Scandic Hotels Group AB

STO:SHOT

Earnings Call Transcript 2018-Q3

[Operator]

Ladies and gentlemen, welcome to the Scandic Hotels Group Q3 2018 Report Call.Today, I am pleased to present CEO Even Frydenberg and CFO Jan Johansson.[Operator Instructions] Speakers, please begin.

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Thank you very much, operator. And good morning, everyone, from up here in Stockholm. And thank you for joining this presentation, which is the third quarter results for Scandic Hotels Group.As the operator said, today, I have with me, as usual, our CFO, Jan Johansson, who in a short time will take you through the financial part of this presentation. And of course, as well, we have Henrik Vikström, our Head of Investor Relations, in the room.So if you could please turn to Slide #2 for a brief summary of the third quarter. We saw a relatively good demand situation in our markets in the third quarter, especially during the summer months of July and August, driven by strong leisure demand in combination probably with the warm weather in the Nordic market. It should also be noted that our Swedish business was probably, as predicted, somewhat supported by the weak Swedish krona during the summer months.Our sales increased by around 23%, fueled by more rooms in operation, including Restel, and currency translation effects. The like-for-like sales growth was marginally positive in the quarter while increasing 1.9% during the first 9 months of the year. Our adjusted EBITDA continued to improve in the quarter, and we also saw an increase in earnings per share. The improvement was to a large extent explained by the increased earnings contribution from Restel, combined with some positive currency translation effects.For the fourth quarter of the year, we expect like-for-like sales to be slightly lower than the fourth quarter last year as we see increased competition in some of our markets. Naturally, as a consequence of this, we will further increase the focus on adjusting costs to any changes in the market conditions in all of our markets.Please now turn to Page 3. As you can see on Page 3, the market RevPAR development was relatively stable in the Nordic markets in the third quarter. We saw a slight positive trend in the quarter in Sweden, Norway and Denmark; and this was driven by growth in July and in August. In Sweden in particular, market RevPAR grew by 2.9%, driven by a slight increase in average room rates. And we were very pleased to see the continued improvement of the market balance in Stockholm city during the quarter. In Norway, RevPAR growth was 1.9%, which is lower than the trend that we have seen in previous quarters. This reduction is explained by a combination of somewhat higher capacity in key regions and slightly lower demand growth. The Danish market was relatively stable, with continued very high occupancy rates and largely unchanged RevPAR compared to Q3 last year.Now we do not have reliable market data for the full quarter for the Finnish market, but the market RevPAR was basically unchanged in July and August, in line with the trend that we saw in the second quarter, with flat demand growth and a capacity growth of about 3%. And we should also note that Helsinki also had 2 large international congresses last year, during third quarter.If you now move to Slide 4, we'll dive a little bit deep -- more detail into 2 of our markets. On this slide, you can see how the market balance has developed in Sweden in Q3 as well as in the last 12 months. In the third quarter, total capacity growth was about 2.4% in Sweden, while demand grew by 2.8%. The average occupancy rate was largely unchanged, while there was an increase in the average room rate, leading to positive RevPAR development both for the quarter and for the past 12 months. Again, we are pleased to see the improved balance between supply and demand in Stockholm city, where RevPAR continued to improve in the quarter. So all in all, a relatively balanced situation in the Swedish market.On the next page, you can see the same market analysis for Norway, where we have seen a slight increase in capacity growth and a somewhat lower demand growth. The number of available rooms in Norway was up approximately 3.6% compared to the third quarter last year; and this was primarily driven by an increase in Bergen, in Oslo as well as the area around Oslo Airport. The number of sold rooms in Norway was up by 1.6%. And as a result of this, we saw that occupancy came down slightly, but that was offset by good increase in average room rates, leading to a small increase in the overall market RevPAR for the quarter. It is also worth noting that RevPAR in the Stavanger region was up almost 20% in the quarter, boosted by a large oil conference.Please now turn to Page 6. In the third quarter, we continued a busy year and strengthened our hotel portfolio by