pandox anual report 2009 (eng)
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Report on Pandox business operations 2009
o n e o f t h e l e a d i n g h o t e l P r o P e r t y c o m Pa n i e s
The Pandox Spirit
Pandox is one of europe’s leading hotel property companies. the portfolio is of the highest quality, embracing 46 hotels with a total of 11,100 rooms as well as nine operating companies. the business model is that through active and committed ownership, work with four operational strategies, situation adapted for each hotel.
the hotels are located in international hotel markets such as london, Berlin, stockholm, copenhagen, Brussels and montreal, as well as stable cities with a high proportion of domestic demand such as Bremen, antwerp, gothenburg and swedish regional and university cities. all hotels have strong natural positions with an average size of 240 rooms, which limits risks and provides prerequisites for efficient operations.
Pandox has a unique network within the hotel market and works together with many of the major brand names, including hilton, intercontinental, hyatt, scandic, crowne Plaza, radisson BlU, holiday inn, clarion, Quality, elite, first, or through independent distribution channels.
Content
The Company
Business model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Success factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
History/Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Business philosophy/Knowledge . . . . . . . . . . . . . . . . . . . . .8
Strategic orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Business processes/Pandox Model . . . . . . . . . . . . . . 14
Types of agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
The Pandox Model in practice . . . . . . . . . . . . . . . . . . . . . 18
Södertälje . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Berlin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Brussels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Montreal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Market communication . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Surrounding world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
The hotel properties
List of properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Hotel properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Finances
Financial overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Sensitivity analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Valuation and fiscal situation . . . . . . . . . . . . . . . . . . . . . . 44
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Ten-year overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Quarterly data 2008–2009 . . . . . . . . . . . . . . . . . . . . . . . . 48
2009 was yet another successful year for Pandox. despite global anxiety, cash flow increased whereas revenues and profits declined. the driving force behind the good developments is a combination of the company’s business model, the high quality of the property portfolio and lower interest costs. read more in the message from the ceo on page 74.
Financial statements 2009
Report of the Board of Directors . . . . . . . . . . . . . . . . . . . 50
Income statement and comments . . . . . . . . . . . . . . . . . . 52
Balance sheet and comments . . . . . . . . . . . . . . . . . . . . . 54
Changes in equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Cash flow statement and comments . . . . . . . . . . . . . . . . 57
Accounting principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Notes to the accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Proposed disposition of earnings . . . . . . . . . . . . . . . . . . . 66
Auditors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Other information
Work of the Board of Directors . . . . . . . . . . . . . . . . . . . . . 68
Board of Directors and auditors . . . . . . . . . . . . . . . . . . . . 68
Senior executives and hotel managers . . . . . . . . . . . . . . 70
Pandox’ management team . . . . . . . . . . . . . . . . . . . . . . . 72
CEO summary of the year 2009 . . . . . . . . . . . . . . . . . . . . 74
2 | Pandox 2009
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s.success factors
development
Knowledge, network & individual capital
consistent strategy
Pandox 2009 | 3
Pandox has had rapid business development since its start in 1995. the success factors are a combination of the company’s expertise and experience, as well as a strategy that implies active ownership and committed industrial owners. 4
Read more on page
Pandox has achieved constant progress in size, cash flow and value-growth – and consequently a strong market position. the portfolio value has increased from seK 800 million to approximately seK 13 billion, while cash flow has increased 40 times since the start 1995. 6
Read more on page
one of Pandox’ most important cornerstones is to constantly develop its areas of competence and expertise. in order to inspire our employees, an informal leadership style has been developed to give each individual considerable freedom and development opportunities. the corporate culture includes an interactive discussion with an extensive network, which provides valuable input in both large and small issues.
8Read more on page
Pandox has a well-defined strategy that is thoroughly embodied with the Board of directors, senior executives and banks – a strategy that has been consistently followed since the com-pany was formed nearly 15 years ago. starting point is to acquire under-performing large hotels in strong locations, where the company’s specialist expertise can be used to develop the assets. this in turn creates good conditions for long-term value development and a strong company.
10Read more on page
4 | Pandox 2009
flexible business modeldepending on the local conditions, Pandox can choose between four operational strategies; through leases with professional operators where Pandox remains as a strategic partner; management agreements where a partner runs the daily operations on behalf of Pandox; by managing one’s own operations within the framework of a franchise agreement with a well-known brand; or through independent distribution channels. the business model provides excellent opportunities to create a situation-adapted strategy of “asset by asset”.2
Well-defined and consistent strategyPandox has a well-defined strategy within geography, types of hotel and yield requirements that have been consistently observed since the company was formed.4
expertise and networkPandox’ management team has extensive experience of hotel and capital markets. the company’s specialist expertise embraces hotel markets, hotel operations, properties, finance and business development.3
short and rapid decision-making paths Pandox’ shareholders and Board of directors possess industrial expertise in hotel opera-tions, properties and business development. their experience creates confidence, and is utilised by being organised and taking rapid decisions within, for example, different acquisition questions. this is a competitive advantage in a significantly slower surround-ing world.1
Pandox’ business model
Successindividually important – together invaluable
Pandox 2009 | 5
Portfolio of the highest quality the hotels are located in international hotel markets such as london, Brussels, Berlin, stockholm, copenhagen and montreal, as well as cities with a high proportion of domestic demand, which in turn creates a balance in revenues. all hotels have strong natural positions with an average size of 240 rooms, which limits risks and provides strong conditions for efficient operations. the hotels are large, thus providing a critical volume, and they are marketed by the sector’s most well-known brand names. the agreements structure, with a combina-tion of leases, management agreements and own operations, provides good potential with a limited risk.
5
strategic alliancesPandox seeks strategic alliances with brand names that are interested in forming a partnership that creates benefits for both parties.9
acquisition strategyPandox primarily acquires hotels with a potential that can be brought out through active measures and where the company’s areas of expertise can be utilised.6
corporate culturePandox has established an informal leadership style where a high level of expertise is combined with low bureaucracy and effective monitoring methods. Keywords are inspiration, simplicity, rapidity, expertise and visible leadership.7
choice of countries and locationsPandox is established in major hotel markets that have good potential and stable demand.8
factors
6 | Pandox 2009
Background and history
Pandox has it’s origin in the swedish financial and property crisis in the early
1990s. the company was founded in 1995 by skanska and securum. its
task was to structure the owners’ hotel portfolio and prepare it for sale, which
was a fact when the company was listed on the stock exchange two years
later. all in all, some 100 assets from the swedish and international hotel and
tourist industry were sorted, systematised and structured. this was the start
of Pandox.
The original hotel property portfolio
initially, Pandox consisted of 18 properties and three small operations. all the
hotels were situated in sweden, most of them were small and located in
secondary locations, which reduced the profitability of the company.
Listing on the stock exchange
When Pandox was listed on the stockholm stock exchange in 1997, it was
the first time a company offering this business concept had ever been listed
in europe. the company’s portfolio was valued at seK 1.3 billion, with a mar-
ket value of seK 520 million, and it had 4,000 new shareholders. after being
listed, Pandox underwent massive expansion, taking over larger hotels in
strong locations while disposing the smaller hotels.
Internationalisation
in 2000, Pandox expanded its geographical strategy to also include northern
europe. this strategy was turned into reality thanks to the acquisition of
hotellus, with its 16 hotel properties, thereby creating a foundation for the
internationalisation of Pandox.
Bought out from the stock exchange
Pandox was reprivatised in 2004. the company was deregistered following a
public offer, and had new industrial owners through eiendomsspar as and
sundt as.
Leading position in Europe
after the privatisation, the acquisition speed increased and a number of major
hotels in cities such as Berlin, Brussels, Basel, copenhagen, stockholm and
malmö were acquired. these transactions reinforced the position of Pandox
as one of the leading hotel property players in europe.
Expansion to North America
in 2007, Pandox continued its international expansion with its first acquisition
in north america. the acquisition of the intercontinental in montreal, with its
357 rooms, laid the foundation for selective expansion in north america. in
2008, the 605-room hyatt regency montreal was acquired. thereby Pandox
had within a year acquired 1,000 rooms in montreal.
Strong growth and stable profitability
the Pandox cash flow has increased 40 times since the company started in
1995. this has been achieved by an active ownership of existing hotels and
profitable acquisitions. the company’s hotel property portofolio is now worth
around seK 13 billion, seeing a thirteen-fold increase in its value since the
start 1995.
Expertise provides ability to rapidly adapt
Pandox’ market expertise, business culture and network enable the com-
pany to rapidly adapt and adjust – where 2009 is an excellent example.
in a demanding global economic climate with dramatically falling demand,
Pandox’ hotel property portfolio has managed considerably better than
the rest of the market.
strong resultdespite a troubled surrounding world, Pandox’ cashflow increased during 2009.
Key figures, SEK M 2009 2008
Property revenue 895.2 915.5operating net 778.2 782.7operating revenue hotel operations 1,095.0 1,105.3operating income hotel operations1) –34.0 20.8Profit before tax2) 252.5 280.4cash flow2) 446.4 444.51) the negative result is primarily attributable to large investments
made in holiday inn Brussels airport and intercontinental montreal. 2) excluding non-recurring items.
Pandox’ business model
Developmentfrom financial crisis to a successful hotel property company
1995–2009
Pandox 2009 | 7
Further details about how the operating activities function in practice are set forth on pages 18–25.
growing operator activities
a natural part of Pandox’ active ownership is to operate its own hotels.
depending on local conditions, the best strategy can be to develop
operations ourselves, and then choose another solution at a later stage.
this creates a situation-adapted strategy – hotel by hotel. another reason
is that business cultures differ among various geographic areas. in scandi-
navia, leases dominate while in north america management and franchise
agreements are more common. europe has a mixture of both. it is there-
fore important to master different strategies in order to successfully operate
in an international hotel environment. own operational expertise also
implies possessing specialist knowledge to evaluate the operators one
has lease agreements with, and be able to realise acquisitions where both
the property and the operations are included.
as a consequence of the market trend, where hotel companies are
more becoming management companies, it is also natural for Pandox to
integrate vertically and assume responsibility for operations.
at the end of 2009, Pandox’ operating activities, including management
agreements, embraced nine hotels with total revenues of seK 1,1 billion
located in Berlin, Brussels, antwerp, montreal and the Bahamas. in recent
years, four operations that were acquired as under performers, and then
developed, have been leased to well-known operators with long-term
agreements. this in turn creates prerequisites for new acquisitions.
the philosophy behind Pandox’ operating activities is to build up each
hotel’s strategy and expertise locally. this implies that most decisions are
delegated, and reporting is made to a board of directors with external
members who are selected for their specialist competence. to be
successful with business processes requires an ability to attract the best
management, and that such persons will get genuine influence on
operations.
Hotels operated by Pandox
City Hotel Brand No. rooms Location Profile
Berlin hotel Berlin, Berlin independent 701 central full service conference hotelmontreal hyatt regency hyatt 605 central, entertainment district full service intercontinental intercontinental 357 city centre, business district Business and conference hotelBrussels crowne Plaza Brussels city – le Palace crowne Plaza 354 city centre Business and conference hotel hotel Bloom! independent 305 central lifestyle hilton Brussels city hilton 283 city Business hotel holiday inn Brussels airport holiday inn 310 airport Business and conference hotelantwerp crowne Plaza crowne Plaza 264 ring road Business and conference hotelBahamas Pelican Bay at lucaya independent 184 central, marina resort
8 | Pandox 2009
Pandox’ business model
KnowledgeKnowledge within the entire value-growth chain – prerequisite for success
Value-growth chain
1. Macro-economy
the level of activity (global, regional or local) constitutes
an important component for how demand shall be devel-
oped within the hotel market. macro also influences the
direction of the economy, which implies that one can
choose different points in time to enter a specific market.
2. The hotel economic cycle
a part of the macro-economy can be divided into
five different phases: downturn, lower pace of
downturn, level-out, growth and peak. With know-
ledge of the pattern of a hotel economic cycle, one
can exploit each situation by investing in different
geographic markets and endeavouring to limit the
risk in the markets that have poorer outlooks.
3. Location and size
two important factors are that hotels have strong
locations and that they have the right size to contain a
critical volume and thereby good preconditions for
profitability.
4. Competition – new capacity
– different market positions
each market is unique and deep knowledge of
the local conditions is required in order to create a
product that provides sustainable profitability.
5. Brand name
a strong brand name strengthens the hotel’s market position
and competition in the chosen product segment.
10. Financing and taxes
the choice of financing and legal structure is a key issue
that creates preconditions for stable value growth.
9. Contract/agreement structure
the hotel industry has many forms of contracts
and agreements, which influence a hotel’s
profitability, financing and value growth. in
general, a contract or agreement should con-
tain mutual incitements so that the parties
work for the same objectives.
6. Operational issues and management
hotel operations are complicated and require a high level of
expertise, active presence and strong leadership. a good
local hotel team creates both satisfied customers and
employees as well as high profitability.
8. Asset management
the hotel industry is capital-intensive and spe-
cialist expertise is required within both the hotel
and property operations in order to effectively
take care of and develop the properties.
7. Investments
a hotel must be constantly developed in
order to maintain a strong market position.
the base for Pandox’ vision, strategy and choice of business model are the value-growth chain in a hotel property. this can be divided into ten different parts:
Pandox 2009 | 9
& network international network enables access to unique expertise
Pandox has a small management organisation. a total of 17 people work at
the office in stockholm, of whom 10 are directly involved in the company’s
development and management. in addition, one of the company’s business
area managers is based in Brussels where the largest operating activities are
located. the model provides major benefits with rapid decision-making paths,
a high level of interactivity, and considerable individual freedom. in order to be
able to maintain all business processes in motion, the organisation is supple-
mented by a national and international network composed of people with
specialist expertise within market, management, hotel operations, property
development, brand names, finance and taxes. Pandox works active to att-
ract people to the network, which is a cornerstone for the company’s rapid
growth and development. the model places demands on both visionary and
operative leadership, as well as an ability to create forms of collaboration with
individuals with different backgrounds.
Pandox’ international network – a precondition for rapid development
Aldert Mikael Liia
10 | Pandox 2009
Pandox’ business model
Individual Pandox’ corporate culture creates room for unique employees
Pandox’ basic management philosophy is more about inspiration than control, and more about the individual than the system.
one precondition for this is individual freedom where entrepreneurship and “out of the box” solu-tions can be created simultaneously as the envi-ronment must be characterised by stringency and structure. the business climate therefore places considerable demands on each person’s power of initiative and ability to deliver their own commit-ments – where the points of departure are distinct and transparent goals.
the philosophy is expressed in a special program called “force of individuals”, based on five cornerstones:
at Pandox, hierarchy has been replaced by power of enterprise.”
it is the individuals at Pandox which makes the company so unique. the principal ingredients are experience, the will to constantly improve, to find new opportunities and to win, of course! – as well as a strong dose of responsibility and initiative.”
the Pandox team’s will to always find solutions is outstanding – nobody understands the word impossible!”
1. Leadership with spirit of enterprise. Pandox believes in people and allows the individual to have significant influence. for the right person, this is an excellent environment, simultane-ously as it also implies significant demands on delivering results.
2. Outside in. one of the driving forces is to constantly learn from new market trends and new products. the message to management is often – “go out and see”.
3. Human touch. the point of departure is that people with considerable motivation do not need to be controlled, but instead inspired. operations are of course monitored carefully, but without reports and bureaucracy taking an upper hand.
4. Down-to-earth. the motto is “Walk the talk”. 5. Lean. an important part of Pandox’ success
is to maintain high productivity that creates prerequisites for good profits, which in turn provides resources for development. the implementation of modern organisation struc-tures is part of the strategy.
Liia Lars Erik
Pandox 2009 | 11
assets
to act quickly and informally is a great freedom, which at the same time places heavy demands on one’s own motivation. demands and expect-ations are definitely high, but there is also room for making mistakes – that is a challenge i like.”
an informal environment with considerable freedom creates room for personal responsibility, power of initiative and devotion, which in turn leads to good results.”
the dynamic of the cooperation within Pandox is the complete and transparent information.”
12 | Pandox 2009
Pandox’ business model
Strategicconsistent strategy provides stability and spread of risks
Pandox’ vision is to be one of the
world’s leading hotel property com-
panies with regard to specialist
expertise in both hotel and property
operations and active ownership.
for the vision to become reality, the company must
retain its specialist expertise as to how the value-
growth chain interacts, and that the balance
between international and national revenues, brand
names and types of hotel are maintained. another
important aspect is to constantly develop the busi-
ness model in order to choose the best situation-
adapted strategy with regards to the local market.
Business concept and strategy
Pandox’ business concept – based on expertise
within hotel properties, hotel operations and busi-
ness development – is to actively own, develop and
lease hotel properties.
Corner stones in Pandox’ strategy
one type of asset – hotel properties
1 a hotel property has characteristics
that distinguish it from other types of
property – which demands specialist
expertise in order to pursue active
ownership.
Business position: Pandox owns 45 hotels
with a total of 10,800 rooms. the company has
never invested outside its core area.
Business model
2 to maximise value-development in
each hotel requires a flexible busi-
ness model that creates potential for
a situation-adapted strategy.
Business position: Pandox has a contractual
structure that embraces lease, management
and franchise contracts and agreements, as
well as contracts with independent players. the
largest proportion includes leases that generate
76 percent of revenues.
geographic market
3 focusing on one type of asset
requires a broad geographic market
in order to create growth precondi-
tions and to be able to benefit from
changes in the hotel economic cycle.
Business position: Pandox is currently present
in eight countries, of which sweden is the largest
market. major markets outside the domestic mar-
ket include Brussels, copenhagen and montreal.
Pandox is represented in locations that have a
mix of national and international demand.
Hilton Stockholm Slussen, Sweden
Sweden, 56%
International, 44%
Geographic distribution, share of hotel rooms
Revenue-based lease, 33%
Revenue-based leases with guarantee, 43%
Management agreements,own operation, 7%
Franchise agreement,own operation, 8%
Own operation, 10%
Lease structure
Pandox 2009 | 13
orientationOverall objective
Pandox’ principal objective, through specialist
expertise within hotels, hotel properties and busi-
ness development, is to achieve optimal return on
investment and value growth in the hotel property
portfolio.
specific goals are set each year for net operating
results, return on shareholders’ equity, value
growth in the existing hotel property portfolio, and
equity/assets ratio. the goals are broken down to
each individual property, and act as guidelines
upon investment decisions.
location and size
4 large hotels with strong locations
increase potential and reduce risks,
as well as being attractive for both
partners and guests. these hotels
have higher liquidity and are easier
to finance.
Business position: all Pandox hotels have
strong locations and an average of 240 rooms
– which is three to four times larger than the
average hotel in europe.
type of hotel
5 the hotels shall belong to the upper-
medium and high-price segments.
Business position: the portfolio is a mix of
high and medium-priced hotels. examples of
those in the high-price segment include the
intercontinental montreal, crowne Plaza Brus-
sels city centre and hilton stockholm slussen.
medium-priced hotels cover many scandic
hotels and the holiday inn Brussels airport.
choice of brand name and partners
6 each hotel shall have the best possi-
ble brand name that strengthens the
profile – which requires that Pandox
maintain a broad network within
domestic and international hotel
companies.
Business position: Pandox works with twelwe
different brand names today, as well as with
independent distribution channels. the brand
names are well-known and established which
provides a unique position and network.
Clarion Hotel Grand, Östersund, Sweden InterContinental, Montreal, Canada
14 | Pandox 2009
Pandox’ five business processes – for increased cash flow and limited risk
With the value-growth chain as the starting point, Pandox has organised its operations into five business processes.
Market analysisTo create knowledge of the market situation
and change patterns .
Asset management Daily management and major investments
in order to increase the value of the
properties in the long-term .
Economic and financial reporting
how operations are monitored through
established goals, evaluated and valued.
Market communicationRegular market activities
aimed towards target groups .
The Pandox ModelThe methodology process for the systematic
evaluation of each hotel .
Pandox 2009 | 15
Market analysisa market analysis is performed in order to assess the potential pro-fitability of a hotel, and thereby its ability to pay rent. the local market is identified and analysed regarding demand, competition and the current and future offer.
Market strategya strategic plan is established for each hotel property based on the respective location’s specific pre-requisites, the local market and its position in the hotel economic cycle. When preparing the strate-gic plan, the property’s continued utilisation scope is evaluated objectively and impartially.
Profitability optimisationin view of that a property’s value is influenced by the hotel opera-tions’ profitability, the operator is naturally Pandox’ most important partner. in order to ensure positive developments within the hotel operations and the value of the property, the operator and related activities are continuously evaluated.
Agreement optimisationthe optimal cash flow in each respective hotel property is then divided among the operator, Pandox and other parties concerned. lease agreements are formulated so that all parties involved have an incentive to continuously improve the hotel property’s overall profitability.
the Pandox model
Possibility to acquire hotel property
Action plan with concrete measures
Evaluation of each hotel property and the hotel property portfolio
Market analysis Market strategy Profitability optimization
Agreement optimization
Divestment in accordance with the strategy
16 | Pandox 2009
Pandox’ contracts and agreements
the value of a hotel property is governed to a considerable degree by the content and formulation of the hotel lease. the objective is to formulate an agreement where all parties concerned are given an incentive to continuously improve the hotel property’s profitability.
