Scandic Hotels Group AB

STO:SHOT

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, welcome to Scandic Hotel Group Q1 Report 2021. [Operator Instructions]. Please note that this call is being recorded. Today, I'm pleased to present Jens Mathiesen, President and CEO; and Jan Johansson, CFO. I'll now hand the call over to Jens Mathiesen. Please begin.

[Jens Mathiesen, President & CEO]

Thank you very much, operator, and good morning, everyone, and thank you for joining this presentation of Scandic's first quarter result. I'm here together with our CFO, Jan Johansson; and our Head of Investor Relations, Henrik Vikstrom. Please turn to Page 2, where I will start going through a brief summary. As you all know, this was another quarter where the pandemic had a huge impact on hotel demand. Scandic's average occupancy rate was 7.5%. We expect markets to recover soon, driven by domestic leisure when restrictions are eased as more people get vaccinated. As we have communicated before, we expect occupancy to exceed last year's level during this summer, and we expect to reach positive cash flow in the third quarter. We are already today seeing some small positive signs in bookings and occupancy, but our customers act with very, very short lead time, and the bookings are closely connected to announcement of easing of the restrictions. Scandic is also well positioned for a recovery. We have developed a wholesale offering for broad target groups, and we have put a lot of effort into adapting our customer offering so that we can fully capture the expected increase in leisure demand during the summer and onwards. Due to the limited visibility near term, we plan to publish an update on market development on June 15 which is the day before we go silent of our second quarter report. We want to be very transparent to you, and at that time, we should have a better visibility on what is expected for the summer months. Last month, Scandic did a placing of a convertible bond that improves our liquidity by SEK 1.6 billion. And we have also agreed with our banks on extension of our credit facilities. And with these measures, we ensure that we cover our liquidity needs until the market becomes more normal again. You will, of course, hear much more about this when Jan is taking us through the financial part in a few minutes. Please turn to Page 3. Market occupancy has been low in all markets in the first quarter. In Sweden, we saw a slight positive trend from very low levels in February and March, with an occupancy rate of around 25%, while Norway and Finland have been around 20%. In Denmark, the market occupancy rate has been as low as 10%. The difference between the markets is, to a large extent, explained by different regulations related to the pandemic. Denmark has had the most extensive restrictions, and most of our Danish hotels were closed in the beginning of the year. If you turn to Page 4, that shows the market RevPAR trends. There was a smaller year-on-year decline towards the end of the first quarter, especially in Sweden and Norway, due to easier comparison as the market fell dramatically in March last year. Obviously, this graph will look completely different in the coming months, with very positive year-on-year changes as we will compare with very weak months from last year.Please turn to Page 5, where you can see an update on Scandic's development so far in April. We have seen some positive signs lately from low levels. The graph to the left shows Scandic's 7 days rolling occupancy. The level in the beginning of April were pretty much in line with the average seen in the first quarter, but there has been a slight pickup lately, and it has been 22% in the last week. The graph to the right shows development per country. The biggest improvement has been in Denmark and Finland in April from low levels. These markets have the most extensive restrictions. There has been some changes lately in both countries where restaurants have been allowed to open and governments have announced plans to gradually ease the meeting restrictions. This has had an immediate impact on both occupancy and booking activity in these countries. Development has been more or less flat in Sweden, where the current restrictions were recently extended until May 17th, and there's no public plan for gradual easing of restrictions in Sweden right now. But we do expect to see changes from mid-May and onward. Please turn to Page 6. In the next few months, we expect increased occupancy, mainly driven by domestic leisure travel as vacations gained momentum and restriction begin to ease. We believe that the pace of the recovery will gradually increase, but the exact timing is dependent on external factors. Crucial to this scenario is, of course, that the infection and death rate decrease as more people get vaccinated, which you also see in the markets right now. We do expect gradual market normalization from the summer and onward, when we should see more sports, cultural events, meetings and increased business travel as well. Initially, demand will be driven by the intra-Nordic travel and the domestic travel, which normally accounts for just over 80% of Scandic's total guest nights. With this development, we expect to generate positive cash flow in the third quarter. Even though leisure will drive the recovery in the summer, we expect increased business activity from the autumn and onward. We are seeing a pent-up demand for meetings among our corporate customers to reestablish relationships within their own organization and with their customers after a year where most people have been working from home. It is obvious that there will be changes in business travel and meeting behavior in the future. We do, however, believe that a relatively large share of domestic business travel could return to pre-pandemic levels quite soon. This applies not least for commendations related to large projects such as infrastructure and construction, which is a relatively important business for Scandic.One of the other examples is our leading position as a supplier for accommodations for sports groups. That also, we think, will be pretty unaffected once the pandemic is over. Please turn to Page 7. This is a look at Scandic's occupancy development from 2019 and onward. We expect average occupancy of around 20% in April, and it has been around 22% in the past week. Last year, we went from extremely low levels, below 10% in April, to just above 40% in July. We are quite convinced that we will see a similar pattern this year. This summer, however, occupancy is expected to be higher than last year, driven by better demand in the big cities. Prior to the pandemic, we have had an occupancy rate of between 70% and 80% during the summer months. If you turn to the next page, 8, the main reason for us believing and expecting a better summer this year than the last year is, of course, the big cities. The Nordic capital cities together account for more than 1/3 of our hotel portfolio. And the average market occupancy in the Nordic capitals were only around 27% in July and August last year, only 1/3 of what is actually normal in -- at that time of the year. As societies are gradually opened up, demand will increase and exceed these very historical low levels from last summer.Please also turn now to Page 9, where you can see our pipeline. Our total pipeline amounted to around 4,800 rooms in the end of the first quarter, which corresponds to 9% of the existing portfolio. We have also in April opened Scandic Grand Central in Helsinki, and we will open 1 hotel in Copenhagen and 1 at Landvetter Airport in Gothenburg here in May. We have continued to do slight adjustments of opening dates in order to adapt to the current market situation. And the -- as an example, the opening of Scandic Spectrum in Central Copenhagen has been moved from the fourth quarter this year to March '22. There might be some additional adjustments to the opening dates for the coming years, and also when it comes to configuration of the hotels, where construction has not yet started. This is 2 areas we are still working on quite a lot.And I think with that, I hand it over to you, Jan, for taking us through the financial part of this presentation.