adding 2 new attractive and centrally located hotels. In early July, we opened Hotel Norge by Scandic in Bergen as a signature hotel. This is one of Norway's most renowned hotels, and it is returning to the market after a full renovation. And in September, we saw the eagerly awaited opening of Scandic Kødbyen in Copenhagen. This is an exciting new hotel with 370 rooms located in the middle of Copenhagen's meatpacking district. It's been a busy year. And in total, we have, during the first 9 months of 2018, opened 6 leased hotels with approximately 1,600 rooms, all of them with great locations in very attractive and key destinations for Scandic.If you now move to Page 7, you can see the overall pipeline for Scandic as of the end of the third quarter. We have added 2 hotels to our pipeline during the quarter. One was a conversion in Helsinki that we will take over in 2019, and one was a new hotel in Trondheim with 425 rooms and with a planned opening in 2022. At the end of the third quarter, you can see that we had an existing portfolio of 51,932 rooms. And our gross pipeline was 5,338 rooms, and that corresponds to roughly 10% of the portfolio. In the coming 3 years, we will be adding between 1,200 and 1,600 rooms per year, and this adds up to about 2% to 3% growth of our portfolio per year.The most important destination in the pipeline is still Copenhagen, where we until now have been underrepresented. And we will open 1 hotel per year in the coming 3 years, in addition to the recently opened Scandic Kødbyen. We should also note that 2 of the hotels in the pipeline for next year, so for 2019, are actually existing hotels that currently are completely closed for renovation. This is one Holiday Inn from the Restel portfolio and the Scandic Marski in Helsinki. And finally, you may also remember from our previous calls that there are 3 hotels in Finland, with a total of 400 rooms, that we need to exit as a condition for regulatory approval of the Restel acquisition. We have already signed agreements for the disposal of 2 of them, 1 in Kuopio and 1 in Pori. So when adjusting for these 3 hotels, the net pipeline amounts to 4,947 rooms.So moving on to Slide 8. We have now included an easy-to-read summary of our portfolio and pipeline. And it's an interesting view to see that we have the same number of hotels in operations in Sweden and in Norway, while Finland has become almost as big for us following the acquisition of Restel. We believe that this more geographically based -- sorry, the more geographically balanced hotel and rooms portfolio is very beneficial to Scandic. These 3 Nordic markets have distinct differences in their market characteristics and with different economic drivers and also different economic cycles. Our strategy remains to focus on key destinations, in other words larger destinations where we see growing demand over time. And in addition, we will still work to seek a good balance between conversions and new projects in the pipeline so that we can improve speed to markets and continue to grow without directly affecting the overall capacity in the market. We remain focused on the portfolio strategy, which is based on strict return requirements and proactive portfolio management, both when it comes to expansion of existing hotels and potential exits of hotels that do not contribute financially over time.Please, if you could now turn to Page 9. And on this page, you can see the latest update on the Restel transaction and integration. The adjusted EBITDA contribution from the former Restel portfolio improved further compared to the previous quarter and reached SEK 84 million in the third quarter, mainly because the summer months are the strongest for many of these hotels. Year-to-date, the adjusted EBITDA contribution was SEK 123 million. Since the acquisition was completed at the very end of 2017, we have, naturally, prioritized the systems integration, the rebranding and the coordination of support functions. And we have already seen some positive effects from cost synergies. We have also, during the year, agreed with one of the larger landlords to already now prolong 8 lease agreements in the Restel portfolio, and we have continued high investment activity in order to strengthen the portfolio in line with our initial business plans.As mentioned earlier, we have completed the agreement for the disposals of Cumulus Pori in June and Cumulus Kuopio in September (sic) [ August ]. The first phase of the integration is now finalized, and we are now increasing the commercial focus for the Restel hotels, in line with our ambition to strengthen revenues as soon as the hotels now are able to take full advantage of Scandic's distribution capacity.So that was a short summary from the operational side. And with that, I will, as usual, hand over to Jan, who will take you through the financial parts of this presentation.

