NH Hoteles S.A.
NH Hoteles S.A.
Santa Engracia 120
Telephone: +34 91 451 97 24
Fax: +34 91 451 97 30
Web site: http://www.nh-hoteles.es
Sales: EUR 980.89 million ($1.3 billion) (2005)
Stock Exchanges: Madrid
Ticker Symbol: NHH
NAIC: 721110 Hotels (Except Casino Hotels) and Motels
NH Hoteles S.A., or NH Hotels, is Spain's leading business-oriented hotel group, and is Europe's third largest and one of its fastest-growing corporate-focused hotel groups. NH Hoteles operates more than 260 hotels in 19 countries, primarily in Europe, but also in Latin America and in Africa. Altogether, the company counts more than 38,000 beds in its empire. The company also plans to add 20 new hotels into the second half of the 2000s, boosting its total room count by nearly 4,000. Spain remains the group's largest market, accounting for 34 percent of its hotel rooms. Germany (24 percent) and The Netherlands (15 percent) are the group's other major markets. In Europe, NH Hoteles is also present in Belgium, Switzerland, Austria, the United Kingdom, and Italy. The company's Latin American presence focuses on Argentina and Mexico, but also includes Brazil, Chile, Cuba, and Uruguay. The company's three Africa hotels are located in South Africa and Ghana. NH Hoteles owns 27 percent of the hotels in its chain, with a lease with call option on an additional 12 percent. Of its remaining hotels, 47 percent are leased and 14 percent are operated under management contracts. The company also owns 79 percent of luxury hotel resort operator Sotogrande S.A., and a 20 percent stake in Italy's four-star hotel operator Jolly Hotels. NH Hoteles' own hotels typically range in the threeand four-star categories; the company also specializes in smaller hotels, ranging from 80 to 200 rooms. Many of the company's hotels feature "Women Style" rooms designed specifically for the group's female clientele. NH Hoteles also has collaborated with star chef Ferran Adria to launch the "Fast Good" and Nhube dining concepts. Much of the group's strong growth came through a series of acquisitions, including the Hotel Krasnapolsky chain, based in The Netherlands, Astron Hotels in Germany, and Chartwell in Mexico, orchestrated by Chairman Gabriele Burgio. The change in the group's revenue mix has been dramatic: in 1999, the Spanish market represented more than 99 percent of the group's revenues. By the end of 2005, international operations accounted for 60 percent of the group's sales, which had more than tripled during this period, to top EUR 980 million in 2005. NH Hoteles is listed on the Madrid Stock Exchange. In January 2006, the company joined that exchange's IBEX 35 index.
BECOMING A SPANISH LEADER IN THE LAST TWO DECADES OF THE 20TH CENTURY
NH Hoteles was founded in 1978 by Antonio Catalan Diaz, with the opening of a single hotel in Pamplona, in the Navarre region. Spain was just then emerging from decades under the Franco dictatorship. As the company began to liberalize its market and open its economy to foreign investment, Diaz recognized the potential for developing hotels catering more specifically to the needs of business travelers. Into the early 1980s, NH Hoteles shifted its interests to Spain's business centers, starting with the purchase of the Calderon in Barcelona in 1982.
The NH Hoteles format proved highly successful, and the company quickly added new hotels in the Madrid and then Zaragoza markets. By 1988, NH Hoteles operated 16 hotels in Spain and had emerged as one of the country's leading hotels groups focused on the buoyant business traveler market. In order to continue its strong growth, NH Hoteles began looking for outside investors.
Spain's fast-growing economy had by then attracted the attention of a number of international investors, particularly Italy's Carlo de Benedetti, one of that country's leading industrialists and investors. In 1987, de Benedetti's Cerus investment wing entered Spain, establishing Corporacion Financiera Reunida, S.A. (Cofir) with a number of other shareholders. In 1988, Cofir invested in NH Hoteles, acquiring 33.5 percent of the hotel group as part of a capital expansion. Other investments made by Cofir in the late 1980s included holdings in the winemaking sector, Banco Zaragozano, the Sotogrande resort development group, and Portugal's Cofipsa.
Cofir originally acted as a passive investment holding company, and as such provided the funding for the hotel group's continued expansion. NH Hoteles grew strongly into the next decade, building up a portfolio of 55 three- and four-star hotels, with more than 5,800 rooms covering all of Spain's major urban markets, by 1993. In addition to 17 hotels owned outright by NH Hoteles, the company acquired the leases to 29 hotels and management contracts for an additional nine hotels. By then, NH Hoteles had become Cofir's single largest holding.