Each property has its own characteristics
Before Pandox enters into a lease, a compre-
hensive market analysis is performed that
includes known changes in the market and
competition from various players both in the
short and long-term. different models are
applied in the leases in order to limit the risk in
a declining market, simultaneously as Pandox
may participate in an upward trend. should an
operator’s liquidity weaken, Pandox has the
expertise and ability to manage the related hotel
operations, which indeed has occurred on
several occasions.
Lease structure
Pandox’ active and situation-adapted owner-
ship is reflected in the various lease models. the
lease structure is governed by factors such as
anticipated market trends, local competition,
planned investments, as well as choice of oper-
ator and distributor. By combining various types
of leases, Pandox has achieved a lease struc-
ture that provides the company with increased
cash flow in a rising market while simultaneously
offering protection against downturns in the
market through rental guarantees.
Types of lease
Revenue-based
revenue-based hotel leases are linked to sales
generated by the hotel business. this form of
lease provides Pandox with a share of growth in
both the market as a whole and in the market
share. to limit the risk, these leases often specify
a minimum rent (guarantee/base rent).
Result-based
a result-based hotel lease implies that the hotel
property owner receives a share of the hotel
operator’s operating net. this type of lease
requires that the hotel property owner under-
stands the operator’s financial control system.
result-based hotel leases can also specify a
minimum rent (guarantee/base rent).
Fixed-fee hotel lease
fixed-fee hotel leases with an index linked to the
development of the consumer Price index (cPi)
are used in mature markets and in well-estab-
lished hotel products. a fixed-fee lease limits the
risk factor but also the potential.
Scandic Skogshöjd, Södertälje, Sweden
Pandox 2009 | 17
Management agreement
a management agreement can be perceived as a
sort of agent contract. the main characteristic is
that the hotel property owner also owns the hotel
business. through a management agreement, an
operator/manager is assigned to operate and
manage the hotel on behalf of the hotel property’s
owner, for which a management fee is paid to the
operator/manager.
Franchise agreement
in its own operations, franchise contracts can be
entered into where Pandox gains the benefits of a
larger system that embraces the hotel’s overall
marketing and sales.
The Pandox Model in practice
RENTAL REVENUES 2009
Per type of contract/agreements
Revenue-based leases, 33%
Franchise agreement,own operation, 8%
Own operation, 10%
Revenue-based leases with guarantee, 43%
Management agreements,own operation, 7%
LEASE AGREEMENTS
Maturity date structure
Year 2010, 3%
Year 2012, 2%
Year 2011, 2%
Year 2013, 20%
Year 2014–, 73%
Pandox has developed a large number of hotel properties
and hotel operations over the years . The philosophy
behind Pandox’ operational activities is to build up each
hotel’s strategy locally . One of the most important factors
to succeed is to attract the best people and give them
considerable influence and responsibility .
The following pages describe some of our completed
repositioning programs and projects . Some of the key
people behind this successful process are also presented
here .
Scandic Skogshöjd and Quality Hotel Park Södertälje City pages 18–19Hotel Berlin, Berlin pages 20–21Holiday Inn Brussels Airport pages 22–23InterContinental and Hyatt in Montreal pages 24–25
18 | Pandox 200918 | Pandox 2009
The Pandox Model in practice
SödertäljeSuccessful restructuring of the hotel market
Two “sleeping beauties”
Pandox acquired Best Western Skogshöjd
and Quality Hotel Park in Södertälje, including
the operations, in 2006. Both hotels were then in
need of product development, new leadership
and inspiration. Skogshöjd is the city’s largest and
best-known hotel with 225 rooms and large con-
ference facilities. at the end of the 1980s, the
hotel was one of Sweden’s leading conference
hotels, but time had taken its toll and when it was
acquired in 2006, the product was dreary with
old-fashioned design, functions and technology.
The other hotel, Quality Hotel Park, was a previ-
ous leisure hotel located in central Södertälje. The
product was shabby, and at the time of the acqui-
sition was positioned as a medium-priced hotel
despite an excellent location. In general, profita-
bility was weak.
Development of Södertälje as a destination
The initial work focused on opening up the market
and to strengthen Södertälje as a destination. This
was performed at several levels. First, a number of
activities were organised in order to become better
known in the area south of Stockholm, which also
included becoming a more distinct part of Greater
Stockholm and to attract shops and stores with a
city profile. Skogshöjd, which had the strongest
name, established the vision of assuming the role
as an important conference hotel.
Transformation with clear objectives
as for Park, the goal was established of becoming
After a successful repositioning, Park and Skogshöjd are now close to their goal of becoming the leading business and conference hotels in southern Stockholm.
Pandox 2009 | 19
southern Stockholm’s best business hotel. The
first phase was concentrated on Park, which was
rapidly transformed to a business hotel with the
help of a new and tough design, a large lobby with
lounge atmosphere, and a modern selection of
food and drinks. The second phase started the
transformation of Skogshöjd where the lobby and
conference product were upgraded. during both
phases, the hotels were operated by Pandox with
a management team to maintain the business
processes. Quite quickly, several hotel chains
showed interest in the hotels. In 2009, a lease was
signed with Choice Hotels Scandinavia for Park
under the Quality brand, and in 2008 a lease was
signed with Scandic with regard to Skogshöjd.
Restructuring completed
The process of repositioning and restructuring
Södertälje’s hotel market has thereby been com-
pleted. a sales and operating system must now
be developed, which will be done with Pandox as
strategic partner for each respective hotel. The
results are expected to be very good. Park Hotel
has rapidly become a favourite among business
travellers, and obtained a young public at week-
ends. Similar developments, with focus on the
conference segment, are expected in Skogshöjd.
For Pandox, the value of the assets has risen
significantly since they were acquired. The driving
forces have been modern products with distinct
positions that are operated in effective and well-
developed management systems, which
increased the overall profitability of both hotels.
Which hotel concept is successful in a city that has everything? The question arose when Pandox acquired the then Clarion Hotel Berlin in the summer of 2006. Fur-ther to the fall of the wall, the market in Berlin became significantly tougher. Many new hotels had opened with modern concepts, and were technically built in acc ordance with state-of-the-art criteria.
Hotel Berlin was built in the 1950s and for a long
time was one of the best-known hotels in the city.
Further to several extensions, it had also become
one of Berlin’s largest hotels. But in terms of con-
cept, design, spirit and profitability, the product
performed below par. The principal target group
consisted of tourist groups from across the world.
While the profitable business and conference seg-
ment chose other hotels. Hotel Berlin subse-
quently had a real challenge ahead in order to rec-
reate the hotel’s historical position.
New position with own profile
The first phase was to survey the market in terms
20 | Pandox 2009
The Pandox Model in practice
BerlinFrom a boring hotel complex to a creative meeting place – Hotel Berlin, Berlin
of products and competition. The conclusion was
that most of the newly built hotels held high inter-
national standards with regard to technology and
product. at the same time, the products were
similar and lacked a local profile. They were
more “brand standards” than with an own soul.
Hotel Berlin’s new position originated here – to
reposition the hotel to the most creative meeting
place with a distinct bond to the city of Berlin’s his-
tory and name. With the help of an investment
program of EUR 10 million, the hotel has been
repositioned and upgraded. The existing confer-
ence product has been developed and ineffective
areas converted to modern meeting rooms. The
façade, entrance and lobby became important
communication instruments and created a
fun-profile where the guests can now be seen,
welcomed and met by a different hotel with an
exciting design and atmosphere. The rooms
product has been improved and the F&B product
has been developed to support the new market
profile. Considerable work has also gone into
creating a new market profile and a modern graph-
ical profile program. Substantial resources have
been put into recruiting and training new employ-
ees, as well as enabling all employees, via work-
shops, to participate in the development process.
Berlin’s leading and creative meeting place
after three years’ hard work, the hotel’s overall
re-profiling is complete. despite the extensive
refurbishment, profitability has risen by 40 percent
due primarily to having regained the position as an
excellent conference hotel. Hotel Berlin, Berlin
now has the potential to become established as
one of Berlin’s leading conference hotels. The
driving force has been the local management
with Cornelia Kausch as leader who, step by
step, has positioned the hotel as one of the city’s
leading meeting places and definitely one of the
most creative.
Hotel Berlin, Berlin welcomes guests as a creative and different meeting hotel with exciting design and atmosphere.
Nothing has been overlooked. The investment program has embraced everything from the facade to the room product.
Pandox 2009 | 21
Cornelia Kausch Managing Director, Hotel Berlin, BerlinCornelia was literally born and raised in the family’s
hotel operations, educated at Lausanne, and has
many years’ international experience from leading
positions at hotels in the upper segment. Together
with Pandox, Cornelia has created the new Hotel
Berlin, Berlin – and made it the leading meeting place
in the city. With her unique competence and leader-
ship based on a will for change and strong visions,
she has successfully led the transformation of the
hotel in a spirit characterised by belief in the individual
and the ability to combine effectiveness with pleasure.
The Pandox Model in practice
BrusselsWith the vision to create the best
Pandox acquired the property and operations of Holiday Inn Brussels airport in 2006. The product is characterised by a strong location close to the airport, in the centre of a growing business park. Good size with 310 rooms, and a full-service product with two restaurants, bar, pool and 15 conference rooms.
However, trends were on a downward slope, and
the hotel needed extensive refurbishment and
development. new leadership was required that
could inspire the staff and implement a modern
organisation. a number of strategic changes were
initially carried out at management level, and a
dialogue was started with the franchiser, Holiday
Inn, in order to establish stronger cooperation with
the IHG system. at board and management level,
a vision was established to create the best upper-
medium-priced hotel at Brussels airport, with key
words such as full service, attractive design and
high effectiveness.
Successful change step by step
The development program was started in the
summer of 2008. The first phase involved produc-
ing and implementing a new rooms concept. In
phase two, the lobby was developed with new
service products and a tough and tasteful design.
Phase three included the meeting rooms, which
were given a new approach with a fun feeling. at
the same time, the F&B offer was strengthened
with a modern look, and the pool and fitness area
was upgraded to modern standards. To carry out
a change program of this size right in the middle of
a rapidly declining market requires a stringent and
embodied business plan along with a long-term
vision and objective, both for the owners and
management. The results have been excellent.
Holiday Inn was also the first hotel in Benelux to
be approved in accordance with IHG’s global
brand standard launch. The development pro-
gram, which amounted to approximately EUR 8
million, also included major organisational devel-
opments.
22 | Pandox 2009
Charles BoelenManaging Director, Holiday Inn Brussels AirportCharles Boelen is the man behind the successful refurbishment of
Holiday Inn Brussels Airport. Charles has an extensive background
within the hotel industry and has previously worked at the Crowne Plaza
Brussels City Centre. He is extremely results-oriented but always with
an eye on the client’s best interests.
Charles’ secret weapon is his smile, and it is not at all surprising
that he introduced “the SKOJ experience” as part of the new hotel.
SKOJ is indeed exactly the same as having a good time, it brings out
our childhood emotions and stimulates creativity and productivity,
encourages new knowledge and gets everyone to exert themselves
just a little bit more. Many people would no doubt say that Charles is
SKOJ personified.
Key words in the development program with Holiday Inn Brussels Airport have been full service, attractive design and high effectiveness.
SKOJ is an appreciated aspect of the new hotel. SKOJ includes a number of features with much humour and a twinklie in the eye approach.
A new room concept was part of the first phase in the repositioning process.
Pandox 2009 | 23
The Pandox Model in practice
MontrealFor both business and pleasure
Pandox developed its strategy in 2007 to also embrace north america. The reason was to estab-lish a broad geographic market in order to look for profitable acquisitions and development projects. The strategy has so far been applied in clusters, where Montreal has become the base with two hotels and a total of nearly 1,000 rooms. Both acquisitions have been typical for Pandox where the hotels have required extensive development with regard to product, profitability and leadership.
Pure magic!
The InterContinental
Montreal, with 357 rooms, was
acquired in the summer of 2007. The hotel
was positioned as a traditional business
hotel with international style. The product
lacked a local profile and competed primar-
ily within its own pitch. The InterContinen-
tal’s competitors had a similar approach –
good hotels that one can find in any large
city. This became our strategic point of
departure. Through changes in layout,
design, management and style, the hotel
has created a new concept with more bou-
tique atmosphere. The range of food and
drinks consists mainly of Canadian raw
materials and production methods. The
management comes from Quebec, which
has strengthened the local embodiment
and created a more European feeling. The
response has been purely magical! The
hotel has already received several awards.
So far, developments have embraced all
rooms, corridors, lobby and the F&B offer.
The creation of a local profile has been one of the starting points within the transformation of the InterContinental Montreal.
Both of Pandox’ hotels in Montreal are currently in the middle of a transformation process – and the results so far have exceeded the expectations.
24 | Pandox 2009
Pandox 2009 | 25
Bernard ChênevertManaging Director, InterContinental MontrealEducated at Lausanne, with more than 15 years’ experience
of the hotel industry and repositioning of hotels. Bernard was
furthermore responsible for the transformation of W Montreal,
which received the Hotel of the Year Worldwide 2007 award.
Bernard’s recipe for success is based on the philosophy
that a good team is one that purposefully moves operations
forwards with continuously ongoing projects that render
operations more effective. To succeed requires close
contact and dialogue with the guests and to be able to
identify and adapt to their changing needs. It is a question
of constantly improving processes and offers so as to
exceed the guests’ expectations.
The next stage is to develop the conference
product and to continue the implementation of
a modern organisation.
On the way to becoming
something very special!
Hyatt, with 605 rooms, was acquired in 2008.
The hotel is strategically located in the centre of
the leisure and entertainment district, where the
city of Montreal is investing considerable capital to
strengthen the destination. The hotel’s vision is to
become Montreal’s best conference and festival
The InterContinental Montreal exuding a timeless elegance
that provides an exciting experience again and again.
hotel. The dynamics that surround the city’s fes-
tivals and entertainment must also be felt in the
hotel. The first phase in the repositioning pro-
cess has been completed with the large ball-
room and the meeting rooms being upgraded
with a new style and a high fun factor. The large
meeting room has really become something
very special! The same atmosphere will now be
implemented in the reception and lobby, starting
in november 2010. Montreal will subsequently
obtain next year an entertainment hotel that
goes hand in hand with the city’s ambitions.
26 | Pandox 2009
Market communication
NetworkPandox’ hotel market day – one of the sector’s most important meeting places
Pandox arranges a hotel market day each year, where current issues that affect the industry and sector are presented and dis-cussed. The event has been held every year since 1997 and interest is constantly growing. Recent years have seen a full house with around 300 people taking part, of which a large part is composed of inter-national guests.
The hotel market day is a dynamic meeting place
where hotel owners, operators, brand names,
banks, public opinion lobbyists, construction
companies, politicians and media come together.
They can listen to interesting presentations that
increase knowledge and insight about the sector’s
conditions, and are given the opportunity to net-
work and obtain a forecast and prognosis for next
year. The evening always closes with a banquet in
a pleasant and relaxed environment. The event is
held in november at the Hilton Stockholm Slus-
sen, which apart from being owned by Pandox is
a conference hotel of the highest class. In recent
years, items taken up have included the effect of
low-price airlines on the hotel industry, the signifi-
cance of shopping tourism for a destination, as
well as the signification of the term “brand profit-
ability” and the business models it offers. The
theme for 2009 was economic trends under the
heading “The effects of the financial crisis on vari-
ous players within the hotel industry”.
The speakers are top-quality. In november, we
had the honour of presenting annika Winsth, CFo
of nordea, S. Kirk Kinsell, President of the EMEa
InterContinental Hotels Group, Urban Jansson,
company director with considerable knowledge of
the hotel industry, as well as Torgeir Silseth, CEo
of Choice Hotels Scandinavia. Staffan olsson,
well-known handball profile and Swedish national
handball team manager, also talked about differ-
ent leadership styles and the characteristics of a
successful coach.
The Swedish Handball association, with the
support of Sweden’s olympic Committee and
together with Pandox, entered into an agree-
ment in the spring of 2009 with Staffan olsson
that enables him to stay in Sweden and con-
tinue to lead the Swedish national team tog-
ether with ola Lindgren. The agreement
implies that the important national team man-
ager issue be solved regarding Sweden host-
ing the World Championship 2011 and further
ahead to the olympic Games in London in
2012. The solution also implies that Staffan
olsson will continue as trainer at Hammarby
Handball. He will furthermore work with mar-
keting issues at Pandox. Pandox is extremely
proud to be able to contribute to Staffan
remaining national team manager.
PANDOXPANDOX
MARKET INFORMATION FROM PANDOX ONE OF THE LEADING HOTEL PROPERTY COMPANIES IN EUROPE
NO
. 2 • 2
00
8
Hotel room of the future without boundaries
Strong half-year despite increase in supply
Pandox 2009 | 27
When Pandox was formed in 1995, a newsletter
was started in order to promote the Company vis-
à-vis the capital market prior to being floated on
the stock market. This publication later became
part of the public reports that the Company
issued. despite the Company no longer being
listed on the Stockholm Stock Exchange, Pandox
continue to maintain the flow of information to
those who are interested in the hotel and hotel-
property market. Pandox Upgrade is therefore
issued on a regular basis. Three newsletters were
published in 2009, covering market trends and cur-
rent Swedish and international hotel market topics.
You are most welcome to become a subscriber
Pandox Upgrade is free of charge and can
be ordered from Pandox by telephone at
+46 (0)8 506 205 50 or via [email protected]
Regular information about market trends and acquisitions
Pandox communicates its acquisitions and other changes in the hotel property portfolio in separate fact sheets and folders.
Staffan Olsson, National manager of the Swedish handball team, and member of the marketing group within Pandox.
national team coach and Pandox’ marketing
28 | Pandox 2009
Market
Overview2009 was gloomier than for a long time
The first half-year 2009 felt like a helter- skelter. The sector experienced a sub-stantial international downturn, with the american hotel industry at the head of the economic cycle. a small improve-ment could be perceived by the end of the summer in the United States, partic-ularly in new York’s high-price segment, where the downturn in occupancy started to subside. Whether this is a temporary break in trends or the first sign of a real recovery for the sector remains to be seen.
For the full-year, occupancy in the United States
closed at 55 percent, which is 9 percent lower
than the previous year. demand for hotel rooms
fell by 6 percent during the year. The number of
available rooms increased during the period by 3
percent, and the fall in occupancy was thereby 9
percent in total.
average rates closed at USd 98, representing
a decline of 9 percent compared with 2008. With
regard to how different price segments developed
over the year, all segments fell in RevPaR com-
pared with the previous year, with the largest
downturn being noted in the luxury segment. The
trends in all segments are the same as the national
average with lower occ upancy compared with
last year and a fall in average rates – resulting in
RevPaR for the whole of the United States closing
at 17 percent down compared with 2008.
new York has been one of the world’s major
cities hardest hit in the downturn – albeit from a
high level. occupancy fell by 6 percent compared
with 2008 and average rates were 22 percent
lower than last year. occupancy for 2009 closed
at 77 percent and the average rate at USd 215.
In many large European cities, the first half-
year 2009 was somewhat hair-raising with a fall in
RevPaR of between 20 and 30 percent compared
with 2008. The downturn has since continued,
although at a slower pace, and a real change in
trends cannot yet be perceived.
one shining exception is London. occupancy for
2009 closed at 82 percent, representing an increase
of 2 percent compared with the previous year. How-
ever, average rates fell by 5 percent for the full-year.
Different patterns in New York and London
new York and London are two markets that nor-
mally follow each other in trends, although with a
certain lage of time where new York as a rule is
first to show upward and downward phases. This
does not seem to apply this time. London’s aver-
age rates started to fall already in august 2008,
while new York maintained its prices up until Sep-
tember the same year. In 2009, new York was hit
considerably harder with a significant fall in Rev-
PaR while London remained surprisingly stable in
the prevailing world at large. occupancy in Lon-
don started to recover already in the summer of
2009, while new York’s volumes first started to
recover in the autumn. RevPaR in new York fell by
26 percent for the full-year, but was only 4 percent
down in London compared with 2008.
Most major European cities were under pres-
sure during the year. In Western Europe, revenues
per room fell by 15 to 20 percent. Eastern Europe
was hit even harder with falls in RevPaR of 40, 30
and 26 percent respectively in Riga, Prague and
Warsaw for the full-year.
Berlin closed at 70 percent occupancy, which
is 1 percent lower than 2008. The average rate
The transactions market collapsed in 2009The transactions market ran completely out of steam in 2008, and did not show any signs of improvement in 2009. Turnover for the full-year will probably be in line with 2002, which has so far been the worst year in the new millennium with a volume of 10 billion dollars.
The global transactions market was a stagger-
ing 78 percent lower in the first half-year 2009
compared with the same period in 2008.
Europe, the Middle East and Africa represented
the largest downturn in transactions in absolute
terms, where turnover closed at USD 1.9 billion
– representing a fall of 76 percent compared
with the previous year. In the United States,
turnover in the same period was USD 1.0 billion,
implying a fall of 86 percent. Asia stood for the
smallest transactions volume during the period
with USD 0.9 billion, representing a decrease of
55 percent compared with the year before.
