Scandic Hotels Looks to Cut Costs to Brace for Increased Competition

Scandic Hotels Group expects a tough end to 2018 as increased competition from rivals eats into its sales.

The Scandinavian hotel operator said like-for-like sales would be slightly lower in the fourth quarter and as a consequence the company is looking to adjust costs.

CEO Even Frydenberg wasn't especially specific on what he had in mind but did stress to analysts on a third quarter earnings conference call that "at this stage there is no significant, deep cost-cutting exercise that is underway."

Scandic is keeping an eye on its costs because of increased competition in markets such as Oslo, Stockholm and Copenhagen, where additional hotel supply was altering the market, or would do so in the future.

“When you have more supply, it doesn't necessarily have a direct impact on the average rate in the near-term, but it does have an impact on the occupancies,” Frydenberg told analysts on Thursday.

At the end of the September quarter, Scandic had 270 hotels with 51,932 rooms. To put that figure into context market leader Marriott said in its most recent set of results that it had 6,717 properties and timeshare resorts with nearly 1.3 million rooms.

Third Quarter Results

Scandic boosted its portfolio last year with the acquisition of Finland-based Restel’s hotel business. The deal completed last December.

The addition of the Restel properties helped boost revenue 22.6 percent during the third quarter to $535 million. Pre-tax profit remained the same at $51.5 million.

"During the third quarter, increased tourism combined with warm weather and the weak Swedish krona helped drive demand, especially in July and August.

"At the same time, we are seeing signs of increased competition in some of our markets which had a dampening effect on underlying growth in the quarter," Frydenberg said.