Scandic Corporate Presentation Ready to Grow Contents

Scandic corporate presentation Ready to grow Contents

A word from the CEO ...... 3

Scandic in brief...... 4

Brand value/revenue generation...... 6

Growth strategy...... 8

Service philosophy...... 10

Human capital management...... 12

Efficient operations...... 14

Sustainable business operations.... 16

Design & construction...... 18

Contacts...... 20 A word from the CEO Welcome to Scandic! Dear reader, This publication has been created to give you insight into our “new” – and fast-growing – European hotel company. We are pursuing an active growth strategy since April 2007, when we became an independent company. Consequently, we have announced ten new hotels in the last half year! As you flick through these pages, it is my hope that you will notice what a young-at-heart, creative and modern company we are. Also, Scandic is one of the largest hotel operators in Europe, running over 130 leased hotels. We are proud to be a recognised leader in sustainability. Since 1994, we have made sustainable operations an integrated part of our business. Whether you are a hotel owner, a customer, a developer, an industry advisor or a student, I do hope that you will find the booklet useful. Again, welcome to Scandic!

Frank Fiskers President & CEO

3 Scandic in brief Scandic is a leading mid-market hotel operator. At the end of 2007, we operated 134 hotels in 9 countries, offering 24,000 rooms. Ever since we started in 1963, our business has been based on the idea of offering trouble-free and accessible accommodation for all. Since 1994, we are also committed to making sustainable operations an integrated part of our business. We are proud to be a recognised leader in this area. Scandic is embarking on a new growth phase. Over the next few years, we are planning to add 20,000 new rooms by further strengthening our position in the Nordic market and extending our footprint to Northern and Eastern Europe, the Baltic states and Russia.

Key success factors • A leader in sustainable business • Growth-oriented • Market leader in the Nordic region • Clear mid-market focus • Easy to do business with • Omtanke – to show consideration – for customers and stakeholders • Centralised and efficient approach • People-driven

The Scandic Compass is our guide to creating value for our customers, our team members and our owners whilst actively contributing to a more sustainable future.

4 Our vision : “Creating value by being the place and inspiration for conscious people in a better world”

Key figures, 2007 Strong geographical coverage Revenue €744.9m EBITDA €102.9m RevPAR growth (06–07) 8.4 %

One of Europe’s largest hotel operators Team members 5,700 Hotels 134 Rooms 24,000 Locations Sweden 67 Denmark 21 Finland 23 Norway 15 Belgium 2 Estonia 2 Netherlands 2 Germany 1 Lithuania 1

5 Brand value and revenue generation The choice of pride and value Scandic’s brand equity is built on a distinctive promise to our customers and stakeholders, first-class execution and consistency of service.

From our beginnings in 1963, when we opened our first 25-room for optimising revenue on a day-to-day basis, e.g. through proac- hotel, Scandic has grown to assume a market leadership position tive pricing strategies. We can remain agile and fine-tune our mar- in the Nordic region. In fact, Scandic is one of Europe’s largest ket offerings, with a view to maximising RevPAR, by continually hotel operators. At the end of 2007, we operated 134 hotels in 9 reviewing, analysing and aggregating local market data. Owing countries, offering 24,000 rooms. The strength of our brand and to our seamless and integrated systems infrastructure, this deep the resilience of our business model are clearly demonstrated by market knowledge can instantly be put to use in all sales chan- the fact that a Scandic hotel generally maintains a RevPAR pre- nels, not least on our new five-language website, incorporating mium over a full business cycle in relation to its local competition. a unique 3-click booking functionality. Between 2003 and 2007, In effect, Scandic’s RevPAR Penetration Index* generally exceeds online bookings grew at an annual rate of 46 %. In addition, the the average by as much as 25–40 % in the Nordic market. Our weight of our efficient central call centres in the sales channel mix attractive mid-market service concepts and our unmatched pres- has increased substantially. ence in key locations have given Scandic a uniquely well-balanced We are convinced that the strong recognition and loyalty guest mix, including business from over 2,000 corporate con- that the Scandic brand enjoys today originate from our belief in tracts. This is an important driver of the stability of our revenues. building our business on smart, value-for-money concepts and an Customer loyalty also translates into stability. Scandic’s loyalty unrivalled consistency of service delivery. An unflinching commit- programme, with more than 200,000 active members, drives ment to sustainable business operations is also a fundamental close to 40 % of our business. part of Scandic’s corporate identity. Since 1994, we have devel- Scandic’s approach to revenue generation and revenue man- oped an environmentally, economically and ethically sound busi- agement is highly process-led and focused, supported by state-of- ness that is setting a standard for the industry. The significance the-art technology. Our centralised sales and marketing organi- of this dedication to our brand equity is growing as people every- sation creates significant synergies, while also offering control where become more conscious and discerning as consumers. In and coordination of all sales and brand development activities. a nutshell, we want Scandic to be the choice of pride and value. Scandic’s IT system incorporates innovative techniques and tools

