Rezidor has raised its cost-cutting plan to EUR30m as the downturn in the European hotel market continues to hit demand across all its brands, which include Radisson SAS, Regent, Rezidor, Hotel Missoni and Park Inn.
The Belgium-based group said the negative impact of the economic slow down on the European hotel market escalated during the last quarter of 2008 with double digit drops in industry RevPAR as a result. It was therefore raising its cost-cutting programme from EUR20m to EUR30m.Kurt Ritter, President and CEO of Rezidor, said: “Industry RevPAR is expected to continue to decline further in 2009. In order to meet an increasingly weaker market we have extended our existing cost cutting programme to a level of annual savings of around EUR 30m and are constantly monitoring the need for additional reductions.”
The group reported RevPAR decreased by 5.3% to EUR 72.8 (76.9) in the final quarter of 2008. Like-for-Like Occupancy was 63.1% (67.6). Revenue decreased by 9.3% or EUR 19.7m to EUR193.6m. Profit after tax was EUR 1.3m.
Annual results were similarly dented by the economic slowdown, although Scandinavia and the Middle East held firm.
“The industry experienced a tough second half of 2008. Despite declining markets Rezidor continued to show strong profitability in the Nordics and the Middle East whilst our profitability in Western Europe suffered from a sharper market decline, the renovation of a number of hotels and the ramping up of newly opened hotels,” Ritter added.
Annual profit after tax came to EUR26.1m down from EUR45.7m in 2007.
Despite the slump, the group continues to invest heavily in hotel development.
“Rezidor continues with the long term strategy to focus its growth on fee-based managed and franchised contracts to reduce risk in the portfolio. 2008 was a record year for new hotels to be built or converted to one of Rezidor’s brands, and over 90% of these contracts were fee-based. 6.500 new rooms, another new record, were opened in 2008; more than 93% of which were fee based,” he added.
“By the end of 2008 Rezidor had a contracted pipeline of more than 22,000 rooms out of which 88% were managed or franchised. While the turmoil in the financial markets may result in some reduction to that pipeline, it is nonetheless a significant asset to the company when the rooms come into operation.”