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Helsinki Investment Guide 2019

Market Hotel Demand Market Area Market and Supply Participants Analysis Description Analysis Hotel 2 Investment Guide 2019

Content

1Market 2Hotel 3Demand Area Market & Supply Analysis Description Analysis Hotel market overview and analysis

1.1 Helsinki in a Nutshell 2.1 Performance and Growth 3.1 Demand Changes 1.2 Accessibility and 2.2 Hotel Profitability 3.2 Supply Changes Infrastructure Development 2.3 Future Market Outlook 3.3 Seasonal Changes 1.3 Commercial Activity and 3.4 Existing Hotel Capacity Development 3.5 New Pipeline Developments­ 1.4 Tourism and Leisure Activity and Development 1.5 Annual Conferences

⊲ Page 6 ⊲ Page 24 ⊲ Page 30 Helsinki Hotel 3 Investment Guide 2019

4Hotel Market 5Investment Participants Guide

4.1 Operators & Brands 5.1 Types of Contracts 4.2 Real Estate Owners and 5.2 Lease Terms Existing Investors 5.3 Recent Transactions 5.4 Labour Cost in 5.5 Investor’s Road Map

⊲ Page 44 ⊲ Page 48 Helsinki Hotel 4 Investment Guide 2019

Welcome to Helsinki! Explore the hotel opportunities in the Helsinki Metropolitan Area The Helsinki Metropolitan Area – the capital region of Finland – is a thriving business hub located in the heart of the region. Linking the west with the east, Helsinki has grown to become a true global hotspot for business and leisure travel. This clean, stable and secure region has an extremely well-functioning business environment and is known for a very high standard of living, quality of life and wellbeing. All this makes the Area a very attractive and promising market for the hospitality industry.

With this comprehensive guide, we wish to help you explore the possibilities and new opportunities the capital region of Finland has to offer for hotel industry professionals and potential investors. As highlighted in the guide, long-term rise in performance levels projects a bright and prosperous future for Helsinki in the hotel and hospitality industries.

Seven reasons to invest in the Helsinki Metropolitan Area Location: Helsinki sits in the middle of the west and 1 the east. With increased tourism from countries like China, , and India, coupled with constant flight route developments, Helsinki can expect an increase of both business and leisure tourism in the years ahead.

Long-term performance development in 2 hospitality KPI’s, such as Occupancy, Average Daily Rate, and RevPAR. 3 Stable economic and political market. provide a stable long term commitment 4 and income.

Potentially higher returns and yield levels than 5 other property types.

Limited number of new concept offerings and 6 international hotel brand presence = more opportunities.

Hotels offer a wide range of different investment 7 instruments and structures. Helsinki Hotel 5 Investment Guide 2019 Helsinki Hotel 6 Investment Guide 2019

Market Area 1 Analysis

40% 80% 6th of Helsinki speak in English population english proficiency has higher Out of 80 countries EF English education Proficiency Index Helsinki Hotel Market 7 Investment Area Guide Analysis 2019

Helsinki in a 1.1 Nutshell

Helsinki – an international Some of the largest companies culture and business hub in Helsinki can be found in the city center, and Aviapolis, Helsinki is the capital of Finland, including well-known companies located in the southern coast of such as Nokia and Kone. Helsinki the country by the . has several venues to host large- There are approximately 650,000 scale conferences, such as the inhabitants in Helsinki, with 1.5 , Expo and Convention million people living in the Helsinki Center, Marina Congress Center Metropolitan Area. and Helsinki Congress Paasitorni. Helsinki is one of the fastest growing A city with great centers for business and leisure in connections Europe. The city has a reputation for Helsinki is conveniently located world-class design, and is enjoying on the quickest route between a cultural and gastronomical boom Europe and Asia – only 8 hours that is quickly turning it into the new from New York and Beijing by it-destination in Europe. Helsinki airplane. The city is linked by ferry offers a wide range of top-ranked to , , St. Petersburg attractions, museums, galleries, and Travemünde. From Tallinn the restaurants and international fastest ferry to Helsinki takes about culture events – all year round. 1.5 hours. It is also possible to take There is significant corporate and the train or the E18 highway directly congress activity in the city, driving to or from St. Petersburg in just 3.5 the demand of hotel stays. hours. Helsinki Hotel 8 Investment Guide 2019

Population of Helsinki Metropolitan Area

1st 1,500,00 Finland is the Population happiest nation 2018 in the world World Happiness Report 2019

The People of Helsinki according to occupational group and gender in 2014

1 Managers

2 Professionals

3 Technicians and associate professionals

4 Clerks

5 Service, shop and market sales workers

6 Craft and related trades workers

7 Plant and machine operators and assemblers Men

8 Elementary occupations Women

0 20,000 40,000 60,000 80,000

Source: Helsinki Marketing Helsinki Hotel 9 Investment Guide 2019

Population by gender

47%Men 53%Women

Population Languages of Helsinki by age

English 1% Other 5% Men Women Somali 1% 90– Estonian 2% Finnish 82% 75–89 Russian 3%

60–74 Swedish 6%

45–59

30–44

15–29

0–14

100,000 100,000

Median age 28 years

Source: Helsinki Marketing Source: Helsinki Marketing Helsinki Hotel 10 Investment Guide 2019

Accessibility and 1.2 Infrastructure Development

World-class accessibility public transportation system, and infrastructure Helsinki is concidered one of the most functional cities in the world. Accessibility and infrastructure in Helsinki are among the best in the Air travel is not the only contributor word. With its efficient train service to the high-volume inflow of connecting the main airport (voted residents and tourists to Helsinki: the best airport in the world in the city also operates the busiest 2017 by Travellink) with the central sea passenger port in the railway station in under 30 minutes, world, circulating over 12 million together with a highly efficient passengers in 2017.

The busiest Ferry services 3.5 h sea passenger Arrow-RightStockholm Helsinki– Port in the world Arrow-RightTallinn St. Petersburg Port of Helsinki Arrow-RightSt. Petersburg by train 12.3 million Arrow-RightTravemünde passengers in 2017 Helsinki Stockholm

St. Petersburg Tallinn Baltic Sea Helsinki–Tallinn Arrow-RightTwin cities Arrow-Right Travel time 2 h by ferry Arrow-Right Up to 18 departures per day

Travemünde Helsinki Hotel 11 Investment Guide 2019

Helsinki Airport

st

1The world’s best 20+million 30minutes by train airport passengers per year from the city centre Travellink 2017

150direct flights 60+airlines flying 100+weekly departures globally to Helsinki to Asia

Source: Finavia Helsinki Hotel 12 Investment Guide 2019

Helsinki Metropolitan Area growth corridors

Airport

Aviapolis Port 1 Railway

Metro Ylästö AVIAPOLIS is situated next to the (2024) Helsinki- airport, with 11 hotels, RIN G RO 2,000 companies and 37,000 people A Potential new hotel D operating in the area, topped with easy Vantaa III 1 development areas access to the city center. The area is expected to offer 25,000 new jobs in the III near future. Experts predict that several AD RO international companies will set up regional NG headquarters here because of the proximity RI to the airport. Myyrmäki

Malmi

I OAD G R RIN

KEILANIEMI is one of the fastest growing areas in the Helsinki Metropolitan Area, receiving the 2most foreign direct investment in Finland. Leppävaara It is a center of technology, research and knowledge together with Otaniemi's and VTT Technical Research Centre. Companies such as Nokia, Fortum,

I Cargo Port I

Tieto, Kone, Neste Oil, Rovio, Valmet and

Microsoft have their headquarters here, D Vuosaari with 45% of the Finnish Stock Exchange A Itäkeskus O Ruskeasuo located in the area. It takes only 15 minutes R 4

to downtown on the new metro line. G

N

I R Vallila Otaniemi 5 6 Hakaniemi 2 Keilaniemi HELSINKI WATERFRONT JÄTKÄSAARI Helsinki is located 10 minutes by tram from Central the city center in the western Business area.3 The area will include housing, offices District and hotels. In 2025, when the area is fully developed it will house approximately 18,000 Jätkäsaari residents and 6,000 jobs. Matinkylä 3

All of the new development areas are easily reached via either public or private transport. Helsinki Hotel 13 Investment Guide 2019

Aviapolis 1 Tikkurila

Ylästö THE PASILA DISTRICT is is one of the RIN key development areas in the city. G RO A It is expected to house over 50,000 Vantaa D III jobs4 and 30,000 inhabitants by 2040. Pasila is known for national conventions, state agencies, a powerful media cluster, and the III D biggest indoor sports arena in the country. OA R The transportation Hub of Helsinki will have ING R estimated 47 million annual passengers in Myyrmäki 2025. A new shopping center and a high rise area will change the area substantially.