* The RevPAR (Revenue Per Available Room) Penetration Index is an indicator of a hotel’s market share versus its local competitive set. It is a function of both room rates and occupancy. 6 DIAGRAM • StrongThe online revenue share of drivers our bookings in all hassegments increased shar- • Marketply in the leading last few years,position as has and the a weight strong, of ourattractive ef- brand ficient central call centres in the sales channel mix. • Loyalty programme with 200,000 enthusiastic members driving 40 % of our business • Over 120 sales professionals manage more than 2,000 accounts • Strategic partnerships drive 10 % of our business • Easy 3-click booking functionality on our brand website, in five languages • Sophisticated revenue management practices = RevPAR penetration 125–140 %*

Scandic’s balanced guest mix Online channels are lends stability to revenues growing in importance

Room nights by segment, 2007 Gross bookings via Scandic websites, 2003–2007

350,000

Business 47% 300,000 Leisure 45% Meetings 8% 250,000

200,000 Scandic connects well with our stakeholders 150,000 Pride Traditional 100,000 upscale brands

50,000 all For For the few Traditional mid-market and 0 budget brands 03 04 05 06 07 Need

7 Growth strategy A new agenda for growth We will strengthen our position in the Nordic market and extend our footprint to Northern and Eastern Europe, the Baltic states and Russia.

While the European hotel industry is still highly fragmented, due for completion in 2009. Scandic will operate the hotel while consolidation is on the rise as independent hotel owners and our partner, IKEA, will build and own the property. At the begin- operators seek to link up with larger brands that offer greater ning of 2008, nine Scandic hotel projects, counting 2,750 rooms, stability of revenue and stronger operational support. Further- were in the pipeline. more, most new hotel development projects involve well-known Scandic’s growth platform is characterised by its flexibility, branded chains that aim to leverage international synergies and scalability and efficiency. Our centralised support organisation economies of scale. Scandic is determined to take active part in and the fact that we operate our own hotels, often under a lease shaping the mid-market segment of the industry by adding some agreement, allow us to quickly and smoothly roll out new con- 20,000 new rooms over the next five years. Our new growth strat- cepts and adjust service delivery across all our hotels. Our history egy is based on further strengthening our position in the Nordic of operating in a high-cost environment has required us to contin- market as well as extending our footprint to Northern and Eastern ually look for creative solutions, remain flexible and maintain a flat Europe, the Baltic states and Russia. The approach to realising organisational structure. This frame of mind is part of our Nordic our growth agenda will be multifaceted, including the acquisition heritage, and it will remain with us as we embark on our journey and conversion of existing hotels as well as new development to become a major European mid-market hotel operator. We will projects. Although Scandic generally favours variable lease agree- also nurture, develop and clarify our position as the smart choice ments, we plan to increase our use of both franchising and man- for the conscious traveller. Scandic is neither a player in the luxury agement contracts. nor in the hard budget segments. We will maintain this strict We took an important first step in the autumn of 2007 by focus. Our smart, sustainable and value-for-money services and commencing development of a 572-room hotel at Potsdamer solutions are appreciated by the corporate and leisure segments Platz in Berlin, due to open in February 2010. In addition, construc- alike, resulting in a very balanced guest profile and consistent rev- tion has begun on the 300-room Scandic Khimki Moscow, also enue and profit generation over the business cycle.

8 The 300-room Scandic Khimki Moscow is currently under construction and will open in late 2009.

The 181-room Scandic Norra Bantorget in Stockholm was acquired and converted from a Best Western in November 2007. The 400-room Scandic Kista Stockholm will open in 2010. 24,000 rooms in 2007 44,000 rooms by 2012

The 572-room Scandic Berlin Potsdamer Platz is under construction and will open in early 2010. 9 Service philosophy More than just a place to stay Showing consideration for our guests and the world around us is at the core of Scandic’s service philosophy.

