Hoteles City Express Results

Hoteles City Express Reports Revenue Growth of 24.3% and Adjusted EBITDA Growth of 42.7% for Q4

Hoteles City Express Announces Fourth Quarter 2017 Results

Hoteles City Express

Hoteles City Express S.A.B. de C.V. (BMV: HCITY), has released its results for the fourth quarter of 2017 ("4Q17"). The numbers are presented in Mexican pesos ("$").

Summary of Relevant Operating and Financial Information (4Q17)

  • At the Chain level, the Average Daily Rate ("ADR") and the Revenue per Available Room ("RevPAR") increased 4.7% and 6.6% over 4Q16, to $927 and $580, respectively. Chain occupancy in 4Q17 was 62.6%, which is 112 basis points higher than occupancy in 4Q16.
  • Total Revenues were $686.0 million, which is a 24.3% increase over the same quarter in 2016, due mainly to a 13.1% increase in the number of Installed Room Nights at the Chain level, in combination with growth of 6.6% in the RevPAR.
  • Operating Income was $154.4 million in 4Q17, which is a 50.8% increase over the same quarter of the prior year.
  • EBITDA and Adjusted EBITDA were $249.5 million and $257.5 million, respectively, which in turn resulted in increases of 43.5% and 42.7% over the same period in the previous year. EBITDA and Adjusted EBIDTA margins during the period were 36.4% and 37.5%, respectively. This is the highest level of this metric in the Company's history for comparable periods.
  • Net Income for the period increased to $115.6 million. Net Income margin was 16.8% in the quarter.
  • At the end of the quarter the Chain was operating 135 hotels, an increase in 12 new units over the 123 hotels that were operated at the close of the same period in 2016. The number of rooms in operation in 4Q17 was 15,228, an increase of 11.1% over the 13,702 rooms operating at the close of 4Q16.

Summary of Relevant Operating and Financial Information (12M17)

  • At the Chain level, occupancy at the close of the year was 60.2%, with an ADR of $934 and RevPAR of $562, which are increases of 10.9% and 8.3%, respectively.
  • Total Revenues consolidated in December 2017 were $2,508.4 million, a 23.1% increase over the same period in 2016. This is a result of the 11.1% increase in the number of Occupied Room Nights at the Chain level, the 8.3% increase in RevPAR, and 37.0% growth in revenues due to Hotel Administration.
  • Operating Income was $511.3 million during 2017, which is a 37.4% increase over 2016.
  • EBITDA and Adjusted EBITDA were $859.0 million and $878.9 million, which is a growth of 29.5% and 29.0%, respectively, compared to the end of 2016. In turn, EBITDA and Adjusted EBIDTA margins were 34.2% and 35.0%, respectively.
  • Net Income for the period was $286.4 million, which is an 8.3% increase over 2016. Net Income margin was 11.4% at the close of 2017.

Operating and Financial Highlights

4Q17

4Q16

4T17 vs 4T16

12M17

12M16

12M17 vs 12M16

12M17 vs 12M16

% Variation

% Variation

% Change

Operating Statistics for the Chain

Number of Hotels at the End of the Period

135

123

9.8%

135

123

9.8%

9.8%

Number of Rooms at the End of the Period

15,228

13,702

11.1%

15,228

13,702

11.1%

11.1%

Number of Installed Room Nights

1,350,327

1,193,937

13.1%

5,173,014

4,545,795

13.8%

13.8%

Number of Occupied Room Nights

845,278

733,999

15.2%

3,115,579

2,803,820

11.1%

11.1%

Average Occupancy Rate (%)

62.6%

61.5%

112 pbs

60.2%

61.7%

-145 pbs

-145 bps

ADR($)

927

885

4.7%

934

842

10.9%

10.9%

RevPAR($)

580

544

6.6%

562

519

8.3%

8.3%

Consolidated Financial Information (Thousands of Pesos)

Total Revenues

686,036

551,738

24.3%

2,508,448

2,037,766

23.1%

23.1%

Operating Income

154,409

102,361

50.8%

511,264

371,992

37.4%

37.4%

Operating Income Margin

22.5%

18.6%

395 pbs

20.4%

18.3%

213 pbs

213 bps

Adjusted EBITDA

257,499

180,487

42.7%

878,877

681,548

29.0%

29.0%

Adjusted EBITDA Margin (%)

37.5%

32.7%

482 pbs

35.0%

33.4%

159 pbs

159 bps

EBITDA

249,458

173,784

43.5%

858,983

663,353

29.5%

29.5%

EBITDA Margin (%)

36.4%

31.5%

486 pbs

34.2%

32.6%

169 pbs

169 bps

Net Income

115,570

79,113

46.1%

286,373

264,498

8.3%

8.3%

Net Income Margin (%)

16.8%

14.3%

251 pbs

11.4%

13.0%

-156 pbs

-156 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 fourth quarter and full-year 2017 show operating and financial strength.

In a year that started out with volatility and put the Mexican economy to the test, the hotel industry continued to demonstrate robust market dynamics, experiencing sustained growth and vigorous demand for quality rooms at affordable prices. At the consolidated level, Hoteles City Express increased Total Revenues and Adjusted EBITDA by more than 23% and 29%, respectively.

Growth of more than 10% in the average rate and more than 8% in the effective rates are reflections of an operating, distribution and digital marketing platform that is best in its class. As we expected, the yield management platform and the efforts to release installed capacity through higher prices, were successful. Today the gap in occupancy levels is non-existent, as it reached levels of 62.6% during 4Q17, more than 100 bps higher than those reported during the same quarter of 2016.

Supported by the transformation to a real-time operating culture, empowerment at all levels of the organization, and technology development in point-to-point processes, Hoteles City Express is ready to capture the benefits of an infrastructure that is able to operate more than 200 hotels without significant increases in the cost basis. Evidence of this is the fact that the company's EBITDA during the year grew 1.3 times more quickly than Total Revenues. 

During 2017 we put more than 1,500 rooms into operation, and we completed our entire development plan, operating 136 hotels today and 140 in the coming weeks. For 2018, we reinforce our commitment towards profitable growth, as we work on a plan to add between 15 to 21 new hotels before the end of the year.

Finally, we recently announced our intention to create a lodging REIT under the name FSTAY. The launch of this vehicle is a watershed for the company in several different ways, we believe it will be a vehicle that fully supports investor interests, as it will be the best in its class in terms of corporate governance. Furthermore, the company believes that this vehicle will be a catalyst to create greater transparency in the value of its assets, to establish a mechanism for continuous development without any dilution in value for investors, and to strengthen its development capacity so that it will be able to put more hotels into operation per year.

This step also marks a change in our model of communicating with the market, in which our investors will be able to validate the performance of that portfolio and to compare it with the rest of the company, which has lower levels of stabilization, thus showing the potential for incremental value of Hoteles City Express over time.

It is worth mentioning that currently the Company has sufficient flexibility to adopt any other strategic alternative to achieve the previously discussed objectives, options like increasing leverage based on the credit facilities currently in-placed and taking advantage from the already created trust structure continue to be other ways to accomplish future growth.

Today more than ever, and now with an additional, and potentially public vehicle, we will maintain our commitment to new shareholders to continue being the best alternative for profitable growth in the market. Thank you for your trust."



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