Earnings Report /
Croatia

Arena Hospitality Group: Gearing Towards a Strong Summer Season

  • The performance across all three regions (Croatia, Germany, and CEE region) recorded an improvement

  • It should be noted that Q1 does not play a significant role in the Company’s overall business operations

  • Hotel Brioni expected to open in May, art’otel in Zagreb expected to open in December.

Tea Pevec
Tea Pevec

Head of Research

InterCapital
3 May 2022
Published by

Q1 2022 marked a period of gradual improvement in demand compared to the same period last year, as the travel restrictions across Europe were eased. The performance across all three regions (Croatia, Germany, and CEE region) recorded an improvement, especially in the CEE region where Arena franz ferdinand in Nassfeld contributed 40% (or HRK 17.4m) of the Group’s total revenue during Q1, with an occupancy rate of 66%. Combined with the rest of the CEE region (of which only 88 Rooms in Belgrade is currently operational), the ADR in this region amounted to HRK 1,085. Germany also recorded an improvement, especially in Nuremberg, as the COVID-19 measures were beginning to be eased. The Company also received COVID-19 support schemes in Germany during Q1. German portfolio’s revenue increased by more than 4x, ending Q1 with HRK 12.2m. The Company’s main market, Croatia, has most of the assets except Park Plaza Belvedere and campsite Arena Grand Kažela closed in Q1. Even so, the relaxation of measures in Croatia also had a significant impact on the Company’s performance, with revenue growing by 151% YoY and amounting to HRK 12.8m.

All of this had a positive impact on occupancy rates, which grew by 6.6 p.p. to 16.2%, and ADR, which grew by 72.8% to HRK 688. In total, AHG recorded revenue of HRK 43.7m, an increase of over 5x compared to Q1 2021’s HRK 8.6m. With the increase in business activity, OPEX also grew by 84.8% to HRK 76.5m.

Moving on, it should be noted that Q1 does not play a significant role in the Company’s overall business operations. As such, most of the profitability is made at the end of Q2 and especially in Q3. Even though revenue experienced positive developments, higher OPEX impacted EBITDA, which remained negative at roughly the same level YoY (HRK -32.9m). EBITDA was also influenced by the lower amount of government grants received compared to the last year. Finally, loss after tax amounted to HRK 79m, an increase of 18% YoY, due to the developments in revenue and EBITDA.

The Company is continuing its investments, with Hotel Brioni expected to open in May, art’otel in Zagreb expected to open in December, and the renovated hotel in Budapest expected to reopen in June. Various smaller investments are also made into other assets. AHG is also not significantly impacted by the Russia-Ukraine crisis, as the Company receives app. 2% of its customers from those regions.

The Company performed better than expected in Q1 2022, supported by the easing of measures and solid performance of Arena franz ferdinand. With no expected lockdowns and minimal exposure to the Russia-Ukraine conflict, AHG is well-positioned to take advantage of the 2022 summer season, which is shaping up to be one of the strongest on record. Current inflationary pressures could have a negative impact, but the Company has proven its ability to resist shocks and uncertainty. As such, we keep our current BUY recommendation for Arena Hospitality Group.