Flexible operating structure helps NH Hotels navigate historic lows

NH-Hotels

Spanish hotel company NH Hotels reported record-low occupancy at its hotels in 2020, driving the company to extreme losses. In a statement to shareholders, CEO Ramon Aragonés acknowledged the “unprecedented environment” the industry as a whole had faced in 2020. “The appropriate operating and financial transformation achieved in previous years together with the severe contingency measures implemented have allowed the group to address this extraordinary complex year, and guarantee business stability,” he said, noting the company’s “flexible operating structure” as a competitive advantage.

While NH Hotels nearly halved its operating expenses in 2020, the company reported a €371 million ($450.54 million) loss in 2020, compared to a profit of €103 million in 2019, a drop of €474 million that the company credited to the “negative business evolution” since late February. Despite mitigating 60 percent of the revenue drop by “minimizing the fixed cost structure and adjusting operations,” revenue dropped 69 percent to €539.7 million, which the company blamed on the “extremely low” demand since March.

Occupancy faced a “historical drop” of 65.1 percent to 25 percent, down from 72 percent in 2019, which the company blamed on hotel closures in Q2 and low activity level in Q4 (16.9 percent compared to 30.8 percent in Q3). Average daily rate fell 20.2 percent to €81.9, affected by a different business mix due to the absence of the corporate segment and high-demand events. In the fourth quarter alone, revenues fell by 82.2 percent, reaching €82 million compared to €148 million in the third quarter. The company blamed the 65.9 percent decrease on the impact of the second wave that began September, along with additional travel restrictions.

More than 300 of NH’s hotels had reopened since June, with 80 percent of the company’s properties opened at the end of August, but further lockdowns and travel restrictions implemented after the summer drove the number of properties open down to 60 percent. The “uncertain environment,” Aragonés said, has forced the company to minimize the fixed cost base. Cost control has achieved an almost breakeven result at operating profit before rents.

“Although demand continues to be severely affected during the start of the year, the flexible operating structure and financial resilience confirmed during 2020 give us the confidence to overcome the short term challenges of the first months of 2021 and deliver on our strong brands and market positioning to drive the steep recovery in the mid-term,” Aragonés said.

NH had 361 hotels with 55,371 rooms in its portfolio as of 31 December, out of which 90 hotels and 13,615 rooms are NH Collection (25 percent of the portfolio). In 2020, the Company signed one new hotel with 394 rooms in Copenhagen that will be operated under a lease contract with NH Collection brand and foreseen opening in 2021. In addition, the company signed one hotel in Tunisia with 93 rooms under a management contract with the Anantara brand. This property is already open.