Nearly at the end of the Rezidor Hotel Group’s fourth quarter earnings call — after the company’s two top executives spent considerable time telling analysts the company was on the right track, and making “excellent progress” with a five-year operating plan announced early last year — one newspaper reporter expressed considerable skepticism at the presentation and the hotel chain’s prospects.
“Your net income is down on the year,” said Oliver Orskaug, a reporter at Finansavisen, a Norwegian financial newspaper. “The share price has fallen the last year. You have a little revenue increase, but compared with the net income fall, it wasn’t way up. How can you call this a solid 2017 result?
Indeed, the company did not have the strongest of 2017 even though revenue ticked upward 0.6 precent. For the year, the company made $5.4 million (4.4 million euros), a decrease of 83 percent, year-over-year. In the fourth quarter, it lost $7.38 million (6 million euros).
CEO Federico Gonzalez preferred to focus on more auspicious numbers, noting that, excluding one-off items, the company’s adjusted earnings for the year increased by 12.1 percent to $120.9 million, or 98.2 million euros. It also grew revenue per average room by 4.8 percent, and said demand is strong in most of Europe, especially the Nordics and Eastern Europe.
Bread and Butter
This produced a feisty response from Orskaug, who said, “nobody can buy bread and butter with adjusted results,” adding, “it’s the bottom line that counts in the end.”
Gonzalez also noted that the second half of 2017 was a complicated time for the company, as there was “an investment in the hotels that we closed for renovations and there was a significant effect both at EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) level of actions that the company has taken of one-offs, part of them associated with the sale or the changes in shareholders of the company.”
He called it a “transition year,” saying investments made in 2017 should pay off this year with lower costs and higher revenues.
The contentious back-and-forth continued with Orskaug asking about the company’s controlling shareholder, HNA Tourism Group. Its parent, the sprawling HNA Group, is having considerable financial difficulties.
Gonzalez said it is “not our job” to worry about HNA’s troubles.
“We work for a Board of Directors and for all the shareholders,” he said. “And in that sense, it does not affect today our day-to-day operations or even the five-year plan as we published — in fact all the board and all the shareholders have supported the five-year plan. And for asset management, we are not affected by any personal or collective situation of any of the people who has represented our company or that [are] represented on the board.”