Of the total number of transactions, only 13
exceeded USD 100 million, compared with 34 in
the first half-year 2008.
Pandox 2009 | 29
The lack of financial capital, the difficulty in
appraising economic outlooks and the general
feeling of uncertainty are the principal causes of
the continued low activity. Furthermore, high
yield requirements and low turnover have
resulted in the market becoming uncertain
about the real level of market prices.
Many people probably believed that transaction
volumes would start to increase in the autumn
of 2009 as a consequence of “distressed
assets” coming out onto the market. However,
it would seem so far that banks prefer to work
with their customers and try to solve their prob-
lems rather than force bankruptcies and to con-
sequently generate losses.
Global transaction trends
Year 2000-2009, USD billions
* YTD September 2009
Source: Jones Lang LaSalle Hotels
09*080706050403020100
12.7 15.610.0
18.6
30.9
44.5
75.6
122.0
24.5
6.8
was EUR 83, which is 8 percent below 2008.
RevPaR in Berlin was EUR 58 for the full-year
2009, representing a fall of 9 percent. Munich
closed 2009 with 68 percent occupancy, repre-
senting a decline of 3 percent, and average rates
fell by 14 percent.
Paris managed less well than London and
closed the year with occupancy at 74 percent,
which was 5 percent lower than the previous year.
Prices were under pressure and closed 9 percent
below 2008 with an average rate of EUR 214.
RevPaR was EUR 158, representing a fall of
around 14 percent compared with 2008.
occupancy in Brussels declined by 6 percent
compared with the previous year, and average
rates by 11 percent, resulting in RevPaR closing at
EUR 68 for the year, representing a fall of 16 per-
cent. In antwerp, occupancy was 9 percent down
and average rates 10 percent down, giving a fall of
18 percent in RevPaR.
General downturn in Scandinavia
Copenhagen, which has seen quite a lot of addi-
tional capacity in recent years, was under consid-
erable pressure for most of the year. a certain
recovery could be perceived in the last quarter
due to the large number of meetings held in the
city in conjunction with the international climate
meeting in december. occupancy in 2009 was 64
percent in Copenhagen – a decline of 6 percent
compared with the previous year. The average
rate was dKK 855, representing a decrease of 5
percent against last year.
The Swedish market was drawn down during
the year by the general international decline.
Hardest hit was the high-price segment in the
city of Stockholm, followed by the municipality
of Stockholm.
The municipality of Stockholm closed 2009
with a downturn in RevPaR of 10 percent com-
pared with 2008, due principally to lower average
rates. The five-start segment lost 11 percent in
price in 2009, while occupancy slightly increased
by 3 percent. occupancy closed at 79 percent
while the average rate was SEK 1,518 in 2009.
Gothenburg has so far managed the down-
turn relatively well, due substantially to an inten-
sive entertainment summer with several interna-
tional concerts in the city. occupancy closed at 68
percent for Gothenburg’s city-centre four-star
hotels, representing a decrease of 4 percent
against the previous year. Prices declined by 2
percent for the year. Mölndal showed similar
patterns. RevPaR fell by 8 percent in Mölndal and
by 6 percent in the centre of Gothenburg.
Malmö managed quite well during the year,
due partly to domestic demand, but also through
the city taking a number of customers from the
Copenhagen region. RevPaR retreated by 3 per-
cent compared with 2008, due to both lower
prices and volume. The average rate was SEK
878, compared with SEK 882 for the year 2008.
The high-price segment in the city centre showed
the same pattern as for the municipality in general.
The Swedish regional cities, which as a rule
lag slightly behind Stockholm, Gothenburg and
Malmö in the economic cycle, showed a general
downturn in RevPaR in the latter part of the year,
due primarily to pressure on prices.
all market data concerns the calendar year 2009.
Hotel pro perties
30 | Pandox 2009
Pandox owns hotels with strategic locations in Sweden, denmark, Belgium, Germany, Switzerland, United Kingdom, Bahamas and Canada.
Pandox works with many different brand names – all are well-known and established, which provides a unique position and network.
46Hotel pro perties
Pandox 2009 | 31
32 | Pandox 2009
Property Operator/Brand nameType of lease Location
Number of rooms
Year of constr. extension
Total area
(sqm)Of which
hotels1) (sqm)Offices (sqm)
Shops (sqm)
Other (sqm)
Right of disposal
Property designation
Tax asses- ment value (SEK M)
Stockholm
Radisson BLU arlandia Hotel, arlanda Rezidor/Radisson BLU og International airport 335 1979/89 15,260 15,260 – – – Land leasehold Benstocken 1:5 132.7Hilton Stockholm Slussen Hilton o City centre 289 1989 18,416 15,725 2,097 – 594 Land leasehold Överkikaren 31 365.9Scandic Skogshöjd, Södertälje Scandic o Södertälje/Central 225 1972/81/87 14,115 14,115 – – – Yxan 8 46.2Scandic Järva Krog, Stockholm Scandic o Stockholm north 215 1971/97 11,300 11,300 – – – Land leasehold Tanken 2 77.6Scandic Park, Stockholm Scandic o City centre 201 1969/88 12,290 10,290 – – 2,000 Lönnen 30 213.0Quality Hotel, nacka Choice Hotels Scandinavia/Quality og Sickla-nacka 164 1986 10,830 8,090 2,705 – 35 Sicklaön 363:2 84.8Mr Chip Hotel, Kista Kista Hotell aB og Stockholm north 150 1984 5,517 5,517 Land leasehold Knarrarnäs 7 50.2Quality Hotel Park Södertälje City Choice Hotels Scandinavia o Södertälje/City centre 157 1890s/1984 10,292 10,110 182 – – Herkules 13 35.6Scandic Upplands Väsby Scandic o Stockholm north 150 1986 6,955 6,955 – – – Vilunda 6:48 34.6TOTaL STOcKhOLM 1,886 104,975 97,362 4,984 – 2,629 1,040.6
GothenburgScandic Crown, Gothenburg Scandic o City centre 338 1988 24,380 21,800 – 300 2,280 Stampen 5:5 170.0Elite Park avenue Hotel, Gothenburg Elite Hotels og City centre 317 1950/74/90 21,998 21,998 – – – Lorensberg 28:4 208.0Scandic Mölndal, Gothenburg Scandic o City centre 208 2000 11,000 11,000 – – – Laken 1 55.2
TOTaL GOThENBURG 863 57,378 54,798 – 300 2,280 433.2
ÖresundScandic Copenhagen Scandic o City centre 484 1970/99 31,500 25,200 – – 6,300 99943-2 –Scandic S:t Jörgen, Malmö Scandic og City centre 288 1967/95 21,485 14,655 – 4,230 2,600 S:t Jörgen 11 222.0Radisson BLU Hotel, Malmö Rezidor/Radisson BLU og City centre 229 1971/88 18,969 18,969 Carolus 33 123.0Clarion Collection Hotel Twentyseven Choice Hotels Scandinavia/Clarion og City centre 200 1913/55/65 7,568 7,568 169 Vester Kvarter København –Scandic Star, Lund Scandic og Central 196 1991 15,711 15,711 – – – Porfyren 2 102.4Clarion Hotel Grand, Helsingborg Choice Hotels Scandinavia og City centre 164 1926/29/96 8,555 7,325 – 1,230 – Högvakten 8 59.4Scandic Kramer, Malmö Scandic o City centre 113 1875/1994 6,913 6,373 – 540 – Gripen 1 73.8TOTaL ÖRESUNd 1,674 110,701 95,801 – 6,000 8,900 580.6
Regional cities and other locationScandic Grand, Örebro Scandic o City centre 221 1985 12,900 10,900 – – 2,000 Land leasehold Mältaren 1 50.6Scandic Winn, Karlstad Scandic og City centre 199 1984/90 10,580 10,580 – – – negern 2 49.0Scandic Swania, Trollhättan Scandic o City centre 198 1918/83/89 10,399 10,399 – – – Svan 7 48.5Clarion Hotel Grand, Östersund Choice Hotels Scandinavia/Clarion og City centre 176 1978 8,766 8,766 – – – Borgens 6 33.8First Hotel Grand, Borås Utlanda Hotell aB/First Hotels og City centre 158 1972/87/90/97 9,593 9,365 – – 228 Land leasehold Prometeus 3 31.9Scandic Plaza, Borås Scandic og City centre 135 1988 10,592 7,961 2,631 Balder 6 62.8Elite Stora Hotellet, Jönköping Elite Hotels og City centre 135 1860/1930/95 11,378 9,379 – 899 1,100 alhambra 1 60.6Clarion Hotel Plaza, Karlstad Plaza Hotell & Restaurang i Karlstad aB/Choice og City centre 131 1929/91 5,907 5,907 – – – Höken 1 39.6Scandic Hallandia, Halmstad Scandic o City centre 154 1890s/1950/75/2007 7,617 6,813 360 427 17 Erik dahlberg 14 & 15 44.8Scandic Billingen, Skövde Scandic og City centre 107 1888/1939/65 7,743 6,844 – – 899 Fjolner 7 27.6Vildmarkshotellet, Kolmården Parks & Resorts Scandinavia og Resort 213 1985 10,300 10,300 Marmorbrottet 1:18 37.2TOTaL REGiONaL ciTiES aNd OThER LOcaTiONS 1,827 95,475 86,914 2,991 1,326 4,244 486.4
international2)
Crowne Plaza Brussels City Centre Pandox/Crowne Plaza Fr City centre 354 1910 28,095 28,095 – – – –Holiday Inn Brussels airport Pandox/InterContinental Fr airport 310 1971 21,072 21,072 Hotel BLooM!, Brussels Pandox Io City centre 305 1976 23,445 23,445 Hilton Brussels City Pandox/Hilton M City centre 283 1910/30 13,850 13,850 – – – Saint-Josseten-noode (1div) 032 –Scandic Grand Place, Brussels Scandic o City centre 100 1900/91 4,500 4,500 – – – –Crowne Plaza antwerp Pandox/InterContinental Fr Central 264 1971 18,340 16,780 1,560 Land leasehold Scandic antwerp Scandic o Ring road 204 1974 13,200 13,200 – – – 24th div, Borgerhout 1st div, ar –Hotel Berlin, Berlin Pandox Io City centre 701 1958/87/96 41,093 41,093 Hilton Bremen Hilton o City centre 235 1991 21,000 15,100 – – 5,900 Grundbuch altstadt IV, Blatt 60 –Hilton dortmund Hilton o Exhibition centre 190 1990 12,500 11,300 – – 1,200 Grundbuch dortmund, Blatt 897 –Scandic Lübeck Scandic o Ring road 158 1991 9,700 8,800 – – 900 Grundbuch Lübeck, Blatt 54545 –Hilton London docklands Hilton o docklands 365 1991 22,800 21,500 – – 1,300 HM Land Registry: SGL465779 –Hyatt Regency, Montreal Pandox/Hyatt Hotels M Central 605 1976 44,148 29,000 – – – –InterContinental Montreal Pandox/InterContinental M Central 357 1991 31,091 31,091 Radisson BLU Hotel, Basel Rezidor/Radisson BLU og Central 205 1957/63/72 17,800 17,000 800 Pelican Bay at Lucaya, Grand Bahama Island Sundt GB Management/Pandox aM Resort 184 7,983 7,983 TOTaL iNTERNaTiONaL 4,820 330,617 303,809 1,560 – 10,100 –TOTaL PaNdOx 11,070 699,146 638,684 9,535 7,626 28,153 2,540.8
1) Includes hotel, restaurant and conference areas. 2) Excluding Copenhagen (included in Öresund).
o = Revenue-based, og = Revenue-based with guaranteed rent, or = Revenue and result-based, R = Result-based, F = Fixed, Io = Internal revenue-based, M = Management agreement, Fr = Franchise, aM = asset management agreement
Pandox’ hotel operations (hotels operated by Pandox)
Property Operator/Brand nameType of lease Location
Number of rooms
Year of constr. extension
Total area
(sqm)Of which
hotels1) (sqm)Offices (sqm)
Shops (sqm)
Other (sqm)
Right of disposal
Property designation
Tax asses- ment value (SEK M)
Stockholm
Radisson BLU arlandia Hotel, arlanda Rezidor/Radisson BLU og International airport 335 1979/89 15,260 15,260 – – – Land leasehold Benstocken 1:5 132.7Hilton Stockholm Slussen Hilton o City centre 289 1989 18,416 15,725 2,097 – 594 Land leasehold Överkikaren 31 365.9Scandic Skogshöjd, Södertälje Scandic o Södertälje/Central 225 1972/81/87 14,115 14,115 – – – Yxan 8 46.2Scandic Järva Krog, Stockholm Scandic o Stockholm north 215 1971/97 11,300 11,300 – – – Land leasehold Tanken 2 77.6Scandic Park, Stockholm Scandic o City centre 201 1969/88 12,290 10,290 – – 2,000 Lönnen 30 213.0Quality Hotel, nacka Choice Hotels Scandinavia/Quality og Sickla-nacka 164 1986 10,830 8,090 2,705 – 35 Sicklaön 363:2 84.8Mr Chip Hotel, Kista Kista Hotell aB og Stockholm north 150 1984 5,517 5,517 Land leasehold Knarrarnäs 7 50.2Quality Hotel Park Södertälje City Choice Hotels Scandinavia o Södertälje/City centre 157 1890s/1984 10,292 10,110 182 – – Herkules 13 35.6Scandic Upplands Väsby Scandic o Stockholm north 150 1986 6,955 6,955 – – – Vilunda 6:48 34.6TOTaL STOcKhOLM 1,886 104,975 97,362 4,984 – 2,629 1,040.6
GothenburgScandic Crown, Gothenburg Scandic o City centre 338 1988 24,380 21,800 – 300 2,280 Stampen 5:5 170.0Elite Park avenue Hotel, Gothenburg Elite Hotels og City centre 317 1950/74/90 21,998 21,998 – – – Lorensberg 28:4 208.0Scandic Mölndal, Gothenburg Scandic o City centre 208 2000 11,000 11,000 – – – Laken 1 55.2
TOTaL GOThENBURG 863 57,378 54,798 – 300 2,280 433.2
ÖresundScandic Copenhagen Scandic o City centre 484 1970/99 31,500 25,200 – – 6,300 99943-2 –Scandic S:t Jörgen, Malmö Scandic og City centre 288 1967/95 21,485 14,655 – 4,230 2,600 S:t Jörgen 11 222.0Radisson BLU Hotel, Malmö Rezidor/Radisson BLU og City centre 229 1971/88 18,969 18,969 Carolus 33 123.0Clarion Collection Hotel Twentyseven Choice Hotels Scandinavia/Clarion og City centre 200 1913/55/65 7,568 7,568 169 Vester Kvarter København –Scandic Star, Lund Scandic og Central 196 1991 15,711 15,711 – – – Porfyren 2 102.4Clarion Hotel Grand, Helsingborg Choice Hotels Scandinavia og City centre 164 1926/29/96 8,555 7,325 – 1,230 – Högvakten 8 59.4Scandic Kramer, Malmö Scandic o City centre 113 1875/1994 6,913 6,373 – 540 – Gripen 1 73.8TOTaL ÖRESUNd 1,674 110,701 95,801 – 6,000 8,900 580.6
Regional cities and other locationScandic Grand, Örebro Scandic o City centre 221 1985 12,900 10,900 – – 2,000 Land leasehold Mältaren 1 50.6Scandic Winn, Karlstad Scandic og City centre 199 1984/90 10,580 10,580 – – – negern 2 49.0Scandic Swania, Trollhättan Scandic o City centre 198 1918/83/89 10,399 10,399 – – – Svan 7 48.5Clarion Hotel Grand, Östersund Choice Hotels Scandinavia/Clarion og City centre 176 1978 8,766 8,766 – – – Borgens 6 33.8First Hotel Grand, Borås Utlanda Hotell aB/First Hotels og City centre 158 1972/87/90/97 9,593 9,365 – – 228 Land leasehold Prometeus 3 31.9Scandic Plaza, Borås Scandic og City centre 135 1988 10,592 7,961 2,631 Balder 6 62.8Elite Stora Hotellet, Jönköping Elite Hotels og City centre 135 1860/1930/95 11,378 9,379 – 899 1,100 alhambra 1 60.6Clarion Hotel Plaza, Karlstad Plaza Hotell & Restaurang i Karlstad aB/Choice og City centre 131 1929/91 5,907 5,907 – – – Höken 1 39.6Scandic Hallandia, Halmstad Scandic o City centre 154 1890s/1950/75/2007 7,617 6,813 360 427 17 Erik dahlberg 14 & 15 44.8Scandic Billingen, Skövde Scandic og City centre 107 1888/1939/65 7,743 6,844 – – 899 Fjolner 7 27.6Vildmarkshotellet, Kolmården Parks & Resorts Scandinavia og Resort 213 1985 10,300 10,300 Marmorbrottet 1:18 37.2TOTaL REGiONaL ciTiES aNd OThER LOcaTiONS 1,827 95,475 86,914 2,991 1,326 4,244 486.4
international2)
Crowne Plaza Brussels City Centre Pandox/Crowne Plaza Fr City centre 354 1910 28,095 28,095 – – – –Holiday Inn Brussels airport Pandox/InterContinental Fr airport 310 1971 21,072 21,072 Hotel BLooM!, Brussels Pandox Io City centre 305 1976 23,445 23,445 Hilton Brussels City Pandox/Hilton M City centre 283 1910/30 13,850 13,850 – – – Saint-Josseten-noode (1div) 032 –Scandic Grand Place, Brussels Scandic o City centre 100 1900/91 4,500 4,500 – – – –Crowne Plaza antwerp Pandox/InterContinental Fr Central 264 1971 18,340 16,780 1,560 Land leasehold Scandic antwerp Scandic o Ring road 204 1974 13,200 13,200 – – – 24th div, Borgerhout 1st div, ar –Hotel Berlin, Berlin Pandox Io City centre 701 1958/87/96 41,093 41,093 Hilton Bremen Hilton o City centre 235 1991 21,000 15,100 – – 5,900 Grundbuch altstadt IV, Blatt 60 –Hilton dortmund Hilton o Exhibition centre 190 1990 12,500 11,300 – – 1,200 Grundbuch dortmund, Blatt 897 –Scandic Lübeck Scandic o Ring road 158 1991 9,700 8,800 – – 900 Grundbuch Lübeck, Blatt 54545 –Hilton London docklands Hilton o docklands 365 1991 22,800 21,500 – – 1,300 HM Land Registry: SGL465779 –Hyatt Regency, Montreal Pandox/Hyatt Hotels M Central 605 1976 44,148 29,000 – – – –InterContinental Montreal Pandox/InterContinental M Central 357 1991 31,091 31,091 Radisson BLU Hotel, Basel Rezidor/Radisson BLU og Central 205 1957/63/72 17,800 17,000 800 Pelican Bay at Lucaya, Grand Bahama Island Sundt GB Management/Pandox aM Resort 184 7,983 7,983 TOTaL iNTERNaTiONaL 4,820 330,617 303,809 1,560 – 10,100 –TOTaL PaNdOx 11,070 699,146 638,684 9,535 7,626 28,153 2,540.8
1) Includes hotel, restaurant and conference areas. 2) Excluding Copenhagen (included in Öresund).