[Jan Johansson, Chief Financial Officer]

Thank you, Jens. I think we go directly to Page 11. Here, we have -- yes, Q1, an extremely difficult quarter, as you have heard from Jens, complicated to operate the business also here. The spin back and forth with restrictions, and it's also some that there has been quite big differences. It's internally between in-occupancy levels and so on and also intra-week variations. However, here looking at Q1, you can see here that we posted a top line of SEK 930 million. I know that this is below expectations. I think primarily 2 reasons for that one is, of course, that the occupancy came in slightly lower than our initial guidance, but also so that the F&B part has been very low during the quarter, and that is due to meetings. I think we're more or less half the meeting business here sequentially if we compare with Q4 last year. So that is one explanation for that. As I mentioned, there are also a big intra-week variations also, Tuesdays and Wednesdays, which was reasonable during the quarter where we have struggled a lot during weekends and so on. And that also, of course, makes it a little bit more complicated to operate the business. I think in big cities, if you look into relation to last year, maybe 80% to 90% lower than last year, while outside the big cities, we are maybe on 60% to 70% lower, and in certain destinations, actually quite decent development. Not a big change between the countries, I think. The variations you see to the right in the picture here is more a reflection of how much of the properties are in the big cities and not in the big cities. And we, of course, also have had the fact that we have had more closed hotels in, especially in Copenhagen and Helsinki, during the first quarter there. As I mentioned, very complicated and difficult quarter, and that is, of course, mirrored into the results, which we will soon get to before I talk a little bit about next page, where we have here -- where we have continued to have state aid and rent discounts more or less on the same levels as in Q4, slightly more direct state aid in Q1 here and slightly less rent discount. However, that is according to plan. And we expect the rent discounts to be more or less on the same level in Q2. Direct state aid, there are a number of applications in progress here. We expect at least to have the same level as we had in Q1 and maybe a little bit more, depending on the outcome of these applications there. It's a consistent system in Norway, where we get up to SEK 40 million depending -- of revenues every month in coverage of fixed cost and rents and so on. And we are currently following what are the possibilities in the other countries there also. We have accounted for SEK 97 million in Sweden due to this support program. So going into the result then, which we have on next page here, 775 minus in adjusted EBITDA. And just going back 2 years, a normal Q1, we should be around 0. That's the normal level here. And I think around SEK 4 billion in revenues, if I remember right from 2019. And as you can see here, SEK 930 million then. If we then think about the sequential development, we reported SEK 282 million in Q4 with an occupancy of 23%. That's a difference of 493. If we adjust for differences in state aid, rent rebates and release of provisions and so on, I think the underlying difference between Q4 is somewhere around SEK 350 million negative. And of course, with the loss of turnover here of a little bit more than SEK 400 million, this leads to a negative conversion of up to something like 80% to 90%. And that is, of course, extremely negative. The only positive thing with that is that when the occupancy goes in the right direction, we will have the same positive, very strong positive conversion here.The problem for us having this is that, of course, when you are on this level as we are right now, it's extremely hard to mitigate the difference on deviations in occupancy with lower costs because 95% of the hotels is actually operating on their minimum already. And that explains why we have this negative conversion. And on top of this, Q1 is normally a quarter when you have seasonally higher property costs due to energy and stuff like that. So that is the explanation for this really, really bad conversion, which we're having during the quarter. If we then go to cash, we have SEK 980 million in negative cash outflow, quite close to SEK 1 billion, and that is a true reflection of the underlying cash burn at these occupancy levels. A few exceptional items, you can see here that the working capital difference in the quarter is very close to 0. Surprisingly enough, we have paid some tax. However, that goes back to 2019, when we earned a lot of money. Quite low investment, as you can see here. But if you normalize that, I would say, normal level is