With losses mounting, Cofir was doubly hurt by its exposure to the hotel market. For one, a vast building boom during the 1980s had led to massive overcapacity in the early 1990s. At the same time, the effects of the recession, combined with the chill cast over the international travel market following the first Persian Gulf War, had sunk occupancy rates to all-time lows. As a result of its losses, Cofir was forced to begin selling a number of its holdings. Many of the company's shareholders also were looking to exit their investment.
NEW LEADERSHIP IN 1992
De Benedetto installed new management at Cofir in 1992. Taking the lead of the company now was Gabriele Burgio, a native of Florence, Burgio had earned an M.B.A. at France's Insead business school, before working at Banker's Trust in New York, and the Manufacturers Hanover (an investor in Cofir) in Italy. When Manufacturers Hanover decided to exit its shareholding in Cofir, Burgio agreed to take charge of the company.
Under Burgio, Cofir changed strategy, adopting a hands-on approach as an "industrial operator," instead of as a passive investor. Burgio now targeted Cofir's hotel operations as its core focus, specifically the NH Hoteles business. Cofir now boosted its stake in NH Hoteles to 62 percent. Cofir then began investing heavily in the hotel operator through the 1990s. By 1999, the company had spent more than $140 million, raising NH Hoteles' portfolio to nearly 80 hotels. As part of the company's investment effort, it also had set out to redirect its mix of hotels to the three- and four-star category.
NH Hotels is known for its motto, "Eye for detail." Customers appreciate and have come to expect the difference in products and services provided by NH Hotels.
The just-squeezed orange juice in the buffet breakfast, the "Good Night" details in the guestroom, the choice of different size and shape pillows in all the hotels, or the complete complementary toiletry kit with "Agua de la Tierra," are just some of those details that try to improve the perception of value for money and increase our guests' satisfaction.
Yet, during the mid-1990s, Cofir also attempted to crack into the discount hotel market in Spain. The company initially sought to develop this operation through a partnership with France's fast-growing Accor group. In 1997, the two companies nearly set up a partnership that would have called for NH Hoteles to open 70 Ibis-branded two-star hotels in Spain. Yet the agreement fell through, and instead, Cofir attempted to launch its own discount chain, called NH Express.
NH Hoteles by then accounted for some 90 percent of Cofir's earnings. In early 1998, the company decided to exit its non-hotels businesses and refocus itself as a pure-play hotel and resort operator. Ownership of Cofir's stake in Sotogrande was transferred to NH Hoteles, while the company's winemaking operations were sold off in 1999 for $125 million. Following that sale, Cofir changed its name to NH Hoteles S.A. At that time, the company's revenues neared EUR 270 million.
INTERNATIONAL GROUP IN THE NEW CENTURY
NH Hoteles, which already dominated the Spanish corporate hotel market, immediately turned its attention toward developing an international expansion strategy. In 1999, the company paid $31.9 million to acquire a 20 percent stake in Italy's four-star hotel group Jolly Hotels. The company then turned its sights to the Latin American market, buying up a number of properties as part of a $50 million investment program. The company initially targeted the Mercosur market, specifically hotels in Argentina, Uruguay, and Chile.
Back in Spain, NH Hoteles targeted further growth. The company bought up a 5 percent stake in the Madrid Movie World Theme Park, which opened in 2002. In 1999, the company paid $85 million to acquire the Hotel Princess Sofia in Barcelona from Inter-Continental. The company also earmarked an additional $80 million for expansion of its NH Hoteles brand, and its Hoteles Express brand, into the mid-decade.
The company's profile changed dramatically in 2000, however. In that year, the company bought up The Netherlands' Krasnapolsky hotel group, which included the flagship Grand Hotel Krasnapolsky in The Netherlands. The addition of the Krasnapolsky group doubled NH Hoteles' hotel portfolio to 168 hotels, adding operations in The Netherlands, Luxembourg, Belgium, and elsewhere. The deal restructured NH Hoteles' geographic presence, reducing its Spanish operations to just 66 percent of its total. Also in 2000, NH Hoteles entered the Portuguese market, buying up the Liberdade hotel in Lisbon.
Buoyed by the Krasnapolsky acquisition, NH Hoteles now began scouting for new foreign acquisition targets. In 2001, the company moved into Mexico, buying up five hotels from Grupo Chartwell. As part of that deal, the company established a new subsidiary, NH Mexico. That company then took over the management contracts for the remaining nine hotels in Mexico previously operated by Chartwell, which retained a 41.25 percent stake in NH Mexico.
