Rezidor reports rate growth

Rezidor said it had seen a "marginal" increase in rate, after reporting second quarter revpar increase by 6.8% to Eu67.1 (£56.6).

The increase was largely drive by like-for-like occupancy, which rose by five percentage points to 67.7%. Rate fell by 1.2%, with the group commenting that occupancy development accelerated in the latter part of the quarter and the rate decline slowed down as the quarter progressed.

Like-for-like rate increased in two of the group's four geographic segments, up by 3.4% in Rest of Western Europe and 1.3% in Middle East, Africa and Other.

The group said that the revpar trend had led to an increased confidence in the investment market, which had led to the banks being more willing to fund new assets and sell distressed assets.

In a conference call, Kurt Ritter, president & CEO, said: "There has been a marginal improvement in rate - marginal, but significant. Absolute revpar is still at low levels, and it will take a while to recovery, but it is moving in the right direction.

"All of Rezidor's operating regions reported revpar growth; most significantly in Germany, France, Benelux and an encouraging rebound in the important Norwegian

market. Although the market is improving, the absolute revpar is still at a historically low level and will need continued improvement to yield a satisfying profitability.

"Overall, Rezidor performed well compared to the market. The market recovery

combined with our successful cost reduction strategies will continue to support

delivery of improved margins."

Knut Kleiven, deputy president and CFO, added that there had been no change in the pattern of rate since Q2, but improvements were "expected".

He said: "The UK market outside London has not performed that great. There hasn't been the improvement that there has been in other Continental countries. The other worry that the industry has is the Budget cuts of the current government. They will have some impact on the hotel industry into the next year.

"It's hard to say how much impact the VAT increase has had, but it has been negative."

The group said that revenue, which increased by 17.2% to Eu203m, grew in all regions, with a positive impact from the increase in occupancy as well as the weakening of the Euro, with as much as one third of the revenue growth coming from new hotels. Like-for-like revenue increased by 5.3%.

Ebitda increased from Eu7.1m to Eu17.5m, with Ebitda margin up from 4.1% to 8.6%.

Pre-tax profit was Eu14.7m, up from a loss of Eu500,000 in the same period last year.

Rezidor opened 4,000 rooms in the second quarter, of which 90% were managed or franchised. The group said that its pipeline continued to shrink, in line with the rest of the industry.

The group signed 3,500 rooms in the second quarter, of which 2,400 related to the agreement to manage a portfolio of 10 hotels (former Reval Hotels) in the Baltics, and  5,100 during the first six months.

Puneet Chhatwal, chief development officer, said: "We opened a significant number of rooms in this quarter, so there has been shrinkage [in the size of the pipeline]."

The group said it would continue to expand the Park Inn brand in markets where it already operated a Radisson Blu or a Park Inn hotel, allowing it to focus on "growing the brand depth versus width in a market".

The group's pipeline was 25% of its total portfolio, with over 90% fee-based and 70% in emerging markets. The 10% leased were in the ‘mega markets' of Milan and Stockholm.

In line with the group's asset-light strategy, the group has no leases in its pipeline after 2010.

Rezidor completed the sale of its part of the Regent business in the second quarter, which resulted in a positive cash inflow of Eu10.6m and a capital gain of Eu3.9m. In addition, write-downs of fixed assets from prior years of Eu1.8m were reversed, leading to a combined positive effect from the sale of Eu5.7m.

The second quarter also saw Carlson become the group's majority shareholder.

HA Perspective: Emerging markets remain the big theme for Rezidor. The company argues that the opportunity is to participate in markets with high operating margins (thanks to the asset light approach), which are often undersupplied and which are less exposed to the current financial crisis.

With more than two-thirds of its pipeline in emerging markets, Rezidor is determined to maintain its pole position in Russia, CIS and the Baltics and continue growth in Africa and the Middle East.

There will be wobbles - emerging markets can suddenly go into reverse for a range of reasons ranging from politics to economics - but the experience already built-up gives Rezidor an enormous edge over its rivals.