Scandic Hotels Delighted With Restel Integration as Profits Rise

The CEO of Scandic Hotels Group, Even Frydenberg, is banking on the acquisition of a regional rival having a “big impact” on the company in 2019.

Scandic announced the a $127 million deal to buy Restel’s Finnish hotel portfolio more than a year ago but these types of purchases take time to bed in. Scandic completed its rebranding work at the end of June and has also agreed to sell two of the 43 properties it bought.

Scandic’s two biggest markets are Norway and Sweden but the deal gives it a much stronger position in Finland. The company has 51,216 hotel rooms in operation at 269 hotels, of which 244 are leased.

In the second quarter Restel contributed $60 million to top line revenue and $4.5 million to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization).

While, Frydenberg said he expected to see the main benefits of the Restel deal to occur in 2019, he also pointed to the fact that the third quarter of Scandic’s financial year is the seasonally strongest quarter for Restel.

“The integration of the Restel has been according to plan. As you may remember, we started the rebranding of the Cumulus hotels [the brand name of Restel’s portfolio] in February and at the beginning of June, we completed the last of the 34 rebranding, keeping in mind that of the original portfolio, 43 hotels, 7 are branded and 2 will be sold. Restel has also started to contributed positively to our EBITDA as of the second quarter,” Frydenberg said on an earnings call with analysts after results announcement.

Overall, Scandic’s revenue increased 26 percent to $533 million in the April-June quarter, compared with the previous year, with net profit up 7.8 percent to $30.9 million.

New Faces

Scandic’s executive team underwent something of a revamp in the quarter. In October last year chief commercial officer, Thomas Engelhart, left the company after a disagreement with Frydenberg.

His role has now been split, with the company making two new appointments: a chief customer officer, responsible for brand strategy, marketing and loyalty,and a chief commercial optimization officer, who will look after distribution and sales.

The separation of the role implies that all the areas mentioned will get special attention. In addition, the role of chief information officer is now part of the group executive committee.

Outlook

Scandic expects the weak Swedish krona to have a “positive” impact on operations during the summer and in general is seeing good demand.

Shares in the company rose 8.8 percent to $10.21 in the wake of the results announcement.