around SEK 150 million a quarter. And exclude the tax, you will still be around SEK 1 billion. So that's the reason why I say that this is a true reflection of the current cash burn. Total liquid -- total credit facilities is 6.650 and that still holds. So on this page, we have available liquidity of SEK 850 million. And make no mistake, the proceeds from the convertible bond is not calculated in here. So those money were accessed here, yesterday actually, when they were released from the escrow account. So now you can put 1.6 on top of those money. If we then flip to the next page, we repeat the sensitivity analysis, and you have probably already realized but the first one here, estimated impact on monthly adjusted EBITDA, is not really holding in Q1. I think the sensitivity on these occupancy levels is actually even higher. So you need to go north from this SEK 15 million in order to be in the right neighborhood here. I would say that when -- as occupancy improves, which it should do, this will be more and more a true and accurate picture of the reality. We still believe that we can reach an EBITDA breakeven around 40% occupancy. Of course, dependent on price development, of course, depending on where we will have -- is it too uneven, we will have an issue to reach it, but it's still -- so that that's our ambition. And of course, that would require all-time high productivity levels in our operations, but it's important that we will still target that level. Estimated cash flow breakeven around 50%, almost a little bit more sure on that than the 40%, to put some color on my feelings here. Right, and then I think we continue here going into the financing, because that is something which we put a lot of ambitions into in Q1 because I think we are already at the end of Q4 so that this would be an issue with the cash burn we had. So we invested a lot of time into finding a solution for this. In the end of March, we announced this convertible bond and we had an EGM here just a few days ago actually deciding on this. The terms, which you see to the left, is well-known for you. We communicated that, as I've said, at the end of March. This is no cash from here. Instead, we issued this convertible bond below the par value on 89%. And of course, it is so that this debt, this commercial bond, will continue to increase with its 3.25% on a yearly basis until maturity, which is done in October 2024. The maximum dilution is 17% of the current shares. And parallel to that, we also managed to get an extension of the current credit facilities from the lending banks. We have 3 lending banks, and those facilities was extended until end of December 2023. Of course, there has been adjustments of the terms in order to reflect the increased risk of this business. We will pay a higher margin. We will pay a 5% margin here on, which is higher than before. And of course, there is much more reported requirements and so on in relation to these credit facilities here.And on -- yes, we need to touch upon the IFRS accounting effect also. It's a big difference now on net result level between normal IFRS and IFRS, and that is due to 2 things. One is the rent discounts during IFRS. These rent discounts are spread over the remaining years of the life length of the leases, whilst we take it in the non-IFRS accounting as an effect immediately here, and that's the reason why the difference is increasing here. Together with the fact that we have prolonged some leases in conjunction with these negotiations here. And this negative effect, SEK 560 million -- you might remember that 2019, it was around SEK 200 million -- will gradually diminish. And when it will suddenly -- or will become positive then in 2027, according to our calculation. And the convertible bond also IFRS accounting and interest margin on the convertible bond is set to a little bit above 10%. And that means that we will have a debt equity split of that, 78% debt and the equity, 22%. And we will also then have a full dilution in the EPS calculation as soon as the EPS becomes positive then. And if it's negative, EPS, of course, there is no dilution then from this. A large proportion going forward, a large proportion of our interest cost is noncash. So when you calculate the cash impact from our financing, please remember to calculate with 5% on our bank debt because that is what -- which will become payable. And the bank debt is high now in the beginning of Q2. And now we have, as I mentioned here, excess money from the escrow account yesterday here, which means that you should calculate with a lower interest program here going forward. However, it's partly offset by the ramp -- interest margin increase from 4.5% to 5%. So that is the IFRS accounting effect, and this concludes my part of the presentation, and then I leave the word back to you, Jens.