Yet Europe provided NH Hoteles with its main stage for growth. The company struck again in 2002, reaching an agreement to pay EUR 130 million for an 80 percent stake in Germany's Astron Hotels. That acquisition gave the company control of 46 hotels in Germany, as well as six properties in Austria, and an additional hotel in Switzerland.
- Antonio Catalan Diaz establishes NH Hoteles with the first hotel in Pamplona, Spain.
- The company adds a hotel in Barcelona, then shifts focus to major city markets, adding hotels in Madrid and elsewhere.
- Cofir acquires control of NH Hoteles, which by then holds 16 hotels.
- Gabriele Burgio takes over as Cofir CEO and steps up investment in NH Hoteles, which by then has 55 hotels.
- Cofir refocuses around a core of hotel and resort operations, transferring its holding in the Sotogrande resort development group to NH Hoteles.
- After Cofir sells off its winemaking holdings, it changes its name to NH Hoteles; the company enters the Latin American market; 20 percent of Jolly Hotels in Italy is acquired.
- NH Hoteles acquires the Krasnapolsky Hotel group in The Netherlands, doubling its number of hotels to 78.
- The company acquires 15 Chartwell Hotels in Mexico.
- Germany's Astron Hotels are acquired, adding operations in Germany, Austria, and Switzerland.
- The Nhube dining concept is launched.
- The Fast Good restaurant format is launched.
- The company acquires its first U.K. property, in London.
- Plans to acquire 20 more hotels are announced.
In the meantime, NH Hoteles had entered a collaboration with star chef Ferran Adria to develop new dining concepts for the group's hotels. That partnership resulted in the launch of a new in-hotel restaurant concept, Nhube (pronounced "noovay"). The new theme incorporated the needs of business clients traveling alone, combining a lounge, bar, and restaurant concept, providing diners with Internet access, television, and music, and reading materials. The Nhube concept, first opened in Madrid in 2003, proved so successful that the company quickly developed plans to open Nhube restaurants in 26 more hotels.
By then, the company's collaboration with Adria had led to the development of another restaurant concept, "Fast Good," which sought to merge fast service with quality food. The first Fast Good opened in Madrid in 2004. In addition to opening further Fast Good restaurants in its hotels in Spain, NH Hoteles planned to introduce the concept to its Latin American hotels, while also developing a stand-alone format.
NH Hoteles continued innovating into the middle of the decade. The company responded to the growing numbers of female business travelers by becoming a pioneer of new "Women Style" rooms, specially outfitted with amenities for the company's female clients. Similarly, NH Hoteles decided to launch its own line of toiletry items, Agua de la Tierra. Instead of buying items from third parties, in this way the company produced its own toiletries, which it also offered for sale.
The company continued to build its hotel network in Latin America. By 2006, NH Hoteles operated hotels in Chile, Argentina, Brazil, Uruguay, Cuba, and Mexico. Yet Europe remained the company's primary market, accounting for more than 75 percent of its total rooms, and some 94 percent of its total revenues of nearly EUR 981 million ($1.3 billion). In 2005, the company took its first step to develop itself as a true pan-European hotel group, buying up its first property in the United Kingdom, the Hotel Harrington in London, for $72 million. NH Hoteles also moved to extend its footprint into Italy, with two hotels in that market, while also eyeing an entry into the French market. With more than 260 hotels, NH Hoteles had far from exhausted its growth. Indeed, the mid-priced, corporate hotel market in Europe remained heavily fragmented, offering the company strong growth possibilities. NH Hoteles appeared confident of its future growth, announcing its plans to add another 20 hotels as it moved into the second half of the decade.
Cofi SL; European Golf Booking Center SL; Grupo NH Hoteles Participaties N.V. (The Netherlands); Hotel Albar Ciudad Albacete SL; Hotel Palacio Castilla S.A.; Hotelera Onubense S.A.; Hoteles Express SL; Latinoamericana de Gestion Hotelera S.A. y Sociedades Dependientes; Lenguados Vivos SL y Filiales; NH Aranzazu Donosti S.A.; NH Private Equity B.V. (The Netherlands); Nuevos Espacios Hoteleros; Retail Invest S.A.; Sotogrande S.A. y Sociedades Dependientes (79%); Toralo S.A. y Filal (Uruguay).
Rallye S.A.; Compass Group PLC; ACCOR S.A.; CIGA S.p.A.; Six Continents PLC; InterContinental Hotels Group (UK) PLC; The Rank Group PLC; Grupo Calinda S.A. de C.V.; Sol Melia S.A.
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―――――――, "Cofir to Shift Focus to Hotels Business," Financial Times, December 11, 1998, p. 29.
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