NH plans brand future amid potential hurdles
 
NH plans brand future amid potential hurdles
28 MARCH 2018 8:14 AM

Madrid-based NH Hotel Group has spent the last few years cleaning up its portfolio. Now executives will focus on their plan to add properties to the nearly 400 hotels already in their company's portfolio instead of spending time on things outside of their control.

BERLIN—Laia Lahoz is blunt when it comes to talking about issues, challenges and opportunities facing NH Hotel Group—the Madrid-based hotel ownership, management and brand company that she has worked for since 2013.

Among those issues is NH Hotel Group’s joint venture with HNA Group, a China-based company that has fallen into financial disarray. Speculation that HNA was seeking to sell its stake in NH Hotel Group led to a merger offer from Barceló Hotel Group earlier this year, which was rejected by NH executives.

Such upheaval hasn’t fazed Lahoz, NH Hotel Group’s chief assets and development officer.

“HNA is a shareholder of 29% … it’s relevant that they have announced they are willing to sell,” Lahoz said earlier this month during a break at the International Hotel Investment Forum. “Our board, and particularly our CEO Ramón Aragonés, is all the time trying to focus the team on ‘you cannot worry about what you cannot control.’ We cannot control what the shareholders will do. I would not say we are worried about HNA.”

Lahoz said the confident approach comes from NH’s ability to perform well and clean up its own internal issues.

“From 2000 to 2008 we grew through an acquisitions model, and from 2008 to 2013 we tried to survive,” she said. “In 2013 we published a five-year plan announcing our willingness to build the NH Collection, and a new (capital-expenditure) plan.

NH’s 2017 revenue grew 6.5% to €1.57 billion ($1.95 billion). In late 2017, the company executed a transaction that reduced its financial leverage and will generate net interest savings of around €10 million ($12.4 million) through 15 November 2019. The price-management strategy NH launched last year resulted in growth across all three major metrics: 8.5% in revenue per available room; 4.9% in average daily rate; and 3.4% occupancy to 70.8%.

“We are now in a healthy positon in terms of debt,” Lahoz added. “At the end of 2018, we’ll be even better. We need to focus ourselves on delivering the plan.”

Laia Lahoz has been with NH Hotel Group for nearly five years. She was appointed the company’s chief assets and development officer in February. (Photo: NH Hotel Group)

NH Hotel Group, which was founded in 1978, has a portfolio of 384 hotels around world—50% are under lease, 25% are owned by NH and the rest are operated under management contracts, according to Lahoz.

“We are not running franchises at the moment,” she said.

Lahoz added that the company’s growth plan is two-fold.

“We would like to grow in an organic way, one by one, in good locations to feed each one of our brands and to fulfill our role as a big player in Europe,” she said. “We also want to grow through inorganic transactions by finding companies that can complement us through geographies or brands.”

France and the Nordic countries are primary targets for growth through either model, she said.

When it comes to development, NH Hotel Group’s main goal is grow its brands: NH Hotels, NH Collection, Hesperia Resorts and its Nhow lifestyle brand.

The Nhow brand has hotels open in Berlin, Milan and Rotterdam, Netherlands, and six more in the pipeline, Lahoz said.

Future openings include London (Shoreditch); Marseilles, France; Frankfurt, Germany; Santiago, Chile; Lima, Peru; and Amsterdam, Lahoz said. Adding Hamburg, Germany, to the Nhow mix is also a priority.

“Each Nhow has its own concept design… not just the look and feel,” she said, citing Berlin as being devoted to music, Milan’s fashion culture and Rotterdam’s architecture roots. “We’re trying to be disruptive … that is what being a Nhow means.”

The NH Collection was launched in 2013 and has 70 hotels open.

“The way we try to position it to guests is to live an exclusive experience,” Lahoz said. “It has very nice GOP margins. It has high returns by offering an extraordinary experience.”

Many of the collection’s properties are conversion projects, according to Lahoz.

“The best location is the one that can fit not only for business but also for leisure traveler,” she said. “If you have locations for both kinds of travelers, it means you can keep rates high in the week and also the weekend. Those are the best ones.”

NH would also like to expand more into Latin America, especially with management contracts.

“We firmly believe in the hospitality industry in Mexico, where we are established,” Lahoz said. “But the model we would like to grow there is asset-light.”

NH is well positioned in Colombia, where in 2015 it acquired Hoteles Royal, she added.

“The other country we would like to grow in terms of management and we see nice opportunities because the middle class is growing very fast is Peru,” Lahoz said. “We are analyzing several portfolios and opportunities because we really like the country.”

A focus on asset management
Lahoz said she focuses on asset management, which means reviewing the 220 leased properties in the portfolio to find opportunities to enhance and improve covenant ratio.

“If (the covenant ratio) is below 1.5 we need to pursue actions to improve it,” she said. “That could include repositioning it to improve performance.”

There are times when repositioning isn’t a viable option, which leads to negotiations to terminate the contract, Lahoz said.

“When the lease is going to end in less than three years, we usually start conversations with the owners to reposition the asset to get the longer lease,” Lahoz said.

When Lahoz joined NH in 2013, the company had 90 leases under water—now it has nine.

“The way NH grew through the past was (through) acquisitions, and when you grow in inorganic transactions you find in the basket, nice beautiful apples and ugly apples,” Lahoz said. “The rules that we like to work is analyze every hotel as an individual project to see if we can improve it.”

That strategy has led to a portfolio of the same number of hotels—but its stability is much more secure, she said.

“In 2013 NH had 58,000 rooms,” Lahoz said. “Now we have 58,000 rooms. We put some hotels out from the portfolio because they did not give us enough return, or sometimes we terminate management contracts because they can be brand damaging.

“We can’t spend a lot of resources in building brand while we are having assets that are confusing our guests,” she added.

All of this leads NH to a good place during a part of the economic cycle that’s still strong, Lahoz said.

“The biggest opportunity is to become not only a relevant player in Europe but to become a leader in Europe,” she said. “To do that we need to cover geographies where we are not and maybe touch some segments where we are not.

“The challenge is we are in a very competitive and tough market,” Lahoz said. “Our performance from STR reports are very good within our comp sets. It’s more in the capital markets. Nowadays everyone is crazy to invest in hospitality. Due to low interest rates, the yields are really low. To go to a market in the moment with very hungry investors makes the inorganic opportunities tougher.”

(STR is the parent company of Hotel News Now.)

3 Comments

  • Flip April 20, 2018 9:09 PM Reply

    It's wonredful to have you on our side, haha!

  • Mateen April 20, 2018 10:21 PM Reply

    I read your potisng and was jealous

  • Mateen April 20, 2018 10:21 PM Reply

    I read your potisng and was jealous

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