Malmi

I OAD G R RIN

KALASATAMA is being developed on scenic waterfront sites close to the Leppävaara city center. Owing to good transport 5connections (6 minutes to downtown on the metro), the area already boasts thousands of jobs, with numerous new offices andVuosaari commercial spaces planned.

I Cargo Port I The nearby former gas plant has been

D Vuosaari

A Itäkeskus converted into a buzzing cultural centre, O Ruskeasuo adding to the charm of the area. The REDI

R 4 mall was opened in 2018. Development G continues until the 2030’s with expected

N

I Pasila 25,000 residents and over 10,000 jobs. R Vallila Herttoniemi Espoo Otaniemi 5 6 Kalasatama Hakaniemi Tapiola 2 Keilaniemi Helsinki Laajasalo Central Ruoholahti Business THE -SÖRNÄINEN DISTRICT is the urban-hip area of the city, District located on the northeastern outskirts Jätkäsaari of6 Helsinki’s urban core. A new coding school, Helsinki Theatre Academy and the Matinkylä Lauttasaari 3 numerous cultural hotspots are lift the area’s image towards trendy urban. The rapidly-developing area will host 25,000 jobs and 30,500 inhabitants by the end of the 2030’s. 2 km Helsinki Hotel 14 Investment Guide 2019

Airport passengers at the Helsinki Airport

20,000,000

15,000,000

10,000,000

5,000,000

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: Finavia/Helsinki Airport Helsinki Hotel 15 Investment Guide 2019 Helsinki Hotel 16 Investment Guide 2019

Helsinki Metro- politan Area is the economic center of Finland and receives the majority of foreign investments. Helsinki Hotel 17 Investment Guide 2019

Commercial 1.3 Activity and Development

Helsinki – Finland’s A home for major economic hotspot companies The Helsinki Metropolitan Area The Helsinki Metropolitan Area is is the economic and financial a home for 20% of the companies center of Finland. The area is in Finland, accumulating 39% of especially strong in information the country's turnover. 27% of all and communications technology, the jobs in Finland can be found health, smart and clean in the area. The main business technologies and business services. districts are the Helsinki Central fDI Intelligence has ranked the Business District (CBD), Pasila, Vallila, region at the top in attracting Kalasatama, as well as Keilaniemi foreign direct investment in and Aviapolis, hosting global Europe. International investment is companies such as Nokia, Kone and supported by the strengths of the Microsoft. Other large international area: an extremely well-functioning companies include UPM and infrastructure with uncomplicated , both major global and efficient cooperation players of forest and bio-industry. throughout the whole ecosystem – The Helsinki Metropolitan Area's from citizens to companies and the share of the country's business government. continues to grow, and is expected to drive significant demand for accommodation.

The largest companies in Finland

Company Name Employees Annual Turnover (000)

Nokia Oyj 101,731 23,147,000

Neste Oyj 5,297 13,217,000

Kesko Oyj 22,077 10,675,000

Stora Enso Oyj 26,206 10,045,900

UPM-Kymmene Oyj 18,489 10,010,000

Kone Oyj 53,417 8,942,400

SOK 6,756 7,074,005

Outokumpu Oyj 10,485 6,363,000

Sampo Oyj 9,364 5,815,000

Metsäliitto-Konserni 9,399 5,040,000

Source: The largest companies in Finland Helsinki Hotel 18 Investment Guide 2019

Tourism and 1.4 Leisure Activity and Development

Main attractions in Helsinki No. of visitors

1 Oodi library* 2,000,000

2 Linnanmäki Amusement Park ca 1,100,000

3 Sea Fortress ca 1,000,000

4 Temppeliaukio Rock Church* 880,000

5 * 500,000

6 Uspenski Orthodox Cathedral* 500,000

7 Helsinki Zoo 455,000

8 440,000

9 Grand Helsinki* 305,000

10 Museum of Contemporary Art * 300,000

11 Art Museum (opening exhibition) 270,000

12 Sea Life Helsinki* 250,000

* Estimate

Source: Website of attraction & Tripadvisor

12 2

4 1 7 10 9 11 8 5 6 1 km Central Business District

3 Helsinki Hotel 19 Investment Guide 2019 Helsinki Hotel 20 Investment Guide 2019 Helsinki Hotel 21 Investment Guide 2019

Major annual events in Helsinki

Event Time of Year

Lux Helsinki (Light art festival) January, 5 days

Bravo! (Theatre festival for children and young people) March, 8 days

Ruutia! (Dance festival for childen and young people) April, 5 days

Restaurant day May, 1 day

Helsinki City Marathon May, 1 day

Tuska Open Air Festival (Music & urban culture) June, 3 days

Jazz-Espa (Jazz festival) June-July, 14 days

Helsinki Cup (Junior football) July, 5 days

Ropecon (Non-commercial roleplaying) July, 3 days

The Weekend Festival July, 2 days

Viaporin Tuoppi Regatta August, 1 day

FLOW Festival (Music & urban culture) August, 3 days

Art Goes Kapakka (Art & gastronomy festival) August, 10 days

Viapori Jazz August, 5 days

Poetry Moon (Literary festival) August, 7 days

Helsinki Festival (Cross-genre event) August-September, 14 days

Helsinki Comics Festival September, 2 days

Helsinki Design Week September, 10 days

Love & Anarchy Film Festival September, 10 days

Helsinki Sauna Day September, 1 day

Helsinki International Porsche Horse Show October, 4 days

Etnosoi! (World music festival) November, 7 days

Baltic Circle Festival (Theatre) November, 5 days

We Jazz December, 7 days

Source: Helsinki Marketing Helsinki Hotel 22 Investment Guide 2019

Fairs and 1.5 Conferences

Helsinki is a globally recognized conference city with an average of 300 international conferences with more than 40,000 participants arranged each year. Together with the fairs, the attendees amount up to one million persons.

Examples of some of the biggest fairs and conferences

Name Date Visitors (estimate)

Matka 2019 / Travel 2019 17.-20.1.2019 65,000

Vene 19 Båt / Boat 19 8.-17.2.2019 65,000

MP 19 Moottoripyörämessut / Motorbike fair 1.-3.2.2019 60,000

Habitare 2019 11.-15.9.2019 60,000

Caravan 2019 18.-20.1.2019 55,000

I love me 2019 18.-20.10.2019 50,000

Koiramessut 2019 / Dog fair 7.-8.12.2019 37,000

GoExpo Winter 2019 15.-17.11.2019 32,000

American Car Show 2019 19.-21.4.2019 25,000

SLUSH 21.-22.11.2019 22,500

Tubecon 2019 16.-17.8.2019 17,000

Viini ja Ruoka 2019 -messut / Food and Wine 2019 24.-27.10.2019 13,000

Finland’s Presidency of the Council of European Union (total of 80 events) 1.-7.-31.12.2019 10,000

Summer Assembly 2019 1.-4.8.2019 9,000

Hammaslääkäripäivät 2019 / Dentist 2019 7.-9.11.2019 9,000

Nordic Business Forum 9.-10.10.2019 7,500

Lääkäri 2019 / Doctor 2019 9.-11.1.2019 7,000

Beauty Pro 2019 18.-20.11.2019 6,700

EAIE Helsinki 2019 (Conference of the European Association for International Education) 23.-27.9./2019 6,000

Farmasian Päivät 2019 / Pharmacy 2019 29.-30.11.2019 5,000

Lautasella 2019 / At your plate 2019 5.-6.4.2019 4,500

Sairaanhoitajapäivät 2019 / Nurse 2019 21.-22.3.2019 4,000

TRA 2020 Transport Research Arena 26.-30.4.2020 4,000

SIJOITUS INVEST 2019 26.-27.11.2019 3,800

Eurospine 14.-18.10.2019 3,000 Helsinki Hotel 23 Investment Guide 2019

st

Helsinki15 is ranked 1Finlandia Hall is the #15 top congress best congress venue city in the world in the world The Union of International Bea World Festival 2018 Associations (UIA)

