Scandic Bets Weak Krona and Sunshine Will Fill Empty Hotel Rooms

(Bloomberg) -- Scandic Hotels Group AB expects a hot summer and weak krona will help it fill empty beds after a Stockholm hotel boom.

The opening of a number of big hotels in Stockholm last year, including Nordic Choice Hotels’ At Six and Scandic’s Downtown Camper, caused a supply glut in the Swedish capital. For Scandic, the largest hotel operator in the Nordic region, that resulted in pressure on its earnings and a profit warning earlier this year. But things are now looking up, according to Chief Executive Officer Even Frydenberg.

Scandic Bets Weak Krona and Sunshine Will Fill Empty Hotel Rooms

"We’re pretty optimistic that much of the capacity increase we have seen can be absorbed during this year," Frydenberg said in an interview at Scandic’s Haymarket hotel in Stockholm on Friday. "The capacity increase ahead is also relatively limited."

Scandic Bets Weak Krona and Sunshine Will Fill Empty Hotel Rooms

That’s also starting to show in key numbers for the industry. While revenue per available room in the market slumped 7.7 percent in Stockholm in the first quarter, looking now at the first five months the drop has slowed to 3.5 percent. And the improvement is expected to continue through the year.

"If demand keeps up and we get some extra help from exchange rates and the weather, I think RevPAR can be close to flat year-on-year in 2018," he said.

Currency Help

Sweden’s krona has plunged this year against major currencies as the country’s central bank signaled it’s in no hurry to raise key interest rates. That not only makes it more expensive for Swedes to travel abroad, but also makes it cheaper for foreigners to visit. Both could help fill hotel rooms in Stockholm.

The unusually sunny and warm weather Sweden has enjoyed over the past few months is also likely to benefit Scandic, according to Frydenberg.

"Those who sell trips abroad in the summer have discounts due to weak bookings," as the good weather means fewer people want to travel abroad, he said.

Frydenberg also expects to get a boost after he finished the rebranding of Finland’s Restel chain, which Scandic bought last year to add some 40 hotels. Restel will have "a positive impact" on Scandic’s earnings in the coming quarters, he said.

Scandic Bets Weak Krona and Sunshine Will Fill Empty Hotel Rooms

There is also scope for more acquisitions after that 114.5 million-euro ($133 million) deal. While Scandic will mainly focus on the Restel integration during 2018, Frydenberg will eventually be looking for smaller hotel chains to purchase in the Nordic region and would potentially consider larger deals, such as Restel, in Germany.

Frydenberg is also focusing on digitalization and customer experiences and on Monday announced three new management positions to strengthen the company’s expertise. Scandic named Ann Hellenius new chief information officer, Niklas Angergard new chief customer officer and Jan Lundborg new chief commercial optimization officer, according to a statement.

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