At Scandic, we have a desire to be more than just a place to stay. the way we think about sustainability and how we relate to the We want our hotels to be places of inspiration, where people can world around us. People are becoming more and more conscious recharge their physical, mental and emotional batteries. Our goal of the choices they make, and Scandic’s long-time position as a is quite simply to have our guests leave us with more energy than leader in sustainability contributes to making Scandic the best when they arrived. This is what Scandic’s service philosophy is all conscious choice. about: our hotels should be accessible, and staying with us should All elements of Scandic’s service offering are founded on our be easy and invigorating. Our job is to make sure that our guests core value of consideration and are integrated in our centrally de- are able to fully focus on the purpose of their stay with us, whether veloped and managed service concepts. These concepts are high- it is leisure or business. Omtanke, a Scandinavian word meaning ly appreciated by our guests for their creativity and innovative- to show consideration, is one of Scandic’s core values. It is truly ness, as well as for their consistency and the high level of comfort fundamental to the way we operate, in that it not only guides our they create. Hotel owners and investors value their contribution interaction with guests and colleagues, but also deeply influences to an efficient and profitable operation.

Our service concepts: Breakfast Frequent guest programme Meeting For families Internet access Fitness centre Shop Overall79% guest satisfaction Willingness78% to recommend percentage of respondents who gave either percentage of respondents who responded a ”completely satisfied” or ”very satisfied” either by ”definitely would” or ”probably rating would” Willingness81% to return percentage of respondents who responded either by ”definitely would” or ”probably would”

Scandic’s customer satisfaction survey for full year 2007.

10 Scandic hotels are meeting places for thousands of people every something for all tastes and preferences, including a vast number day. In fact, Scandic is the leading conference organiser in the of ecological and low-calorie products. Nordic region. Our events range from get-togethers for a handful Families have always been a core segment for Scandic and of people to conventions for thousands. Our goal is to provide a SIGGE the Hedgehog – the mascot and friend of our young guests framework for effective meetings in a peaceful – yet productive – – is at the centre of our family concept, designed to ensure that environment. Our practically appointed meeting rooms, our deli- parents and children alike enjoy their stay with us. Amenities in- cious and healthy meeting menus and the professional support of clude a play area in most hotels during weekends and public holi- our dedicated staff appeal to people who look for a fresher kind of days, special family rooms with extra beds and cots for the young- conference setting. est children, changing tables, and microwaves for heating up baby Free unlimited wireless internet access in all areas of our ho- food. Of course, we have a children’s menu in our restaurants. tels makes life easier for our guests, as does the in-lobby Scandic Fresh and modern Nordic design – based on distinctive princi- SHOP where lighter food, snacks and drinks are on offer 24 hours a ples of comfort, value and sustainability – is an integral part of our day, as are toiletries, toys, clothes and something to read. Scandic is overall service concept, offering Scandic guests a positive hotel also in the planning stages of introducing 24-hour fitness centres experience whilst making a good conscious choice. into all our hotels. We expect the roll-out to be complete by 2008. To many people breakfast is the most important meal of the day. Our fresh and contemporary buffet selection offers every- body the opportunity for a good, healthy start to the day. There is

11 Human capital management Being part of a winning team At Scandic, our team members are not just helping our customers to a pleasant stay. They are building, protecting and strengthening our brand, everyday.

Scandic has always been a value-driven company and, by living We believe that only highly motivated people can deliver top-notch our values everyday, we create an atmosphere of loyalty, busi- service and efficiency. We also believe that a good hotel manager ness focus and service-mindedness, while at the same time makes all the difference to the success of a hotel, which is why building our employer brand. Our commitment to sustainable we invest so much in providing them with effective management business operations also serves to strengthen our attractiveness tools and training. Having good management in place contributes as an employer. greatly to the commitment and satisfaction of our team members, Being a large international employer with a rapidly expanding and Scandic’s extraordinarily high employee satisfaction scores are business, we know that having a well-developed talent manage- a true testimony to the successful combination of our local hotel ment programme is crucial in order to attract, develop and retain managers and our central corporate support. talented people. Providing continuous development opportuni- We believe in shared values with our customers, team ties for our team members and future leaders is imperative, and members and partners. New employees soon discover that we this is a central part of Scandic’s talent management strategy. In are not just talking about our values, but that we are living them our own Scandic Business School, we offer a broad range of inter- everyday. All new joiners go through an e-learning program, nal leadership programmes as well as an extensive training port- “CheckIn@Scandic”, in order to find out about Scandic’s values folio on how to improve work procedures and customer service. in the economic, ethical and environmental areas. This ensures In order to make Scandic Business School accessible to as many that every new team member quickly gets up to speed on our team members as possible, we use both classroom training and company. Health and safety is something we take very seriously e-learning. We have delivered over 11,000 e-learning courses since at Scandic, both for ourselves and our guests. We want to make it 1998. A large part of the training portfolio can also be accessed on easier for our team members to lead healthy lives, e.g. by offering the Knowledge Portal on our intranet – an efficient self-service non-smoking programmes and by promoting physical exercise tool for personal development. and healthy food choices.