o = Revenue-based, og = Revenue-based with guaranteed rent, or = Revenue and result-based, R = Result-based, F = Fixed, Io = Internal revenue-based, M = Management agreement, Fr = Franchise, aM = asset management agreement
Pandox’ market segment
Stockholm Number of hotels 9Number of rooms 1,886Property revenues, SEK M 167.7Operating net, SEK M 141.2 Gothenburg Number of hotels 3Number of rooms 863Property revenues, SEK M 85.2Operating net, SEK M 78.0 Öresund Number of hotels 7Number of rooms 1,674Property revenues, SEK M 182.3Operating net, SEK M 151.6 Regional cities and other locationsNumber of hotels 11Number of rooms 1,827Property revenues, SEK M 120.1Operating net, SEK M 104.3 International Number of hotels 16Number of rooms 4,820Property revenues, SEK M 339.9Operating net, SEK M 303.1 Hotel operations Number of hotels 9Number of rooms 3 326Operating revenues, SEK M 1,095.0Operating profit, SEK M 177.7 31%
Proportion of totalnumber of rooms
Proportion of totalnumber of rooms
17%
15%
Proportion of totalnumber of rooms
8%
Proportion of totalnumber of rooms
44%
Proportion of totalnumber of rooms
15%
Proportion of totalnumber of rooms
Pandox 2009 | 33
34 | Pandox 2009
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Radisson BLU arlandia hotel , arlanda airportnumber of rooms: 335 operator: Rezidor/Radisson BLU
Scandic Järva Krog number of rooms: 215 operator: Scandic
hilton Stockholm Slussen number of rooms: 289 operator: Hilton
Scandic Park, Stockholm number of rooms: 201 operator: Scandic
Scandic Skogshöjd, Södertälje number of rooms: 225 operator: Scandic
Quality hotel Nacka number of rooms: 164 operator: Choice Hotels Scandinavia/Quality
Scandic Upplands Väsby number of rooms: 150 operator: Scandic
Mr chip hotel, Kista number of rooms: 150 operator: Kista Hotell aB
Scandic crown, Gothenburg number of rooms: 338 operator: Scandic
Quality hotel Park Södertälje city number of rooms: 157 operator: Choice Hotels Scandinavia
Pandox 2009 | 35
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Elite Park avenue hotel, Gothenburg number of rooms: 317 operator: Elite Hotels
Scandic S:t Jörgen, Malmönumber of rooms: 288 operator: Scandic
Scandic Mölndal, Gothenburgnumber of rooms: 208 operator: Scandic
Radisson BLU hotel, Malmö number of rooms: 229 operator: Rezidor/Radisson BLU
Scandic copenhagen, copenhagennumber of rooms: 484 operator: Scandic
clarion collection hotel Twentyseven, copenhagen number of rooms: 200 operator: Choice Hotels Scandinavia/Clarion Collection
Scandic Kramer, Malmönumber of rooms: 113 operator: Scandic
Scandic Star, Lund number of rooms: 196 operator: Scandic
Scandic Grand, Örebro number of rooms: 221 operator: Scandic
clarion hotel Grand, helsingborg number of rooms: 164 operator: Choice Hotels Scandinavia
36 | Pandox 2009
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Scandic Winn, Karlstad number of rooms: 199 operator: Scandic
First hotel Grand, Borås number of rooms: 158 operator: Västsvenska Hotellfastigheter aB/ First Hotels
Scandic Swania, Trollhättan number of rooms: 198 operator: Scandic
Scandic Plaza, Borås number of rooms: 135 operator: Scandic
clarion hotel Grand, Östersund number of rooms: 176 operator: Choice Hotels Scandinavia
Elite Stora hotellet, Jönköping number of rooms: 135 operator: Elite Hotels
Vildmarkshotellet, Kolmården number of rooms: 213 operator: Parks & Resort Scandinavia aB
Scandic Billingen, Skövde number of rooms: 107 operator: Scandic
clarion hotel Plaza, Karlstad number of rooms: 131 operator: Plaza Hotell & Restaurang i Karlstad aB/Choice
Scandic hallandia, halmstad number of rooms: 155 operator: Scandic
Pandox 2009 | 37
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crowne Plaza Brussels city centre number of rooms: 354 operator: Pandox/Crowne Plaza
hilton Brussels city number of rooms: 283 operator: Pandox/Hilton
holiday inn Brussels airport number of rooms: 310 operator: Pandox/Holiday Inn
Scandic Grand Place, Brussels number of rooms: 100 operator: Scandic
hotel BLOOM!, Brussels number of rooms: 305 operator: Pandox
crowne Plaza antwerp number of rooms: 264 operator: Pandox/Crowne Plaza
hilton Bremen number of rooms: 235 operator: Hilton
Scandic antwerp number of rooms: 204 operator: Scandic
hilton dortmund number of rooms: 190 operator: Hilton
hotel Berlin, Berlin number of rooms: 701 operator: Pandox
38 | Pandox 2009
Scandic Lübeck number of rooms: 158 operator: Scandic
intercontinental Montreal number of rooms: 357 operator: Pandox/InterContinental Hotels
hilton London docklands number of rooms: 365 operator: Hilton
Radisson BLU hotel, Basel number of rooms: 205 operator: Rezidor/Radisson BLU
hyatt Regency Montreal number of rooms: 605 operator: Pandox/Hyatt Hotels
Pelican Bay at Lucaya, Bahamasnumber of rooms: 184 operator: Sundt GB Management/Pandox
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Pandox 2009 | 39
Hotel BLOOM!, Brussels
Financial overview . . . . . . . . . . . . . . . . . . . 40
Sensitivity analysis . . . . . . . . . . . . . . . . . . . 42
Valuation and tax situation . . . . . . . . . . . . . 44
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 45
Ten-year overview . . . . . . . . . . . . . . . . . . . 46
Quarterly data 2008–2009 . . . . . . . . . . . . . 48
Financial statements 2009 . . . . . . . . . . . . . 49
Report of the Board of Directors . . . . . . . . 50
Income statement and comments . . . . . . . 52
Balance sheet and comments . . . . . . . . . . 54
Changes in equity . . . . . . . . . . . . . . . . . . . 56
Cash flow statement and comments . . . . . 57
Accounting principles . . . . . . . . . . . . . . . . 58
Notes to the Accounts . . . . . . . . . . . . . . . . 60
Proposed disposition of earnings . . . . . . . 66
Auditor’s report . . . . . . . . . . . . . . . . . . . . . 67
Finances
40 | Pandox 2009
Well-weighted risk profile
FINANCIAl oVeRVIew
Financial policy
The basic objective of Pandox’ financial opera-
tions is to achieve the lowest possible financing
costs while simultaneously limiting the risks
related to interest rates, foreign currencies and
borrowings. The interest rate risk is the risk that
changes in interest rate levels which could nega-
tively affect the Group’s results. Currency risk is
the risk that the Group’s balance sheet and income
statement which could be negatively affected by
changes in the value of the Swedish krona. Finally,
the borrowing risk is the risk that external financing
may become more difficult to find.
Interest rate risk/interest rate strategy
Pandox’ basic objective is that interest rate expo-
sure shall be adapted so that increased costs as a
result of reasonable changes in interest rates shall
be compensated by higher revenue. The interest
rate risk must therefore be limited through con-
tracting periods of varying lengths with the aim of
creating an optimal due date structure and fixed
interest periods. The long term objective is that
the average fixed interest period be matched with
the average point in time when rental revenues,
based on underlying leases, are estimated to be
affected by a change in interest rates. Interest
swaps are mainly used for extension of fixed inter-
est rate periods.
Currency risk/currency risk strategy
Pandox is exposed to currency risks due to certain
of the Group’s assets being denominated in foreign
currencies. Pandox’ policy is to hedge the majority
part of its exposure by raising loans in the local cur-
rency of each respective country and by hedging
with appropriate currency hedging instruments.
Methodology and systems
Pandox has developed and implemented systems
and procedures to enable the continuous monitor-
ing and reporting of interest rate risk trends.
Financing strategy
In order to gain flexibility and administrative bene-
fits, Pandox has centralised when possible all bor-
rowing in the Parent Company. The objective is to
work with long-term framework agreements that
provide scope for borrowing with varying maturi-
ties and fixed margins. derivative instruments
such as swaps are preferably used for the exten-
sion of fixed interest rate periods.
Capital structure
The objective for the Group’s capital structure is
that the equity/asset ratio long term should meet
internal and external financial strength require-
ments in order to enable continued expansion.
Financing
as of 31 december, the Pandox Group’s interest
bearing liabilities amounted to SEK 6,850.5 M
(6,808.6). The loan portfolio has a spread due-
date structure with an average fixed-capital period
Radisson BLU, Basel
Pandox 2009 | 41
INTeReST STRUCTURe1), SeK M
Year due SEK DKK EUR GBP CHF CAD USD Total Share,% Interest, %2)
2010 834.9 449.8 1,578.3 251.9 62.6 137.7 447.1 3,762.3 54.9 1.62011 125.0 – 23.8 – – 119.0 – 267.8 3.9 4.62012 225.0 – – – 62.6 – – 287.6 4.2 4.22013 75.0 – 208.5 – – – – 283.5 4.1 5.12014 350.0 – 417.0 – – – – 767.0 11.2 3.22015 and later 350.0 140.1 614.0 – 125.2 253.0 – 1,482.3 21.7 3.9Total 1,959.9 589.9 2,841.6 251.9 250.4 509.7 447.1 6,850.5 100.0 2.6Share, % 29 9 40 4 4 7 7 100 average interest rate, % 3.4 2.2 2.4 1.2 3.1 3.5 0.7 2.6 average interest rate period, years 2.6 1.5 2.3 0.1 3.1 4.1 0.1 2.3 1) Converted to SEK.2) average interest rate in percent.
of 7.5 years is without financial covenants and has
an average fixed-interest period of 2.3 years (1.7).
The average interest rate on loans at 31 decem-
ber was 2.6 percent (3.6). The financing of hotel
properties is raised in each respective local cur-
rency in accordance with the financial policy. The
Group’s liquid funds amounted to SEK 326.4 M
(347.7). In addition, there was an unutilised credit
facility of SEK 1,182 M. a facility of another SEK
300 M has been signed just after the end of 2009.
Equity capital
The Group’s equity capital as per the balance
sheet at 31 december 2009 amounted to SEK
2,996.7 M of which SEK 1,424.6 M was restricted
equity and SEK 1,572.1 M unrestricted equity.
The Pandox Group’s cash flow before changes
in working capital, investments, other revenue and
capital gains amounted to SEK 446.4 M (444.5).
Working capital
Pandox receives rental revenue in advance and
pays most of its operating costs and interest
expense in arrears while hotel operations normally
receive revenues in arrears. altogether the Group
normally has a relatively small working capital to
finance.
42 | Pandox 2009
SeNSITIVITy ANAlySIS
Pandox’ operations and profitability are affected by a number of factors, of which the most important are described below.
The hotel market
The development of Pandox’ earnings and the
value of its hotel properties are dependent upon
trends within the hotel market, which in turn
closely follow general economic developments.
Business travel and conference activities nor-
mally increase during periods of high economic
activity, while there is a corresponding decrease
during periods of low economic activity. There is
thus a strong connection between economic
trends (GdP) and trends within the hotel market.
developments of GdP can be closely monitored,
whereas factors that influence local hotel markets
are significantly more complex. The most impor-
tant influential factors are local economic condi-
tions, the proportion of new hotel capacity in the
market, how well developed a market is concern-
ing brand names and segments, currency fluctua-
tions, aswell as extraordinary events.
New capacity
new capacity introduced to the market implies an
increased risk for local players. depending upon
existing demand, additional hotel rooms through
the construction of a new hotel can lead to a rapid
negative influence on occupancy rates and aver-
age prices. To deal with this risk, Pandox has
developed an information system that continually
monitors planned new constructions within its
market areas, and thus enabling Pandox to be
prepared and proactive.
Agreement structure
Pandox has a large proportion of variable leases,
which represented 94 percent of total rental reve-
nue in 2009.
about 33 percent of variable leases contained
a guaranteed rent, meaning that 61 percent of
rental revenues were fully variable downwards. a
change in the occupancy rate and the average
room revenue consequently affects Pandox very
differently, depending on the direction of change.
The choice of agreement is based on optimal
distribution of cash flow between Pandox and the
operator so that both parties are motivated to
continuously increase the hotel property’s overall
profitability. Factors that may influence risks asso-
ciated with variable leases are the hotel property’s
location, market segment and brand name/opera-
tor. Pandox’ strategy is to operate in a selected
market segment, which in combination with its
hotels market expertise and systems, limits Pan-
dox’ agreement risk.
Partners
Pandox’ agreement structure, with a large propor-
tion of variable leases, means that the Company is
more dependent on the individual tenant/opera-
tor’s business than other property companies. The
Company’s strategy to actively cooperate with the
market’s most competitive and powerful opera-
tors with well established brand names, reduces
both the related operative and financial risks. Pan-
dox’ largest tenants in terms of revenue are Scan-
dic, Hilton, Rezidor, Elite Hotels, InterContinental
Hotels Group, Choice Hotels and First Hotels,
which together accounted for 85 percent of all
rental revenue in 2009.
Leasing level
The leasing level as of 31 december was 99.8
percent. Vacant space amounting to 1,700 sqm
consisted entirely of store and office premises.
If for any reason a hotel operator should
choose to terminate its lease agreement, Pandox
may either select a new suitable operator as ten-
ant or operate the hotel under its own manage-
ment. With Pandox’ specialist expertise in the
hotel sector, the risk of vacant hotel space is seen
as being extremely low.
For other commercial space, which represents
approximately 8.5 percent of total space in the
Company’s properties, Pandox is exposed to the
same fluctuations in supply and demand for prem-
ises experienced by other property owners.
Changed risk potential
Historically, the hotel industry and hotel property
sector have always been associated with high
risk. The market has however changed signifi-
cantly in recent years. owners have become more
professional with restructured companies and
focused strategies, with a greater holistic view and
specialised expertise. Reports from public com-
panies have substantially improved information
about the transparency of the market. The propor-
tion of established strong brand names with effi-
cient operations has increased. For streamlined
companies with own expertise in hotel operations,
hotel properties and business development, and
who are active owners, the potential risk is consid-
erably lower than it has been in historic terms.
Decisions by public authorities
The hotel market can be affected by decisions
made by public authorities. Two examples of such
decisions are changes in taxation related to claims
for travel expenses or rules concerning value
added tax both in general and for the hotel and
restaurant industry in particular.
Property tax
Property tax on Pandox’ Swedish properties
amounts to 1.0 percent of the tax assessment
value. Changes in the tax rate or in the tax assess-
ment value affect Pandox’ earnings. However, an
increase only has a limited impact on the earnings
because many lease agreements are formulated
so that the property tax be passed on to the ten-
ant. Property tax on properties outside Sweden is
generally less than one per cent of the book value.
about 59 percent of the property tax was debited
to tenants in 2009, which means that the net effect
on Pandox’ earnings amounted to SEK 24 M.
Site leasehold rents
as of 31 december 2009, Pandox held seven
properties via site leasehold rights. Rents on these
properties are currently calculated in such a man-
ner that a municipality that normally owns the land
receives what is deemed to be a reasonable real
rate of interest on the estimated market value of
the land in question. Site leasehold rents generally
run for periods of 10 to 20 years.
Interest rates
Interest expense is Pandox’ largest single cost
item. Fluctuations in interest rates will therefore
have an impact on Pandox’ earnings. In order to
limit its financial risk, the Company’s average fixed
interest period is 2.3 years. The full effect of a
change in interest rates is accordingly not felt by
Pandox until after this period.
Currency risk
Pandox’ policy is to hedge the major part of its
currency exposure, including shareholders’ equity,
by financing properties in local currencies and by
hedging through means of appropriate currency
instruments. Transaction exposure is limited as
revenue and costs are usually in the same cur-
rency.
Factors that affect Pandox
Pandox 2009 | 43
Sensitivity analysis
The table to the right illustrates how Pandox’
earnings are affected by changes in certain key
factors.
Earnings impact 2009, SEK
Change in rental revenue occupancy rate +5 percentage points +53.0occupancy rate –5 percentage points –52.4average room rate SEK +50 +34.0average room rate SEK –50 –34.0other commercial premises +/–5 %1) +/–1.7 Change in other variablesInterest expense during the year +/–1 percentage point +/–37.6average interest expense +/–1 percentage point1) +/–68.5Exchange rate fluctuation +/–5 % +/–2.4operating and maintenance costs +/–5 % +/–2.61) The figures in the table are standardised so that the effects of changes in rental revenue and interest rates are immediate, although such
changes do not have full impact in reality until leases and loan agreements are renegotiated.
Quality Hotel Park Södertälje City
44 | Pandox 2009
VAlUATIoN AND TAx SITUATIoN
The valuation of hotel properties with their specific characteristics demands extensive know ledge and expertise of the hotel market and hotel operations.
Cash flow valuation
Pandox continuously evaluates all of its hotel
properties in accordance with a valuation model
based on the properties’ cash flow, and which is
adapted to the characteristics specific to the hotel
industry.
The cash flow calculation is built up from
underneath, with the property operator’s income
statement as the point of departure. This in turn is
based on assumptions as to how the underlying
hotel market will develop in terms of occupancy
and average rates, as well as how each specific
operator’s respective key ratios and figures
develop in this market. The operator company’s
results and forecasts, together with the formula-
tion of the agreement, provide underlying data to
estimate revenues, which subsequently constitute
the basis of the cash flow calculation. The value
calculated is the present value of the next ten
years’ cash flow, with a supplement for the pres-
ent value of the hotel properties’ residual value
after ten years.
The valuation model is based on the following
assumptions:
Changes in rental revenue during the calcula-•
tion period are based on the formulation of indi-
vidual agreements and on underlying factors.
Inflation is assumed to amount to an average •
of 2.0 percent annually during the calculation
period.
operating costs are assumed to increase in •
line with inflation.
The rate of interest used in the calculation is •
based on the real interest rate plus a risk pre-
mium based on location, lease, and form of
ownership.
an internal valuation of Pandox’ 46 hotel proper-
ties in accordance with this method resulted in a
total value as of december 2009 that substantially
exceeds the book value. In accordance with the
Swedish Financial accounting Standards Coun-
cil’s recommendation no 17, each individual prop-
erty’s recovery value was reconciled with its book
value, further to which it was noted that no write
downs were necessary.
The Pandox Group’s property holdings are reported for accounting purposes as fixed assets. The consolidated book value as of 31 december 2009 amounted to SEK 8,735.8 M excluding equipment, of which the consolidated surplus values amounted to SEK 1,694.1 M.
Accounting of deferred tax
Pandox applies the Swedish Financial accounting
Standards Council’s recommendation (RR 9) on
income tax. In short, this recommendation implies
that both deferred tax liabilities and tax claims are
to be included in the financial statements and that
any changes will affect the income statement as
deferred tax.
Pandox’ consolidated balance sheet as of 31
december 2009 includes a deferred tax liability in
the net amount of SEK 146.8 M corresponding to
the difference between a deferred tax liability of
SEK 363.0 M and a deferred tax claim of SEK
216.2 M. The deferred tax liability refers mainly to
the estimated deferred tax based on the differ-
ence between the properties’ consolidated book
value and the fiscal residual value of each respec-
tive legal unit. The difference in value has arisen as
an effect of surplus value upon acquisitions of
property in companies, known as pure intrinsic
acquisitions, as well as fiscal depreciation that
exceeds book depreciation. Tax deduction for
annual depreciation of properties has normally
been made at the rate of 3 to 5 percent of a prop-
erty’s acquisition cost. as a result, the amount of
fiscal depreciation exceeds that of book deprecia-
tion, and the difference between the book value
and the fiscal value of a property increases year on
year. The deferred tax liability generated by asset
acquisitions has been calculated using the pres-
ent value method based on the shortest period of
ownership estimated for each property, and corre-
sponds to an average tax rate of approximately 10
percent. This is based on the Swedish Financial
accounting Standards Council’s regulation for
assessing deferred tax upon pure intrinsic acquisi-
tions, where the tax effect is taken into consider-
ation when calculating the acquisition price. The
deferred tax relating to the difference between
book depreciation and fiscal depreciation is calcu-
lated based on the applicable tax rate.
The deferred tax claim pertains mainly to defi-
cit deductions. at the end of 2009, there were
remaining deficit deductions totalling SEK 780 M
in the Swedish companies. The valuation of
deferred tax claims is based on their potential utili-
sation against future taxable profits, and is calcu-
lated according to the applicable tax rate. Conse-
quently, no deficit deductions in non-Swedish
companies were reported at the end of 2009.
Hotel property portfolio value
The Company’s tax situation
Hotel Twentyseven, Copenhagen
Pandox 2009 | 45
DeFINITIoNS
definitions of key data
Property related key figures
Direct yield
operating net as a percentage of the average
book value of properties and hotel equipment
during the year.
Operating net
Hotel property revenue less operating and mainte-
nance costs, property tax, ground rent and other
property costs.
Property related administration
The portion of total administration costs that is
directly related to the management and develop-
ment of a property. other administration costs
include central administration and costs for
administration of non-Swedish entities.
Total property revenue
The sum of rental revenue and other property
revenue.
Financial key figures
Return on equity
Profit after net financial items and paid tax as a
percentage of average equity.
Return on total assets
Profit after net financial items, plus financial costs
as a percentage of average total assets.
Interest coverage ratio
Profit before tax less depreciation and net financial
items (EBITda) in relation to net financial items.
Equity/asset ratio
Equity at the end of the year as a percentage of
total assets.
Hotel market related key figures
Occupied rooms
number of sold room nights during a given period
of time – normally one year.
Available rooms
available room capacity during a given period of
time – normally one year.
Occupancy rate
number of occupied rooms as a percentage of
the number of available rooms.
Average room rate
Total revenue from sold rooms divided by the
number of occupied rooms.
RevPAR
(Revenue Per Available Room)
Total revenue from sold rooms divided by the
number of available rooms.
Market penetration
The performance of an individual hotel in relation
to the average of the market.
GOP (Gross Operating Profit)
net profit in hotel operator companies before
depreciation, rent, net financial items and taxes.