Name Start date Visitors (estimate)

XXVI International Congress of Entomology, ICE 2020 19.-24.7.2020 3,000

World Congress of the European Association for Palliative Care EAPC 19.-21.5.2021 3,000

SETAC EUROPE 29th Annual Meeting 24.-30.5.2019 2,000

World Circular Economy Forum 2019 (WCEF 2019) 3.-5.6.2019 2,000

Arctic 15 5.-6.6.2019 2,000

2019 HIMSS Europe & Health 2.0 Conference 11.-13.6.2019 2,000

EAS 2021 - Congress of the European Atherosclerosis Society 30.5.-2.6.2021 2,000

Eurotox 2019 8.-11.9.2019 1,500

World Conference of the International Society for Music Education - ISME 2.-7.8.2020 1,500

Labquality Days 2019 7.-8.2.2019 1,000

Cyber Security Nordic 19 2.-3.10.2019 800

11th Annual Meeting of the Society for Neurobiology of Language SNL 19.-21.8.2019 700

EBA 2019 - European Burns Association Congress 4.-7.9.2019 700

3rd Nordic Congress on Gynaecological Endoscopy NCGE 5.-8.6.2019 600

26th International Annual EurOMA Conference 17.-19.6.2019 600

EFECS European Forum for Electronic Components and Systems 19.-21.11.2019 600

ESPR - Annual Congress of the European Society of Paedriatric Radiology 4.-8.6.2019 500

WTCF 2019 Fragrant Hills Tourism Summit (World Tourism Cities Federation) 2.-4.9.2019 500

Euclid Consortium Meeting 4.-7.6.2019 450

40th Meeting of the European Strabismological Association ESA 5.-8.6.2019 450

WORK 2019 - The 4th International Interdisciplinary Conference on 14.-16.8.2019 400 Research on Work and Working Life

World Conference of Explosives and Blasting EFEE 15.-17.9.2019 400

16th Nordic Waste Water Conference NORDIWA 23.-25.9.2019 400

Source: Various conference venues Helsinki Hotel 24 Investment Guide 2019

Hotel Market 2 Description Helsinki Hotel 25 Investment Guide 2019

Performance 2.1 and Growth 2018: a record-breaking 2010 the highest occupancy was and compound annual growth year achieved in 2018 – at 73%. Before rate of 1.7%. Looking at the pace of this, Occupancy levels circulated performance evolution in a market Looking at the full-year RevPAR around 68%. is crucial; it is the best way to track actual, 2018 was a record-breaking and benchmark development and year for Helsinki Metropolitan Area. Increasing rates, positive goals. When looking at Helsinki City The area achieved 81 RevPAR growth Centre it is impressive to note that – a 3.0% lift from full-year 2017. Both Room rates have increased at a 50/365 nights achieve over 90% Occupancy and ADR saw increases, higher pace, which is the main in occupancy, and 150/365 nights contributing to the RevPAR growth. contributor to the positive RevPAR achieve over 80% in occupancy. Here however it is important to Helsinki made a strong recovery growth over the past 8 years. The mention that the sample mainly after the global economic crisis, in increase from 95 EURO in 2010 to 111 consists of branded properties. both occupancy and rates. Since EURO in 2018 is a 17% total increase

KPI performance 2010–2018

€ 120 74%

€ 90 72%

€ 60 70%

€ 30 67%

€ 0 65% 2010 2011 2012 2013 2014 2015 2016 2017 2018

OCC ADR* RevPAR *All rates include VAT 10% Source: Statistics Finland

Nordic comparison 2017–2018

Helsinki Stockholm Oslo Copenhagen Reykjavik

2017 2018 % 2017 2018 % 2017 2018 % 2017 2018 % 2017 2018 %

Occupancy 71 72 1.4 % 67 67 0.0 % 69 68 -1.4 % 79 79 0.0 % 85 80 -5.9 %

ADR 113 116 2.7 % 125 118 -5.6 % 109 110 0.9 % 131 134 2.3 % 165 161 -2.4 %

RevPAR 80 84 5.0 % 84 80 -4.8 % 76 75 -1.3 % 104 106 1.9 % 140 129 -7.9 % All rates exclude VAT Source: Benchmarking Alliance Helsinki Hotel 26 Investment Guide 2019

Hotel 2.2 Profitability

A hotel’s performance will of course could potentially operate. Keep in vary, and if anyone knew how to mind that the examples below are guarantee a high earning hotel based on the assumption that the operation with sky high profits, hotels are operating in a stable it would probably be the most economy – exactly the current state popular industry in the world. of Helsinki and Finland. Nevertheless, below are examples of how hotels in different segments

Hotel X Budget Midscale Luxury

Hotel Trading Days 365 365 365

Total Rooms 200 200 200 Rooms Available 73,000 73,000 73,000 Rooms Sold 58,400 54,750 47,450 Occupancy rate 80% 75% 65% ADR 70 100 180 RevPar 56 75 117

Revenues Rooms 90.1% 4,088,000 75.3% 5,475,000 72.1% 8,541,000 Food and Beverage 7.7% 350,000 15.8% 1,150,000 20.7% 2,450,000 Other Income (conference, spa, etc.) 2.2% 100,000 8.9% 650,000 7.2% 850,000 Total Revenue 100.0% 4,538,000 100.0% 7,275,000 100.0% 11,841,000

Operating Costs Room 20.0% 817,600 25.0% 1,368,750 35.0% 2,989,350 Food and Beverage 60.0% 210,000 65.0% 747,500 75.0% 1,837,500 Other Income 20.0% 20,000 25.0% 162,500 30.0% 255,000 Total Operating Costs 23.1% 1,047,600 31.3% 2,278,750 42.9% 5,081,850

Undistributed Costs Administration & General 5.0% 226,900 5.5% 400,125 7.0% 828,870 Sales & Marketing 5.0% 226,900 5.5% 400,125 6.5% 769,665 Property Operation and Maintenence 3.0% 136,140 4.0% 291,000 4.5% 532,845 Energy and Utilities 4.0% 181,520 4.0% 291,000 5.0% 592,050 Total Operating Costs 17.0% 771,460 19.0% 1,382,250 23.0% 2,723,430

Gross Operating Profit 59.9% 2,718,940 49.7% 3,614,000 34.1% 4,035,720

Source: NHC data Helsinki Hotel 27 Investment Guide 2019

Future Market 2.3 Outlook

⊲ Things are looking bright Accessibility for Helsinki ⊲ Limited (confirmed) projects in In a nutshell, hospitality pipeline, with the exception of performance over the next five 2020 where over 2,000 rooms are years in Helsinki is expected to be expected to enter the market positive. There are various factors ⊲ Increased volume in tourist taken into consideration when demand making this statement, the most important ones being: ⊲ Stable economic and political market

⊲ Increased interest from international investors and operators

KPI performance forecast 2013–2023

€ 120 75%

€ 90 73%

€ 60 70%

€ 30 68%

€ 0 65% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

OCC ADR RevPAR Source: Statistics Finland, NHC Helsinki Hotel 28 Investment Guide 2019 Helsinki Hotel 29 Investment Guide 2019 Helsinki Hotel 30 Investment Guide 2019

Demand & Supply 3 Analysis Helsinki Hotel 31 Investment Guide 2019

Demand 3.1 Changes

Foreign tourism – a key success factor in Helsinki What makes Helsinki different from another capital, Stockholm, is its increased volume on foreign tourism. While some of the the other Nordic capitals are more dependent on domestic travel, Helsinki relies equally on international visitors.

The gap between domestic and Foreign 50% Domestic 50% foreign visitors is quite narrow, which is a good sign of a stable market balancing the demand and making both equally important to the overall market performance.

Domestic vs. foreign guest nights in Helsinki

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Domestic Foreign Source: Helsinki Marketing Helsinki Hotel 32 Investment Guide 2019

Business remains important, tourism keeps growing Similar to the gap between domestic and foreign visitors to Helsinki, the gap is equally narrow when looking at purpose of travel. In 2010, the business segment was somewhat larger compared to the leisure segment. However, over the past 10 years, the leisure segment has surpassed business. In 2018, the split was very close to a 50/50 split.

