, Madrid, Spain. Furthermore, the name of the Parent Company did not change in this financial year or in the previous one.

 

Impact of COVID-19

After the start of the COVID-19 pandemic in the middle of March 2020 in Europe, demand for hotels dropped drastically due to lockdowns, travel restrictions and social distancing, which drastically affected mobility.

The gradual reopening of hotels was made possible by the flexible costing structure and began in the middle of 2020, progressively, depending on recovery of domestic demand and with a focus on optimising profitability.

With the gradual roll out of vaccines since the beginning of 2021, a turning point was beginning to be seen that – together with the progressive lifting of restrictions in some European countries – allowed a faster reopening of the portfolio once again. Therefore, at the end of 2021, around 90% of the hotels were open, compared to 60% at the beginning of the year.

In 2020 NH Hotel Group put “Feel Safe at NH” into place in all its hotels. This is a new plan, with measures approved by experts, to face up to the health crisis caused by the SARS-CoV-2 coronavirus. The Company has reviewed all its procedures and made nearly 700 adaptations to its operating standards to preserve the health and safety of travellers and employees worldwide. Grouped into 10 main lines of action and backed by specialists in different fields, the measures implemented cover the digitisation of hotel services, adapting sanitation processes, including social distancing regulations in operations and the application of personal protective equipment, among others. We also reached a collaboration agreement with SGS, the world leader in inspection, analysis and certification, which allows us to follow up on the measurement and diagnostics protocol established to verify that the Group’s hotels are clean and safe environments.

In spite of the low level of demand, its flexible operational and financial structure has enabled the Group to overcome the major challenges in 2020 and 2021. The Group will benefit from brand recognition recovery, excellent locations and strong market positioning, once recovery accelerates in Europe.

 

Contingency Plan

As a result of the exceptional circumstances that occurred after the start of the global pandemic (COVID-19), the Group implemented different measures and plans to adapt the business and ensure its sustainability with the aim of minimising costs, preserving the Company’s liquidity to meet operational needs and ensure that the recovery of the hotel activity is carried out efficiently and under maximum guarantees in terms of health and safety.

The following costs discipline and control measures to ensure minimisation of operational costs and preserve liquidity continue to be implemented:

  • Personnel (Note 25.3): The Group carried out adjustments, temporary lay-offs and reductions in hours and wages in hotels and central offices caused by force majeure or production reasons. Some of these processes continued during 2021. In addition, a collective redundancy process was carried out in Central Services in Spain as part of a global plan pursuant to local legislation.
  • Operational costs (Note 25.4):
    • Negotiations with suppliers to reduce purchase costs, seek alternative, cheaper products and attain improvements to payment terms.
    • Suspension of non-priority third party advisory services.
    • Significant reduction in marketing and advertising costs despite the need to boost income.
  • Leasing (Note 8): The temporary reduction in fixed leases continued during the first part of 2021 and, to a lesser extent, during the second half of the year, after recovery began.
  • CapEx: Capex decreased by more than 50% during 2020, and during 2021 it has continued to be limited to a figure of around 36.8 million euros.
  • Strengthening liquidity: during 2021 NH Hotel Group proactively carried out a battery of initiatives to reinforce the Group’s capital structure:
    • In May a €100 million capital investment was agreed by Minor International through an unsecured subordinated loan that was drawn down in May and capitalised in September 2021 through a capital increase process directed towards all shareholders. This agreement provided immediate liquidity and demonstrated the support of the main shareholder in the recovery. The capital increase to offset the shareholder loan was approved at the Shareholders’ meeting held on 30 June. At the same time as the capital increase, the Board started up the cash capital increase under the same economic conditions and with preferential subscription rights for the other shareholders to prevent diffusive effects in the shareholdings (Note 16.1).
    • In addition, during April, in order to continue to optimise the debt profile, the expiry of the ICO syndicated loan of 250 million euros was extended from 2023 to 2026 (Note 17). Furthermore, the waiver on compliance with financial covenants was extended for the whole of 2022.
    • In June, NH Hotel Group successfully launched a senior bonds issue on the market, guaranteed for the amount of 400 million euros and maturing in July 2026. The funds obtained have been used to repay the senior bond for 357 million euros expiring in 2023. The new issue, which was significantly oversubscribed, has an annual interest of 4% (Note 17).
    • Furthermore, NH Hotel Group has agreed to extend its revolving syndicated credit facility (RCF) for 242 million euros, which will now expire in March 2026, instead of March 2023. It is worth pointing out the support shown by the loan institutions taking part in this financing, with the extension of the waiver on the financial covenants during all of 2022 (Note 17).
  • On 30 June 2021, the sale & leaseback transaction on the NH Collection Barcelona Gran Hotel Calderón was announced, which was sold for 125.5 million euros with a linked 20 year lease agreement, with NH having the option to exercise additional extensions. With this transaction, the Group has generated a net book gain of 46.7 million euros and net cash, after paying the taxes on the sale, of 113 million euros.

For more information on the Contingency Plan, see the section “Impacts of COVID-19 and the measures implemented” of the Consolidated Management Report for the financial year ended 31 December 2021.

These consolidated annual accounts include the impact arising from the situation described above, with particular relevance to the impairment analyses carried out by the group during the financial year and the resulting recorded results (Note 11), activation of tax credits based on their recovery (Note 18), and the description and analysis made by directors and their conclusion on business continuity and drawing up the relevant as a going concern (Note 2.8).

These consolidated annual statements should be read taking into account that assessment and breakdown.