Hotel Twentyseven, Copenhagen
46 | Pandox 2009
TeN-yeAR oVeRVIew
Condensed consolidated income statement
SEK M 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Property operationsRental revenue 476.3 551.1 536.2 535.1 562.7 548.8 605.0 747.5 872.3 850.6other property revenue 21.4 24.0 26.0 26.5 30.2 25.2 29.9 34.7 43.2 44.6Total property revenue 497.7 575.1 562.2 561.6 592.9 574.0 634.9 782.2 915.5 895.2
operating and maintenance costs –88.9 –96.7 –93.2 –100.1 –118.7 –103.8 –111.5 –126.3 –132.8 –117.0Operating net 408.8 478.4 469.0 461.5 474.2 470.2 523.4 655.9 782.7 778.2
depreciation1) –45.8 –56.2 –63.2 –64.3 –70.3 –78.2 –91.3 –129.3 –163.8 –193.6Income from property operations 363.0 422.2 405.8 397.2 403.9 392.0 432.1 526.6 618.9 584.6
Hotel operationsoperating revenue 28.2 39.7 60.1 81.3 216.8 250.2 420.0 788.8 1,105.3 1,095.0operating costs1) –25.5 –39.3 –58.2 –75.7 –204.4 –239.4 –407.7 –768.2 –1,084.5 –1,129.0operating income hotel operations 2.7 0.4 1.9 5.6 12.4 10.8 12.3 20.6 20.8 –34.0Gross income 365.7 422.6 407.7 402.8 416.3 402.8 444.4 547.2 639.7 550.6
administrative costs1) –31.8 –33.9 –34.5 –35.5 –39.3 –42.5 –51.9 –55.4 –64.6 –68.3other revenue/realisation results 1.9 8.6 28.8 7.4 – 444.4 39.9 3.4 6.9 –Operating income 335.8 397.3 402.0 374.7 377 804.7 432.4 495.2 582.0 482.3
non-recurring financial income & costs – – – – –56.1 – – – – 79.5net financial items for current operations –150.7 –178.1 –171.0 –159.2 –148.4 –137.4 –166.4 –232.4 –294.7 –229.8Income after financial items 185.1 219.2 231.0 215.5 172.5 667.3 266 262.8 287.3 332.0
deferred tax2) –27.0 –28.3 –44.2 –50.3 –47.6 36.8 –33.0 –23.5 34.2 –10.1Tax –1.4 –0.2 –0.1 11.4 –0.2 –15.8 –31.4 –9.3 –22.2 –20.4Income/loss for the year 156.7 190.7 186.7 176.6 124.7 688.3 201.6 230.0 299.3 301.51) The depreciation rate on properties is 1.0 as of 2000 and amounted to SEK 193.6 M (163.8) in 2009 of which SEK 0.4 M (0.3) relates to administration. 2) as of 2001, Pandox applies the Swedish accounting Standards Council’s recommendation in income tax (RR:9). Comparative figures for 2000 have been restated to take this into account.
Pandox 2009 | 47
Condensed consolidated balance sheet
SEK M, as of 31 December 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
AssetsProperties including hotel equipment 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5 6,907.5 8,223.8 9,212.5 9,348.0other fixed assets 13.0 5.4 6.9 7.2 6.9 113.7 172.8 139.0 794.6 843.3Current assets 61.9 37.1 29.5 34.6 58.6 201.7 174.4 223.1 241.2 158.4Cash and bank 16.4 86.7 213.2 137.5 58.0 236.4 174.1 272.8 347.7 326.4Total assets 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3 7,428.8 8,858.7 10,596.0 10,676.1
Equity and liabilitiesShareholders’ equity 1,670.8 1,772.1 1,853.9 1,919.2 1,923.0 2,307.7 2,272.3 2,407.7 2,729.2 2,996.7deferred tax liability 8.8 37.0 83.5 135.9 184.3 208.5 279.7 352.5 335.2 363.0Interest bearing liabilities 2,934.7 3,178.5 3,070.6 3,211.9 3,080.4 3,165.3 4,398.5 5,516.8 6,808.6 6,850.5non-interest bearing liabilities 261.5 178.4 203.0 189.0 198.5 347.8 478.3 581.7 723.0 465.9Total equity and liabilities 4,875.8 5,166.0 5,211.0 5,456.0 5,386.3 6,029.3 7,428.8 8,858.7 10,596.0 10,676.1
Key dataProperty related key dataBook value of properties including hotel equipment, SEK M 4,784.5 5,036.8 4,961.4 5,276.7 5,262.8 5,477.5 6,907.5 8,223.8 9,212.5 9,348.0Total property revenue, SEK M 497.7 575.1 562.2 561.6 592.9 574.0 634.9 782.2 915.5 895.2operating net, SEK M 408.8 478.4 469.0 461.5 474.2 470.2 523.4 655.9 782.7 778.2direct yield, % 9.6 9.6 9.5 9.3 9.1 8.5 8.1 8.6 9.2 8.4
Financial key dataInterest coverage ratio, multiple 2.5 2.6 2.6 2.7 2.2 3.2 2.9 2.7 2.5 4.5Return on total assets, % 8.1 8.0 7.8 7.1 7.0 14.2 5.9 6.1 6.2 5.5Return on equity, % 11.6 11.0 12.6 12.0 12.0 30.8 10.4 11.0 10.8 11.2Equity/assets ratio, % 34.6 34.3 35.6 35.2 35.7 38.3 30.6 27.2 25.8 28.1Cash flow from current operations, SEK M 228.2 267.2 265.8 272.4 298.9 301.4 317.6 389.0 444.5 446.4Investments excluding acquisitions, SEK M 101.3 149.1 67.3 60.8 70.5 165.1 282.6 274.9 269.3 312.5Property acquisitions, SEK M 2,340.3 141.9 – 370.7 – 661.3 1,327.8 1,063.4 370.9 163.3
48 | Pandox 2009
QUARTeRly DATA
Quarterly data
CoNDeNSeD INCoMe STATeMeNTS
2008 2009SEK M Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Total property revenue 199.6 243.4 220.5 252.0 203.0 230.8 218.1 243.3operating net 165.3 209.3 187.7 220.4 171.0 201.9 188.9 216.4Income from property operations 128.5 167.8 149.5 173.1 125.1 155.3 139.8 164.4Income from hotel operations –15.8 18.4 8.0 10.2 –30.7 0.9 –1.6 –2.6
operating income 96.4 170.0 142.6 173.0 77.5 138.6 123.3 142.9net financial items –72.7 –67.7 –74.8 –79.5 –74.6 –57.4 6.9 –25.2Income after financial items 23.7 102.3 67.8 93.5 2.9 81.2 130.2 117.7Income after tax 17.2 77.6 51.5 153.0 0.7 57.0 114.5 129.3
CoNDeNSeD CoNSolIDATeD BAlANCe SHeeTS
2008 2009SEK M 31 Mar 30 Jun 30 Sep 31 Dec 31 Mar 30 Jun 30 Sep 31 Dec
Assets Properties including hotel equipment 8,165.3 8,547.9 8,778.1 9,212.5 9,309.9 9,319.1 9,228.8 9,348.0other fixed assets 324.2 466.2 558.6 794.6 1,214.2 1,180.6 869.4 843.3Current assets 167.8 231.2 253.7 241.2 166.0 202.6 181.9 158.4Cash and bank 204.7 315.3 428.8 347.7 244.4 313.0 371.4 326.4Total assets 8,862.0 9,560.6 10,019.2 10,596.0 10,934.5 11,015.3 10,651.5 10,676.1
Equity and liabilities Shareholders’ equity 2,408.0 2,330.6 2,480.4 2,729.2 2,700.0 2,771.9 2,798.5 2,996.7deferred tax liability 357.0 370.6 386.6 335.2 336.0 352.4 363.2 363.0Interest bearing liabilities 5,555.0 6,232.8 6,482.6 6,808.6 7,171.8 7,333.2 6,952.6 6,850.5non-interest bearing liabilities 542.0 626.6 669.6 723.0 726.7 557.8 537.2 465.9Total equity and liabilities 8,862.0 9,560.6 10,019.2 10,596.0 10,934.5 11,015.3 10,651.5 10,676.1
PRoPeRTy RelATeD Key DATA
2008 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
direct yield, % 8.1 10.1 8.7 9.9 7.3 8.7 8.2 9.3
FINANCIAl Key DATA
2008 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Interest coverage ratio, multiple 1.8 3.1 2.4 2.8 1.7 3.7 2.8 6.1Return on total assets, % 4.1 7.6 6.1 7.2 2.9 5.2 7.2 6.4Return on equity, % 3.7 16.5 11.1 12.1 0.2 10.8 18.5 15.2Equity/assets ratio, % 27.0 24.4 24.8 25.8 24.7 25.2 26.3 28.1Cash flow from current operations, SEK M 61.3 143.2 106.0 134.0 48.9 124.0 110.6 162.9Investments excluding acquisitions, SEK M 56.8 52.4 84.3 75.8 86.3 76.8 78.1 71.3Property acquisitions, SEK M – 370.9 – – – – 163.3 –
Pandox 2009 | 49
Financial statements 2009
Property revenues and total revenuesPandox’ property revenues for 2009 amounted to SEK 895.2 M (915.5), which for comparable units, including an adjustment for currency effects, represented a decrease of 7 percent against 2008. The Group’s total revenue amounted to SEK 1,778.5 M (1,804.1).
Cash flowCash flow from ongoing operations, excluding other revenue and capital gains, amounted to SEK 446.4 M (444.5).
acquisitions during the yearPandox became new owner of the hotel property Vildmarkshotellet in Kolmården on 1 September. The purchase price for the property amounted to SEK 160 M and includes 213 room, large conference facilities an a newly built spa.
ProfitsThe pre-tax profit for 2009, excluding other revenue and capital gains, amounted to SEK 252.5 M (280.4). Profit after tax amounted to SEK 301.5 M (299.3).
Financial StatementS
50 | Pandox 2009
Report of the Board of directors
The Board of directors and Chief Execu-tive officer of Pandox aB, Swedish corpo-rate registration number 556030-7885, hereby submit the annual report and con-solidated accounts of the Company for the financial year 2009.
Operations and strategy
Pandox is one of Europe’s leading hotel pro-
perty companies. The Company has built up
specialist expertise within the key areas of hotel
markets, hotel operations, hotel properties and
business development. active ownership, with
well developed strategic plans for each hotel,
enables the creation of good prerequisites for
stable and improved cash flows, and thereby
growth in value for the shareholders.
Pandox’ strategy is to own one type of pro-
perty – hotel properties. Its focus is strengthe-
ned by a prioritised market segment.
Pandox is to own large hotel properties in
Sweden, major locations in Europe, as well as
developing regions in Eastern Europe and
north america.
The hotels should be in central and strong
locations such as city centres, airports and
exhibition centres. The hotels should be in the
upper medium to high price range and focus on
the business and leisure segments.The hotels
owned by Pandox are operated and marketed
by the most powerful players in the hotel mar-
ket, who with well known brands and dynamic
independent distribution channels create
strong market positions and thereby stable
revenues.
Revenues are created by flexible agree-
ments related to the operator’s turnover and
results or through management agreements
where Pandox assigns a third party to manage
operations, or alternatively through its own
management. Irrespective of the form of opera-
tion, Pandox contributes via its active owner-
ship to increasing total cash flows and reducing
risks.
at the end of the year, the Company’s port-
folio contained 46 hotel properties and nine
hotel operations of which one asset manage-
ment assignment. Pandox owns and develops
assets in Sweden, denmark, Belgium, Ger-
many, Switzerland, the United Kingdom,
Canada and the Bahamas.
Accounting principles
Pandox does not apply IFRS. as an unlisted
company, Pandox is not subject to the IFRS
accounting requirements. Pandox applies the
stipulations of the Swedish annual accounts
act and generally accepted accounting princip-
les, as well as the recommendations of the
Swedish accounting Standards Board unless
otherwise stated.
Ownership situation
Pandox is since the beginning of 2004 owned
by the norwegian companies Eiendomsspar
aS and Sundt aS through their wholly owned
Swedish company aPES Holding aB.
The hotel market
Global demand in the hotel sector has fallen
substantially since the end of 2008 as a result
of a troubled surrounding world with a broad
financial crisis and subsequent economic
downturn.
RevPaR in the United States fell by 17 per-
cent during the year compared with 2008, and
was spread equally between price and volume.
The luxury segment was affected hardest, with
a fall in RevPaR of 24 percent. new York, which
is placed in the beginning of the economic
cycle, recovered well in the last quarter of the
year, and is relatively close to stabilisation of its
revenues.
Europe has experienced similar develop-
ments as in the United States. The pattern nor-
mally progresses with a time-lapse of about six
months, but this time the markets have develo-
ped almost in parallel. London managed well in
2009, and declined by only 3 percent, which
was entirely attributable to lower average rates.
Berlin and Brussels both fell in volume and
price. Brussels came out worst with a decrease
in RevPaR of 16 percent, while Berlin declined
by 9 percent.
all of the major markets in Scandinavia
experienced lower revenues during the year.
Copenhagen suffered already in the last quarter
of 2008, and lost 11 percent in 2009 despite
several large international congresses at the
end of the year. Stockholm and Helsinki fell by
11 percent and around 16 percent respectively,
due primarily to less international travel.
The Swedish regional cities, which are nor-
mally stable, also experienced downward
trends of 5 to 10 percent depending on their
location. Relatively few markets have shown
any positive developments.
Pandox’ portfolio
as indicated above, Pandox’ portfolio has
developed better than the market. In general,
the hotels in Malmö, Gothenburg and Swedish
regional cities have shown relatively stable
trends compared with last year. Pandox’
Stockholm hotels have developed slightly less
well than the market, although with relatively
large individual differences among the hotels.
The Hilton Stockholm Slussen and the newly
refurbished Quality Hotel Park in Södertälje
came out best, while the hotels in northern
Stockholm showed poorer trends.
all Pandox hotels in Gothenburg have per-
formed better than the market as a whole, with
only a marginal downturn compared with last
year. Pandox’ Malmö hotels have also shown
strong trends, due partly to good demand in
conjunction with the U21 European Football
Championship and considerable interest from
denmark. In a tough Copenhagen market with
fewer international meetings the Scandic
Copenhagen and Clarion Collection Hotel 27
reported relatively weak results for the period.
Pandox’ four German hotels have seen
uneven trends. Hotel Berlin, Berlin, which is run
as own operations and has undergone sub-
stantial repositioning, generated stable cash
flows compared with last year.
The Hilton London docklands has mana-
ged the downturn well, but has nonetheless
lost to competitive groups.
Pandox’ Belgian hotel portfolio has develo-
ped unevenly. Hotel Bloom and the Crowne
Plaza Brussels City Centre have taken market
shares. after a difficult start, the Hilton Brussels
City has increased its volumes and is well-pla-
ced as 2010 gets under way. Similar patterns
can be seen at the Scandic Grand Place. The
Holiday Inn Brussels airport was totally refur-
bished during the year with the goal of beco-
ming Brussels airport’s best medium-priced
hotel. Revenues subsequently declined more
than the market, but the hotel is showing good
growth further to the launch of the new product
in the autumn. In antwerp, the market is under
considerable pressure in both price and
volume. The Pandox-owned Scandic antwerp
Pandox 2009 | 51
has managed to maintain volumes, while the
Crowne Plaza antwerp, which is run as own
operations, has lost market shares due prima-
rily to a fall in the number of meetings in the city.
after a good start, revenues within Montreal’s
hotel market decreased by almost 14 percent
in 2009. Hyatt performed better than the mar-
ket, due mainly to greater focus on revenue
management, while the InterContinental deve-
loped less well due entirely to the hotel’s total
refurbishment during the year.
Revenues and operating net
– property operations
Property management revenues for the year
amounted to SEK 895.2 M (915.5). For compa-
rable units and currencies, the portfolio decli-
ned by –7 percent. This fall is principally attribu-
table to the generally poorer underlying hotel
economic climate in all of Pandox’ sub-mar-
kets. In particular, the refurbishment projects at
the InterContinental Montreal and Holiday Inn
Brussels airport simultaneously reduced the
revenue capacity in the portfolio during the
year. However, at the hotel property level in
each respective sub-market, there are relatively
large differences in results depending on their
location, market segment, type of agreement
and operator. Property costs excluding depre-
ciation amounted to SEK 117.0 M (132.8).
The operating net declined in total by SEK
4.5 M to SEK 778.2 M (782.7). For comparable
units, the operating net decreased by SEK 16.5
M, or by 2.1 percent. direct yield for the period
was 8.4 percent (9.2).
Revenues and income – hotel operations
Total revenues from hotel operations amounted
to SEK 1,095.0 M (1,105.3). For comparable
units and adjusted for currency effects, reve-
nues fell by about 13 percent, due primarily to
the weaker hotel economic climate and a short-
fall in revenues and profits subsequent to exten-
sive refurbishments at the InterContinental
Montreal and Holiday Inn Brussels airport. The
overall loss from hotel operations amounted to
SEK –34.0 M (20.8).
Income
The Group’s profit for 2009 before tax and
excluding non-recurring items amounted to
SEK 252.5 M (280.4).
Financing and cash flow
net financial items relating to current opera-
tions for the period January–december 2009
amounted to SEK –229.8 M (–294.7).
The Group’s interest-bearing liabilities
amounted as of 31 december 2009 to SEK
6,850.5 M (6,808.6). The loan portfolio has a
spread due-date structure with an average
fixed-capital period of 7.5 years and an average
fixed-interest period of 2.3 years. The average
interest rate on loans at 31 december 2009
was 2.63 percent. Financing of Swedish pro-
perties has been made in Swedish kronor
(SEK), while properties outside Sweden have
essentially been financed in each respective
local currency.
available liquid funds, including unutilised
bank overdraft and credit facilities totalling SEK
1,182 M amounted to SEK 1,508 M (1,521).
Further to the end of the year, agreements for
further credit facilities for a total of SEK 300 M
have been signed. available liquid funds, inclu-
ding unutilised bank overdraft and credit facili-
ties now amount to SEK 1,808 M.
Cash flow before changes in working capi-
tal and investments, excluding non-recurring
items and tax, amounted to SEK 446.4 M
(444.5).
Investments
The Pandox Group’s investments, excluding
acquisitions, amounted for the year to SEK
312.5 M (269.3). Investments pertained prima-
rily to refurbishment programs at the Holiday
Inn Brussels airport, Hotel Berlin, Berlin, Inter-
Continental Montreal, Hyatt Regency Montreal
and the Radisson Blu Basle, as well as product
improvements in a large number of properties.
The net book value of hotel properties,
including furniture, fixtures and equipment,
amounted to SEK 9,348.0 M (9,212.5). The
market value of the hotel properties significantly
exceeds their book value.
Taxes
The Swedish Tax agency has in a reassess-
ment notice dated october 2007, decided to
increase the assessed income of a number of
Pandox’s subsidiaries by in total SEK 430 M
(corresponding tax effect of SEK 120.4 M) as a
consequence of the sale of real estate through
non-Swedish subsidiaries carried out in 2005.
The decision has been appealed to the county
administrative court. The case has been put on
hold awaiting the Supreme administrative
Court’s judgement in another (non-Pandox
related) case. The Company is of the opinion
that all transactions and claims have been
made in accordance with applicable laws and
therefore no reserves have been booked in the
Groups’ accounting.
Personnel
Central administration counted 18 employees
as at 31 december. Figures concerning aver-
age number of employees, as well as salaries
and other remuneration are set out in note 16.
The work of the Board of Directors 2009
The Board of directors of Pandox has been
composed of seven members since the annual
General Meeting of Shareholders held in 2009.
during the year, the Board has held four ordi-
nary meetings in accordance with the establis-
hed annual agenda. The meetings have revie-
wed and discussed external and internal report-
ing of operating results and the Company’s
financial position as well as various business
matters. other important items that are regu-
larly studied and reviewed each year are mar-
keting, strategy, finance, and budget issues.
Parent Company
Property activities in the Group’s property-
owning companies are administered by staff
employed by the Parent Company, Pandox aB.
The cost of these services has been invoiced to
the Group’s subsidiaries. Invoicing in 2009
amounted to SEK 51.1 M (55.2). The profit for
the year amounted to SEK 400.0 M (–161.1).
Outlook for 2010
Revenues in the hotel sector are expected to
be gradually more stable in 2010. If one studies
new York, which is placed in the beginning of
the economic cycle, and assuming that reve-
nues will even out during the spring, the prere-
quisites are that the same pattern will spread to
Europe during the summer and autumn –
which is good news. at the same time, prices
are under pressure, which will reduce producti-
vity and subsequently profitability. Pandox fore-
casts that the Company will continue to pro-
duce stable cash flows in 2010.
Financial StatementS
52 | Pandox 2009
Income statement
Group Parent CompanySEK M 2009 2008 2009 2008
Property operationsRental revenue note 1, 2, 3 850.6 872.3 – –other property revenue 44.6 43.2 – –Total property revenue 895.2 915.5 – –
Property costs –117.0 –132.8 – –Operating net 778.2 782.7 – –
depreciation as per plan note 4 –193.6 –163.8 – –Income from property operations 584.6 618.9 – –
Hotel operationsoperating revenue 1,095.0 1,105.3 – –operating costs –1,129.0 –1,084.5 – –operating income from hotel operations note 1, 2, 16 –34.0 20.8 – –Gross income 550.6 639.7 – –
administrative costs note 4, 15, 16 –68,3 –64.6 –62.3 –59.7other revenue note 5 – 6.9 51.1 55.2Operating income 482.3 582.0 –11.2 –4.5
Interest income note 6 25.5 12.6 457.8 234.3Interest expense –256.5 –310.5 –202.9 –279.8other financial income and costs note 6 80.7 3.2 188.1 –168.2Net financial items –150.3 –294.7 443.0 –213.7Income before tax 332.0 287.3 431.8 –218.2
Tax note 7 –20.4 –22.2 25.3 –deferred tax note 7 –10.1 34.2 –57.1 57.1INCOME FOR THE YEAR 301.5 299.3 400.0 –161.1
Specification of external revenue
Revenue from property operations 895.2 915.5 of which internal rentals –211.7 –216.7 Revenue from hotel operations 1,095.0 1,105.3 Total external revenue 1,778.5 1,804.1
Pandox 2009 | 53
Comments on the income statement
Rental revenue
Rental revenue pertains to hotel premises, hotel
furniture and equipment, and other commercial
premises. Rental revenue for 2009 decreased
in relation to the previous year and amounted to
SEK 850.6 M (872.3).