A reason for this change is strongly related to the increase in incoming flight routes to Helsinki, especially from Asia. Despite seeing a decrease in overnight stays from both China and Japan, the long- term trend points to the opposite direction. Over the last 5 years, overnight stays have increased significantly from Asia in general, especially from China and Japan.

Guest nights by travel purpose (leisure vs business)

3,000,000

2,500,000

2,000,000

Business 50% Leisure 50% 1,500,000

1,000,000

500,000

0 2010 2011 2012 2013 2014 2015 2016 2017 2018

Leisure Business Source: Statistics Finland Helsinki Hotel 33 Investment Guide 2019

Growing tourism equals a When looking at the origin of visitors The increased demand from China growing hotel market to Helsinki it is important to focus on – 23.2% between 2016 and 2018 – annual percentage changes from has also become an important Tourism in Helsinki has over the the key countries that contribute factor to Helsinki’s success. A past 8 years experienced a steady to the city’s tourism. Looking at major reason for the growth is the annual growth, which is a key the table below points out several increased number of direct flight reason for the city’s successful hotel interesting developments since routes from mainland China. performance. The continuously 2016: growing demand from both domestic and international The improvement of Russia’s tourists has resulted in industry economy has led to a vast increase stakeholders being able to increase in Russians travelling abroad. The the city room supply. This keeps annual increase of 36.5% in 2017 and enhancing Helsinki as a steadily a further 5.2% increase in 2018 is growing hotel market. an important factor in the success Helsinki has experienced since 2016.

Percentage of tourists Number of overnight stays by foreigners at accommodation establishments 1)

Country of domicile % of total 2015 2016 Growth % 2017 Growth % 2018 Growth % 2018

Russia 9% 192,776 173,716 -9.9% 237,122 36.5% 249,487 5.2%

Germany 8% 202,414 193,856 -4.2% 212,840 9.8% 225,288 5.8%

USA 7% 145,721 165,317 13.4% 192,110 16.2% 206,670 7.6%

United Kingdom 7% 172,405 168,785 -2.1% 203,208 20.4% 195,434 -3.8%

China 7% 138,101 156,593 13.4% 196,489 25.5% 192,894 -1.8%

Sweden 6% 175,843 177,369 0.9% 204,302 15.2% 187,024 -8.5%

Japan 5% 139,711 145,722 4.3% 170,680 17.1% 152,254 -10.8%

Spain 3% 51,543 58,049 12.6% 76,049 31.0% 79,976 5.2%

Estonia 3% 57,690 61,068 5.9% 74,393 21.8% 79,401 6.7%

France 3% 62,410 66,337 6.3% 75,108 13.2% 74,955 -0.2%

Other 43% 966,938 1,047,670 8.3% 1,223,450 16.8% 1,258,867 2.9%

Total 2,305,552 2,414,482 4.7% 2,865,751 18.7% 2,902,250 1.3%

1) Accommodation establishments with at least 20 bed places or caravan pitches with electrical connection points, as well as hostels

Source: Statistics Finland, Accommodation statistics Helsinki Hotel 34 Investment Guide 2019

Supply 3.2 Changes

The demand for The Helsinki hotel market accommodation keeps experienced a decline in demand in rising in Helsinki 2009 following the global financial crisis, and again in 2013 as key A stable and successful hotel industries, such as telecom (lead market is highly dependent on by Nokia), were struggling. However, balancing demand and supply. supply growth in the period has In other words, to decide whether been very limited with few new to build a new hotel in a stable developments, softening the hotel market, demand needs to impact on hotel performance. In be on the rise as well. Helsinki has 2018, there are approximately 14,000 since the global economic crisis in bedrooms (hotels or similar) in 2008 experienced a limited supply greater Helsinki. increase, a compound annual growth rate of 1.7%. The supply is set to grow This has been positive for the As indicated in the table on the existing hotels as the city demand right, supply has only increased has been increasing at a higher slightly, less than the increase in pace: this usually opens possibilities demand. Since 2008, the annual for increased room rates. supply increase/decrease has varied, averaging an annual The city needs more hotels change of below 2%; 2017 was an As seen in the graph on the right, exception, where the room supply 22 new establishments (making up rose by 8.9%. As the interest of around 2,900 rooms) have opened investing in Helsinki is on a rise, it is in the Helsinki Metropolitan Area expected to see continuous years of since 2007. Compared to the other supply increases, however, demand Nordic capitals like Stockholm, is expected to rise at a higher pace. Copenhagen and Oslo, this is the most modest increase in supply over the roughly 10-year period when including outskirts and neighbouring towns (greater areas). Helsinki Hotel 35 Investment Guide 2019

Hotel supply in Helsinki Metropolitan Area

110 15,000

103* 100

83 11,250 84 81 82 82 83 83 82

55 7,500

28 3,750

0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018*

Hotels Hotel rooms * Prelim Numbers Source: Statistics Finland Helsinki Hotel 36 Investment Guide 2019 Helsinki Hotel 37 Investment Guide 2019

Seasonal 3.3 Changes

Helsinki is a very stable market again, it is not easy to point out the when looking at the seasonal hotel peak and low season. While RevPAR demand changes. As seen in the peaks between May and June, the graph below, performance varies performance remains high in the month to month, but there is not last 6 months of the year. a clear drop in the occupancy level to 40–50%, like in some other markets. It is also interesting to look at summer versus winter. Here

Monthly KPI performance January–December 2018

ADR OCC % 130 100

110 88

90 75

70 63

50 50 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

ADR RevPAR OCC

Source: Statistics Finland Helsinki Hotel 38 Investment Guide 2019

Existing Hotel 3.4 Capacity Helsinki Metropolitan Area

No. of No. of BUDGET/ECONOMY Chain MIDSCALE Chain Rooms Rooms

AEL Hotel Other N/A Best Western Carlton Best Western 21

Airport Hotel Bonus Inn Other 211 Best Western Plus Hotel Haaga Other 21

Airport Hotel Pilotti Other 112 Break Hotel Flamingo 541

Arkadia Hotel & Hostel Other 25 Finlandia Park Hotel Helsinki Finlandia Hotels 40 (Käpylä) Cheap Sleep Hostel Other 8 Forenom Aparthotel Espoo Forenom 133 Eurohostel Other 135 Leppävaara

Forenom Hostel Espoo Kivenlahti Forenom 36 Forenom Aparthotel Helsinki Forenom 144 Herttoniemi Forenom Hostel Espoo Otaniemi Forenom 88 Forenom Aparthotel Helsinki Forenom Hostel Helsinki Kuto- Forenom 96 Forenom 191 motie Forenom Aparthotel Helsinki Forenom Hostel Helsinki Meri- Forenom 66 Forenom 29 Pikku haka Forenom Aparthotel Vantaa Forenom Hostel Helsinki Pitä- Forenom 57 Forenom 114 Tikkurila jänmäki Helka Hotel Helka Hotels 150 Hostel Academica Other 326 Hellsten Espoo Hellsten Hotels 100 Hostel Diana Park Other 15 Hellsten Helsinki Parliament Hostel Suomenlinna Other 8 Hellsten Hotels 43 Apartments Hotel Avion Other 39 Hellsten Helsinki Senate Hellsten Hotels 52 Hotel Finn Other 35 Holiday Inn Helsinki City Centre IHG/ Scandic Hotels 174 Hotel Sofia Other 45 Holiday Inn Helsinki Exhibition & IHG/ Scandic Hotels 244 Omena Hotels Lönnrotinkatu­ Omena 147 Convention Center Holiday Inn Helsinki Vantaa Omena Hotels Yrjönkatu­ Omena 82 IHG/ Scandic Hotels 281 Airport The Yard Concept Hostel Other 11 Holiday Inn Helsinki West IHG/ Scandic Hotels 256 Total 1,657 Ruoholahti

