Hoteles City Express announces 3Q19 Results with a 9.5% growth in total revenues

MEXICO CITY, Oct. 16, 2019 /PRNewswire/ -- Hoteles City Express S.A.B. de C.V. (BMV: HCITY) ("Hoteles City Express" or "the Company"), announced today its results for the third quarter of 2019 ("3Q19"). All accounting figures have been prepared in accordance with International Financial Reporting Standards ("IFRS"), except where noted, and are presented in Mexican Pesos ("$").

Financial and Operating Highlights (3Q19)

• At the Chain level, Average Daily Rate ("ADR") increased 6.0% and Revenue per Available Room ("RevPAR") 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.

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."

Conference Call Details:

Hoteles City Express will host a conference call to discuss these results:

Conference Replay will be available for 30 days:

U.S.: 1-877-344-7529/ International: 1-412-317-0088

Passcode: 10135371

About Hoteles City Express:

Hoteles City Express is the leading and fastest-growing limited-service hotel chain in Mexico, in terms of number of hotels, number of rooms, geographic presence, market share and revenues. Founded in 2002, Hoteles City Express specializes in offering high-quality, comfortable and safe lodging at affordable prices via a limited-service hotel chain geared mainly towards domestic business travelers. With 151 hotels located in Mexico, Costa Rica, Colombia and Chile, Hoteles City Express operates five distinct brands: City Express, City Express Plus, City Express Suites, City Express Junior and City Centro, to serve different segments of its target market. In June 2013, Hoteles City Express completed its IPO and began trading on the Mexican Stock Exchange under the ticker symbol "HCITY;" furthermore, on October 8, 2014, Hoteles City Express completed a follow on with the aim of accelerating its growth in new hotels in the next few years.

HCITY has formal coverage, notes and analytical assessments by the following financial institutions and analysts: Actinver (Pablo Duarte), Bank of America Merrill Lynch (Carlos Peyrelongue), Citigroup (Dan McGoey), GBM (Eugenio Saldaña), ITAU BBA (Enrico Trotta), J.P. Morgan (Adrián Huerta), Morgan Stanley (Nikolaj Lippman), Santander (Cecilia Jiménez), Signum Research (Armando Rodriguez) and UBS (Marimar Torreblanca).

For further information, please visit our website: https://cityexpress.com/en/investors/

Disclaimer:

The information presented in this report contains certain forward-looking statements and information regarding Hoteles City Express, S.A.B. de C.V. and its subsidiaries (jointly, "the Company"), which are based on the understanding of its management, as well as assumptions and information currently available to the Company. These statements reflect the Company's current vision regarding future events and are subject to certain risks, factors of uncertainty and assumptions. Many factors may cause the results, performance or current achievements of the Company to be materially different with respect to any future result, performance or accomplishment of the Company that might be included, expressly or implicitly, within such forward-looking statements, including, among other things: changes in general economic and/or political conditions, governmental and commercial changes at the global level and in the countries in which the Company does business, changes in interest rates and inflation, exchange rate volatility, changes in business strategy and various other factors. If one or more of these risks or uncertainty factors should materialize, or if the assumptions used prove to be incorrect, actual results could differ materially from those described herein as anticipated, estimated or expected. The Company does not intend to assume, and does not assume any obligation whatsoever to update these forward looking statements.

SOURCE Hoteles City Express S.A.B. de C.V.