Other property revenue
other property revenue is primarily comprised
of costs debited for heat, electricity and pro-
perty tax.
BReaKDOWn OF OtHeR PROPeRtY ReVenUe
SEK M 2009 2008
Payment for operating costs 10.3 9.5Invoicing of property tax 34.3 33.7Total 44.6 43.2
Property costs
Operating costs
operating costs are costs that directly pertain
to the operation of the properties, such as heat,
water, electricity, and maintenance. Costs are
reported gross, meaning that the portion of
costs debited to tenants is reported as revenue
under the heading other Property Revenue,
and that total costs are reported among costs
in their full amount.
Maintenance costs
Maintenance costs are costs incurred to main-
tain the standards of buildings and equipment.
Pandox’ leases are in most cases structured
sothat the tenants – the hotel operators – are
responsible for the greater part of interior main-
tenance of the properties.
Ground rent
a total of seven properties owned by Pandox
are held under site leasehold rights. The condi-
tions and maturities in all cases are based on
prevailing market terms.
Property tax
Pandox’ Swedish hotel properties are liable to
property tax at the rate of 1 percent of the tax
assessment value. Properties located outside
Sweden are subject to varying percentages
and underlying basis.
Other costs
These costs include costs of legal counsel on
leasing matters, insurance premiums, and
costs of leasing external premises.
BReaKDOWn OF PROPeRtY cOStS
SEK M 2009 2008
operating costs 21.9 23.6Maintenance costs 30.9 33.5Ground rents 1.5 12.7Property tax 58.5 57.2other costs 4.2 5.8Total 117.0 132.8
Operating net
The operating net for 2009 amounted to SEK
778.2 M, representing a decrease of SEK 4.5 M.
direct yield amounted to 8.4 percent (9.2).
Hotel operations
For accounting purposes, the hotel operations
conducted by Pandox are charged with internal
rent. The internal rent is linked to the operator’s
revenue and based on what are deemed to be
market conditions. The internal rent is debited
to hotel operations and credited to revenue in
property management.
In 2009 no hotel operations was acquired.
In May an agreement was settled with Choice
Hotels Scandinavia regarding the their take
over of the hotel operations in Quality Hotel
Park Södertälje. With that, eight hotel opera-
tions remains in Pandox portfolio at the end of
2009 of which five were directly operated by
Pandox and three via management contracts.
Administrative costs
administrative costs relate to central adminis-
tration, as well as foreign hotel property admi-
nistration. all central administrative staff is
based at the Stockholm office. The remunera-
tion of staff and auditors is set out in notes 15
and 16.
Financial StatementS
54 | Pandox 2009
Balance sheet
Comments on the balance sheet
Properties and equipment
one hotel property was acquired in 2009.
depreciation of properties amounted to SEK
108.8 M (98.6), and the year’s investments to
SEK 224.1 M (138.3). The book value of equip-
ment, including hotel furniture and fixtures
amounted to SEK 613.5 M (547.4). deprecia-
tion amounted to SEK 85.2 M (65.5) and invest-
ments to SEK 89.4 M (131.0).
The greater part of the book value of furni-
ture, fixtures and equipment, representing SEK
613.5 M, pertains to that used by hotel opera-
tors. In certain cases, these items are included
as an unspecified portion of rent, and in other
cases as a separate rental charge. When these
items are included in rental revenues, Pandox
includes their value in the property value used
to calculate direct yield from the properties. at
the end of the year, the book value of the pro-
perties, including hotel furniture, fixtures and
equipment, amounted to SEK 9,348.0 M.
other items consist of administration equip-
ment with a book value of SEK 1.3 M.
Other long-term receivables
Pertain to a long-term promissory note and to a
pledged deposit.
Inventories
Relate to stocks of consumables in the hotel
operations.
Trade accounts receivable
Pandox’ accounts receivable normally consists
of rental receivables and trade receivables in
hotel operations. Since rent is generally paid
quarterly and monthly in advance, amounts
outstanding at year-end mainly comprise
accrued revenue-based rents.
Other receivables
Short-term receivables such as those pertain-
ing to costs that are to be debited to external
parties.
Prepaid costs and accrued revenue
This item is comprised mainly of prepaid costs
for the following year, such as insurance premi-
ums and rents.
Cash and bank deposits
The liquidity of the Pandox Group is primarily
managed by the Parent Company through a
central bank account structure where liquidity
Group Parent CompanySEK M 2009 2008 2009 2008
ASSETS Fixed assets Tangible fixed assets Properties note 8 8,735.8 8,665.8 – –Equipment note 9 613.5 547.4 1.3 0.7 9,349.3 9,213.2 1.3 0.8
Financial fixed assets Shares and participations in subsidiaries note 10 – – 4,270.6 3,835.6other shares and participations note 11 610.2 544.4 – –
amounts due by Group companies – – 3,885.3 2,965.5other long-term receivables 15.6 15.0 14.7 14.0 625.8 559.4 8,170.6 6,815.1
deferred taxes recoverable 216.2 234.5 – 57.1Total fixed assets 10,191.3 10,007.1 8 ,171.9 6,872.9
Current assetsInventories 8.2 6.5 – –accounts receivables 99.7 81.0 – –Tax receivables 5.3 – – –other receivables 16.9 122.6 5.6 5.5Prepaid costs and accrued revenue 28.3 31.1 1.5 1.5Cash and bank 326.4 347.7 199.3 111.4Total current assets 484.8 588.9 206.4 118.4
TOTAL ASSETS 10,676.1 10,596.0 8,378.3 6,991.3
Pandox 2009 | 55
is assembled in a joint interest-bearing transac-
tion account. Surplus liquidity can also be
invested as a fixed term bank deposit. In addi-
tion, Pandox has unutilised credit facilities for a
total of SEK 1,182 M.
Restricted reserves Parent Company
opening balance adjusted for non exercised
options.
Liabilities to credit institutions
as at 31 december 2009, Pandox’ total inte-
rest-bearing liabilities amounted to SEK
6,850.5 M, spread over six lenders and seven
currencies. Because financing is arranged
mainly through long-term credit agreements,
the majority of the debt is considered as long-
term. as regards fixed interest rates, debt
amounting to SEK 3,762.3 M carries a fixed
interest rate for a period of less than one year.
Further details are set out in the Financial over-
view section on page 40.
Deferred tax liability
In 2009 the deferred tax items are accounted for
on a gross basis. Further details are set out in
the Pandox’ Tax Situation section on page 44.
Accrued expenses and prepaid income
The amount pertains essentially to accrued
interest expense and prepaid rent.
Pledged assets
This item refers mainly to property mortgages
pledged to credit institutions as collateral for
loans.
Contingent liabilities
The Parent Company’s contingent liabilities
refer mainly to guarantees to banks with regard
to subsidiaries’ debts.
Group Parent CompanySEK M 2009 2008 2009 2008
EQUITY AND LIABILITIESEquityRestricted equityShare capital 373.5 373.5 373.5 373.5Restricted reserves 1,051.1 1,050.2 830.0 830.0 1,424.6 1,423.7 1,203.5 1,203.5
Unrestricted equityUnrestricted reserves 1,207.6 1,006.2 129.1 219.4Profit for the year 301.5 299.3 400.0 –161.1 1,572.1 1,305.5 529.1 58.3Total shareholders’ equity 2,996.7 2,729.2 1,732.6 1,261.8
Provisionsdeferred tax liabilities note 7 363.0 335.2 – – 363.0 335.2 – –
LiabilitiesLiabilities to credit institutions note 11 6,850.5 6,608.6 4,199.7 4,559.2Trade accounts payable 87.3 100.1 21.3 23.2Liabilities to Group companies – – 2,335.4 987.5Tax liabilities 13.9 14.4 – –other liabilities 98.3 232.2 3.0 0.1accrued expenses and prepaid revenue note 13 266.4 376.3 86.3 159.5Total liabilities 7,679.4 7,531.6 6,645.7 5,729.5TOTAL EQUITY AND LIABILITIES 10,676.1 10,596.0 8,378.3 6,991.3
Pledged assets note 14 4,961.9 5,239.2 12.2 12.2Contingent liabilities note 14 2.5 2.3 2,675.3 2,221.6
Financial StatementS
56 | Pandox 2009
Changes in equity
SEK M Share capitalRestricted
reservesUnrestricted
reservesProfit
for the year Total
Group 2008opening balance 373.5 886.8 917.4 230.0 2,407.7appropriation of profits – – 230.0 –230.0 –other changes – –1.9 1.9 – –dividend – – –161.9 – –161.9Group contribution – – – – –Translation differences including tax effect – 165.3 18.8 – 184.1Profit for the year – – – 299.3 299.3 373.5 1,050.2 1,006.2 299.3 2,729.2
Group 2009opening balance 373.5 1,050.2 1,006.2 299.3 2,729,2appropriation of profits – – 299.3 –299.3 –other changes – –69.4 69.4 – –dividend – – – – –Group contribution – – – – –Translation differences including tax effect – 70.3 –104.3 – –34.0Profit for the year – – – 301.5 301.5 373.5 1,051.1 1,270.6 301.5 2,996.7
Parent Company 2008opening balance 373.5 830.0 394.4 –13.1 1,584.8appropriation of profits – – –13.1 13.1 –dividend – – –161.9 – –161.9Group contribution – – – – –Profit for the year – – – –161.1 –161.1 373.5 830.0 219.4 –161.1 1,261.8
Parent Company 2009opening balance 373.5 830.0 219.4 –161.1 1,261.8appropriation of profits – – –161.1 161.1 –dividend – – – – –Group contribution – – 70.8 – 70.8Profit for the year – – – 400.0 400.0 373.5 830.0 129.1 400.0 1,732.6
Translation differences include a tax effect of SEK 43.5 M (–89.6) regarding currency hedging of non-Swedish operations. The number of shares as at 31 december 2009 amounted to 24,900,000 with one vote per share and a nominal value of SEK 15 per share.
Pandox 2009 | 57
Cash flow statement
Comments on the cash flow statement
Group Parent CompanySEK M 2009 2008 2009 2008
Current operationsProfit/loss before financial items 561.7 582.0 –11.2 –4.5depreciation 194.0 164.1 0.4 0.3Interest received 4.6 12.6 457.8 234.3Interest paid and other financial costs –247.0 –307.2 –88.4 –467.7Tax paid –26.2 –14.8 – –Cash flow from current operations before change in working capital and investments 487.1 436.7 358.6 –237.6
Change in working capitalIncrease/decrease (±) in operating receivables 87.5 –18.0 96.0 –2.2Increase/decrease (±) in operating liabilities –98.8 45.7 1,349.2 365.9Total change in working capital –11.3 27.7 1,445.2 363.7Cash flow from current operations after change in working capital and investments 475.8 464.4 1,803.8 126.1
Investment operationsInvestment shares and participations –65.7 –544.4 –434.9 –544.8Investments in properties and equipment –313.5 –269.3 –1.0 –0.2acquisition of properties and equipment –163.3 –370.9 – –Sale of fixed assets – 1.8 – 2.7Total investments –542.5 –1,182.8 –435.9 –542.3Cash flow after investments –66.7 –718.4 1,367.9 –416.2
Financing operationsChange in financial fixed assets – – –920.5 –50.9Change in interest-bearing loans 42.0 970.9 –359.5 665.0dividend – –161.9 – –161.9Cash flow from financing operation 42.0 809.1 –1,280.0 452.2Change in liquid funds –24.7 90.6 87.9 36.0
Liquid funds at the beginning of the year 347.7 272.8 111.4 75.4Exchange rate difference in liquid assets 3.4 –15.7 – –Liquid funds at the end of the year 326.4 347.7 199.3 111.4Change in liquid funds –24.7 90.6 87.9 36.0
adjusted for other revenue and capital gains of SEK 79.5 M (6.9) the cash flow from current operations amounts to SEK 446.4 M (444.5).
Cash flow per share rose to SEK 17.93 (17.85).
Financial StatementS
58 | Pandox 2009
accounting principles
The annual report and accounts have been prepared in accordance with the Swedish annual accounts act and gene-rally accepted accounting principles, as well as taking into account the recom-mendations of the Swedish accounting Standards Board if not stated otherwise. Pandox’ accounting and evaluation prin-ciples are in general unchanged compa-red with last year.
Consolidated accounts
The consolidated accounts for the Group
include all subsidiaries as at financial year-end.
The Swedish Financial accounting Stan-
dards Council’s recommendation RR 1:00 has
been applied in the preparation of the financial
statements. The consolidated accounts have
been prepared in accordance with the
purchase method, whereby assets and liabili-
ties have been taken over at market value in
accordance with an acquisition analysis. The
difference between acquisition value and
acquired shareholders’ equity has been added
to land and buildings as surplus value. Surplus
value is amortised in accordance with the same
principle used for properties. Estimated defer-
red tax liability with respect to Group surplus
value and estimated deferred tax recoverable
are reported net as a deferred tax liability in the
balance sheet.
Tax
Pandox applies the Swedish Financial accoun-
ting Standards Council’s recommendation RR
9 regarding income tax. Briefly, the recommen-
dation implies that both deferred tax liabilities
and tax recoverable shall be included in the
financial statements, and that any changes
shall affect the income statement as deferred
tax. The deferred tax relating to the difference in
book depreciation and fiscal depreciation shall
be calculated using the prevailing tax rate.
acquisitions based on the deferred tax lia-
bility relating to asset acquisitions shall be
based on the acquisition price and be calcula-
ted from each respective property’s shortest
estimated period of ownership, resulting in an
average tax rate of approximately 10 percent.
The deferred tax recoverable pertaining to
estimated tax recoverable related to deficit
deductions in the Company are valued based
on the estimated potential utilisation against
future taxable profits, and are calculated based
on the prevailing tax rate.
Property operations
The Group’s properties are reported in the
balance sheet as fixed assets in view of the
purpose of the holdings being the long-term
ownership, management and development of
the properties.
Hotel operations
The hotel operations conducted by Pandox are
charged with internal rent for accounting pur-
poses. The internal rent is linked to the opera-
ting companies’ revenue and based on what
are deemed to be market conditions. The inter-
nal rent is expensed to hotel operations, and
carried as revenue in property operations.
Tangible fixed assets
When new construction and additions are car-
ried out, all direct costs including project costs
are capitalised. In the case of refurbishments,
direct costs related to the improvement of pro-
perties compared with their original condition
are capitalised.
Costs of repairing a property to its original
condition are not capitalised. an exception to
this principle involves the costs of measures
taken further to neglected maintenance esta-
blished at the time of an acquisition, and where
the acquisition price is adjusted accordingly.
Costs of tenant-related modifications that
imply that the rent may be increased are capita-
lised and depreciated over the remaining period
of the lease.
depreciation according to plan is calculated
on the acquisition value at the following percen-
tages:
%
Buildings 1.0 Building fixtures 4–6.7 Land improvements 3.5 Equipment 6.7–33
Pandox changed the depreciation rate for buil-
dings from 1.5 percent to 1 percent with effect
from 2000.
depreciation according to plan is calculated
on the acquisition value and a residual value of
SEK 0.
Write-down of fixed assets
The Group’s properties are continuously valued
in accordance with an internal cash flow model,
Pandox 2009 | 59
which also fulfils the requirement to calculate
the utilisation value in accordance with RR:17
whereby the recoverable value, which is the
greater of the net sales value and the utilisation
value, is compared with the property’s book
value in order to assess the need for a possible
write-down.
Leasing
Pandox reports all leasing contracts as opera-
tional. Leasing contracts entered into concern
private cars and office machines. They are not
significant in size and do not therefore influence
an assessment of the Group’s results and
financial position.
Revenue
Management revenue pertains to rental reve-
nue as well as re-debited operating costs and
property tax. Revenue and costs related to the
operations of hotel operators are reported
separately in the consolidated income state-
ment. Rental revenue is spread over a period of
time in accordance with the terms of each
lease. This implies that rent paid in advance is
reported as prepaid rental revenue.
Shares and participations
Shares and participations in subsidiaries and
subsidiaries of subsidiaries have been stated at
acquisition value with the exception of holdings
that may have been written down to their esti-
mated actual value.
Financial instruments
Interest swaps are used to change underlying
financial liabilities’ interest-due structure. Reve-
nue and costs related to interest swaps are
reported net as interest costs, and are spread
over the duration of each contract.
International subsidiaries
International subsidiaries are stated as per the
current rate method, which implies that the
income statement is restated at the average
exchange rate of the period, and the balance
sheet at the exchange rate prevailing on the
closing day. The exchange rate difference that
arises as a result of this method is recorded
directly against the Group’s equity. any compa-
nies acquired during the year are included in
the Group at an amount relating to the period
following such acquisition.
Receivables and liabilities expressed in
foreign currencies
Receivables and liabilities expressed in foreign
currencies are restated at the rate of exchange
prevailing on balance sheet date. any differen-
ces that may arise are either credited or debited
to income. When loans or forward contracts
are entered into to hedge investments in inter-
national subsidiaries, any exchange rate diffe-
rences that may arise are offset in the Group by
an amount corresponding to the differences
arising from the recalculation of the net assets
of international subsidiaries.
Other receivables and liabilities
Receivables have been stated in the amounts
expected to be received. other assets and lia-
bilities have been stated at nominal values.
Financial StatementS
60 | Pandox 2009
notes to the accounts
NOTE 1 SEGMENT REPORTING
Primary segmentPandox’ primary segment is comprised of two operating branches – property operations and hotel operations. Information in accordance with segment reporting is presented in the consolidated income statement and balance sheet.
Secondary segmentYear 2009 Stockholm Gothenburg Öresund Rest of Sweden International Adjustment Total
Property revenue 167.7 85.2 182.3 120.1 339.9 –211.7 683.5Property costs –26.5 –7.2 –30.7 –15.8 –36.8 – –117.0operating net 141.2 78.0 151.6 104.3 303.1 –211.7 566.5
Book value of properties 1,386.2 756.1 1,488.1 998.8 4,718.8 – 9,348.0
Investments 50.6 1.8 12.2 13.9 234.0 – 312.5operating revenue – hotel operations 16.1 – 8.9 – 1,070.0 – 1,095.0operating costs – hotel operations –15.4 – –9.2 – –1,104.4 211.7 –917.3operating profit – hotel operations 0.7 – –0.3 – –34.4 211.7 177.7
Year 2008 Stockholm Gothenburg Öresund Rest of Sweden International Adjustment Total
Property revenue 187.9 84.5 183.5 116.7 342.9 –216.7 698.9Property costs –39.3 –8.1 –33.0 –16.3 –36.1 –132.8operating net 148.6 76.4 150.5 100.4 306.8 –216.7 566.0
Book value of properties 1,360.5 766.8 1,518.7 834.7 4,731.8 9,212.5
Investments 56.7 23.6 9.2 19.8 160.0 269.3operating revenue – hotel operations 51.6 – 10.4 – 1,043.3 1,105.3operating costs – hotel operations –55.1 – –10.6 – –1,018.9 216.7 –867.9operating profit – hotel operations –3.5 – –0.2 – 24.4 216.7 237.4
NOTE 2 RENTAL REvENUE
Revenues from hotel operations pertain to business, of which three are operated under management agreements with Hilton, InterContinental and Hyatt respectively, as well as the five hotels operated by Pandox. Rent and remuneration for other property costs which were paid by these hotel operator companies to the property company are reported gross, i.e. they have not been eliminated in the income statement. This is done to provide a more accurate picture of the operating net generated by the property company and the operating income of the hotel operating company. The elimination of these items would imply that the total management revenue and the operating company’s operating costs would be reduced by SEK 211.7 M for the year 2009 (216.7).
NOTE 3 GEOGRAPHICAL DISTRIBUTION OF RENTAL REvENUE
% 2009 2008
Sweden 53 54denmark 8 9United Kingdom 5 5Germany 13 12Belgium 15 15Switzerland 2 2Canada 4 3Total 100 100
Pandox 2009 | 61
NOTE 4 DEPRECIATION ACCORDING TO PLAN
Group Parent CompanySEK M 2009 2008 2009 2008
Buildings –108.0 –97.8 – –Land improvements –0.8 –0.8 – –Equipment –85.2 –65.5 –0.4 –0.3 Total depreciation –194.0 –164.1 –0.4 –0.3
depreciation amounts to a total of SEK 194.0 M of which SEK 193.6 M (163.8) refers to property operations and SEK 0.4 M (0.3) to administration.
NOTE 5 OTHER REvENUE
other revenue of SEK 6.9 M in 2008 refered to a compensation for a parking rental contract and sale of a minor office asset in Östersund. Property activities in the Group’s property-owning companies are administered by staff employed by the Parent Company. The cost of these services has been invoiced to the Group’s subsidiaries. Invoicing in 2009 amounted to SEK 51.1 M (55.2).