[Jan Johansson, Chief Financial Officer]

Thank you, Even.We start on Page 11 with the financial summary. And a subheading to that could be we continued to improve results both operationally and bottom line.We continued to grow our business 22% to 23% in Q3, primarily driven then by higher volume, more rooms in operation. Like-for-like sales growth has come down. We post a slight positive number in Q3. You'll remember, for the first 6 months, we were 1.8, so this is a little bit lower. We come -- we will come back to that. However, adjusted EBITDA increased with 18% to with SEK 736 million and, as I said earlier, primarily a volume-driven effect, so more rooms in operation. We have close to more -- 15 more hotels in operation now than we had last year at the same point in time. And regarding leverage, that has been constant now, so from the second quarter until the third quarter, 2.4x. And obviously, we expect that to improve through the end of the year, as it usually do in the now seasonally driven business.If we then go to next page and take a look on our RevPAR. You'll remember Even was talking about the market RevPAR here some slides ago. And you can see that we are actually posting a negative RevPAR number for the group of minus 3.1, but, and this is important, the main explanation behind that is the inclusion of Restel and they had a lower RevPAR at the point of acquisition than we have. And obviously, that is something which we see as a potential going forward, to try to bridge that gap a little bit. If you look into Finland in isolation, the RevPAR number is -- for like-for-like, is 3%, which is an okay number given the circumstances therefore. We can see in some other parts here that we have softer RevPAR number like-for-like compared with earlier quarters. And the reason for that is that we have a little bit of lower occupancy now in general in some of our destinations. Prices have held up generally, with one exception. And it's -- that is Denmark, where you see that the like-for-like number is negative. And that is primarily driven then by average prices, but we should remember then that we compare with a very strong Q3 last year.Of course, the weaker RevPAR relevance has directly mirrored into the like-for-like sales number, which we have on the next page. And this is Page 13 then. Just firstly on the like-for-like sales growth, as I said, it's a direct effect of the slower RevPAR growth during Q3, a like-for-like growth of 0.3%. And the accumulated number was 1.3%. We have a good and a major impact on sales top line from new hotels. We have added more than SEK 700 million of sales or 18% in Q3. Currency effects, and now I'll talk about the translation effect, has had a positive effect of 4% to the top line growth here. Main contributors is -- to the like-for-like growth has been Germany, where we have the very positive developments on the like-for-like basis there, but you can also see Finland there has done good on like-for-like sales here. We have an uplift of 4% so far accumulated this year, come down a little bit in the third quarter. All in all, sales was up 23%, up to SEK 4.9 billion in the quarter.And regarding the performance per segment, we have that on Page 14. And totally then, the group adjusted EBITDA was up SEK 114 million, 18%, to SEK 736 million. Restel explained SEK 84 million of the improvement there; and currency, the translation effect, SEK 26 million. So that is largely explaining the improvement there.Looking into the different segments. At first glance, you see a negative development in Sweden. However, it is important here to -- we -- and maybe you'll recall, hopefully, this follow-up that we have made a change in the phasing of the payroll-related and pension costs there. That effect is an amount of around SEK 12 million in the quarter. Those merely are not gone, of course. We will get them back in Q4, but if you adjust for that, you can see that we have an underlying EBITDA improvement in the Swedish operation.Norway, we have a slight improvement, though, even though we are negatively impacting by a softening of the occupancy numbers in the end of the third quarter, which has impacted cost efficiency. Obviously, that is something which we're currently addressing. On top of the Restel contribution, which is the main driver in the Finnish operation, there is a profit uplift in the heritage hotel in Finland, which you can calculate on the difference there. Other Europe, a good improvement there. And that is coming from Germany, where we can notice a good development in the heritage hotel in the German operation but also the inclusion of the Frankfurt Museumsufer that's contributed positively to the development in Other Europe.Central costs, we had a one-off last year of SEK 10 million. If you exclude that, central costs are more or less on the same level.And then on Page 15, a little bit a more technical page where we explain the difference from adjusted EBITDA to EBITDA. And for the following years, I think it's that direction. Let's concentrate on adjusted EBITDA because, when we come in with the financial release IFRS 16 next year, EBITDA level will lift very much as we exclude the fixed and guaranteed part of the rents. Already now we have been trying to apply some of this with this table which we are having on Page 15. And the difference between adjusted and reported EBITDA is that you put back the effects of financial leasing, the fixed part. And then we exclude pre-opening costs, and you can see here that we have SEK 90 million so far this year. And that is obviously triggered then by a large amount of new openings. That number will obviously come down now, as we don't have any major openings left this year. Items affecting comparability, the vast majority of that refers to the integration of Restel, and we are more or less done. We -- I think there could be a small amount of new units left maybe in the fourth quarter, but that's insignificant when compared with what we have seen so far.If we then look through the rest of the income statement on Page 16. We have talked through the effects of the EBITDA. With regard to depreciation and amortization -- and then I think we should compare excluding finance lease. Then you have an uplift of SEK 66 million. That is primarily related to the Restel portfolio. There is also an impact on the -- on some of the openings we have had this year, of course, the 5 openings, but primarily related to Restel. And anyway, if we take that into account, we have an increase of EBIT of around SEK 11 million, as we can see here. And then we have a nonrecurring item of SEK 30 million included in that, in this year's numbers; and in addition to that, the unfavorable phasing of the pension-related costs, which I talked to you about just seconds ago.Net financial item are more or less on par with last year, if we exclude the financial leasing, despite the acquisition of Restel. And I think we do have actually quite cost-efficient financing in place there, where we also are active in the money market and to lower interest rates. So we -- even with that taken into account, we have a slight improvement of profit and loss before tax, as you can see here.And we also have an improvement in reported EPS of 6.6%. And we would like to take you through the EPS development a little bit more in detail on Page 17 and then maybe concentrate on the accumulated numbers.At first glance, the reported numbers on EPS is negative. It's with 7%. We will continue to adjust for EPS with financial leasing because that could potentially have a bigger impact next year, so it's important to look at on the adjusted EPS, which is still negative if we look into the accumulated number. However, we have a significant impact from the integration costs of Restel. If we would exclude that, and then corresponding number on EPS is SEK 0.89 per share, we would have an uplift of the underlying adjusted EPS of 9% on the accumulated numbers. And if you look into Q3 in isolation, that number is actually 14%. And we, you can also see that on an accumulation basis Restel operation is actually EPS positive even if we take into account uncalculated interest and tax on those numbers.Finally, a few words on the balance sheet. And that's, at first glance here, you see a quite big difference in cash flow compared with last year. There is a SEK 500 million difference, minus SEK 327 million this year compared with SEK 205 million last year, the first 9 months. First and foremost, we will reverse the negative working capital trend up until year-end, which is normal. You should also bear in mind that 2018 is a CapEx-heavy year, and we -- that will continue throughout this year. And we expect that will come down next year and primarily due to lower activity of openings of new hotels next year. This year, we have also had a cash out of SEK 140 million and -- of Restel integration and Restel CapEx, in addition to the SEK 50 million you are seeing on the line of acquisition and disposals. We have also paid out SEK 100 million extra now because we have a tax case around the -- with the Finnish tax authorities. Obviously, we are looking to get that money back, but so far we have paid it out. There is also change in working capital between the years, which primarily is related to the inclusion of Restel. However, for Q4, working capital situation will improve. Investments in new hotel will naturally come down. And also, integration costs will let -- almost cease during Q4. So there are good reasons to expect a stronger cash review in Q4.And with that, I think I'll leave the word back to Even.