[Jens Mathiesen, President & CEO]

Thank you very much, Jan. And just to kind of have a picture of, let's say, of a ramp-up situation, we believe Scandic is very well prepared for a market recovery. We are well positioned in the market, and Scandic has a very broad mid-market offering with high focus on domestic and Nordic customers and, of course, high customer satisfaction. We have measures in place to meet that demand, and we have focused a lot on developing our customer offering further, adapting towards the leisure segment that we believe will be a driver for growth, both near-term and, of course, also in the long perspective. We have recently introduced attractive offers for families. And we have launched bookable round trips for our customers, and we have further developed our distribution towards the leisure segment, just to mention a few examples. So much easier now to kind of book your own to on the web. As Jan also mentioned, we will enter the recovery with a very low cost base. Our costs are currently halved compared to the pre-pandemic levels. And we have done considerably sustainable cost reductions, especially in group functions and in the country support offices that we will benefit from. So we have clearly improved our ability to generate good margins when the market now stabilizes in the times to come.And with that, I hand it back to operator for the Q&A session.

[Operator]

[Operator Instructions] Our first question is from Adela Dashian from Handelsbanken.

[Adela Dashian, Analyst]

Adela Dashian here from Handelsbanken. Let me start by asking you a general question first regarding your outlook. I agree with you that vacation will play an important role even this summer, and that, obviously, with easing of restrictions, activity in larger cities will be higher than last year and so on. But then for the fall, at least in my forecast, I have occupancy levels coming down again in pace with you becoming more dependent on corporate travelers rather than leisure. So what are your thoughts on this? Firstly, do you agree with my view? And then secondly, what are you doing internally to prepare for a potentially weaker Q4 than Q3 coming this year?

[Jens Mathiesen, President & CEO]

We are doing quite a lot in those areas. And I think what we look into is, of course, what's happening around the world right now. And we could be actually a bit positively surprised by the, let's say, recovery in other markets like U.S. and China. And if you look at China being well ahead of Europe right now, actually, in the last weeks, we have seen occupancy also almost back on '19 levels even in the major cities. And that's driven not by the leisure, but on corporate demands. So we are actually a bit surprised by, let's say, the speed of the recovery in China, which is almost back on '19 levels, even in the big cities. And if you look at U.S., that is a bit behind China, but because they still have a lot of restrictions, they are around 60% of '19 levels and also with fairly okay corporate levels. So when I look at corporate for the autumn looking into that period after the summer, to your question, I think we should be aware that for us, corporate is everything we kind of contract, meaning that also it includes, for instance, the sports groups, it includes a lot of infrastructure workers that normally after such a crisis is increasing. We see quite high demand for that because of governmental investments in the infrastructure buildings where we cover a lot of that demand. So it's actually a bit of a mix. I think we will see that it takes some time for regular business travelers to come back to the normal levels and we prepare for that. But I think we do see a demand for -- actually, we have quite a lot of meeting bookings for the autumn that has been moved from the spring into the autumn, because people need to meet up and they need to train their people, they need to meet their customers, et cetera. So it will be a mixed picture. And I think you're definitely right when it comes to the individual corporate customers. It will take a bit more time before that market recovers to the normal levels. But I think we will be surprised in other areas, sports groups, infrastructure buildings, et cetera, that will come back a bit faster.

