REVAL HOTELLIGRUPI AS

ANNOUNCEMENT

09.08.99

 

COMMENTARY TO H1 RESULTS

 

FINANCIAL RESULTS

 

The H1 1999 consolidated turnover of Reval Hotel Group totaled 93.2 million EEK 

(99.8 million EEK in 1998, incl. 1.7 million EEK turnover of AS Taimekt, 

which was sold in 1998), divided between the companies in the group as follows:

 

Reval Hotel Group: management and consultation services sales 3.2 

million EEK (1.9 million EEK in 1998);

AS Hotel Olümpia: accommodation services sales 90.0 million EEK 

(96.2 million EEK in 1998).

 

Decreased accommodation services net sales of AS Hotel Olümpia in H1 1999 compared 

to the previous year’s respective period proceeded from tightened competition on 

the market, as supply of hotel rooms in Hotel Olümpia market sector has increased 

by 47% from 1998.

 

The H1 1999 unaudited net profit of Reval Hotel Group amounted to 7.8 million EEK 

(1998 - 8.9 million EEK), confirming that the net profit forecast for the year 

will be met (annual profit forecast of 25 - 28 million EEK).

 

Besides the seasonality-related factors, the 1999 net profit figure will also be 

affected by uneven division of financial expenses during the year. The H1 reports 

include 0.8 million EEK investment into OÜ Hansa Hotel (owner of ExpressHotel, 

opened in June), also from fluctuations in privatization voucher exchange rates 

and risk management related expenses of 0.8 million EEK. In accordance with OÜ 

Hansa Hotel projections, revenues earned during the first year of operations 

should cover the establishment expenses and hence the hotel should end the year 

with zero-profit. As of end-H1, the risks proceeding from privatization voucher 

borrowings are hedged, hence no respective expenses are projected into H2. 

Proceeding from decreased liabilities and changes in interest rates, the H2 

interest expenses will be approximately 255 lower than during H1.

 

Decrease of the group’s gross profit by 49.6 million EEK from previous year’s 51.1 

million EEK level is due to the hotels’ lower turnover compared to the previous 

year’s respective period. The company has also imposed stricter control on its 

expenses, as a result of which the gross profit margin has improved and the 

group’s operating profit is on the same level as during the last year (for 

comparability purposes, 9.2 million EEK difference between Olümpia hotel’s rent 

and amortization expenses must be eliminated).

 

 

RESULTS OF REVAL HOTEL GROUP SYSTEM

 

In H1 1999, total of 167 rooms were added to the Reval Hotel Group System, 

increasing the total number of rooms in the system to 921 (22.1% increase).

 

The Reval Hotel Group System includes the hotels operated by Reval Hotel Group 

under different models (management contract, rent contract, ownership). 

 

As of 30.06 1999, the Reval Hotel Group System included Olümpia Hotel, Central 

Hotel, Park Hotel & Casino and ExpressHotel (opened 01.06.1999).

 

Accommodation services provided by the Reval Hotel Group System in H1: 

 

 

Hotel           Net sales of            Rooms per night         Average net price

                accommodation           sold                    per room (EEK)

                services

                (thous. EEK)                                    

                 H1 99   H1 98          H1 99    H1 98          H1 99  H1 98

Hotel Olümpia   46 924  49 431          45 018  46 627           1042   1060

Hotel Central   16 311  10 534          23 060  16 724            707    630

Hotel Park &     8 713   9 319          10 683  11 782            816    791

Casino

ExpressHotel     1 311       -           2 522       -            520      -

(opened 1.06.99)

Reval System    73 259  69 285          81 283  75 133            901    922

 

Compared to the same period last year, net sales of accommodation services and 

volume of rooms per night sold increased in H1 1999 by 5.7% and 8.2%, 

respectively. Average of 2.3% decrease of room prices in the Reval Hotel Group 

System was mainly due to structural changes in the group, proceeding from 

increased number of lower-priced rooms (expansion of hotel Central in June 1998, 

ExpressHotel opened in June 1999). After elimination of impact of changes in the 

structure of different price class rooms, the average increase of room prices is 

ca 2%.

 

Tallinn hotel services market in H1 was characterized by the following trends:

- rapidly growing supply of hotel rooms (ca 22% increase from the last year);

- moderate increase in demand (considerably faster in Q2 than in Q1);

- increased seasonal demand fluctuations compared to previous years.

 

In Q1 1999, the volume of rooms per night sold in Tallinn hotels (by Estonian 

Hotel and Restaurant Association members) increased by 2% from the Q1 1998 level. 

Comparing the results of Q2 1999 and Q2 1998, however, the respective increase was 

ca 14%, proceeding mainly from increased number of holiday tourists. Rapid growth 

of demand in Q2 confirms the Reval Hotel Group’s earlier forecasts of ca 6% annual 

increase in volume of rooms per night sold.

 

The following trends will affect the Tallinn accommodation services market in H2:

- H2 accommodation services turnover will account for 55 – 57% of annual turnover;

- increased share of business and conference travelers in September and October 

(in general, the highest share of business clientele in these months), resulting 

in higher average room price;

- no new hotel rooms will be opened. 

 

Katrin Rasmann

Financial Director

Tel. +372 62 74 444