Hotel Anna Other 64

Hotel Arthur Other 182

Hotel Ava Other 75

Hotel Rantapuisto Primehotels 182

Hämeenkylä Manor Other 52 Helsinki Hotel 39 Investment Guide 2019

No. of No. of MIDSCALE Chain UPSCALE Chain Rooms Rooms

Original Sokos Hotel Albert Ascend Collection Hotel F6 Nordic Choice 66 Sokos Hotels 95 Helsinki Clarion Hotel Helsinki Nordic Choice 485 Original Sokos Hotel Helsinki Sokos Hotels 203 Clarion Hotel Helsinki Airport Nordic Choice 258 Original Sokos Hotel Pasila Sokos Hotels 178 Helsinki Crowne Plaza Helsinki IHG/ Scandic Hotels 349

Original Sokos Hotel Presidentti GLO Hotel Art Kämp Collection 171 Sokos Hotels 494 Helsinki Hilton Helsinki Airport Hotel Hilton Worldwide 330 Original Sokos Hotel Tapiola Sokos Hotels 154 Garden Espoo Hotel Fabian Kämp Collection 58

Original Sokos Hotel Vaakuna Hotel GLO Espoo Sello Kämp Collection 147 Sokos Hotels 270 Helsinki Hotel GLO Helsinki Airport Kämp Collection 76 Original Sokos Hotel Vantaa Sokos Hotels 265 Hotel Glo Kämp Collection 184 Scandic Espoo Scandic Hotels 96 Hotel Indigo Helsinki Boulevard IHG 120 Scandic Grand Marina Scandic Hotels 462 Hotel Primehotels 106 Scandic Hakaniemi Scandic Hotels 152 Hotel Seurahuone Helsinki Scandic Hotels 118 Scandic Helsinki Airport Scandic Hotels 150 Radisson Blu Aleksanteri Hotel Radisson Hotel 151 Scandic Helsinki Aviacongress Scandic Hotels 278 Helsinki Group Radisson Hotel Scandic Helsinki Aviapolis Scandic Hotels 306 Radisson Blu Hotel Espoo 209 Group Scandic Scandic Hotels 123 Radisson Hotel Radisson Blu Royal Hotel Helsinki 262 Scandic Kallio Scandic Hotels 121 Group

Scandic Marski Scandic Hotels 289 Radisson Blu Seaside Hotel Radisson Hotel 337 Helsinki Group Scandic Meilahti Scandic Hotels 188 Rivoli Jardin Hotel Other 55 Scandic Paasi Scandic Hotels 170 Radisson Hotel Radisson Blu Plaza Hotel Helsinki 302 Scandic Park Helsinki Scandic Hotels 523 Group

Scandic Simonkenttä Scandic Hotels 360 Solo Sokos Sokos Hotels 152

Total 7,851 Hilton Helsinki Kalastajatorppa Hilton Worldwide 238 Hotel

Total 4,174

No. of LUXURY Chain Rooms

Hilton Helsinki Strand Hilton Worldwide 190

Hotel Haven Kämp Collection 137

Hotel Klaus K Kämp Collection 171

Hotel Kämp Kämp Collection 179

Hotel Lilla Roberts Kämp Collection 130

Lapland Hotel Lapland Hotels 182

St. George Kämp Collection 150

Total 1,139 Helsinki Hotel 40 Investment Guide 2019 30

8 New Pipeline

26 4 Developments­ Helsinki 12 3.5 20 Metropolitan Area New developments 3 in Helsinki Public / confirmed Points 3 pipeline of interest 10 Location TRANSPORTATION Type 1 Katajanokka 1 Ring Road I Road 2 Hakaniemi 2 Ring Road II Road 3 Helsinki CBD 3 Ring Road III Road 4 Vantaa 4 Esplanade Street 5 Street 5 6 Railway 6 Pasila, Tripla 7 Helsinki Central Railway Station Railway, Metro & Bus terminal 7 Ruskeasuo 8 Helsinki Airport Airport 8 Helsinki CBD 9 West Harbour Harbour 1 10 Port of Helsinki – Katajanokka Harbour 9 11 South Harbour Harbour 1 10 Myyrmäki 27 ATTRACTIONS 11 Kamppi 12 Linnanmäki Amusement Park 12 Koivuhaka 13 Suomenlinna Sea Fortress 13 Helsinki CBD 14 Helsinki Cathedral Church 25 14 Hakaniemi 15 Church 15 Katajanokka 7 16 Uspenski Orthodox Cathedral Church 16 Katajanokka 17 Ateneum Museum 6 6 17 Töölö 24 18 Kiasma Museum of contemporary art 18 Kalasatama 21 19 Amos Rex Museum 2 20 19 Töölö 20 Heureka Science Park 20 Vallila 17 12 2 21 Vallila SHOPPING CENTERS AND DEPARTMENT STORES 18 22 Helsinki CBD 14 21 Forum Shopping 31 23 Hakaniemi 29 22 Kamppi Shopping, Metro & Bus terminal 23 24 Pasila 33 5 23 Stockmann Shopping 19 18 25 Jätkäsaari 15 8 22 9 24 24 Sokos Shopping 22 19 7 26 Jätkäsaari 17 14 11 21 13 14 25 Itis Shopping, Metro & Bus terminal 23 4 27 Jätkäsaari 3 10 1 15 Shopping & Entertainment SPA 5 26 Jumbo & Flamingo SPA 16 28 Jätkäsaari Center 11

29 Jätkasaari 27 Sello Shopping, Railway & Bus terminal 28 32 25 27 30 Helsinki-Vantaa Airport 26 28 Iso Omena Shopping, Metro & Bus terminal 29 28 31 Espoo 29 Ainoa Shopping, Metro & Bus terminal 9 32 Jätkäsaari 30 Redi Shopping, Metro & Bus terminal 13 33 Keilaniemi 31 Tripla (2019–2020) Shopping, Railway terminal

Please see next page for more detailed information.

Railway Metro Jokeri Light Rail (2024) Source: NHC Data 7

24 5 12

20

3

10

Helsinki Hotel 41 Investment Guide 2019 30 1

8

26 4 12 20

25 3

3

10

25

7

6 31 6 24

21 1

1 20 27 12 17 2 30 18 25 14 7

27 6 6 24 23 521 2 20 19 15 18 22 9 17 12 8 24 2 19 22 7 17 18 14 14 13 31 11 21 16 29 3 23 4 23 1 15 33 5 10 19 18 5 15 8 22 9 16 24 22 19 7 17 14 11 21 13 14 11 23 4 3 10 1 15 26 5 16 11 32 25 27 28 26 32 25 27 29 26 29 28 28 9 9 13

13 2 km 1 km Helsinki Hotel 42 Investment Guide 2019

New developments in Helsinki Public / confirmed pipeline

Room Development Opening Location Address Operator Concept No. type Year 1 Katajannokka Kanavakatu 1 NREP Unknown 200 Conversion 2019 2 Hakaniemi Hämeentie 33 NREP Unknown 200 Conversion 2019 3 Helsinki CBD Mannerheimintie 10 Scandic Upscale 80 Extension 2019 Jumbo Shopping Mall, 4 Vantaa Sokos Hotels Midscale 232 Extension 2019 Flamingo SPA Total 2019 Total 2019 712 5 Kaartinkaupunki Unioninkatu 14 U14 Conversion 120 New build 2020 6 Pasila, Tripla Ratapihantie 6 Sokos Hotels Midscale 430 New build 2020 7 Ruskeasuo Mannerheimintie 109 SSA Base Hotel Midscale 440 New build 2020 8 Helsinki CBD Vilhonkatu 13 Scandic Midscale 483 Conversion 2020 Total 2020 Total 2020 1,473 9 Kruununhaka Mariankatu 23 Ruby Hotels Upscale 140 Conversion 2021 10 Myyrmäki Raappavuorentie NREP Unknown 322 New build 2021 11 Kamppi Fredrikinkatu 51–53 Primehotels Unknown 230 Conversion 2021 12 Koivuhaka Kuriiritie 11–13 Primehotels / Marriott Midscale 206 New build 2021 13 Helsinki CBD Kaivokatu 12 HYY Luxury 190 Conversion 2022 14 Hakaniemi Siltasaarenkatu 13 Primehotels Lifestyle 200 New build 2022 15 Katajannokka Vyökatu 1 Primehotels / Marriott Upscale 50 Extension TBA 16 Katajannokka Kanavakatu 14 YIT Unknown 200 New build TBA 17 Töölö Nordenskjöldinkatu 13 Helsinki Garden Unknown 300 New build TBA 18 Kalasatama Leonkatu 2 SRV Unknown 200 New build TBA 19 Töölö Taivallahti Unknown SPA/Upscale 200 New build TBA 20 Vallila Aleksis Kiven Katu 21–23 Folks Hotel Midscale 150 Conversion TBA 21 Vallila Aleksis Kiven Katu 49 YIT Conference 380 New build TBA 22 Helsinki CBD Vuorikatu 24 Jatke Oy Unknown 200 New build TBA 23 Hakaniemi Hakaniemenranta Ab Invest As / Nordic Choice Upscale 400 New build TBA 24 Pasila Tower Area Unknown Unknown 300 New build TBA 25 Jätkäsaari Välimerenkatu 18 Art Hotel / Primehotels Boutique 150 New build TBA 26 Jätkäsaari Välimerenkatu 22 Hotel Hellsten Aparthotel 80 New build TBA 27 Jätkäsaari Jätkänsaarenlaituri 3 SRV / Stora Enso Midscale 185 New build TBA 28 Jätkäsaari Atlantinkatu Royal Areena SPA 350 New build TBA 29 Jätkasaari Välimerenkatu Vastint / Moxy Budget / Lifestyle 192 New build TBA Helsinki-Vantaa 30 T1 Unknown Unknown 600 New build TBA Airport 31 Espoo Tapiola Unknown Upscale 200 Conversion TBA 32 Jätkäsaari Palvelukortteli Forenom Aparthotel 200 New build TBA 33 Keilaniemi Keilaranta Kämp/GLO Upscale 350 New build 2023 Total 2020 Arrow-Right 5,425 Grand total Total 7,610