[Adela Dashian, Analyst]

So are we talking about demand coming from domestic corporate travelers? Are you seeing anything yet as of international travelers? Or is it more structured around your intra-Nordic?

[Jens Mathiesen, President & CEO]

Yes, we do focus -- for this year, we've focused to the full on the, let's say, the domestic and the intra-Nordic business. We do expect that the borders will be open inter-Nordically during the summer, and that will support us during the autumn. And as you remember from all the numbers and what we have said, around 80% of our total turnover comes from the inter-Nordic business. So we're less dependent on the international part. And I also think that we will be positively benefited from much more people staying at home location-wise. We also have introduced co-working, which we think is a big opportunity for us in the years to come when companies decrease their square meters in their offices. So they will be more dependent on working from elsewhere as well as we have introduced hybrid meetings, so we can support business with digital solutions for having meetings and not travel as long as they normally did. So we are tapping into also the new segments. So I think it will be a mix, but I'm pretty positive to the recovery when I compare with what's happening elsewhere in the world right now.

[Adela Dashian, Analyst]

OK, got it. Then if I could also ask on the agreed rent rebates, you previously said that these amounted to around SEK 900 million. And when I do my calculations, I see that you have just under SEK 600 remaining of this, with the outflows in Q4 and also Q1. So do you expect any additional discounts from your landlords from here on, or should we stick with the earlier-announced numbers for the remainder of the year in 2022?

[Jan Johansson, Chief Financial Officer]

I think for forecasting purposes, I suggest that you stay with the numbers which we have communicated.

[Adela Dashian, Analyst]

And then if I'm correct here then, I assume the rent discounts in the second half of 2021 will amount to just under SEK 100 million.

[Jens Mathiesen, President & CEO]

We have communicated a little bit in excess of SEK 500 million for the full year. You have the numbers here for Q1. You will assume the same number, I think, for Q2 and the remainder, I'd suggest that you split evenly between Q3 and Q4.

[Operator]

And our next question is from Karl-Johan Bonnevier from DNB Markets.

[Karl-Johan Bonnevier]

First, Jens, just looking at CapEx for this year, looking at now pushing a couple of your hotel projects a little into the future as well, what would be your best guess that you need to spend on hotel renovations in the existing platform and then for the new openings?

[Jens Mathiesen, President & CEO]

In total, SEK 600 million to SEK 650 million for the full year, we would say around SEK 150 million, SEK 160 million a quarter. It was a little bit less during this first quarter due to some special circumstances, but I think for forecasting and modeling purposes, I think you should assume SEK 150 million, SEK 160 million a quarter. A little bit higher now maybe in Q2, that due to we have a few more offerings in Q2. And then I think -- but as I said here, this is close to SEK 1 billion cash burn first quarter, even though investment was a little bit underrepresented. We also had some tax during this first quarter, which compensates for that. So I think this close to SEK 1 billion in negative cash flow is quite representative anyway at these occupancy levels. However, of course, we do expect better occupancy levels in Q2. I think you all realize that this is not a bold assumption.

[Karl-Johan Bonnevier]

You sound convinced on that and looking at the trends it sounds logical as well. And thank you very much for those updated comments you had on the breakeven levels and what kind of occupancies will go. And also, Jens, your comments about the lower cost base going into the future. So if you dare at this time, stretch the perspective into, say, a recovery scenario bringing you back to 11% margin, what kind of RevPAR level would that require compared to 2019 to get back to 11% margins for financial targets?

