NH Notel Group said that it was hoping to benefit from a “potentially accelerated recovery in the travel sector in 2021” as the result of a vaccine.
The company said that it had been able to generate an operating profit at its open hotels through a flexible cost structure.
The group had 75% of its portfolio open as of the end of September, pushing revenue from €30m in the second quarter to €148m in the third. Average monthly occupancy across the open hotels surpassed 40%.
NH said that its contingency plan, rolled out last March, translated into significant savings in the second and third quarters, reaching close to 60% of operating costs and 50% factoring in rentals. The group has extended its furlough and short working hour schemes and pay cuts until 2021 and said that it was continuing to pursue additional lease renegotiations with a view to lowering its lease expense further.
Cash burn has gone from a monthly average of between €55m and €60m in the second quarter to a monthly average of €25m. Available liquidity stood at €485m at the end of September.
Ramón Aragonés, CEO, NH Hotel Group, said: “The group has once again this quarter gone to tremendous efforts to reduce costs to render the revenue generated at all of the hotels reopened profitable, despite low occupancy levels.
“We are striving to monetise each visit and generate loyalty among all of our guests, framed by an exhaustive effort that continues tirelessly thanks to the hard work and sacrifice of NH's professionals.
“We remain firmly committed to preserving liquidity and holding on to the group's notable competitive advantages for when the business returns to normal. Every quarter that we overcome such adverse business conditions is bringing us that bit closer to our objective.”
In order to protect and reinforce its liquidity, in October the group reached an agreement with Spanish and international banks to extend the maturity of its €236m syndicated RCF until March 2023 and secured a waiver until December 2021 from compliance with its financial covenants under the RCF and also the €250m loan with the guarantee of Spain's official credit institute, ICO, last May.
This left the group with no relevant debt maturities until 2023.
Nevertheless, the second wave of the pandemic and the various health measures and mobility restrictions rolled out in Europe saw NH postpone the reopening of hotels initially slated for September and October.
Insight: Coming at the tail end of results season has done a lot for Aragonés’ cheery mood and all those observing, including parent Minor. There had been fears at the start of the pandemic would be to NH’s detriment, with concerns from Fitch that Minor’s debt would drag it down.
This was not the case, in large part due to NH leaping into action and cutting costs. Such slashing can not be permanent - as owners who have been rejoicing across the hotel market are about to see - and hopes of a return to almost normal have come in time.
There had been speculation that NH, or at least part of it, would end up being hived off by Minor and certainly some of its assets remain a twinkle in many investors’ eye. But those can now be saved for another rainy day.