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Okay, and thank you very much, Jan.So we will move to Slide 19, which is our outlook for the fourth quarter.And for the fourth quarter, we expect to see continued strong sales growth primarily driven by Restel, while we expect like-for-like sales to be slightly below the level from Q4 of 2017, as Jan mentioned, as we see increased competition in a few of our key destinations. For Restel, the first phase of the integration is finalized, and we will now increase the commercial focus in line with our business plan both with regards to strengthening the revenues and to start harvesting cost synergies. Scandic has a flexible cost structure and with proven ability to adjust costs to changes in the market conditions, and we are constantly working to ensure that we remain competitive and efficient. And we are now naturally further increasing our focus on this to adjust costs given the outlook for a somewhat lower underlying top line development.So with that said, I will hand it back to you, operator, for Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Jamie Rollo from Morgan Stanley.

[Jamie David William Rollo, Managing Director]

A few questions, please. First, could you talk a bit about the performance of September in the quarter? Because July and August seemed pretty good for the market. So how much worse did the quarter get? And also, are there any sort of early indications for 2019 you can talk about? Secondly, could you please help us quantify the cost savings you're talking about? How big could those be? And also, are there any figures you can give for synergies for Restel? And finally, on Restel, what was the EBIT contribution, please? The D&A charge seems very high for that business.