[Jens Mathiesen, President & CEO]

Well, we -- I think instead of looking at just the RevPAR, you can look at that, let's say, if you compare with '19, where we exceeded SEK 19 billion turnover and made the SEK 2 billion in EBITDA, we definitely don't need to come back to SEK 19 billion in order to get that same level, because we will hit better margins faster than before. And I think you all know that when I took over together with Jan, and we presented already at the Capital Market Day different initiatives to actually strengthen our margins onward. And of course, you should never miss a crisis either. So we have definitely used this crisis also to really change quite a lot when it comes to, let's say, the cost levels above hotel level, where approximately 1/3 of the cost is now removed on those levels. And we think we can work much more efficient now with the new structure that we have set in place, also to secure that we do not bring back a lot of cost when occupancy levels goes up. So to answer your question, I cannot say whether we will hit this on SEK 16 billion or SEK 16.5 billion or SEK 17 billion, but definitely way before we hit the SEK 19 billion in turnover we will reach that. And then you can calculate margins yourself. I expect us to deliver much stronger margins in the future, also because we actually focus much more on working within the areas that are with stronger margins such as the room part versus how we handle, for instance, the restaurant part and work with partners on those areas, which we will continue to focus on in order to improve not only the result but also margins onward.

[Karl-Johan Bonnevier]

And is there anything think we should add to our thinking on the operating leverage and how that should develop when you reach breakeven and go over breakeven? Is there any extra costs that we really should put back into the equation to not overdo the operating leverage after reaching...

[Jan Johansson, Chief Financial Officer]

Yes, that's good. I think, Karl, initially here when we start to move from this 18%, 19%, 20%, there will be an extremely good conversion, because, I mean, we can easily accommodate those extra guests without increasing any cost. I mean, maybe spend a little more on breakfast, because they need to eat and spend a little bit more on cleaning, but not below. But otherwise, I think we will be managing those extra guests within the existing capacity. However, that conversion will gradually come down over time here. So -- but initially, I think you should expect an extremely good conversion until we maybe reach some 30%, 35%, something like that, because then you come into a situation where you maybe need to man up a little bit more, and you will have some extra costs and so on. But -- and then, of course, the next step is when you start to pay variable rents. However, given the situation during the first 4 months, I fully think that will happen very late this year.

[Jens Mathiesen, President & CEO]

And then you can also say that normally -- normally, when we have, let's say, a financial downturn or something like that, when we're hit like we are, of course, we have less CapEx spend because we do less renovation. But it's not that we actually moved into this crisis with, let's say, a very updated portfolio and you can say, with a very low occupancy levels, which we have been spreading out at the hotels, you can say, the need for that renovation is very limited. So it's not that we have a lot of underinvested hotels that we need to catch up with for the time to come. So we are -- I think we -- there's no big surprises in this. It's pretty obvious that we will benefit from, especially, the recovery in the beginning. And it's also very important because it has been a terrible year for us as a whole. So we are very focused on staying very lean to get back very solidly with this recovery.

[Operator]

Our next question is from Jamie Rollo from Morgan Stanley.

[Jamie David William Rollo, Managing Director]

Just wondering, are there any numbers you can share with us for your summer leisure bookings to suggest that it's going to be a stronger period than last year? I appreciate it's early days, and perhaps not much visibility, but any other anecdotal or quantitative comments would be helpful.

[Jan Johansson, Chief Financial Officer]

Yes, I think it's a very variable question, and that's -- I'll mentioned maybe 2 things in this because definitely, last year was extremely low since the amusement parks was closed, which they are not this year. So that will drive something during the summer. And of course, the visibility is very low. We see the pickup is coming in with days' and weeks' notice. So it's really early stage to put numbers on this for July.Well, we have started a week ago the summer campaign, and there has been more interest into the big cities this year than last year. That's also a small signal. It's very small numbers yet if you compare in totals, but it's a small signal. When I talk to the CEOs of the amusement parks, there's quite a high interest in those because they have been missing out, and they have a lot of members also willing to visit them. So yes, I think there's a lot of reason why we believe that, let's say, the big cities should do better than last year. And we do not have any, let's say, reasons not believing that the rest of the countries will not do as last year, which was pretty healthy. Because people are not traveling a lot this summer. And if you talk to travel agencies, they are still missing people to book their vacations in the South, et cetera. People are waiting there for restrictions to ease.And so if we look at the Nordic market, a lot of people already now expect to stay home. So I think we have a lot of indications of that, but to be as open towards you as we can, we also announced that we, on the 15th of June, will give you an update to secure that you know how we expect the summer to be. So we will come back on that topic in just before the next window closes, to be as open as we can to you guys.