NOTE 6 INTEREST INCOME AND OTHER FINANCIAL INCOME AND COSTS
The interest income of the Parent Company is divided into SEK 77.3 M (230.3) from Group companies, SEK 1.1 M (4.0) from external parties, and SEK 379.4 M from dividends from subsidiaries. of SEK 188.1 M (–168.2) in other financial income and cost in the Parent Company, SEK 190.3 M (–167.8) pertains to currency effects in valuation of liabilities in foreign currency at closing date exchange rate. of SEK 25.5 M (12.4) in Group interest income, SEK 4.6 M refers to external interest income and SEK 20.9 M refers to divi-dends from other shares and participations. other finacial and costs in the Group amounts to SEK 80.7 M (3.2) of which SEK 79.5 M pertains to capital gains further to the sale of shares in HoST Hotels & Resorts Inc.
NOTE 7 DEFERRED TAx AND ACTUAL TAx
Group Parent CompanySEK M 2009 2008 2009 2008
Deferred tax expense for the yeardeferred tax expense relating to temporary differences –38.5 –2.9 –0.7 –deferred tax expense relating to deficit deductions –15.9 109.9 –56.4 60.0deferred tax expense relating to other provisions 44.3 –80.0 – 0.8Effect of income tax rate changes – 7.2 – –3.7Deferred tax reported in the income statement –10.1 34.2 –57.1 57.1
Actual tax in the income statement –20.4 –22.2 25.3 –
Difference between reported tax and nominal tax rateReported profit before tax 332.0 283.3 431.8 –218.2Tax as per applicable tax rate –87.3 –83.0 –113.6 57.4Tax effect due to nontaxable income 36.8 0.1 134.5 0.0Tax effect of nondeductible costs and other tax adjustments –21.1 52.8 –52.7 –0.3Tax effect relating to foreign operations 41.1 34.9 – –Effect of income tax rate changes – 7.2 – –Reported tax expense –30.5 12.0 –31,8 57.1
Deferred tax recoverabledeficit deductions 205.2 222.5 – 56.4other deferred tax recoverable 11.0 12.0 – 0.7Total deferred tax recoverable 216.2 234.5 – 57.1
Deferred tax liabilitiesdifferences between book value and fiscal value of properties 363.0 335.2 – –Total deferred tax liabilities 363.0 335.2 – –Total deferred tax liabilities/recoverable net –146.8 –100.7 – 57.1
The Group’s nominal tax rate is estimated at 26.9 percent and in the Parent Company it amounts to 26.3 percent. after income tax rate cut as per 1 January 2009 from 28.0 percent to 26.3 percent the deferred tax balance items was recalculated for the year 2008 in the Group as well as in the Parent Company to reflect the new tax rate. The effects 2008 are presented under deferred tax expense for the year. The effective income tax rate in the Group amounted in 2009 to 9.2 percent (–4.2) and in the Parent Company to 7.4 percent (26.2).
Financial StatementS
62 | Pandox 2009
NOTE 8 LAND AND BUILDINGS
GroupSEK M 2009 2008
opening acquisition value 9,641.4 8,589.3Reclassified as equipment –5.2 –14.0acquisition of properties 89.4 360.5Investments 224.1 138.3Sales – –Translation differences – balance sheet –151.0 567.3Closing accumulated acquisition value 9,798.7 9,641.4
opening depreciation –975.6 –785.6Sales – –depreciation for the year –108.8 –98.6Translation differences – balance sheet 21.5 –91.4Closing accumulated depreciation –1,062.9 –975,6Closing residual value 8,735.8 8,665.8
Tax assessment value of Swedish properties 2,521.7 2,509.4of which land 707.9 730.6
The Group’s opening acquisition value and opening depreciation regarding 2008 have been adjusted with SEK –242.8 M and SEK 242.8 M respectively. The closing residual value has thus not been affected.
NOTE 9 EQUIPMENT
Group Parent CompanySEK M 2009 2008 2009 2008
opening acquisition value 900.4 641.6 3.6 3.4Reclassified from land and buildings 5.2 14.0 – –acquisition of equipment 73.9 10.3 – –Investments 89.4 131.0 1.0 0.2Sales/disposals – –3.5 – –Translation differences – balance sheet –31.0 107.0 – –Closing accumulated acquisition value 1,037.9 900.4 4.6 3.6
opening depreciation –353.0 –486.7 –2.9 –2.6Sales/disposals – 1.7 – –depreciation for the year –85.2 –65.5 –0.4 –0.3Translation differences – balance sheet 13.8 –68.5 – –Closing accumulated depreciation –424.4 –353.0 –3.3 –0.3Closing residual value 613.5 547.4 1.3 0.7
The Group’s opening acquisition value and opening depreciation regarding 2008 have been adjusted with SEK –266.0 M and SEK 266.0 M respectively. The closing residual value has thus not been affected.
Pandox 2009 | 63
NOTE 10 SHARES AND PARTICIPATIONS IN SUBSIDIARIES
Corp. Reg. No.Registered
officeNumber
of shares Par valuePercent owned Book value
Parent CompanyHotab Förvaltnings aB 556475-5592 Stockholm 1,000 100 100 285.1Pandox Förvaltning aB 556097-0815 Stockholm 5,500 100 100 304.7Hotab 6 aB 556473-6352 Stockholm 1,000 100 100 0.1Fastighets aB Grand Hotel i Helsingborg 556473-6329 Stockholm 1,000 100 100 15.9Pandox Fastighets aB 556473-6261 Stockholm 1,000 100 100 0.1Fastighets aB Mora Hotell 556475-9370 Stockholm 1,000 100 75 5.7Fastighets aB Stora Hotellet i Jönköping 556469-4064 Stockholm 1,000 100 100 30.1Pandox Belgien aB 556495-0078 Stockholm 1,000 100 100 4.0Pandox Hotel Management aB 556469-9782 Stockholm 1,000 100 100 0.1Malmö Favorit Hotell aB 556475-9446 Stockholm 1,000 100 100 16.1Pandox Luxemburg aB 556515-9216 Stockholm 10,000 10 100 68.3Fastighets aB Porpur 556349-8327 Stockholm 10,000 100 100 0.1Pandox i Halmstad aB 556549-8978 Stockholm 1,000 100 100 8.7Pandox i Borås aB 556528-0160 Stockholm 1,000 100 100 61.5Grand i Borås Fastighets aB 556030-7083 Stockholm 6,506 100 100 10.0Hotell Värmdövägen 84 aB 556286-4826 Stockholm 1,000 100 100 4.3Hotellus International aB 556030-2506 Stockholm 7,480,000 100 100 970.2KB Lorensberg 49:2 916833-3269 Gothenburg – – 100 0.0Hotellus Östersund aB 556367-3697 Stockholm 1,000 100 100 3.0ademrac Holding 1 aB 556683-3371 Stockholm 10,093 100 100 219.4ademrac Holding 2 aB 556683-3363 Stockholm 10,010 100 100 219.6ademrac aB 556426-2748 Stockholm 1,790,042 100 6.6 3.4Le nouveau Palace Sa 446188 Brussels 3,000 – 100 291.4Convention Hotel International aG 270.3.001.168-3 Basel 14,000 – 100 6.2Hotellus denmark a/S 28970927 Copenhagen 5,000 – 100 1,021.6Hotel Bloom Sa 0476.704.322 Brussels 68,808 – 100 67.3Pandox Belgium Sa 0890.427.732 Brussels 100,000 – 100 471.6Pandox i Malmö aB 556704-3723 Stockholm 1,000 100 100 142.0Ypsilon Hotell aB 556481-4134 Stockholm 1,000 100 100 39.8Pandox Kolmården aB 556706-8316 Stockholm 100,000 1 100 0.1Hotellus Sverige Ett aB 556778-8699 Stockholm 1,000 100 100 0.1Hotellus Sverige Två aB 556778-8707 Stockholm 1,000 100 100 0.1Total Pandox AB 4,270.6
Corp. reg. no. Registered office
Group arlanda Flyghotell KB 916500-8021 StockholmFastighetsbolaget Utkiken KB 916611-7755 StockholmFastighets aB Hotell Kramer 556473-6402 StockholmHotellus nordic aB 556554-6594 StockholmHotellus Järva Krog aB 556351-7365 StockholmHotellus Mölndal aB 556554-6636 StockholmBioeffect aB 556244-5030 StockholmVestervold KB 916631-9534 StockholmHotellus Mellansverige aB 556745-4656 StockholmSkogshöjd Handels & Fastighets aB 556066-0432 StockholmHotellus Belgium nV – BelgiumGrand Hotel Brussels nV – BelgiumTown Hotel Sa – Belgium
Corp. reg. no. Registered office
Holcro nV – BelgiumHotellus Suomi oY – FinlandHotellus nord oY – FinlandEuro Lifim BV – netherlandsHotellus Europe BV – netherlandsPandox Holland BV – netherlandsPandox Holland 2 BV – netherlandsHotellus Luxemburg Sarl – LuxemburgHotellus deutschland GmbH – Germanyatlantis GmbH – GermanyPandox Berlin GmbH – GermanyHotellus Canada Holdings Inc – CanadaHotellus Montreal Holdings Inc – Canada
Financial StatementS
64 | Pandox 2009
NOTE 11 OTHER SHARES AND PARTICIPATIONS
other shares and participations of SEK 610.2 M (544.4) refers to the american hotel property company HoST Hotels and Resorts Inc. The market value of the shares per 2009-12-31 amounted to USd 11.67 per share or SEK 883.4 M for the whole investment.
NOTE 12 LIABILITIES TO CREDIT INSTITUTIONS
Group Parent CompanySEK M 2009 2008 2009 2008
Liabilities that fall due within one year following balance sheet date 738.9 877.8 562.3 877.8Liabilities that fall due between one and four years following balance sheet date 980.5 1,181.4 809.1 815.8Liabilities that fall due five or more years following balance sheet date 5,131.1 4,749.4 2,828.3 2,865.7Total 6,850.5 6,808.6 4,199.7 4,559.3
NOTE 13 ACCRUED ASSETS AND CONTINGENT REvENUE
Group Parent CompanySEK M 2009 2008 2009 2008
Prepaid rents 54.7 61.0 – –accrued interest expenses 16.3 28.8 11.0 20.5Property tax 4.7 4.7 – –Unrealised hedge results 64.1 126.8 61.6 126.8other 126.6 155.0 13.7 12.2Total 266.4 376.3 86.3 159.5
NOTE 14 PLEDGED ASSETS AND CONTINGENT LIABILITIES
Group Parent CompanySEK M 2009 2008 2009 2008
Pledged assets for loans from credit institutions Property mortgages 4,942.1 5,009.0 – –Pledged deposit 22.3 32.8 14.7 14.0Contingent liabilities 2.5 2.3 2,675.3 2,221.6
NOTE 15 AUDIT FEES AND REMUNERATION
Group Parent CompanySEK M 2009 2008 2009 2008
KPMG audit assignments 3.5 2.8 1.0 0.9other assignments 1.4 1.6 – –
SET Revisionsbyrå audit assignments 0.1 0.1 0.1 0.1
Other other assignments 0.2 0.2 – – Total 5.2 4.7 1.1 1.0
Pandox 2009 | 65
NOTE 16 PERSONNEL
Group Parent Company 2009 2008 2009 2008
Average number of employeesMen 474 534 9 8Women 468 555 9 9Total 942 1,089 18 17
of whom employed in Sweden 31 61 18 17of whom employed in Belgium 341 432 – –of whom employed in Germany 189 219 – –of whom employed in Canada 381 377 – –
Board of directors and senior managers and executivesMen 11 11 10 10Women 2 2 2 2Total 13 13 12 12
Wages, salaries and other remuneration, SEK MBoard of Directors and CEOWages, salaries and other remuneration 5.6 5.6 5.6 5.6Social security costs 1.6 1.4 1.6 1.4Pension costs 0.8 0.8 0.8 0.8Total 8.0 7.8 8.0 7.8
Other employeesWages, salaries and other remuneration 355.3 283.1 15.0 16.0Social security costs 69.5 62.8 5.0 3.9Pension costs 11.6 10.0 4.4 5.5Total 436.4 355.9 24.4 25.4
Wages, salaries and other remuneration per country, SEK MSwedenBoard of directors and CEo 5.6 7.8 5.6 7.8other employees 19.6 37.7 15.0 25.4
Belgium other employees 132.4 165.8 – –Germany other employees 44.9 52.2 – –Canada other employees 158.4 97.5 – –Total 360.9 363.7 20.6 33.2
Personnel employed in Belgium relate to the operator activities of the Crowne Plaza Brussels City Centre, the Holiday Inn Brussels airport, the Crowne Plaza antwerp, the Hilton Brussels City, and the Hotel BLooM!. Personnel employed in Germany to Hotel Berlin, Berlin and in Canada to InterContinental Montreal and Hyatt Regency Montreal.
The remuneration of the Members of the Board is established by the annual General Meeting of Shareholders. The remuneration of the Chief Executive officer (CEo) is composed of a basic salary, a bonus, a company car, and a retirement pension scheme. The age of retirement of the CEo is 65 years, with the possibility of retiring at the age of 60. In the case of termination, the CEo shall be given a period of notice of 24 months by the Company, with a deduction clause. Upon resignation by the CEo, a period of notice of 6 months shall apply.
Sickness absence in the Parent Company amounted to 0.5 percent (0.9).
Financial StatementS
66 | Pandox 2009
Proposed disposition of earnings
The following profits are at the disposition of the forthcoming annual General Meeting of Shareholders:
Balance brought forward SEK 129,148,129
Profit for the year SEK 399,973,745
SEK 529,121,874
The Board of directors and Chief Executive officer propose that the accumulated profits be appropriated as follows:
dividend to the shareholders,
SEK 10.50 per share SEK 261,450,000
amount to be carried forward SEK 267,671,874
SEK 529,121,874
Stockholm, 9 February 2010
Christian Ringnes
Chairman
Leiv Askvig Christian Sundt Olaf Gauslå
Bengt Kjell Helene Sundt Mats Wäppling
Anders Nissen
Chief Executive Officer
our audit report pertaining to this annual report and consolidated
financial statements was submitted on 10 February 2010.
Per Gustafsson
Authorised Public Accountant
Willard Möller
Authorised Public Accountant
Pandox 2009 | 67
auditor’s Report
To the annual meeting of the shareholders of Pandox AB
Corporate identity number 556030-7885
We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the board of
directors and the managing director of Pandox aB for the year 2009. These accounts and the administration of the company and the
application of the annual accounts act when preparing the annual accounts and the consolidated accounts are the responsibility of
the board of directors and the managing director. our responsibility is to express an opinion on the annual accounts, the consolidated
accounts and the administration based on our audit.
We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we
plan and perform the audit to obtain high but not absolute assurance that the annual accounts and the consolidated accounts are
free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
accounts. an audit also includes assessing the accounting principles used and their application by the board of directors and the
managing director and significant estimates made by the board of directors and the managing director when preparing the annual
accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the
consolidated accounts. as a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken
and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the
managing director. We also examined whether any board member or the managing director has, in any other way, acted in contra-
vention of the Companies act, the annual accounts act or the articles of association. We believe that our audit provides a reasonable
basis for our opinion set out below.
The annual accounts and the consolidated accounts have been prepared in accordance with the annual accounts act and give a
true and fair view of the company’s and the group’s financial position and results of operations in accordance with generally accepted
accounting princi ples in Sweden. The statutory administration report is consistent with the other parts of the annual accounts and the
consolidated accounts.
We recommend to the annual meeting of shareholders that the income statements and balance sheets of the parent company and
the group be adopted, that the profit of the parent company be dealt with in accordance with the proposal in the administration report
and that the members of the board of directors and the managing director be discharged from liability for the financial year.
Stockholm, 10 February 2010
Per Gustafsson Willard Möller
Authorised Public Accountant Authorised Public Accountant
68 | Pandox 2009
Work of the Board of Directors
ControlIndustrial expertise and experience create confidence and an ability to act
Board of Directors and auditors
CHRISTIAN RINGNES, b. 1954
ChairmanCEO of Eiendomsspar ASMember of the Board of Pandox since 2004.
Other appointments: Chairman of NSV-Invest AS, Sundt AS, Dermanor AS and Mini Bottle Gallery AS. Board member of Schibsted ASA, Thor Corporation AS and Oslo City’s Town Architecture Council (Oslo Bys Råd for Byarkitektur).
LEIV ASKVIG, b. 1957
CEO of Sundt ASMember of the Board of Pandox since 2004.
Other appointments:Chairman of Oslo Børs VPS Holding ASA, Oslo Børs ASA and Alfarveg AS. Board member of Eiendomsspar AS, Verdipairsentralen VPS ASA, Skips AS Tudor and Agder OPS Vegselskap AS.
OLAF GAUSLÅ, b. 1961
CFO of Eiendomsspar ASMember of the Board of Pandox since 2004.
BENGT KJELL, b. 1954
CEO of AB Handel och Industri Member of the Board of Pandox since 1996.
Other appointments:Chairman of Indutrade AB and Hemfosa Fastigheter AB. Board member of Skanska AB, Höganäs AB, Munters AB, Helsingborgs Dagblad AB and Skånska Byggvaror AB.
AUDITORSThe task of the auditors is to examine the Company’s accounts, administration and financial information. The audit leads to an audit report where the auditors give an opinion as to whether the annual accounts and financial statements have been prepared in accordance with the Swedish Annual Accounts Act and generally accepted accounting principles.
PER GUSTAFSSON, b. 1959Authorised Public AccountantKPMG
WILLARD MÖLLER, b. 1943Authorised Public AccountantSET Revisionsbyrå AB
Pandox 2009 | 69
Expertise and experience of the following areas
are important in an international hotel property
company such as Pandox:
Hotel operations and the hotel market•
Financing•
Property and the real estate sector•
Business development•
Brand name strategies•
development of international companies.•
The Board of directors of Pandox, which is com-
posed of seven members, has broad experience
and knowledge of these areas.
Work procedures
The Board of directors has adopted procedures
for its own work along with directives for the Chief
Executive officer, and has provided management
with instructions with regard to reporting. Every
year, Pandox’ Board of directors establishes and
documents the objectives and strategy of the
Company. The Board has furthermore adopted a
finance policy, an approval policy and guidelines
for decision-making, as well as a particular strat-
egy for acquisitions.
The Board of directors of Pandox holds four
ordinary meetings each year. The Board meetings
follow an established annual agenda. The meet-
ings review and discuss the external and internal
reporting of operating results and the Company’s
financial position, as well as various business mat-
ters. Marketing, strategy and budget issues are
also studied and reviewed each year. Underlying
material is sent to the members approximately one
week in advance. The Company’s auditors attend
at least one meeting each year to present a report
of their audit and their review of the Company’s
internal control systems.
In addition to their ongoing audit, the Compa-
ny’s auditors were also commissioned by the
Board to carry out a special review of major lease
agreements during the year.
CHRISTIAN SUNDT, b. 1977
Board member of Sundt ASMember of the Board of Pandox since 2008.
Other appointments:Owner and chairman of CGS Holding AS. Board member of Sundt Air Holding AS, Sundt Sepa AS, Sundt Helene AS, Sundt Air AS, Sundt Eiendom II AS and Sundt Eiendom I AS.
HELENE SUNDT, b. 1979
Styrelseledamot i Sundt ASMember of the Board of Pandox since 2008.
Other appointments:Owner and chairperson of Sundt Helene AS. Chairperson of Dronningen Eiendom AS, Lanternen Eiendom AS. Board member of Sundt Sepa AS and Sundt Christian Gruner AS.
MATS WÄPPLING, b. 1956
President and CEO of SWECO ABMember of the Board of Pandox since 2003.
Other appointments:Board member of SWECO AB.