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

All right, maybe I'll start with the September performance. Clearly, this is quite varied when you look market to market, but in principle we would see -- or we saw in the different markets a lower RevPAR growth in September than we saw in the previous 2 months of the quarter, as an example, market RevPAR in Sweden. The country was close to flat. I think it was 0.3% in the month of September, while year-to-date it was 2.4%. That is an indication of Sweden. If you think about some of the other bigger markets, I think we indicated that in Norway, for example, where the month -- RevPAR in the month of September was actually negative in Norway. So clearly, the July and August were the drivers of the growth in the big markets, while September was weaker. And I should also mention Denmark. In Denmark, we also saw a slight negative trend in RevPAR for -- as a country for September. While in -- as we mentioned, we don't have reliable data for Finland at this stage, but RevPAR in the rest of Europe, primarily driven by Germany, was very strong also in September. When it comes to your question about quantifying the cost savings, I think that is something that we naturally do, but I don't think it's something that we at this stage would be sharing with you guys on this call. And then the question on Restel, I'm looking at Jan here, if he had had a chance to take a look at the numbers.

[Jan Johansson, Chief Financial Officer]

Yes, yes. And I mean, obviously you're right in your comment, Jamie. And I mean, the difference here between the Restel portfolio and the other hotels, you can say that the rents agreements are flat, the difference I talked. So we have a bigger responsibility for part of the building in many of those contracts, which means that we will be able to ask for a higher margin on those -- EBITDA margin in order to have the same EBIT margin over time. So that is totally correct. I mean the -- on the uplift of the SEK 66 million in depreciation between the years, approximately SEK 50 million is coming from Restel. So you would still arrive on a positive EBIT for the third quarter but obviously a negative number for the first 3 quarters. And in terms of synergies and -- I mean, that it's primarily -- if we're then talking about the cost synergies, it is primarily to merge some of the functions, finance and marketing and so on, from Restel with the other Finnish function. We are through with that work, so the synergies should start, will impact the numbers and for the rest of the year. And there is also some synergies with regard to procurement. However, we expect those to mainly come into the numbers next year. It might be starting in the end of the year but primarily through 2019. And those are the main areas on the cost side. However, the largest effect, we do expect that we can put them in sort of the way we sell and distribute our products. And that's a little bit on the longer term.

[Jamie David William Rollo, Managing Director]

Just on the trading question, I -- it was more about, I mean, we've all seen September being bad. The question was really why it was so tough and whether that was just an unusual month or whether that's more normal corporate month. And also, any indications about 2019?

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Okay, so got you, Jamie. On September, the one thing that does stand out, in particular for a company like ours, where 70% of our revenues are corporate related -- corporate-travel related, September had one additional weekend this year versus last year. So that clearly had an impact on the amount of business days, but that does not -- I don't think we would say that, that underwrites the whole difference. It is also an interesting month because it is the change from leisure focus to corporate focus, but apart from that, it's difficult at this stage to say any more details on what the driver would be there. Apart from that weekend, there is no other, what shall we call, structural reasons for this. And for 2019, I mean, clearly, we're focused on our guidance for Q4. And at this stage, we are not ready to give any guidance into where we see the market demand growing for 2019. We know capacity changes, but the demand, I think, honestly, everybody would like to know and everybody is trying to get it out of their crystal ball, but I think it's too early to tell.

[Jamie David William Rollo, Managing Director]

And I'm guessing you do know group business you booked for next year. Sorry to interrupt, any comments on some of the forward bookings you've already made for next year?

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Well, we can talk about the business on the books that we have for 2019 versus what we had same time last year, and that is a positive variance.

[Operator]

Our next question comes from the line of Andreas Lundberg from ABG.

[Andreas Lundberg, Research Analyst]

Could you talk a little more about -- you talk about negative like-for-like in the fourth quarter related to more competition. I mean, where do you see that there's more supply? Or is it more different behavior from competition?

