Pandox paradox: optimism among uncertainty


Pandox, the Stockholm-based European hotel owner and operator, adopted a determinedly optimistic tone as it published full year results on 11 February. “We are preparing for a brighter future,” said Anders Nissen, the chief executive. The upbeat assessment came despite a sharp reversal in recovery trends in October, November and December 2020 and admission that current conditions were “bad.”

Positive third-quarter trends were disrupted because of reinstated social distancing measures in its markets, the company said.  Mr Nissen said that underlying demand in the hotel market was “basically good” and that there is: “significant pent-up demand for travel among both companies and individuals.”

“Based on the positive market trend we saw during the summer and early autumn of 2020 in Europe,” he said, “combined with the clear improvement we are seeing now in many large hotel markets outside Europe, we believe there is good potential for strong recovery in Pandox’s markets once restrictions are eased.”

Pandox lost MSEK305 in the fourth quarter where it made profits of MSEK1,291 in the same three months of 2019. The losses are three times higher than in the summer months albeit better than the MSEK 668 and MSEK332 losses in the first and second quarters of 2020.

Pandox owns 156 hotels in northern Europe with 35,060 hotel rooms in fifteen countries. Most are leased under brands including Scandic, Jurys Inn, Leonardo and Hilton. Nearly one-third of the rooms are taken by Scandic. Its leading markets are Sweden, Germany and the UK.

Blame was laid squarely on the COVID-19 pandemic for full year losses of MSEK1,408 compared to profits of MSEK2,700 in 2019.

It has a three-pronged strategic ambition. It says it wants to “respond”, that is, take steps to alleviate the acute current crisis; “restart” with a plan for recovery; and “reinvent - create insights into how the hotel market will change.”

Full year numbers fell in part because of downward revisions in the market value of the company’s properties. Most of the fall is notional because assets have not been sold but Pandox said the value was 6.2% lower at MSEK 59,542.  At the end of the period the weighted average unexpired lease term was 14.6 years down from 15.6 years. There were no reductions in hotel rents which Pandox said was testament to the solidity of its tenants.  Net interest-bearing debt was more or less unchanged at MSEK29,000 making the net loan-to-value 48.7% against 46%.  Interest cover reduced from a healthy 4 times at the end of 2019 to 1.9 times a year later. In the fourth quarter, it fell to 1.6 times. The average interest rate was unchanged at 2.6% but the average repayment period dropped to 2.8 years from 3.3 years.

The company said it: “has a continued positive and close dialogue with its lenders on new financing, refinancing as well as necessary adjustment of terms and covenants in existing credit agreements with consideration to COVID-19.” There is no dividend.


It was a lovely bright morning in Stockholm said Anders Nissen, Pandox chief executive, on Thursday’s full year results call. His outlook for Pandox, and the hotel market generally, is similarly sunny.

Sure, the base case scenario is that pandemic restrictions, vastly helped by the vaccines, will ease as spring and summer come along. The trouble is, as the old saying goes, forecasting is tricky . . . especially where the future is involved.

In that context Mr Nissen’s view 12 months ago is, well, let’s say unfortunate. In February 2020 he said: “Conditions for the hotel market are generally sound. Forward-looking economic indicators for the world economy have gradually improved and the positive long-term drivers for the hotel market remain intact.”

Even six months ago things seemed to be looking up after a good bounce in trading over the summer. By October, Pandox had adopted a suitably cautious approach. Yet the glimmers of light proved to be a false dawn.

One hopes that another linguistic choice made by Mr Nissen on Thursday won’t come back to haunt him. Emphasising his optimism, he said he’d use a Swedish term - “bomb” - to suggest that a boom was on the way. In common English slang, “to bomb” means the precise opposite.

Given the weaknesses in the reported results and the uncertainties encapsulated in the step down in the market value of Pandox properties, the company might put most of its efforts into dealing with present concerns. The priority may be to roll with the punches; look to minimise losses rather than maximise profits.

In fairness, it is doing that quite well. Rental income is holding up and operational adaptions required by virus conditions show positive signs. Occupancy rates are better than they might look on the surface and there is resilience in pricing. Meanwhile, the absence of dividend also suggests Pandox has its feet on the ground.

Still, it would be unwise to assume storm clouds will blow away as fast as everyone would hope.