Pandox is reporting growth in total net operating income of 33 percent and growth in net asset value of 20 percent, on an annualised basis, in the second quarter. The drivers were profitable acquisitions in new, large hotel markets, sustained strong growth in Brussels and good underlying demand in the hotel market.
Adjusted for currency effects and comparable units, revenue in Property Management increased marginally, while net operating income fell correspondingly, including a slightly negative renovation effect. The investment properties acquired in 2017 in the UK and Ireland, which are not part of the comparable portfolio, demonstrated strong growth. The comparable growth (pro forma) in revenue for these properties is estimated at around 10 percent for the second quarter.
In Operator Activities the solid growth rate was sustained, both for revenue and net operating income, driven by an increase in business travel and more and larger conferences, mainly benefitting the hotels in Brussels due to their strong market position.
In Montreal development was weaker due to strong comparative figures and new capacity.
The underlying demand in the hotel market remained positive in the quarter with good average price development. RevPAR growth in several large hotel markets in Europe, including Germany, was negatively affected by there being fewer business days in May, which a stronger June was not able to fully compensate for.
Combined with a weaker trade fair calendar and strong comparative figures, the result was somewhat uneven growth distribution in the portfolio. At the country level, rental growth in the comparable portfolio was strongest in Sweden (+5 percent) and weakest in Switzerland (-7 percent). Destinations with particularly strong rental income development were Malmö, Gothenburg, Oslo, Frankfurt and Munich.
In Stockholm rental income grew by 3 percent, mainly driven by good growth in hotel markets outside the city centre.
Good Start in Uk and Ireland
Pandox’s portfolio acquisition in the UK and Ireland has had a good start, and the hotel properties had a very good development in the quarter. The hotels in the portfolio are all well renovated with strong locations in expansive regional hubs such as Glasgow, Belfast, Dublin, Manchester and Birmingham. Measured at the portfolio level, the hotels’ RevPAR increased by around 9 percent in the first half of 2018.
Pandox continues to see good potential for increasing the acquired hotels’ market share as renovations already completed reach their full effect. Work on further developing the hotel products through smart investments to, for example, add more beds or more rooms is in the early stages, but is expected to make a positive contribution over time
Cash-Flow driving investments in focus
During the quarter Pandox continued to focus on identifying additional cash-flow driving investments in the existing portfolio.
Examples of such investments are:
- Infill; more beds in existing rooms
- Conversion of unproductive spaces into new rooms
- Expansion by adding new floors and buildings
At the end of the period, committed investments for future projects amounted to around MSEK 940, which is a good starting level. New projects include an upgrade of Crown Plaza in Brussels to further establish its position as one of the city’s leading meeting hotels.
Stable positive outlook
Growth in the hotel market is in line with Pandox’s expectations and the hotel properties are in general developing well in their respective submarkets. Underlying demand is good and is supported by good economic growth and increased international travel.
In certain markets new hotel capacity is having an adverse effect on growth in the short term. In total, market conditions are favourable, laying the foundation for a stable positive development in 2018. The transaction market is active and additional acquisitions are possible.
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