Senior executives
70 | Pandox 2009
Management team
CoachesCreative, passionate and bold
– Pandox’ leaders possess the right qualities
ANDERS NISSEN, b. 1957
CEoEmployed since 1995
LIIA NÕU, b. 1965
Vice President and CFoEmployed since 2007
LARS HÄGGSTRÖM, b. 1954
Vice President asset Management and Business area ManagerEmployed since 2000
MIKAEL PLANELL, b. 1960
Business area Manager Employed since 2005
ALDERT SCHAAPHOK, b. 1959
Business area Manager and director of operationsEmployed since 2004
ERIK HVESSER, b. 1969
Business area Manager Employed since 2006
Hotel managers in operating companies
Pandox 2009 | 71
MAGNUS ALNEBECK, b. 1964
Employed since 2005 Background: degree from SHM-Les Roches, Switzer-land. Has worked for Intercontinental, Cunard, Radisson/SaS and Forte Hotels in Switzerland and London. Hotel manager for Ladera Resort, St. Lucia 1996–2004. Pelican Bay at Lucaya, Grand Bahama IslandNumber of rooms: 184Operator: Sundt GB Management/Pandox
RAYMOND SOUMAKO, b. 1961
Employed since 2009Background: degree from the University of Montreal in administration plus a Bachelor degree in Industrial Work Relations. More than 30 years’ experience within the hotel industry. over 20 years with IHG, and 10 with Star-wood. also experience in the repositioning of hotels. Member of the Hotel association of Greater Montreal since 1995 and has been on the IaHI board for 5 years.Hyatt Regency, Montreal, Canada Number of rooms: 605 Operator: Pandox/Hyatt
CORNELIA KAUSCH, b. 1962
Employed since 2006Background: degree from Lausanne Hotel Management School. Considerable experience of hotel operations and personnel management. Has held several leading posi-tions within accor Germany, Louvre Hotels Paris, Inter-Continental Hotels Germany and Corinthia Hotels Inter-national. Hotel Berlin, Berlin, Germany Number of rooms: 701 Operator: Pandox
BERNARD CHÊNEVERT, b. 1969
Employed since 2008Background: degree from Lausanne Hotel Management School. More than 15 years’ experience of the hotel industry, including the repositioning of hotels. Led W Montreal to Hotel of the Year Worldwide in 2007.InterContinental, Montreal, CanadaNumber of rooms: 357Operator: Pandox/InterContinental Hotels
ERIC VAN DALSUM, b. 1962
Employed since 2004 Background: degree from Lausanne Hotel Management School. Has held several leading positions at major hotels across the world within Hilton, Shangri-La Hotels & Resorts and Radisson SaS. Under Eric’s leadership, the Crowne Plaza in Brussels was awarded Hotel of the Year IHG Hotels Group EMEa in 2007.Crowne Plaza Brussels City Centre, BelgiumNumber of rooms: 354Operator: Pandox/Crowne Plaza
HANS WILS, b. 1959
Employed since 2009 Background: Considerable hotel experience within Mar-riott, Golden Tulip and accor. Has worked for Sofitel since 2001 and was most recently at the Lafayette Square in Washington dC, USa.Crowne Plaza Antwerp, BelgiumNumber of rooms: 264Operator: Pandox/Crowne Plaza
CHRISTEL CABANIER, b. 1970
Employed since 2008Background: Considerable experience from several hotels in antwerp. Started as receptionist and became the youngest hotel manager in Belgium at just 25 years old. Christel is also a well-known TV profile in Belgium.Hotel BLOOM! Brussels, Belgium Number of rooms: 305 Operator: Pandox
CHARLES BOELEN, b. 1968
Employed since 2007 Background: Came to the InterContinental Group and Crowne Plaza Brussels “Le Palace” in 2001, further to 10 years within Hilton International in Belgium, the nether-lands and France.Holiday Inn Brussels Airport, BelgiumNumber of rooms: 310Operator: Pandox/Holiday Inn
KATHARINA SCHLAIPFER, b. 1974
Employed since 2008Background: Has worked for several Hilton hotels, including in Germany, France and Belgium, and was most recently at the Hilton Molino Stucky Venice in Italy where she worked with business development.Hilton Brussels City, BelgiumNumber of rooms: 283Operator: Pandox/Hilton
72 | Pandox 2009
1. Josefin Bergqvist, acquisition and Investment analyst, b. 1974. Josefin holds a master’s degree in hotel management from Griffith University in australia, as well as a master’s degree in property finance from the Royal Institute of Technology (KTH) in Stockholm. Josefin has previously worked for CBRE hotels in London as analyst and operationally for Marriott International. She has been with Pandox since august 2006 and is member of some of the Company’s international operative Boards.
2. Nils Lindberg, Senior advisor, b. 1947. nils has a long career at Pandox and was previously responsible for eco-nomic and financial issues. He decided two years ago to go over to an advisory role within the Group. His experi-ence includes working as controller and treasurer of dow Chemical nordic Region, as well as bank manager with nordbanken and director within Securum. nils joined Pandox in 1995.
3. Ann-Sophie Forsmark, Property accountant, b. 1971. ann-Sophie is a graduate economist from the IHM Business School. She joined Pandox in 1999 after having previously been employed by Riddarstaden aB, Marco Polo and Fritidsresor. ann-Sophie works within Pandox’ finance and accounting department.
4. Jonas Törner, Controller, b. 1971. Jonas is a graduate in business administration and economics from Stock-holm University. He has previously worked with Corpo-rate Finance at nordea Securities and as group controller for the industrial company deLaval. Jonas was recruited by Pandox as controller in 2005. during his time with Pandox, Jonas has worked with improving quality in Pan-dox’ reporting flow, the monitoring of Pandox’ operating activities, as well as the development of Pandox’ valua-tion model for hotel properties.
5. Anette Paulsson, acquisition and Investment analyst, b. 1975. anette is a graduate in business admin-istration and economics from the European Business School in London. She has also studied property valua-tion at the Royal Institute of Technology (KTH) in Stock-holm. Upon completion of her studies, anette worked with Corporate Finance at deloitte & Touche. She was recruited by Pandox in 2003 as analyst, and works with acquisitions, market analysis, market communication and decision-making support for the business area managers and upon acquisitions.
6. Anders Nissen, Chief Executive officer, b. 1957. anders nissen has a strong background from the hotel industry and property sector, with more than 25 years’ experience. He started his career as hotel manager and advanced to different leading positions within the group management team of the hotel operator Reso. In the beginning of 1993, anders became CEo of Securum Hotel & Turism aB, where he led the process of structur-ing Securum’s hotel activities. He was a key player behind the initiative to form Pandox, and has been CEo since the Company was formed in 1995.
7. Annelie Sundström Aguilar, assistant to the CEo, b. 1974. annelie joined Pandox in the autumn of 2008. Her position implies providing support to the CEo, the Board of directors and senior executives. annelie’s tasks also include external communication, production of the annual report and Upgrade, as well as the coordination of the Com-pany’s events, along with Pandox’ annual Hotel Market day. She has considerable experience of service and administra-tion, and worked most recently at Morgan Stanley.
8. Mikael Planell, Business area Manager, b. 1960. Solid background within the hotel industry with more than 20 years’ experience, including as hotel manager and opera-tions manager in London, Benelux and Stockholm. Mikael’s areas of responsibility cover several of Pandox’ largest hotels such as Hotel Berlin, Berlin, which is Ger-many’s fifth largest hotel with 701 rooms. Before joining Pandox in 2005, he was manager of operating and busi-ness development for accor Hotels’ nordic operations.
9. Michaela Borg, acquisition and Investment analyst, b. 1968. Michaela is a graduate in business administra-tion within mathematics and statistics from Karlstad Uni-versity, and also holds two MBas from Stockholm Univer-sity within organisation, leadership and entrepreneurship. She has previously worked at Coor Service Management. Michaela joined Pandox in September 2008 and works with market analysis, market communication, decision-making support for the CEo and business area manag-ers, as well as with acquisitions.
10. Josefin Nilsson, Receptionist, b. 1983. Josefin is responsible for daily office procedures and ensures that everything flows properly. during the last year, she has supervised the redecoration of Pandox’ offices. She has been with Pandox since 2006 and worked previously within the travel sector.
11. Liia Nõu, Vice President and CFo, b. 1965. Liia was recruited in 2007 and is responsible for economic and financial issues within the Group. Her principal areas of work are financial control and reporting, the Group’s over-all financing, and acquisitions. Liia is a graduate in busi-ness administration and economics from the Stockholm School of Economics (HHS), and was most recently nor-dic CFo of GE Money Bank aB. She has also been CFo of Song networks, Tele2, Icon Medialab, further to work-ing for Kuwait Petroleum and american Express.
12. Ulrika Norrbrink, Property accountant, b. 1966. Ulrika came to Pandox in 2006 after having previously worked for Expert Stormarknad aB, Proact IT Sweden aB and Lars Gullstedts Fastigheter aB. Ulrika currently works within Pandox’ finance and accounting depart-ment.
13. Erik Hvesser, Business area Manager, b. 1969. Erik is an economics graduate of the School of Economics & Business administration in oslo. He came to Pandox in 2006 from the position as asset manager with norgani aSa. Erik has 15 years’ operating experience within the hotel industry as hotel manager, business area manager, business controller, as well as various senior positions within Hilton/Scandic’s Swedish management team. He is currently responsible for the major part of Pandox’ Swedish hotel property portfolio.
14. Aldert Schaaphok, Business area Manager and director of operations, based in Belgium, b. 1959. aldert has solid experience of operations and concept develop-ment, and has also been hotel manager of full-service hotels in the netherlands, Belgium and Germany. Before coming to Pandox, he was Regional director operations and Vice President operations of dorint Hotels & Resorts aG. aldert was recruited by Pandox in 2004 on a consul-tancy basis, and he is responsible for the Company’s operational activities in Belgium and Montreal. He is also Board member of Hotel Berlin, Berlin.
15. Louise Ceder, Property Support, b. 1970. Louise works with property support, and during the last year has produced a new website for reporting and follow-up. Louise reports to our business area managers and has worked at Pandox since 2000.
Management team
Assetsa small coordinated team with mutual driving forces
1. 2. 3. 4.
5. 6. 7. 8.
9. 10. 11. 12.
13. 14. 15.. 16.
17. 18. 19.
Pandox 2009 | 73
16. Stefan Kornhammar, Property Manager, b. 1960. Stefan is a graduate engineer and has 25 years’ experi-ence of the consultancy sector, of which 15 years within this own firm. He has worked as consultant for Securum Hotell & Turism and Pandox since 1993. Stefan has been project manager for several major rebuilding projects for Radisson SaS, novatel and Scandic, as well as the recent conversion of Elite Park avenue in Gothenburg. Stefan was recruited as property manager of Pandox in the autumn of 2008, and he is responsible for the Com-pany’s properties in Sweden and denmark.
17. Lars Häggström, Vice President asset Management and Business area Manager, b. 1954. Lars is a graduate marine engineer and has considerable experience of the hotel industry, with an emphasis on property-related questions. He was technical manager of Scandic Hotels from 1993 to 1998, and VP Building & Technology of Hotellus International from 1998 to 2000. When Pandox acquired the company in 2000, Lars became Business area Manager at Pandox. Lars now holds the position of VP with responsibility for all of the Company’s property issues and development projects, as well as a number of the Company’s international hotels.
18. Staffan Olsson, director of Health, Sports and Coaching at Pandox, b. 1964. Staffan works on a half-time basis for Pandox, primarily with marketing and event questions. His remaining time is spent as Manager of the Swedish national Handball Team. Staffan is a legend in the world of handball and has played 357 international matches and scored 852 goals. He has won 2 World Championship gold medals, 4 European Championship gold medals, 3 olympic silver medals, 1 World Champion-ship silver medal and 2 World Championship bronze medals, as well as a number of international champion-ship medals as a professional player in Germany. Staffan has represented Skånela IF, Huttenberg, niederwurz-bach, HK Cliff, THW Kiel and Hammarby during his career. Further details are available on page 27.
19. Enzo, Corporate dog
CEO summary of the year 2009
Results Pandox delivers – even in tough times
2009 was yet another successful year for Pandox. despite global anxiety, cash flow increased whereas revenues and profits declined. The driving force behind the good developments is a combination of the Company’s business model, the high quality of the property portfolio and lower interest costs.
The past year was dramatic for the hotel industry, demand, measured in RevPaR, decreased by a huge 20 percent in the United States and Europe. The collapse was ruthless – all markets and seg-ments were dragged down. and the fall came per-haps faster than ever before in modern times.
A stimulated surrounding worldEven if the collapse as such came as a surprise, there were a number of indicators that a downturn was dangerously at hand. Volumes were on the way down in the summer of 2008. Most sectors and economies lived in a stimulated surrounding world where demand was record high. The stimu-lation consisted of inexpensive capital, which cre-
ated high liquidity – and which is still the case. The high level of economic activity in combination with relatively little new capacity created a fantastic business climate for the hotel industry. There were more guests than ever and they accepted that prices be raised several times a year. In this favourable world at large, the hotel industry also received capital injections when new financial players arrived, with limited – indeed in many cases totally without – industrial competence. They stoked the number of transactions within the sector to a level that we had never previously experienced. The good liquidity increased the value of assets and the interest in building new hotels was record high. The spiral just continued upwards, but in the end came to a halt.
When the financial crisis then spread to the hotel market and major parts of the artificial respi-ration disappeared, the downturn was even more dramatic. The market collapsed in new York’s high-price and luxury segments the day after the bankruptcy of Lehman Brothers. The downturn then spread at lightening speed to other cities. a global hotel crisis had become reality.
The market was subsequently in free fall in the
beginning of 2009. during the year’s first nine
months, revenues decreased by more than 30
percent. The fall was even greater in the city’s
business and luxury segments. Trends were the
same for markets such as Boston, atlanta and
Chicago. The euro area – which normally follows
developments with a lag of about two quarters –
was now shadowing the american market with a
minimal delay. In countries with a large proportion
of domestic demand, the downturn came gradu-
ally during the year.However, trends changed in the autumn. The
rate of downturn in volumes started to abate for markets situated in the beginning of the economic cycle. But prices continued to decline, which put further pressure on operating results. However, over all, the year closed slightly better than the dark predictions that were painted at the begin-ning of the year.
Continued warning flagan analysis shows that the course of events was increasing significantly. The downturn phase was
a fighting spirit was created with the motto: “We never give up”
74 | Pandox 2009
faster and deeper than normal. In the same way, the upturn came more rapidly and stronger than after previous downturns. Current developments indicate a rapid recovery, which is supported by several macro-economists’ opinions regarding 2010.
a crucial question is whether the recession is already over, and whether or not we will see a strong recovery. We at Pandox believe that it is too early to say that the danger is over this time round. Experience from previous downturns, the propor-tion of new hotel capacity expected in the market, and impending rises in interest rates together lead us to not being too optimistic. We see two proba-ble developments ahead of us. Either we will experience developments for the economy and our sector in the form of a W with a short and weak upturn followed by a further downturn – or alternatively we will see a long and slow recovery. However, it would seem that it will take many years before RevPaR levels return to the heights seen in 2008.
Three problems that require a solutionIn addition to weak economic trends, there are a
number of structural problems that need to be handled within the sector.
1. The banks one problem concerns the banks, which risk becoming major owners of hotels. This applies in particular to banks and other financial players in the United Kingdom. But large banks in the rest of Europe have also been active and taken part in the inflated transaction market for hotels and hotel properties. It is now time to take care of the prob-lems that the banks have considerably contrib-uted to through far too generous financing com-bined with a lack of knowledge of how the sector functions. The banks have two strategies to choose between – one passive and one active. Experience unfortunately says that they will choose the former. But we hope that they choose a more active strategy where they can obtain inspiration from the Swedish model from the beginning of the 1990s. at that time, the Swedish government formed a special company, Securum, to take care of distressed credits from the banking system. one prerequisite for success is to allow a competent
board of directors and management, who have not been involved in granting the credit, to handle the situation. By proceeding actively and quickly with the assets, significant values can be saved.
Indeed, Pandox has its roots in such active management of distressed credits from the major finance and property crisis in Sweden in the beginning of the 1990s.
Irrespective of the model the banks choose, they play a key role. In the Baltic States, the Scan-dinavian banks started early to build up specially adapted organisations to be able to manage and transform bad credits to assets. apparently, finance institutions in Europe are handling similar questions. a qualified guess is that we will see greater activity in 2010 to ensure that as much value as possible be saved. Pandox is interested in taking part, and our experience from this type of situation is globally known within the sector.
2. Hotel brokersHotel brokers represent the next problem area. a large number of new hotels and business transac-tions have arisen based on calculations and valua-
Pandox 2009 | 75
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to: J
essi
ca G
ow
tions based on eternal growth, and produced by these so-called advisers. now that they have cashed in their amply sufficient fees, they offer their services as managers of these stranded hotel projects. They should be disqualified from provid-ing this kind of service. Perhaps it is time to intro-duce ethical rules within the hotel industry?
3. Operator-friendly agreementsThe last major problem area is the one-sided operator-friendly management agreements cre-ated by the large hotel companies in conjunction with their massive sales of properties. This form of agreement is directly counter-productive through offering low incentives for management compa-nies who have responsibility for the assets. The structure does not reward knowledge of how prof-itability be developed, which primarily affects own-ers and banks. But the problem also spreads to the guests through a “fat cat” attitude being imple-mented in daily operations.
Coming early with the right decisionPandox’ activities in 2009 were primarily charac-terised by internal work. already in the spring of 2008, we in the management team identified key issues and created action plans with the objective of being prepared for a difficult economic down-turn. The plans principally embraced four areas: To perform an overview of the Company’s infor-mation systems to enable fast and correct infor-mation regarding operational developments. To raise requirements regarding orderliness in all parts of the Company so as to reduce the risk of negative surprises. The important question of mapping all investment and maintenance ques-tions within the Pandox sphere, which annually amounts to approximately SEK 500 million, directly or indirectly. With this knowledge, particu-lar emphasis was placed on product development and cash-flow generating measures, while tech-nology-related investments were given lower pri-ority. a considerable amount of work was carried out, starting already in 2007, to increase the pro-portion of variable interest-bearing liabilities. This enabled the Company to benefit from falling inter-est rates and to thereby compensate the simulta-neous decline in revenues. other significant work
was carried out to prepare the operational activi-ties for a poorer market and lower revenues. The action plans focused on strengthening products to maintain existing customers and to increase productivity through lower and more flexible costs.
Prior to a major change process, it is impor-tant that the entire organisation has the same driv-ing forces, and that the leadership be situation-adapted. It is necessary to be able to lead with both demands and support simultaneously. With the spirit on which Pandox is based, this was rela-tively easy. The model with delegated leadership and considerable personal scope and responsibil-ity was maintained. all plans were produced in coordination with the local management teams. Follow-up often took place in informal meetings where we focused more on inspiration than con-trol. Solutions to problems were adapted to the local conditions so that the management in each location could develop competition advantages based on their own competence. Substantial individual responsibility was given to find own solutions. a fighting spirit was created with the motto: “We never give up”.
Well-positioned for yet another tough yearThe hotel property Vildmarkshotellet was acquired during the year, thereby leading to Pandox becoming part of the Kolmården destination, which has seen impressive developments in recent years. The vision is that the hotel shall become one of Sweden’s most creative meeting places for both conferences and tourism. With regard to important investments in existing hotels, several projects were completed during the year. Hotel Berlin, Berlin, which was acquired in 2006, is now repositioned further to an extensive devel-opment program and new inspiring management. The InterContinental Montreal has been given a new image and, with its design in boutique style and product offer, has every chance of achieving the goal as RevPaR leader in the city. Holiday Inn Brussels airport has been upgraded and is now the best medium-priced product in the area. Radisson BLU Hotel in Basel has been refurbished in close cooperation with the operator, and has quickly increased its market share. Park and Skogshöjd in Södertälje have been developed
since their acquisition in 2006 with regard to both the product and the operating systems. The results are good and the operator has shown con-siderable interest, which has led to both hotels being leased with long contracts to Choice and Scandic respectively.
The prospects for 2010 are difficult to judge. Pandox’ point of departure is that the markets in the forefront of the economic cycle, particularly new York, will achieve stable RevPaR during the summer, and the euro zone is expected to follow with a certain time-lag. Prices will be under pres-sure, which could create greater profitability problems. The Scandinavia markets have in general a tough hotel year ahead. all in all, results will deteriorate, but trends will nonetheless improve, which should lead to better liquidity in the market. Pandox’ own forecast is that cash flows will remain stable in 2010.
Stockholm, February 2010
anders nissen CEO
76 | Pandox 2009
In fact it is simple, if you work together with
the best people, you will often win.”
PSIf I may say so myself, the results were very satisfactory. In a difficult
surrounding world, Pandox’ hotel property portfolio has performed
significantly better than the market, and has been able to generate
cash flows that even exceed last year’s record levels. There are many
heroes involved in this process. I would like to take this opportunity
to send roses out to those in the organisation. The first goes to the
Crowne Plaza Brussels City Centre, which year after year continues
to strengthen its market position irrespective of the business climate.
The next rose goes to Hotel Berlin, Berlin. The hotel is now reposi-
tioned and an impressive amount of work has been carried out to
improve the revenue structure through more and larger meetings, as
well as a well-organised process to adapt costs. The hotel is now
entering the next phase where the brand – Berlin’s most creative
meeting place – will be developed to the next level. Another rose
goes to Hotel BLOOM! for its dynamic work with the organisation
during the year. Of the Swedish hotels, Hilton Stockholm Slussen
has impressed with a stringent revenue-management process and
Quality Hotel Park in Södertälje, Radisson BLU in Malmö, Elite Stora
Hotellet in Jönköping and Elite Park Avenue in Gothenburg have
improved their market positions in difficult times. The saying still
stands: a good hotel with a strong location, run by a skilful team, will
always have a market – even in bad times.
In this context, Pandox’ shareholders and board of directors
should not be forgotten. Despite the greater risks due to the poorer
market – and we have also had several major ongoing investments –
they kept to their original plans. This created a peaceful climate for
the management team, which then spread through the entire organi-
sation. I am also extremely proud to send a large bunch to all my co-
workers at Pandox. In fact it is simple, if you work together with the
best people, you will often win.
a large bunch of roses
Pandox 2009 | 77
Pandox aB · P o Box 5364 · SE-102 49 Stockholm, Sweden · Tel +46 (0)8 506 205 50 · Fax +46 (0)8 506 205 70 · www.pandox.com
Production: P
andox in cooperation with H
allvarsson & H
alvarsson. Photo: U
lf Blom
berg, Getty Im
ages, Johnér Bildbyrå. P
rinting: Jernström o
ffset, Stockholm
, 2010.