NH Hoteles unveils major expansion plan

NH Hoteles has presented a three-year plan for doubling its results which will involve capital expenditures totalling €1,300M. By embarking on this ambitious development plan, NH Hoteles expects to double its operating income (EBITDA) from its hotel business, to above €300M in 2009.
The expansion plan envisages integrating Jolly and Framon, two hotel chains that have recently been added to the company, into its Italian Business Unit. This will involve an outlay of over €700M in capital expenditure and debt taken on. The company also plans a further €100M in capital expenditure for renovating the Italian chains to convert them into the NH Hoteles standards. The target set by the company for its Italian Business Unit will lead to a double its current results by the end of 2009, improving the operating efficiency of the hotels that have been acquired. A major feature of Jolly Hotels and Framon is that the two companies are complementary with NH Hoteles as far as customer profile, services on offer, strategic urban locations and broad geographical cover.
NH Hoteles plans to strengthen its position as leader in the medium price range segment in Europe by focusing its capital expenditure on growing organically in the major markets on the continent where it already has a well-entrenched presence. The group plans to invest €500M in Europe, based on the company’s position as a reference in the major countries where it operates and making the most of the promising prospects for the economy for the coming years. There is a great deal of scope for growth in the medium-price range segment of the hotel industry in Europe, where only 25% of the hotels are run by hotel brands. In this line, NH Hoteles plans to use this opportunity to growth in this fragmented market and to consolidate its leading position in the 3 and 4-star hotel segment. The company will therefore focus on investing in attractive property markets, such as Germany, and will use low-risk formulas in other countries where it operates, such as Spain.
NH Hoteles is in a privileged position to make a high return on its development plan. The company’s brand recognition has improved in countries such as Germany, Austria, the Netherlands and Belgium and remains high in Spain, according to the latest study of 2006 carried out by Ikerfel, a consultancy. Moreover, the increase in RevPar in 2006 provides confirmation for the upward trend in all the Business Units over the last year.
The company plans to double the number of rooms opened and signed for the coming three years. The target set by NH Hoteles, to have more than 70,000 rooms by the end of 2009, will consolidate its position as the leader in the European hotel middle segment. 
The strategic plan envisages major investments in countries such as Germany and Italy, where strong growth is expected as they will consolidate as reference markets over the coming years. Near 25-30% of the capital expenditure of the expansion plan will be made in the Germany, Switzerland and Austria Business Units, paying particular attention to achieve an homogeneous level of product quality for NH Hoteles in the eight largest cities in Germany. Around 20-25% of the capital expenditure of the expansion plan will go to Italy, so as to consolidate the company’s position as leader there.
In Belgium, the Netherlands and Luxemburg plans are to add another 3,000 rooms, based on an increased presence of the hotel chain in secondary cities (in terms of population), particularly in the Netherlands, as well as in Amsterdam. In Belgium and Luxemburg, expansion will be focused on strategic cities such as Antwerp and the city of Luxemburg.
NH Hoteles plans to speed up its positioning in Poland and in the most important cities of Eastern Europe. It plans to spend 10-15% of its strategic plan to achieve this goal.
In Spain and Portugal, NH Hoteles plans for a further 2,000 rooms by 2009, keeping up its market share in the largest cities where it is already present and seeking opportunities in cities not yet covered by the hotel chain, under lease or management agreements.
The growth plan for Latin America focuses mainly on increasing the number of rooms in the capital of Argentina and the major cities in Mexico, as well as continuing to study other interesting markets such as Chile, Colombia and Peru.
In the holiday segment, where NH currently has a number of projects under development in Cap Cana (the Dominican Republic) and Riviera Maya (Mexico), the company plans to build on its growth by making a limited investment of no more than 3% of the total capital expenditure of the plan by 2009.
The company has approved a €250M capital increase to finance the plan, in addition to the funds that will be generated by its own cash flow.