Hoteles City Express Results

Hoteles City Express Announces 3Q19 Results with a 9.5% Growth in Total Revenues

Hoteles City Express

Hoteles City Express S.A.B. de C.V. (BMV: HCITY), announced today its results for the third quarter of 2019. All accounting figures have been prepared in accordance with International Financial Reporting Standards, except where noted, and are presented in Mexican Pesos ("$").

Financial and Operating Highlights (3Q19)

  • At the Chain level, Average Daily Rate increased 6.0% and Revenue per Available Room decreased 0.5 percentage points compared to 3Q18, to $1,021 and $596, respectively. Chain occupancy in 3Q19 was 58.4%.
  • Total Revenues were $811.8 million, which represents a 9.5% increase with respect to the same quarter in 2018, primarily due to an increase in the number of Occupied Room Nights at the Chain level and to higher ADR.
  • Operating income was $128.4 million in 3Q19, a 21.8% decrease compared to the same quarter last year, due to increased depreciation expenses related to accounting adjustments under IFRS 16 and to higher energy costs.
  • EBITDA and Adjusted EBITDA were $242.2 million and $243.8 million, respectively. EBITDA margin and Adjusted EBITDA margin for the period were 29.8% and 30.0%, respectively.
  • Net income for the period was $19.6 million.
  • At the end of the quarter, the Chain was operating 151 hotels, an increase of 12 new units compared to the 139 hotels operating at the close of the same period in 2018. The number of rooms in operation in 3Q19 was 17,157, an increase of 9.3% compared to 15,691 at the close of 3Q18.

Operating and Financial Highlights

3Q19

3Q18

3Q19 vs 3Q18

9M19

9M18

9M19 vs 9M18

% Change

% Change

Operating Statistics for the Chain

Number of Hotels at the End of the Period

151

139

8.6%

151

139

8.6%

Number of Rooms at the End of the Period

17,157

15,691

9.3%

17,157

15,691

9.3%

Number of Installed Room Nights

1,579,518

1,439,936

9.7%

4,667,395

4,232,115

10.3%

Number of Occupied Room Nights

922,422

896,151

2.9%

2,650,192

2,540,715

4.3%

Average Occupancy Rate (%)

58.4%

62.2%

-384 bps

56.8%

60.0%

-325 bps

ADR($)

1,021

963

6.0%

1,016

969

4.8%

RevPAR($)

596

599

-0.5%

577

582

-0.9%

Consolidated Financial Information (Thousands of Pesos)

Total Revenues

811,775

741,116

9.5%

2,333,680

2,135,996

9.3%

Operating Income

128,357

164,226

-21.8%

377,849

449,448

-15.9%

Operating Income Margin

15.8%

22.2%

-635 bps

16.2%

21.0%

-485 bps

Adjusted EBITDA

243,775

259,923

-6.2%

720,305

736,438

-2.2%

Adjusted EBITDA Margin (%)

30.0%

35.1%

-504 bps

30.9%

34.5%

-361 bps

EBITDA

242,214

257,703

-6.0%

713,450

730,816

-2.4%

EBITDA Margin (%)

29.8%

34.8%

-493 bps

30.6%

34.2%

-364 bps

Net Income

19,628

57,459

-65.8%

42,703

176,836

-75.9%

Net Income Margin (%)

2.4%

7.8%

-534 bps

1.8%

8.3%

-645 bps

Adjusted EBITDA = Operating income + depreciation + amortization + non-recurring expenses (pre-opening expenses for new hotels).

Comments from Mr. Luis Barrios, CEO of Hoteles City Express:

"Our results for the third quarter of 2019 reflect a robust and efficient operating model that leverages the geographic, industrial and market diversification of our property portfolio that gives us a distinct competitive advantage as the leading hotel chain in the limited service segment of Mexico.

Year-to-date, Mexico's economic activity has slowed, characterized by political and economic uncertainty, reduced economic growth expectations, and high volatility, all of which has resulted in a general loss of business confidence and has been influenced mostly by government policy decisions. Nevertheless, we are moderately confident that the new administration is returning to a more pragmatic approach and beginning to implement more favorable public policies for the private sector.

Despite the economic slowdown, a favorable trend continues in the main urban destinations of the country's north, where the strength of the Export corridor stands out. Also noteworthy is the Industrial corridor, home to Maquiladoras and other manufacturing businesses which have benefited from increased foreign investment stemming from trade tensions between the United States and China that have been spurring Asian companies to begin relocating operations to areas in northern Mexico. In contrast, the Bajío region remains lackluster, which we believe is mainly cyclical in nature and due, to a lesser extent, to security issues in cities like Irapuato, Celaya and Salamanca.

At the end of the third quarter, the strong performance of our portfolio of established hotels continued, delivering RevPar growth of 1.7%, compared to the same period in 2018, that resulted from ADR growth of 6.6%. We attribute this growth mainly to our decentralized yield management platform which, unlike the rest of our industry, has allowed us to respond to adverse events in a timely and efficient manner. Further, despite ongoing absorption of new inventory, our consolidated portfolio continued to perform favorably, with solid operational and market penetration indicators that led to a 9.5% year-over-year increase in the chain's total revenues.

In terms of profitability, we finished the quarter with an Adjusted EBITDA of approximately $243.8 million, a decrease of 6.2% versus third quarter 2018. We continue to progressively reinforce our cost reduction program, as well as advance our strong sustainability strategy, which has become a primary focus of our operations. At the beginning of October, our Clean Energy Supply and Acquisition Agreement became effective for 95% of our portfolio of owned, co-invested and leased hotels, and which we expect to generate savings of more than 25% in annual energy costs, which represents around 3.5-5.0% of hotel operation revenues for an established property. In addition to significantly reducing our operating costs, this high-impact sustainability program will substantially reduce greenhouse gases - the equivalent of taking approximately 4,155 cars out of circulation or planting approximately 1.6 million trees.

Regarding our expansion plans, we remain focused on geographic areas where we see the greatest potential for long-term growth and which afford diversification and depth in demand. We will continue leveraging our ability to effectively penetrate primary markets, such as Monterrey, Tijuana and Mexico City, where we have seen signs of recovery and flexibility in government procedures related to the construction sector. However, we are still encountering slow licensing and other government processes, mostly in Guadalajara.

Accordingly, we continue evaluating our investment opportunities within a strict framework of caution and financial discipline that has characterized us as a chain throughout Hoteles City Express' history. We remain steadfast in continuing to offer our shareholders an investment alternative with profitable growth and high potential for generating value in the medium- and long-term. Thank you for your ongoing trust and support of our mission."



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