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Okay, so again, we've highlighted already some areas where we do already have additional supply in the market. We -- for example, in Norway we highlighted Oslo, Bergen and Oslo Airport. And clearly, when you have more supply, it doesn't necessarily have a direct impact on the average rate in the near term, but it does have an impact on the occupancies. And so far, I would say that, where we have seen the additional capacity come on, there has been relatively good price discipline. So the majority of the impacts have come on the occupancies. We've seen additional and -- capacity coming online in -- or we see in fourth quarter in Stockholm, for example, primarily in Stockholm circle, but still not huge numbers but expect the capacity coming there, which will also have an occupancy impact. And in the -- what should we call it? In the rest of Sweden, in some of the secondary and tertiary cities where we have operations, we've also seen additional capacity come on. And of course, we have talked about Copenhagen there. There is capacity growth. We are included in that. And again, that had primarily, so far, had an occupancy impact. So now do you want to say anything else, Jan, or...

[Jan Johansson, Chief Financial Officer]

No, I think we've given...

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Did that answer your question, Andreas?

[Andreas Lundberg, Research Analyst]

Yes. And if I can follow up on that: You'd mentioned some addressed -- addressing on the cost side. What can you do, and what will you do?

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Well, again, clearly, if you have a change in occupancies -- the majority of our operating costs are variable costs, even both the supply that you use and the people handling the guest services. So those will vary with the changes in occupancy. And of course, we are always looking at what else we can do when it comes to opening hours of restaurants and bars too, et cetera, et cetera. So that is something that is a normal part of our business. And as you know, if you look historically on the Scandic margins, they're very consistent through up and down cycles. So again, it's just doing what we are known to be good at, which is running hotels that reflect the demand situation in the areas that they operate.

[Andreas Lundberg, Research Analyst]

So it's more temporary. So demand driving costs, rather than structural costs addressing...

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Yes, yes. And then remember we have made -- and you'll see that in the report. We made some organizational changes. And that is something that naturally a company of our size always looks at, but at this stage there is no significant, deep cost-cutting exercise that is under way. I think, for us, it is very important to watch the market and make sure that we flex the costs and are ready to flex the costs when changes happens in our marketplace. And they can be the overall Northern Europe marketplace, or it can be a country or city specific. So the key is to always be ready for it so that you can implement it quickly.

[Operator]

Our next question comes from the line of Karl-Johan Bonnevier from DNB Markets.

[Karl-Johan Bonnevier]

Just coming back to the like-for-like development that you see in Q4. Do you also see that, say, the more muted outlook on that has an impact on how you're bringing the new capacity into the market and how successful you are bringing that online, so to say?

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Well, when we look at the hotels that we have brought into the market, because there is -- we are not opening anything major more at the end of this year, but what -- the 6 that we have opened and that we talked about in the presentation, I would say that we are very pleased with the performance of all of those hotels. And we have not seen that the change in the market dynamics or the demand has had a negative impact on any of those, realizing again they are new, state-of-the-art hotels in very good locations and in markets -- even if they are competitive, typically when you opened a new hotel, it's not the new hotel that is suffering. It is the older hotels that is suffering. So for the ones, we're very comfortable that we are on target.

[Karl-Johan Bonnevier]

And have you seen then, turning that question around, the cannibalization effect on the existing, say, stock of hotels?

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

That's an excellent question, Karl-Johan. Of course, we see cannibalization effect, but to be honest, we're very, very careful on how we position our hotels; and that we have core segments that each of our hotels focus on, and they're not all the same, so that you limit that cannibalization effect. Clearly, there will always be some. And you just have to make sure that you quantify it and you're ready. You build it into your business case already, and your projection; and you start early to look to replace the business that you think you may lose to your new hotel. So when you look at what we have done: Okay, Frankfurt is our first hotel, so that is not an issue. Lilleström is in a location where we don't -- didn't have a hotel, so that's not really an issue. Scandic Helsinki Airport, the demand is so strong that we see no reason why that should have any major cannibalization effect. Bergen, we know there is a big supply. We should also note that we actually have just closed one of our other hotels in Bergen for renovation, the Strand hotel. So there, also with the market positioning that Hotel Norge has in Bergen, it is unlikely that with the price level we're coming in at, that we will cannibalize from any of our existing hotels. Just to give you as an -- some example: In the one in Copenhagen, in the meatpacking district, that will have an impact. And we have quantified that as part of our business case. And we are working in the hotels that we expect that cannibalization coming from to replace that business with new segments.