12 At the end of 2007, Scandic had over 5,700 team members in 9 countries. Over the next five years we will welcome over 3,000 new team members.

85%Our industry-leading scores on team member83% satisfaction and motivation 78% 88% Are you proud to be working Do you enjoy your work? Are you motivated by your In general, do you feel that Scandic in a Scandic hotel? 83 % positive, 13 % neutral, current duties? guests receive very good service? 85 % positive, 12 % neutral, 4 % negative 78 % positive, 15 % neutral, 88 % positive, 10 % neutral, 3 % negative 7 % negative 2 % negative

Based on 4,856 respondents (in the Internal Satisfaction Index survey carried out by Netsurvey, 2007).

13 Efficient operations A hotel chain, as opposed to a chain of hotels Scandic’s renowned efficiency is built on relentless bottom-line focus, a high degree of centralisation and our long-time commitment to sustainable operations.

Scandic’s business is based on a very simple concept: to offer ity, reliability and profitability. Scandic’s way of doing business trouble-free and accessible accommodation for all. This idea is means that everyone is truly on the same team. Our company pervasive in our organisation and it deeply affects the way we is built on openness and inclusiveness, enhancing information manage our business, everyday. Our guests appreciate the de- sharing and the leveraging of relationships across functions and pendability of our service and the consistency in our execution, locations. regardless of which of our hotels they choose. This all adds up to considerable benefits in terms of opera- We like to think of ourselves as a hotel chain, as opposed to a tional efficiency and economies of scale. As we expand and lever- chain of hotels. While the difference may be subtle, it captures the age our capabilities across an increasing number of hotels, these essence of what sets Scandic apart from many of our competitors. gains will continue to accrue. Scandic’s business model is highly Firstly, it means that we are highly experienced in running our own scalable. The strength of our support organisation allows us to hotel operations. Our relentless bottom-line focus partly derives bring new hotels into the Scandic family quickly and economically. from the fact that our portfolio is dominated by leased hotels. They reach full operational capability in a very short period of It can also be traced to our roots in the high-cost Nordic region: time, owing to our standardised service concepts, effective train- continuously striving to improve productivity and profitability has ing programs and strong infrastructure, not least in the areas of always been natural to us. Secondly, it means that our business marketing, sales, purchasing and HR. Also, our long-time commit- model is characterised by a high degree of centralisation. Our sup- ment to running our business in a truly sustainable way improves port organisation ensures that our tried-and-tested concepts are operational efficiency and thus contributes to the overall profit- implemented in the same way across all our hotels, assuring qual- ability of a Scandic hotel.

14 Efficient operations enable our service concepts while sustaining margins • Centralised functions for IT, technical services, HR, marketing and sales provide considerable economies of scale • Buying power through unrivalled central procurement agreements

47.5% The average Gross Operating Profit margin for a medium-to-large Scandic in 2007.

Only six weeks passed from signing the agreement to acquire a hotel at Norra Bantorget in downtown Stockholm to the opening as a Scandic. In this short period of time, the hotel was rebranded and integrated into the Scandic infrastructure.

15 Sustainable business operations Showing the way in sustainable business For Scandic, sustainability is not just about being part of and contribute to a sustainable society and environment; it is about driving new business, working smarter and lowering costs. It is about being part of the solu- tion, not part of the problem. Since the start, our sustainability programme has saved us over €18M.

In this age of rapidly increasing environmental and social aware- mitment to sustainable practices, it is just business as usual. ness, concern for the impact of business on the world around us Working with sustainability is good for our business. Scandic’s is very much in focus. Recent years have seen the climate change leadership position in this area has made us the preferred hotel issue, and sustainable business operations in general, propelled company for numerous major companies and organisations and to the top of the global agenda, making people everywhere more we believe that we have only seen the beginning of this change. conscious as consumers. For us at Scandic, after 15 years of com- Since 1994, Scandic has worked closely with The Natural

Resource consumptions per guest night, 2007 vs. 1996 • Half of Scandic’s top 50 corporate clients requested % detailed information on our sustainability programme 100 before signing with us • Scandic’s public sector conference contracts increased 80 by 37 % in 2007, as the weight of sustainability para- meters increased in the purchase decision 60

■ 1996 ■ 2007 0 Energy Carbon Water Unsorted Single-packed dioxide waste items 400 million single-packed toiletry items have been eliminated since 1996.

