REVAL HOTELLIGRUPP

COMMENTARY TO FINANCIAL RESULTS



COMMENTARY TO FINANCIAL RESULTS, H1 2000



Sales results of Reval Hotels



Compared to H1 1999 the supply of hotel rooms (based on available 

rooms per night) on Tallinn hotel market has increased by 13%. In 

year 2000 no new hotels have been opened in Tallinn; also no 

expansions have made to larger hotels. Last year's rapid growth in 

supply of hotel rooms has slowed down, expected to grow ca 6% in year 

2000.



Demand for hotel rooms, however, has grown rapidly - in H1 2000 the 

demand on Tallinn hotel market increased by 19% on annual basis. 

The average duration of accommodation has remained at 1.47 days.



Continuous growth in demand is based on the following:

- tight competition on Tallinn hotel market, which has improved the 

quality of hotel services and kept the prices low. In H1 2000 the 

share of overnight-staying travelers among all tourists visiting 

Tallinn has increased 

- increased share of tourists from neighboring countries among the 

accommodation clients. Share of tourists from Finland is up at 53.3% 

(51.4% in 1999). The share of clients from CIS and Baltic countries 

has grown for the first time after economic slowdown. The share of 

Estonian staying overnight in Tallinn hotels is higher, even though 

it has not yet reached the 1997 pre-crisis level.

- continuous improvement of local infrastructure and transportation. 

Prices of ferries between Tallinn and Helsinki are continuously 

favorable.

- number of business travelers has grown due to positive economic 

growth expectations. Regardless of rapid growth in number of leisure 

travelers (mainly from Finland), the share of business travelers has 

remained at ca 40% of total accommodation.



Accommodation services sold by the Reval hotels in H1 2000:



                       Accommodation       Rooms per night     Average price of

 		          turnover		 sold		      room 

                        (EEK thousand)                               (EEK)

                      H1 2000  H1 1999    H1 2000  H1 1999    H1 2000  H1 1999



Reval Hotel Olümpia    47,141   46,925     45,708   45,018      1,031    1,042

Reval Hotel Central    15,111   16,311     23,338   23,060        647      707

Park Hotell & Casino    7,731    8,713     10,340   10,683        748      816

Reval Expresshotel(1)   7,213    1,318     14,600    2,522        494      522

Reval Hotels           77,196   73,266     93,986   81,283        821      901



(1) - opened on 31.05.1999



Number of rooms per night sold by Reval Hotels in H1 2000 has grown 

by 12,703 rooms per night or + 15.6%. Thus Reval Hotels has retained 

its ca 30% market share on Tallinn accommodation services market.





Group financial results



In H1 2000 Reval Hotelligrupi AS consolidated net sales were EEK 

117.4 mln (EEK 94.0 mln in 1999), divided between the companies in 

the group as follows:





- Reval Hotel Olümpia turnover EEK 89.3 mln (EEK 90.8 mln in 1999);

- Reval Hotel Central turnover EEK 26.3 mln (in 1999 the consolidated 

net turnover of Reval Hotelligrupi AS did not include the turnover of 

Reval Hotel Central (EEK 27.7 mln), as the company managing this 

hotel was bought at the end of 1999);

- sale of management and consultation services: EEK 1.8 mln (EEK 3.2 

mln in 1999, incl. Reval Hotel Central management fee in the amount 

of EEK 1.5 mln).



Reval Hotelligrupi AS consolidated and unaudited net profit in H1 

2000 was EEK 21.9 mln (in 1999 EEK 7.8 mln). The group's net 

profit was on expected level.



Major changes have occurred in the group's expense structure and 

profitability ratios compared with H1 1999. Gross profit margin 

increased from 53.69% in H1 1999 to 59.24% this year, mainly due to 

lower expenses resulting from more efficient use of personnel at 

Reval Hotel Olümpia. Compared with last year the operating 

profitability ratios have remained unchanged: ratio of EBITDA to net 

sales is at 36.04% (35.26% in 1999) and operating margin 22.64% 

(23.03% in 1999). The dynamics of profitability ratios were 

significantly influenced by increased ratio of administrative 

expenses to net sales (32.6% in 2000 vs. 26.5% in 1999), mainly due 

to amortization of goodwill from purchase of operating company of 

Reval Hotel Central. Increase in net profit margin from 8.29% in 1999 

to 18.4% in 2000 is due to drop in financial expenses from EEK 11.0 

mln in H1 1999 down to EEK 5.1 mln in this year, and amendments to 

income tax legislation. Compared with H1 1999 the capital 

profitability ratios improved in H1 2000. In order to objectively 

evaluate the dynamics of the ratios, one must also consider that as 

of the current year the group income statement does not reflect the 

income tax expenses, as income tax is payable upon payment of 

dividends. 



As a result of capital restructuring processes, which were completed 

in the beginning of the current year, the group liquidity ratios have 

shown substantial improvement (debt ratio at 1.69 in 2000, compared 

with 0.89 in 1999; current ratio at 1.47 in 2000 compared with 1.00 

in 1999). After share issue and refinancing of loans in February, the 

debt management ratios have reached the level planned in capital 

management strategies (equity-to-assets ratio 0.59; working capital 

0.57).





Katrin Rasmann

CFO

Tel. +372 62 74 444