REVAL HOTELLIGRUPI AS

ANNOUNCEMENT

05.11.99

 

COMMENTARY TO THE FINANCIAL RESULTS 09/99

 

FINANCIAL RESULTS

 

The 9-months 1999 consolidated turnover of Reval Hotelligrupi AS 

totaled 146.3 million EEK (153.9 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 Hotelligrupi AS: management and consultation services turnover 

5.5 million EEK (3.6 million EEK in 1998);

AS Hotel Olümpia: accommodation services turnover 140.8 million EEK 

(148.6 million EEK in 1998).

 

AS Hotell Olümpia 9-months turnover is in accordance with the 

respective forecasts. Decreased accommodation services net sales of 

AS Hotell Olümpia in 9-months 1999 on y-o-y basis are due to 

tightened competition on the market, as supply of hotel rooms 

in Hotell Olümpia market sector has increased significantly.

 

The 9-months 1999 unaudited net profit of Reval Hotelligrupi AS 

amounted to 17.4 million EEK (1998 - 16.7 million EEK), confirming 

that the net profit forecast for the year will be met (annual profit 

forecast 25 - 28 million EEK).

 

Regardless of lower turnover due to tight competition, Reval 

Hotelligrupi AS 9-months 1999 gross profit was on the same level as 

the last year’s respective figure (82 million EEK in 1999 and 81.2 

million EEK in 1998), and operating profit has increased on y-o-y 

basis (35.6 million EEK in 1999 and 20.6 million EEK in 1998). The 11 

million EEK difference between rent and depreciation costs of hotel 

Olümpia building should be eliminated for the purpose of correct 

evaluation of operating profit dynamics. The improved profit margins 

are mainly due to effective cost control exercised in Reval 

Hotelligrupp hotels. 

 

The recently launched capital restructuring processes, and company 

development and investment activities have had a substantial impact 

on Reval Hotelligrupi AS 1999 net profit figure. 

 

As a part of capital restructuring processes, the company conducted 

in June a public issue of shares, which provided the company with 

24.1 million EEK of additional finances. The proceeds from the issue 

were used for installment payments (in Privatization Vouchers) for 

privatization of Olümpia hotel estate, as a result of which the 

company covered substantial financial risk and high-interest 

liabilities (the actual interest rate on liabilities is 23-26%, 

considering the current Privatization Voucher exchange rate). In June 

1999 the IFC Council resolved to invest into Reval Hotelligrupi AS 

share capital and to grant the company a long-term loan (at lower 

interest rate than the average interest rate at the Estonian loan 

market). Reval Hotelligrupi AS has paid 1.2 million EEK of loan 

administration fees for processing of the loan application; however, 

the share issue to IFC and conclusion of loan contract were postponed 

due to lawsuit regarding hotel Olümpia estate. At present the notes 

prohibiting the sale of the estate are cancelled, and the loan 

contract is to be concluded between Dec 1999 - Jan 2000. The council 

of the Privatization Agency has given its agreement in principle to 

cover the additional expenses Reval Hotelligrupi AS carried with 

regard to the aforementioned court case. 

 

Amid the development projects, the company’s 9-months 1999 results 

were affected the most by opening of ExpressHotell on 01.06.1999. 

During its first months of operating, the hotel has met the expected 

results, and the owner of the hotel Hansa Hotelli OÜ (Reval 

Hotelligrupp owns 34%) intends to cover all pre-opening costs during 

the first financial year and end it with zero-profit. Reval 

Hotelligrupi AS carried one-time costs of preparation and launching 

of the project in total amount of 2.5 million EEK.

 

 

RESULTS OF REVAL HOTELLIGRUPP SYSTEM

 

Total number of rooms available on Tallinn accommodation services 

market has increased in a year (9-months 1999 vs. 9-months 1998) by 

ca 22%. Reval Hotelligrupp System has added 167 rooms, thus staying 

highly competitive (22.1% increase).

 

During the period of one year, the number of accommodated visitors in 

Tallinn has also increased by ca 22% (based on data from ESA about 8-

months results of Tallinn hotel market). As the average length of 

stay, however, has dropped substantially (from 1.58 days in 1998 to 

1.46 days in 1999) and popularity of double-rooms has increased, the 

total number of rooms per night sold in Tallinn hotel market has 

increased by only ca 8%.

Number of rooms per night sold by Reval Hotelligrupi System has 

increased on y-o-y basis by 13.8 %. 

 

Accommodation services provided by the Reval Hotel Group System in 9 

months of 1999:

 

                    Accommodation    Rooms per night  Average price of

 		     turnover		sold		  room

                    9m 1999 9m 1998 9m 1999 9m 1998  9m 1999 9m 1998

Hotel Olümpia        76 487  78 964  74 560  75 074    1 026   1 052

Hotel Central 1      27 407  21 306  39 409  32 835      695     649

Park Hotell & Casino 14 696  15 905  18 818  20 332      781     782

ExpressHotell         6 459      --  13 207      --      489     --

Reval system        125 050 116 175 145 994 128 241      857     906

 

 

1 –9-months 1999 and 9-months 1998 turnovers and rooms-per-night sold 

are not comparable as 105 rooms were added in June 1998 after 

expansion of the hotel

 

9-months accommodation net turnover increased on y-o-y basis by 7.6%. 

The 5.4% decline in average room price in Reval Hotelligrupp System 

as a whole was mainly due to structural changes after addition of 

lower price-class rooms (expansion of Central Hotel in June 1998 and 

ExpressHotell in June 1999).

 

The following factors affected the Tallinn accommodation services 

market:

- Number of tourists staying in Tallinn overnight has continuously 

increased due to favorable weather conditions during the tourism 

season, allowing to upgrade the earlier-made annual rooms-per-

night demand forecasts from 6% level to up to 7%;

- Increase in the number of Finnish and Swedish tourists accounts 

for more than 90% of the increase in demand;

- The holiday tourists accounted for substantial share of demand 

increase, thus decreasing the average room price in several 

hotels. In near future the number of business travelers may 

increase due to expected improvement of the economic environment;

- Regardless of the market participants’ attempts to increase the 

number of new clients from the CIS and Baltic countries (incl. 

Estonia), the share of such visitors in Tallinn hotels has 

constantly declined. However, increasing popularity of Park Hotell 

& Casino as entertainment facility, and opening of cheaper and 

comfortable ExpressHotell has increased the volume of rooms-per-

night sold by Reval Hotelligrupp System to Estonians by ca 1000 on 

y-o-y basis.

 

 

Katrin Rasmann

Financial Director

Tel. +372 62 74 444