Pandox (PNDX) Hotel Market Day 2020 summary

Demand and recovery

• Domestic travel and individual leisure are leading current demand; shorter, safer trips and sustainability may sustain the shift, with more frequent domestic trips potentially lifting demand.

• STR survey: 75% were as likely or more likely to travel domestically over the next two years, while 55% were less likely to travel internationally.

• Hotels that stayed open through lockdowns outperformed closed competitors by ~20 percentage points in occupancy; smaller hotels also performed better.

Business model and strategic shifts

• Four industry models were outlined: leases, management contracts, franchises and independent operations; all four are used across the portfolio.

• Management contracts may lose leverage as international travel declines and major brands favor asset-light strategies; local third-party managers, multi-brand operators and premium independents may gain.

• Brands may shift toward modernized franchises; leases may move from fixed rent to revenue-based terms, supported by minimum guarantees and greater transparency.

• Owners, who provide 80%-85% of hotel investment, should lead business-model changes; the crisis may accelerate a better balance between risk and reward.

• Greater domestic demand may strengthen local brands; operating across the full value chain was presented as a way to capture opportunities and support further growth.

Financial position and execution

• 85% of business comes from turnover-based rents with minimum guarantees, sharing upside and risk while supporting cash-flow neutrality or positive cash flow in the worst conditions.

• Close to $5.5bn in liquid funds and credit facilities, backed by 11 banks, provides capacity to consider opportunities and take over tenant operations to protect assets.

• The response framework is organized around respond, restart and reinvent; crisis response has been the focus through most of 2020, with readiness to assume operations where needed.

• Reduced speculative investment and fewer prospective new hotels led to a more optimistic industry-platform view than in January; the crisis was also seen as an opportunity to grow further.