CFO interview: Positive operating results and double-digit EBITDA growth at Hotelbeds

Andrés García-Tenorio, our CFO, celebrates his 15-year anniversary with an exclusive  interview with Hosteltur – the leading travel trade publication in Spain - where he highlights Hotelbeds’ strong financial performance and explains the real story about our debt.

(Translated and reproduced from original Hosteltur article https://www.hosteltur.com/134437_hotelbeds-genera-resultados-operativos-positivos-creciendo-a-doble-digito.html)

• For the fiscal year ending September 30, 2019, Hotelbeds registered double digit EBITDA growth of over 230 million euros and a net cash position of €498 million.
• The company’s operating results are positive. The statutory results reflect losses due to the acquisitions made.
• The bedbank had a turnover of €6 billion and will be working to meet the objective for 2021 to reduce the “cost per roomnight” KPI from the current €6.30 to €4.90.

In 2019 Hotelbeds finished the integration generating positive operating results, with revenues of €6 billion and an EBITDA above 230 million euros, in line with previous year’s growth. However, the statutory results reflect losses, a fact that is very common in private equity environments when acquisitions are made, as Andrés García-Tenorio, CFO at Hotelbeds, explains in an exclusive interview with Hosteltur, as he celebrates 15 years in office.

What is your assessment of the last financial year for Hotelbeds?

Last year we concluded the integration of the three largest bedbanks worldwide, consolidating our operations and positioning ourselves as leaders in our segment. Likewise, for the fiscal year ending September 30, 2019, we achieved good financial results registering double digit EBITDA growth of over 230 million euros and a net cash position of €498 million.

Despite these good financial results, is it true that your statutory income statement reflects accounting losses?

We generate positive operating results, but it is true that the statutory results reflect losses, a fact that is very common in private equity environments when acquisitions are made. The losses were already budgeted for and were not a surprise. They have no direct relationship with the day-to-day business, nor impact the available cash; they are due to the accounting amortization of the purchases made, and the interest derived from loans with our investors, whose interests are capitalizable and don’t involve cash outflow. In short, our business continues to grow in terms of results and generates cash.

Could you please explain the situation regarding bank debt?

Our business generates cash and does not need any financing. Our debts come from the acquisitions that took place in the past. Our level of debt is aligned with the Group's EBITDA and with the market and is an ideal structure, mainly because of the environment of low interest rates we are in. The maturity of the debt is long term, so we don’t feel pressure because of it. Debt investors looking for a liquidity window can find it in the secondary market, without discounts or the need to wait until 2023. The debt is trading at an attractive price, in fact it has improved during the last months, this reflects that our loan set-up is attractive to long-term investors looking for stable and recurring returns.

After 15 years in the company, what have been the main challenges during your tenure?

I would say that there have been mainly three. In chronological order, the first would be our international expansion that we carried out between 2005 and 2009, increasing our presence in Europe, Asia and the Americas. Secondly, the creation of Hotelbeds as an independent company, separating from TUI and moving to a new ownership structure under Cinven and CPPIB. And, finally, the integration of Hotelbeds with GTA and Tourico Holidays. These have really been years of massive changes in which I cannot fail to thank all our team worldwide for the huge effort they have made so that we can be where we are now. I also feel very proud about how Hotelbeds has become a leading company that continues to achieve such important milestones, becoming a benchmark in the accommodation sector with revenues of €6 billion. I’m proud of the fact that we employ around 5,000 people worldwide, 1,500 of them in Mallorca, our headquarters, and continue providing value to the 180,000 hotel partners and 60,000 clients with whom we work worldwide.

How was the Hotelbeds that you found 15 years ago and how has it since evolved?

Like it is today, Hotelbeds was an exciting and dynamic environment, where we were eager to try new things. Back then, our online business was small, basically aimed at the UK source market travelling to Spain. The big difference is that we have become much bigger and more professional. We have been able to achieve great organic growth globally and make strategic acquisitions which have given us an even more relevant position. After these integrations, we now have a strong company with great capacity to continue the success story that has always characterized us.

“These have really been years of massive changes, in which I cannot fail to thank all our team worldwide for the huge effort they have made so that we can be where we are now.”

What was your professional background before joining Hotelbeds?

I started my professional career working for Price Waterhouse in Spain and the UK. Later, I joined Allied Domecq which, at that time, was the second biggest producer and distributor of spirits with brands such as Beefeater, Ballantines and Tía María. It was a very interesting stage in my professional career because of the transformation process that the company was carrying out. I was fortunate to hold various financial positions in Spain, as well as in the UK and the United States.

What would you highlight regarding your years at Hotelbeds?

Our people, without a doubt. We have a team of magnificent professionals at all levels, with a great capacity to carry out projects. New challenges and opportunities constantly appear, and it is essential to have a team that can carry them out and has the flexibility and agility to adapt to such a fast-changing environment.

Despite that, there have been some layoffs…

Yes. We have integrated three global bedbanks in which there were similar positions in each of the companies. In order to be an efficient, dynamic company and not to be left behind, there have been some exits, a fact that is completely normal in merger situations.

What indicators do you expect to improve significantly in 2020?

Basically, our goal is to continue investing in a fully scalable model where our business can continue to grow while costs are proportionally reduced in order to be the most efficient bedbank in the market. The performance indicator that we use is what we call "cost per roomnight". In 2020 we will be working to meet the objective we have set for 2021 to reduce this from the current € 6.30 to € 4.90. We think this objective is fully feasible, since as a reference, in 2016 Hotelbeds as an independent business prior to integration, was achieving a cost per roomnight of €5.40 without the scale and experience of our recently combined business.

“Our goal is to continue investing in a fully scalable model, where our business can continue to grow while costs are proportionally reduced in order to be the most efficient bedbank in the market”

You have mentioned that you are focused on being the most efficient bedbank in the industry, what are you doing about it?

To achieve this goal, and to take advantage of the scalability of our recently unified operations, we have identified new opportunities to optimize our operations and our business model, investing in automation and cutting-edge technology in order to improve the experience for our clients.

The company comments that Andrés García-Tenorio is one of the key people in Hotelbeds. As Chief Financial Officer for 15 years, he continues to form part of the Executive Team after Tourico Holidays and GTA joined Hotelbeds in 2017. Andrés has been recognized as one of the 100 most important financial directors in Spain on several occasions and in 2016, he was included among the 25 most innovative CFOs in Spain, according to the Spanish economic newspaper Expansión.