[Karl-Johan Bonnevier]

Excellent. And coming back to the question there also about the conversion of -- say, from the leisure season in July, August into September and now the high-business months that you're booked of the rest of Q4, have you seen the business demand come back? Or have you had indications from your corporate accounts that they are taking out less of the room supplies that they would normally take? Or...

[Jan Johansson, Chief Financial Officer]

It's Jan here. It's we -- I mean, we are currently analyzing exactly the questions you're raising internally also because it's -- I mean, what we have seen is that there is a little bit of less events or some things and so on. And there isn't really any growth in the conference market. It's more or less flat. We have seen a -- how to say it, declines in starting destinations with regard to SMB and so on. So there are, of course, areas, but I think to say that there is an general pattern, no, there isn't. I think it's very much driven by destination by destination. But clearly, it's so that, I mean, for the future, we will also need to attract new business as we see more capacity in the market, and I think we need to look more into international travelers and so on in order to actually secure volumes at our hotels.

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Yes. I think Jan has hit the nail on the head here. I think it's we're still in the period of the year where leisure travel -- the increase in leisure travel could somewhat camouflage in the overall numbers a pattern in the business side. However, when we look at it with the information we have so far, as Jan said, there is no negative sign. Meeting and conference is flat, but it's not negative. Business on the books is not negative. And we are in the corporate contracting season, and we do not see any different behavior towards previous years and our own expectations so far in the contracting season.

[Karl-Johan Bonnevier]

Excellent. And one final question also on Restel. Looking at Restel, the performance year-to-date, how does that compare to, say, Restel last year before you took it over? Do you have any comparison figures how that has developed like-for-like, so to say?

[Jan Johansson, Chief Financial Officer]

No, I don't have any reliable quarterly numbers there, for obvious reason, because this was kind of a carve-out. So I have -- but I think, if it would -- if you would rephrase your question and say, "Will you meet the pro forma number for last year's?" I'd say, honestly, I'm a little bit in doubt that we can do that, but I'm not surprised given the focus which we have had which have been on integration and so on. As -- and as Even said, we need to regain the commercial focus now because the technical integration is done. So we need to really focus that, and so -- but I think, in general terms, the integration has gone very well. And obviously, there should be room for improvement in operational performance both from a market point of view where we actually need to move the RevPAR a little bit closer to the other hotels, which we're having in Finland, but also it really is key so that we can enjoy the full synergies going forward. So from that point of view, we are not worried at all even maybe if we could ask for some more millions in result this year.

[Karl-Johan Bonnevier]

Excellent. And on the back of that, there is no change to your idea that Restel, when synergies are fully realized, should deliver, say, well above your corporate target of 11%.

[Jan Johansson, Chief Financial Officer]

Yes -- no, that is absolutely the ambition. That is also I think there is nothing which we have found during this year which would contradict that, so -- but I think it's again -- I mean it's, yes, the real matters in here. We will have very good hotels there. And we will have some hotels which might need some extra love in order to perform, so -- but I think -- I mean, we have a fantastic strategic footprint in Finland right now, and that was basically the main reason for the acquisition. And then we need to develop the business both from a hotel-by-hotel basis but also see to that we can enjoy the synergies both in marketing and sales but also in procurement and administration.

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Yes. And as we saw in the Rica integration, this is a little bit of a journey that's now happened in the first 6 to 12 months and that we're well on our way on that journey. And we're quite comfortable that we see where this journey should end.

[Jan Johansson, Chief Financial Officer]

Yes.

[Operator]

[Operator Instructions] As there are no questions registered at this time, I will hand the call back to you, speakers, for closing comments.

[Even Frydenberg, President, CEO & Acting Chief Customer Officer]

Excellent. I appreciate everybody's time. I know it's a busy reporting week and a busy reporting day. And we look forward to seeing some of you guys as we take the show on the road, but thanks again. And we'll talk soon.

[Operator]

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.