Source: NHC Data Helsinki Hotel 43 Investment Guide 2019 Helsinki Hotel 44 Investment Guide 2019

Hotel Market 4 Participants Helsinki Hotel 45 Investment Guide 2019

Operators & 4.1 Brands

Growing potential for and more attractive for leading international companies international management companies. The Nordic market has predominantly been dominated by Scandic: a clear leader local players. Due to the nature of in supply the local business climate where Looking at the Helsinki Metropolitan lease contracts have been the Area and the existing supply, standard lease type, international there is one clear leader: Scandic. management companies have not After acquiring the local brand yet made an aggressive push into Restel, Scandic now accounts for the Nordic countries. over 23% of the supply in Helsinki. This is most likely going to shift Other operators making up a slightly in the near future as a large portion of the current supply result of real estate owners being include S-Group, Kämp Collection more open to management and and Nordic Choice. franchise contracts. The Nordic markets are becoming more

Major operators Helsinki Metropolitan Area 2018

Scandic Hotels + 23% Hotel Seurahuone

Sokos Hotels 15%

IHG*, operated by Scandic 10%

Kämp Collection Hotels 10%

Radisson**, 9% operated by Sokos Hotels

Nordic Choice Hotels 6%

Hilton Hotels, 5% operated by Scandic

Other operators 23%

* Inter Continental Hotel Group: Holiday Inn, Indigo and Crowne Plaza Hotels

Source: NHC Data * * Radisson Blu Hotels Helsinki Hotel 46 Investment Guide 2019

Nordic operators & brands

International operators & brands Helsinki Hotel 47 Investment Guide 2019

Real Estate 4.2 Owners and Existing Investors Biggest real estate investors in Finland (2017) EUR billion

Kojamo Plc

Sponda Plc

SATO Corporation

Ilmarinen Mutual Pension Insurance Company

Varma Mutual Pension Insurance Company

OP Insurance and Pension Companies and OP Funds

LocalTapiola Group and Local Tapiola's Funds

Keva

Elo Mutual Pension Insurance Company

Citycon Plc

eQ Real Estate Funds

Fennia Group and Funds

Avara Ltd.

Logicor

CapMan Real Estate

Etera Mutual Pension Insurance Company

AB Sagax

Bank of Åland Real Estate Investment Funds

Technopolis Plc

Aberdeen Standard Investments

Nordea Life Insurance Finland Ltd.

Nordisk Renting

Antilooppi Ky

Niam

ICECAPITALS REAM

NREP Companies invest in hotels Mercada Ltd.

Source: KTI Pandox

0 1 2 3 4 5 Helsinki Hotel 48 Investment Guide 2019

Investment 5 Guide Helsinki Hotel 49 Investment Guide 2019 Helsinki Hotel 50 Investment Guide 2019

Types of Hotel 5.1 Contracts

Lease Agreement Lease agreement is historically and currently the most common type of agreement in the Nordics. Lease Lease Agreement agreements are typically based around three key areas: annual PROS rent, contract length and financial + low risk guarantees. + stable yield, fixed or variable Annual rent – based on the agreed lease turnover levels for the hotel. A fixed, + limited hotel operation experience needed variable or minimum guaranteed rent with a variable upside is CONS agreed upon between the real - real estate owner has limited estate owner and the operator. influence on operations The annual rent is based on the - owner is not involved in predicted revenue generated from business trading performance room sales, food and beverage sales and other income. The difference in percentages vary Fixed rent – an annual amount depending on the location, concept agreed upon between the operator and financial predictions of the and the real estate owner. The hotel. For example, an upscale hotel fixed rent is consistent and will not with an AAA location in central change unless affected by CPI Helsinki would most likely fall into throughout the agreed contract the higher percentage scale – period. 33–37% of rooms and other revenue and 10–12% of food and beverage Variable rent – based on sales. percentages earned from the hotel operation. Typically 28–37% of total For an economy or midscale hotel room and other revenue is paid as located on the outskirts of Helsinki annual rent to the real estate owner. city centre, the variable percentage On top of that, 8–12% of food and decreases accordingly, very much beverage sales is also added to the depending on the class, concept annual variable rent. and financial predictions. Helsinki Hotel 51 Investment Guide 2019

Management Contract A management contract is on an annual fee paid from the real a service contract. A hotel estate owner to the operator for Management management contract is defined operating the hotel. These fees are Contract as an agreement between a usually based on a base fee and an management company (or an incentive fee. The base fee is a fixed PROS operator) and a property owner, fee and is based on a percentage + fee based on incentive whereby the operator assumes of rooms and other revenue. The + opportunity to high quality real responsibility for managing the incentive fee is performance-driven estate assets property by providing direction, and is based on a percentage of + upside potential supervision and expertise. The the achieved gross operating profit. + better control over operations operator runs the hotel on behalf and development of the owner for a fee, according to Fees paid to the management CONS specified terms negotiated with company: - bound to global hotel the owner. management company brand Base fee – typically around 2% of standards Management contracts – the most rooms + other revenue - employee responsibility and common lease structure outside liability the Nordics and primarily driven by Incentive fee – based on achieved - need to understand hotel large operators such as Marriott, GOP percentage, typically ranging business Hilton, IHG and Accor – are based between 5–10% of GOP. - non constant ROI

Franchise Agreement A franchise contract is a licensing cases be operated either by the Franchise contract. A franchisee owns a owner of the property or by a “white Agreement business, but pays a proportion label” operator. of profits and conducts certain Franchising is based on paying business operations as agreed in PROS the franchisee company various the contract, in exchange for the + fee based on incentive fees to be allowed to use a certain permission to use the franchisor’s + opportunity to high quality real brand, use their distribution estate assets business model. channel systems, having access to + upside potential While franchise contracts are very their loyalty programs, and most + better control over operations and development common in the Americas, parts of importantly, a fee based on annual Europe and Asia, the Nordics have room + other and F&B turnover. CONS not yet embraced the model. That Fees paid to the franchisor: - bound to global hotel is not to say they do not exist or will management company brand become more popular in the future. standards Annual turnover fee from rooms + Compared to a management other revenue – typically ranging - employee responsibility and liability contract, a franchise contract is between 3–5%. - need to understand hotel based on paying a franchisee Annual turnover fee from food business company a fee to use their brand. and beverage – typically ranging - non constant ROI Managing the operation in the hotel is not included in a franchise between 1–3%. agreement. The hotel can in some Helsinki Hotel 52 Investment Guide 2019 Helsinki Hotel 53 Investment Guide 2019