16 We have significantly increased our use of ecological foods. Step, an organisation with focus on promoting global sustaina- tices are implemented and further developed at each level in the bility by guiding companies, communities and governments onto organisation, everyday. an ecologically, socially and economically sustainable path. Our sustainability programme involves every area of Scandic’s For more than eight years, Scandic has been associated with the operations, including sustainable design and construction. By Swan Label, a non-profit organisation whose mission is to contribute using better-designed water taps, toilets and showers, we have to reducing the consumer burden on the environment. In 1999, we managed to cut our water consumption by 15 % since 1996 – opened our first Swan-labelled hotel. Today, all our 107 Swedish ho- enough water to fill 863 Olympic swimming pools. tels are certified by this eco-label, one of the toughest in the world. All hotels report their resource usage in SIR, our Sustainability Our partnerships with The Natural Step and The Nordic Swan Indicator Reporting system. We track each hotel’s individual de- have been very successful, not just in terms of being environmen- velopment over time, as well as compare it to other hotels’ results. tally sound, but also in financial terms. Our programmes have, The objective is to constantly benchmark, learn and improve. for example, resulted in savings of €9.6M in energy costs as well We do not strive to be a part of our community; we are a part as the elimination of 400 million single-packed toiletry items. of our community. Each Scandic hotel runs its own local “society Together with our guests, we have decreased unsorted waste by programme”. Activities vary depending on location, but include 67 % since 1996. the donation of bed linen to shelters and the support of local Our team members are the most important part of our sus- youth activities. We believe that being an attractive employer im- tainability programme. All new starters go through an extensive plies being a good citizen. In turn, this means shared values with training programme in order to ensure that our sustainable prac- our guests, team members, partners and society at large.

Scandic’s major awards in sustainable business, 2006 – 2007 “S:t Julian Disability Award” City of Stockholm, Sweden “Glassbjörnen Environmental Award” GRIP Forum, Norway “Oslo’s Urban Environmental Prize” Oslo City, Norway “Best Environmental Program” Grand Travel Awards, Sweden “Stilpriset Hjärter Ess” accessibility Stil, Sweden “Swedish Recycling Award” Recycling & Miljöteknik, Sweden The Sustainability Award, “SLEEP” European Hotel Design Awards, London, UK “Best CSR Programme” International Hospitality Awards, Paris, France

Scandic is a 2008 finalist in the World Travel & Tourism Council’s “Tourism for Tomorrow Award”.

Partners

Scandic uses environmentally friendly detergents and cleaning products. 17 Design & construction Efficiency, comfort and sustainability begin with the design of our hotels Scandic’s guiding principles of comfort, value and sustainability deeply influence the way we approach hotel design and construction.

Scandic’s service philosophy and our dedication to sustainable In the end though, the main advantage of working with Scandic’s hotel operations form the foundation of our comprehensive hotel technical services team is that it guarantees a building with opti- design and construction guidelines. Our experts can provide mal efficiency and space utilisation that also contributes to pro- complete guidance on the construction and appointment of the viding guests with an experience that meets their high expecta- hotel, including exteriors as well as interiors. We can also give tions. Our design reflects our Nordic heritage; it is light, practical advice on the latest in energy efficient technologies as well as and simple while also being comfortable and pleasing to the eye. on sustainable materials and construction practices. Involv- All Scandic hotels have a local maintenance crew that is ing Scandic early in the design and construction process also continuously supported by our technical specialists, based in our benefits hotel owners and developers by ensuring tight financial head office as well as in regional offices. This set-up ensures that project control, economical sourcing of high-quality materials hotel assets are always maintained and serviced in an optimal and equipment, in addition to professional management of exter- way. These specialists also provide support and guidance to local nal suppliers and contractors. hotels during large rebuilding or refurbishment projects.

18 19 Join us! Please contact Scandic We would be delighted to speak to you Nevio Sagberg P.O. Box 6197 about any development opportunities. Sr Vice President Business Development SE-102 33 Stockholm [email protected] Sweden Jesper Engman Telephone: +46 8 517 350 00 Director Business Development scandichotels.com [email protected] [email protected]