[Jamie David William Rollo, Managing Director]

And then you talked encouragingly about some of the more resilient part of your business travel, sports groups, some of sort of trade-related prorated work. Is there any way you can help us understand the rough breakdown of your corporate demand between the different groupings, please?

[Jan Johansson, Chief Financial Officer]

Yes, that was good question here. And I think -- I mean, a detail breakdown, we cannot give you a year, but that's obviously something which is now part of our analysis going forward here because, Jamie, of course, as you realize, we also see that the market will change. And we -- I mean initially, when this crisis came over us here, we maybe thought that this was a bump in the road or something like that and everything should go back. But of course, we also now realize more and more that the market dynamics will change here. So that is actually part of that exercise and that analysis, which we are doing here. But I mean, if you take the normal occupancy, you can say that Tuesdays, Wednesdays is mainly made up quite individual business travelers for different reasons in conjunction with meeting business. And of course, that -- when we come back to the sports groups and another type of group arrangement, that's predominantly something which has been in the hotels during weekends, together with ordinary leisure travels and so on. So -- and as Jens said, maybe we will see even more of the demand coming into the end of the week and the weekends and so on. So I mean, going back in a number of years, I would say the Monday, Tuesday, Wednesday, was by far the best days for Scandic, and that started to level out prior to the pandemic and maybe after the pandemic, we will see a shift there where we will see that the weekends actually will be stronger. And we will probably need to work with Mondays and Tuesdays and Wednesdays to try to create demand in certain areas there, especially then in the big cities, as we see it, because we -- it's probable that some of the corporate traveling will change in nature and -- but I think also the kind of hotels which we have opened the last couple of years caters for more amount demand kind of reason to stay here also. I think you will find more reasons to stay in those hotels than we did maybe on those hotels, which we opened 10, 15 years ago. So -- but of course, it will be a commercially complicated task here to work with the sourcing, the guest sourcing here. So -- but I cannot give you any details, at your question there, but I cannot give you any details on the customer mix. But we will, of course, come back on that and together with our thoughts about how that will develop over time, because I think it makes sense when we combine the history with our thoughts regarding the future.

[Jens Mathiesen, President & CEO]

And, Jamie, you can also understand, we are -- we don't want to tell the whole world, which is our very strong sites in some of our business mix. But of course, we have a lot of infrastructure workers right now. And we also know from historically crisis that all of these governmental investments that will be on the back of a crisis in order to support the economy is good for us because we have a lot of that infrastructure builders working and staying with Scandic during midweeks. So that will continue. But let's see how this works out. I think, like Jan said, we need to spread it out a bit more. And I think the good thing is that the last many openings we have done the last years includes much more leisure facilities. We are opening this month in -- near Copenhagen airport, but that's actually including a huge spa. So it's kind of a leisure resort in the middle of 600 meters from the airport when we open Downtown Camper, it has also a spa on top. And so when you look at some of the latest openings, it is much more taking care of the broad customer mix. So we have been pretty prepared for this trend that we have seen for the last 10 years, that leisure has been outperforming corporate year-on-year. But still corporate accounts for more than half of the total.

[Jamie David William Rollo, Managing Director]

And then just the point on --

[Jan Johansson, Chief Financial Officer]

The trick will be the big cities. That's the trick.

[Jens Mathiesen, President & CEO]

Sorry, what did you say, [ Jamie ]?

[Jamie David William Rollo, Managing Director]

I was just saying, just finally, you talked about the loss of some of that meetings market to virtual. Do you have a view on what percent reduction in that sort of other group or transient business travel might go virtual? What sort of percentage reduction? Would you hazard a guess?