5.2 Lease Terms

Typical lease agreement terms Nordic capitals

Whether a rental RENTAL TERM Peak Base Low term falls under ‘peak’, ‘base’, or ‘low’ Variable rent levels is predomenantly determained by Rooms and meeting 33–37% 32–34% 28–32% location. room rental income AAA-location in central F&B and other 12% 10% 8% Helsinki = peak

Min. guaranteed rent % Secondary or tertiary 80–90% 75–85% 65–75% of total variable city in Finland = low

Guarantee*

6-12 months – winding Bank guarantee 24 months 12 months down

Guarantee cap None None 12-18 months rent

Property tax Tenant Tenant Tenant/owner

FF&E reserve** 5% 2–4% None

F&B allocation (e.g. breakfast) Amount per guest Amount per guest Amount per guest

Income reductions None Cap (3–5% of revenue) No cap (OTA commissions, cc fees)

Duration +25 years 15–20 years 10–15 years

FF&E investment*** Tenant/owner Tenant/owner Tenant/owner

Maintenance & renewals

Exterior Owner Owner Owner

Technical installations Owner (tenant service) Owner (tenant service) Owner (tenant service)

Bathrooms/wet rooms Tenant/owner Owner Owner

Interior/FF&E**** Tenant Tenant Tenant

* ** *** **** Source: NHC Data

Guarantee is Is based on stabalized Normal is that operator Note that the indication either corporate or operations - new takes FF&E investment upon the division of bank – typically not a developments typically for new projects, the maintenance combination have a built-up. Note, alternatively the FF&E accounts is simplified a few operators do not investment is financed in this overview. Futher work with FF&E reserves via a separate rent. note that once FF&E at all. is replaced by the tenant, the ownership is transfered to the tenant and upon termination of the contract the owner will purchase the FF&E at book value. Helsinki Hotel 54 Investment Guide 2019

Recent 5.3 Transactions

Nordic selected hotel real estate transactions 2015–2017 (EUR)

Number Number Year Market Property/properties of hotels of rooms Operator Buyer Seller

2016 Oslo Smart Hotel 1 257 Smart Hotel DNB Næringseiendom Hodne family

2016 Oslo Carlton Hotel 1 53 Gulsmeden Private family Gulsmeden hotels

2016 Oslo Quality Hotel 33 1 242 Choice Ragde Eiendom AS OBOS Forretningsbygg AS, Aspelin Ramm Eiendom AS, Ringkjøb Invest AS

2016 Copenhagen Hotel Østerport 1 170 Private Balder Private

2016 Copenhagen Avenue Hotel 1 68 Bröchner Hotels Bröchner Hotels Geschwendtner

2016 Helsinki Hotel St. George 1 153 Kämp Collection Deka Immobilien CapMan Real Estate Hotels

2016 Helsinki Scandic Marski 1 68 Scandic Varma EM Group, Sewatek Ltd Extention

2016 Hyvinkää Rantasipi Sveitsi Hotel 1 182 Independent Kiinteistörahasto Sveitsi Ky CapMan Real Estate

2016 Various Pandox Portfolio 8 965 Scandic, Choice, First Midstar Pandox

2016 Stockholm Quality Globen 1 527 Nordic Choice Strawberry brothers (Varner/Stordalen) Home Properties

2016 Stockholm Scandic Ariadne 1 283 Scandic NIAM Vasakronan AB

2016 Solna Hotel Hagaplan 1 222 Elite Hotels SPP Livsförsäkring Skanska

2016 Malmö Quality Hotel View 1 302 Nordic Choice Volito Fastigheter Peab

2016 Örnsköldsvik Scandic 1 103 Scandic Midstar Partners Group

2016 Copenhagen Copenhagen Marriott 1 406 BC Hospitality ATP-Ejendomme & PensionDanmark Solstra Capital Partners Hotel Group

2017 Helsinki Tripla Hotel 1 430 Sokos Hotels Exilion Pasilan Asemahotelli Ky YIT Oyj

2017 Oslo/Drammen Comfort Hotel Union 1 140 Choice Midstar Union Eiendomsutvikling Brygge

2017 Oslo Comfort Karl Johan 1 181 Choice CBRE Global Investors Partners Group

2018 Helsinki Various Scandic + 6 870 Scandic / Corum AM CapMan Real Estate Holiday Club Holiday Club

2018 Copenhagen Hotel City 1 81 Private Secura Capital Private investor

2019 Copenhagen Scandic Hotel Scanport 1 357 Scandic Pareto Securities Skanska

Source: NHC Data – all amounts are estimated and subject to ­currency conversion and rounding Helsinki Hotel 55 Investment Guide 2019

Number Number Year Market Property/properties of hotels of rooms Operator Buyer Seller Hotel transaction activity has been Yields have been compressing in 2016 Oslo Smart Hotel 1 257 Smart Hotel DNB Næringseiendom Hodne family picking up across the Nordics in most markets. Prime yields in the 2016 Oslo Carlton Hotel 1 53 Gulsmeden Private family recent years. An increasing amount capital cities have in selected cases Gulsmeden hotels of investors have included hotels as reached sub 4% but overall prime 2016 Oslo Quality Hotel 33 1 242 Choice Ragde Eiendom AS OBOS Forretningsbygg AS, part of their real estate allocation. yields are currently in the range of Aspelin Ramm Eiendom AS, Ringkjøb Invest AS Buyer activity has been dominated 4–5%. In the major regional cities, by local/regional investors such as yields are generally in the range of 2016 Copenhagen Hotel Østerport 1 170 Private Balder Private specialized hotel funds like Midstar, 5–6% – and in tertiary markets +6%. 2016 Copenhagen Avenue Hotel 1 68 Bröchner Hotels Bröchner Hotels Geschwendtner institutional investors, listed real In terms of prices per key, recent 2016 Helsinki Hotel St. George 1 153 Kämp Collection Deka Immobilien CapMan Real Estate estate investors like Balder and activity provides substantial ranges. Hotels owner-operator constellations such Prime assets in capital cities have 2016 Helsinki Scandic Marski 1 68 Scandic Varma EM Group, Sewatek Ltd as Strawberry Brothers (co-owned Extention traded at +200,000 EUR/room and by Nordic Choice owner Petter up to +400,000 EUR. In regional 2016 Hyvinkää Rantasipi Sveitsi Hotel 1 182 Independent Kiinteistörahasto Sveitsi Ky CapMan Real Estate Stordalen). International investors markets, values have been more 2016 Various Pandox Portfolio 8 965 Scandic, Choice, First Midstar Pandox have historically been almost in the range 100,000–200,000 EUR/ absent from the Nordic market 2016 Stockholm Quality Globen 1 527 Nordic Choice Strawberry brothers (Varner/Stordalen) Home Properties room”. but in recent years, investors 2016 Stockholm Scandic Ariadne 1 283 Scandic NIAM Vasakronan AB such as CBRE GI, DEKA Immobilien 2016 Solna Hotel Hagaplan 1 222 Elite Hotels SPP Livsförsäkring Skanska and Corum AM have completed 2016 Malmö Quality Hotel View 1 302 Nordic Choice Volito Fastigheter Peab acquisitions and generally the 2016 Örnsköldsvik Scandic 1 103 Scandic Midstar Partners Group international investor interest is increasing. 2016 Copenhagen Copenhagen Marriott 1 406 BC Hospitality ATP-Ejendomme & PensionDanmark Solstra Capital Partners Hotel Group

2017 Helsinki Tripla Hotel 1 430 Sokos Hotels Exilion Pasilan Asemahotelli Ky YIT Oyj

2017 Oslo/Drammen Comfort Hotel Union 1 140 Choice Midstar Union Eiendomsutvikling Brygge

2017 Oslo Comfort Karl Johan 1 181 Choice CBRE Global Investors Partners Group

2018 Helsinki Various Scandic + 6 870 Scandic / Corum AM CapMan Real Estate Holiday Club Holiday Club

2018 Copenhagen Hotel City 1 81 Private Secura Capital Private investor

2019 Copenhagen Scandic Hotel Scanport 1 357 Scandic Pareto Securities Skanska Helsinki Hotel 56 Investment Guide 2019

Labour Cost 5.4 in Finland

Finnish labour and occupational The salaries of some common safety legislation is applicable to categories of hotel staff are all employees working for Finnish found in the table below. On an employers regardless of their average a hotel employee earns nationality. In the case of ‘posted approximately 2,200€ per month. workers’, terms and conditions The total employee cost for the such as overtime, working hours, employer is approximately 3,000€. vacations, sick-leave and minimum This amount includes pension wage are in accordance with the contribution of an average of 17.75%, applicable collective agreement.

