NH: Minor focuses its hotels on luxury and leisure | Business

Minor, the Thai firm that took on NH in 2018 and now controls 96% of its shares, is ready to scrap the roadmap it had planned for 2021 for the group, of which the Spanish-based company is part. And after the first big change, which was to remove the NH acronym from the commercial brand it operates in Europe and the Americas (it is now called Minor Hotels Europe & Americas), it is preparing to prioritize the group’s growth in two segments of the urban fringe, where the old NH provides 350 of the 530 hotels it has worldwide. The goal is to add 200 hotels and 30,000 rooms in three years, of which at least 25% will belong to the luxury brand NH Collection, which currently owns almost 100 hotels.

The focus is on two new business areas: luxury and leisure, with the Anantara and Tivoli brands from the Minor portfolio as the crown jewels. “We aim to be one of the most active players in the hotel business both in the countries where we operate and in those where we want to grow. We are in the process of diversifying, focusing on these two specific segments,” sources in the company emphasize. This does not mean that contracts in the urban segment will be abandoned, but rather limited to specific opportunities. “We will continue to strategically grow in the urban segment in major cities in France, the UK, the Nordic countries and in major cities in the US, where we have a new dedicated expansion team and are actively seeking opportunities,” he emphasizes. In Paris alone, the company has signed contracts with three hotels for the coming years.

This roadmap will be financed in three different ways. The first is related to the strong revenues achieved in 2022 and 2023. Last year, the company’s turnover exceeded 2,000 million for the first time, and the forecast for this year, like that of the rest of the hotel companies, points to optimism. “Demand continued to be strong in the first half of the year, so the favorable dynamics of the business allow us to predict a continuation of record results throughout the current year. To date, hotel occupancy in July and August in Spain is two percentage points higher than on the same date a year ago. In addition, this year there has been an increase in prices of approximately 5% compared to the same period last year,” the latest results report, corresponding to the first quarter, highlights.

Opening a bank tap

The second growth area will be the renewed access to bank credit following the rating upgrades announced by Fitch and Standard & Poors. First it was Moody’s, which improved it by one notch in December 2023 and changed the outlook from stable to positive “due to a faster-than-expected deleveraging, driven by improved profitability, a reduction in lease liabilities and early debt repayments”. Just four months later, Fitch announced a two-notch improvement, “reflecting the dynamics reported in 2023, a significant deleveraging and cash generation”. The latest results, corresponding to the first quarter of 2024, show net financial debt at €2,270 million, of which €1,984 million corresponds to operating rents (224 out of 350 hotels), which are calculated as liabilities, thus limiting the debt to €286 million. At this point, the company believes that there is no need to resort to a new bank loan, as at the end of the first quarter of 2024 it had liquidity of €494 million, distributed between €190 million in cash and €304 million in additional available credit lines.

And the third way to generate income will be through asset sales. The former NH owns 73 hotels, 20% of the portfolio, and does not rule out future asset sales. “Divestment may happen, but it will always be for strategic reasons. Never because of company difficulties that do not exist at the moment. “Minor Hotels Europe & Americas constantly analyzes its own portfolio and market opportunities in order to always have an up-to-date asset rotation strategy.”

Leaving the reputational crisis behind

The hotel company’s new phase will also mean a revolution at the top. Ramon Aragonés, who has led NH for the past seven years, will step down on December 31 (he will continue as a non-executive director) and will be replaced by Gonzalo Aguilar, CEO of Marriott Operations in Europe. Aguilar will take up his new role on October 1 and will split a quarter with Aragonés. In addition to stimulating the business and reducing debt, another priority will be to restore market confidence, although only 4% of the equity is in free float due to the reputational crisis that followed the failed delisting bid for the takeover, which was vetoed by the CNMV.

The episode began on 8 May 2023, when Minor issued a statement offering a 24% premium to buy NH shares for 30 days, which was interpreted by the CNMV as an attempt to circumvent the takeover exclusion offer. Spanish regulations set certain conditions for the exclusion of securities from trading in order to protect the interests of minorities, and some exceptions (such as a merger or unanimous shareholder consent) require a takeover exclusion offer or, failing that, a prior takeover bid that included the prospect of exclusion. Independent directors tendered their resignation, the board accused them of disloyalty and, finally, with their departure from the company, the crisis was resolved. The president of the board, Alfredo Fernández Agras, was replaced by NH CEO Ramon Aragonés and the proposed takeover exclusion offer was mistakenly closed with the purchase of another 2% to reach the current 96%.

Keep up to date with all the information Economy And Business V Facebook And Xor in ours weekly newsletter