[Jan Johansson, Chief Financial Officer]

No, I don't think we have, and I think there's a lot of people guessing right now and maybe too many are guessing of the future, to be honest. I think let's really look into what's happening in other places. What's happening in U.K. right now, what's happening in the U.S. and China, what's happening in Israel that are ahead of Europe. And I think we will see when the fact is here, but I'm a bit positively surprised when I look into what's happening in China, for instance, and China is really up to speed. And China is almost on '19 levels as a whole. But what we have seen recently in the last 2, 3, 4 weeks, is actually that Beijing, Guangzhou, some of the major cities, they are almost back on '19 levels as well. And that is driven by corporate timing. If you look at the U.S., they are around 60%, I think, right now versus '19 levels. And then that's with a lot of restrictions still in place. So before we kind of -- it's very easy to say, yes, corporate travel will not come back, but I have a lot of companies that are extremely interested in meeting up and continuing their work. We have a lot of these infrastructures. We have a lot of people that simply needs to be on the road. So our business mix in the mid-market is quite broad, and I expect a fair percentage coming back actually in the coming years.

[Operator]

[Operator Instructions] Our next question is from Andre Juillard from Deutsche Bank.

[Andre Juillard, Research Analyst]

Just to come back on the bookings on the corporates, do you have any visibility on the Mice segment and potentially, some events which would which could take place next out or even in '22? First question. Second question is regarding the cost structure, because you are mentioning that your cost ratio was down 50%. Another way to ask the question compared to the ones which have been asked before is how much of this proportion is expected to be permanent? Third question about the state help. Do you have any visibility on what could go on after Q2? I guess it will depend from the level of business you will have, but I'm interested to have your feedback on that.

[Jens Mathiesen, President & CEO]

Thank you, Anders. If we start with the first one, the Mice, of course, we -- the visibility is still low, but we have seen we have seen, let's say, some of the in-group business that we have had during the spring being postponed until the autumn, and I think also there will probably be quite an immediate demand for meetings to catch up in the beginning. And then it will find its level probably on a lower level than we saw before, at least for the first years. So we are preparing for that, and that's why we also look at how we can reconfigure it some of the hotels and use some of these square meters for other purposes and work with partners for some of that. But it's not that we don't think it's coming back. We think, actually, that meeting will continue, and we have introduced these hybrid meetings, and we have introduced co-working in some of the same locations where we actually use square meters for other purposes.And we think there might be quite an interesting opportunity within co-working since a lot of businesses are lowering their square meters in their offices and want people to work from home or work more co-working. So a lot of these people announcing that they expect levels to go down also announced that they expect people to work more from home. So we think that Mice will be on a lower level long term, even short and long term. But we think -- and that will be an area that will recover a bit slower than maybe some of the others. But initially, there's a decent amount. If you look at the cost structure, we clearly -- it's difficult to put percentages, but what we tried to do was to give you a bit of a hunch on this one. We said approximately 30%, 35% of the cost of people above hotel level has been removed during the crisis. And of course, some of these will come back when levels go up. But we definitely will not go back to the same level as before. So we will keep it a very efficient and lean, let's say, cost model when it comes to head office costs and support office cost. So that's especially where we want to continue working with this. We have also been looking over management at hotel level in order to get that even a bit more efficient and will also long-term continue to have savings there. We do not foresee savings when it comes to the operational model as such because Scandic has been extremely efficient when it comes to housekeeping efficiency and front-office efficiency and within waiters and chefs. So in that level, we do not foresee savings onward, but to maintain the very, very lean model we have. So that was what I could say on the cost structure. And then, of course, with the state help, it is clearly linked to the restrictions. So as long as we have restrictions, we also will get different kinds of support. And there's still a lot of discussions going on with the different levels, where we might have potential to get a bit more coming in. But we have reported what is known. And Jan have clearly reported that we estimate the minimum the same level for Q2 as Q1. So you calculate on that. And then we have no hopes for Q3 and Q4 before we know whether all restrictions are gone or not. But right now, we expect that actually, most of the restrictions will be lifted. During now the spring and the summer due to the fact that during the summer, all of the adult population will be vaccinated. So then there's no reason to keep restrictions on us. So we have not calculated with a lot of state help for Q3 and onward.

[Operator]

[Operator Instructions] And there are currently no further audio questions. I will hand the word back to the speakers.

[Jens Mathiesen, President & CEO]

Okay, then I just want to thank everyone for dialing in. And if you have further comments or questions coming up, please call Henrik directly. He will be here if you need anything. Otherwise, looking forward to speak to you soon and some even later. And all of you, we will come back, as reported, mid-June for a new update on the summer thank you very much.