Average earnings Salary by position and labour costs and department

% Reception €

6 GM 5,000

Front Office Manager 4,000 5 Duty Manager 3,000

4 Receptionist 2,500

Kitchen 3 Head Chef 3,500

2 Cooks 2,200

Restaurant 1 Restaurant Manager 3,500 Compensation per empoyee 0 Waiter/ Bartender 2,300 Average hourly earnings, national accounts Housekeeping –1 Index of wage and salary earnings Real Estate Manager 4,200

–2 Caretaker 2,800 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Head of Housekeeping 3,000 Source: Statistics FInland and Bank of Finland Houskeepers 1,900

Adminstrative

Sales Manager 4,000

Marketing Manager 4,000

Financial Manager 4,500

Source: NHC Helsinki Hotel 57 Investment Guide 2019

holiday pay of approximately they could lead employers to incur Regular working hours are 112.5h 16% and a number of employee additional costs. As a general over three weeks period. It’s notable insurances. It also includes all baseline an employee has a right that hotel staff are paid evening social security fees such as health to receive pay also for the time he/ supplement (18–24) 1.10€/h and insurance and parental leave. she is on annual holiday. Normally night shift supplement (24–06) holiday leave accumulates 2 days 2.17€/h. Special salary apply during Finnish labour law includes (when employment has lasted Sundays and public holidays. regulation of annual leave, labour less than 1 year) or 2½ days for protection and parental leave. each holiday credit month. Normal Some aspects of the law are wages are paid for the time an particularly important because employee is on holiday.

Example of a salary breakdown in the service industry

Amount %

Employee Salary Breakdown

Gross salary (EUR) 2,500.00 100%

Local & income tax 585.00 23%

Pension 162.75 7%

Unemployment Insurance 15.00 1%

Employee receives monthly 1,737.25 69%

Employer Salary Payout Breakdown

Gross salary (EUR) 2,500.00

Pension contribution 443.75 18%

Employment accident insurance 20.00 1%

Unemployment insurance 16.25 1%

Group life insurance 1.75 0%

Employer’s social security contribution 21.50 1%

Monthly cost for annual bonus and holiday pay 397.50 16%

Total monthly cost for employer 3,400.75

Source: Invest in Finland Helsinki Hotel 58 Investment Guide 2019

Investor’s 5.5 Road Map

Operator

Become local. Get yourself familiar with the local market and go out to find companies and partners that can help you evaluate the market on a 1 higher level to determine the initial interest.

In-depth research & analysis. Conduct relevant research in order to prove 2 for yourself and partners / financers that it is the way to move forward.

3 City/site visit. Submit bid for hotel project.

Pitch bid, site inspection, convince real estate owners that you are the 4 right operator.

5 Sign LOI with real estate owner making out basic terms.

Negotiate contract until both parties are happy 6 – sign contract.

7 Plan for opening.

8 Open hotel. Helsinki Hotel 59 Investment Guide 2019

Real estate investor New build

Become local. Get yourself familiar with the local market and go out to find companies and partners that can help you evaluate the market on a 1 higher level to determine the initial interest.

In-depth research & analysis. Conduct relevant research in order to prove 2 for yourself and partners / financers that it is the way to move forward.

Plan the Project. In this initial stage it is important to involve local experts and consultants to make sure every bit and piece is thought of. This includes working with potential operators to pin down the hotel concept and eventually decide on a sole operator to partner with and sign a lease/ management/franchise agreement with (see steps for operators). With this PLANNING 3 completed, the project will be more enabled to go into financing, zoning, and building stage. It is also important at this early stage to have built relationships with construction companies.

Find the Money. If the funds are there, good for you, you are ready to go ahead with the next stage. If not, this is the stage where all pre-work done will become extremely helpful. By now, relationships with financers are 4 crucial.

Zoning With the investment funds locked in, it is now time to finish and submit floor plans and other documents, needed for zoning and building permits for the local municipality. If the plot does not have a commercial ZONING PERMIT property zoning in place, a zoning process must be initiated. Before being able to apply for a building permit, a hearing must be held for stakeholders that could potentially be affected by the project, as these stakeholders 5 can file appeals for the project to be rejected. When this stage is passed, it is now time to apply for a building permit. If the application is approved, which usually takes 3-4 months, the permit will be valid for 5 years. If the zoning is already in place, the process will take only the time needed to BUILDING PERMIT obtain the building permit.

6 Construction. BUILDING

7 Operator installment.

8 Open hotel. Helsinki Hotel 60 Investment Guide 2019 Helsinki Hotel 61 Investment Guide 2019 Helsinki Hotel 62 Investment Guide 2019

Helsinki – a true award- winning destination

One of 10 best Europe's The World’s 100 music festivals hottest new food Greatest Places in Europe destination of 2018 The Guardian CNN Time

Flow Festival Helsinki Helsinki Löyly Helsinki

Number 1 Shortlisted for Top 10 country to Design Award country travel to for Best City Lonely planet, in 2019 2019 Best in Travel Business Insider Wallpaper*

Finland Helsinki Finland

PHOTO CREDITS Pages 2–3 Helsinki Marketing / Jussi Hellsten Page 5 Helsinki Marketing / Tuomas Uusheimo Page 6 Helsinki Marketing / Pekka Keränen Page 8 Visit Finland / Julia Kivelä Page 9 Helsinki Marketing / Jussi Hellsten Page 10 City of Helsinki / Magnus Rietz Page 12 SARC Architects Page 13 Voima Graphics Oy / Ville Riikonen Page 14 City of Helsinki / Felix Siivonen Page 16 Helsinki Marketing / Tuomas Uusheimo Page 19 Helsinki Marketing / Jussi Hellsten, Helsinki Marketing / Jussi Hellsten, Tapio Haaja, Helsinki Marketing / Jussi Hellsten, City of Helsinki Page 20 Helsinki Marketing / Jussi Hellsten Page 21 Helsinki Marketing / Petri Asikainen, Helsinki Marketing / Jussi Hellsten, Helsinki Marketing / Jussi Hellsten, City of Helsinki / Dewberry Page 27 Visit Finland Page 32 City of Helsinki / Julia Kivelä Page 43 Helsinki Marketing Page 44 Helsinki Marketing Page 52 Helsinki Marketing / Joel Pallaskorpi Pages 60–61 Helsinki Marketing Page 62 Helsinki Marketing, Helsinki Marketing, Löyly, Helsinki Marketing, Amos Rex, Helsinki Marketing

DISCLAIMER This document has been prepared to assist prospective investors in making their own preliminary evaluation of investing in Helsinki Metropolitan Area and does not purport to contain all the information which a prospective investor may desire. In all cases, prospective investors should conduct their own investigation and analysis of any market of interest. None of the producers or financiers of this document provide any guarantee of the accuracy or completeness of the information contained in this document, including forecasts and market data.

VERSION 1.1 15 April 2019: Minor updates on pages 38-39, compared to the originally published guide. Helsinki Hotel 63 Investment Guide 2019

Contact information We are happy to help you discover the Helsinki Metropolitan Area hotel opportunities and provide you with the right contacts and market information. To get you started, contact Ms. Kati Soini.

Ms. Kati Soini Senior business advisor Helsinki Business Hub +358 40 501 1469 [email protected]

Helsinki Business Hub is the Helsinki is the Capital of Finland Business Finland is the national international trade and investment and the centre of the Helsinki promotion organisation for trade, promotion agency for the Finnish Metropolitan Area, a functional investment, travel and innovation capital region. It is owned by the urban region of about 1.48 million funding. Business Finland is fully cities of Helsinki, Espoo, Vantaa inhabitants and 767,000 jobs. owned by the Finnish Government and Kauniainen, and the www.hel.fi and it employs 600 experts in 40 Regional Council. offices globally. www.helsinkibusinesshub.fi www.businessfinland.fi