"Seizing the momentum and focusing on the future"
2024 was an active and good year for Pandox. Here CEO Liia Nõu talks about the past year and looks ahead to 2025.
13 mars 2025
Liia, 2024 was a strong year for Pandox. What highlights would you like to spotlight?
"2024 has been a very active and successful year for Pandox. Supported by a growing hotel market, we’ve maintained a high pace in terms of both acquisitions and value-creating investments in our existing portfolio. This has produced results. Our revenues increased by 4 percent, while net operating income and cash earnings increased by 7 percent and 12 percent respectively. In addition, EPRA NRV increased by 7 percent. All in all, this is a clear proof that we are doing the right things in the right way.
In September we completed a directed new share issue that strengthened our balance sheet by SEK 2 billion. This was a proactive measure to increase our ability to make profitable acquisitions. The capital injection gives us great flexibility and the ability to maintain a high pace in our value creation.
I really appreciate the strong interest shown by investors in participating in the directed new share issue and the trust they’ve put in us to continue developing Pandox."
What has driven growth during the year?
"In 2024 the event calendar has been strong in several of our key markets, with highlights such as Taylor Swift’s European tour and the UEFA EURO championships in Germany, which of course had a positive effect. However, the main driver of growth has been a continued return to normal travel after the pandemic for both private individuals and businesses.
The hotel and travel industries are stable. There are many reasons to travel and developments in recent years also show that both people and companies value travel and experiences highly, which continues to strengthen our sector."
In August you completed a major acquisition of three hotels in central London. Why did you do that?
"To start with, it’s a very good deal that creates profitable growth. They are three well-positioned aparthotels in strong locations in central London that increase our exposure to the attractive extended-stay segment. The hotels are highly profitable, with longer average stays, lower staffing needs and higher average rates thanks to their central locations. They are well established in the market and have strong distribution reach through our new partnership with Marriott International. The hotel properties are of a high standard both technically and from a sustainability perspective, helping to enhance the quality of our hotel property portfolio. Their good energy performance also enabled us to take out a green loan – the first for Pandox – on favourable terms.
During the year we also acquired DoubleTree by Hilton Edinburgh City Centre, which is a great addition to our portfolio. The hotel is already performing well today, and Edinburgh is a strong and attractive hotel market. At the same time, there are good opportunities to develop the hotel product further and to enhance its competitiveness in higher demand segments as well.
At the end of the year we also announced the acquisition of Radisson Blu Hotel in Tromsø. Northern Norway is an exciting region and Tromsø is one of the strongest hotel markets in the Nordic region, with high appeal among international visitors. The hotel has a very strong location in central Tromsø with demand from all guest segments. The hotel is currently performing very well and we are completing the acquisition at a high yield. At the same time, we see great potential to create one of northern Scandinavia’s premier full-service hotels for leisure, business and conference travellers through targeted investments. The acquisition was completed on 1 January 2025.”
What are you looking for when you make acquisitions?
"We adapt to the opportunities that exist. The most important thing for us is the return, rather than the property’s location in a certain country or city. We are happy to acquire hotel properties where there is a need for change and development, where the operating model is perceived as risky or where the lease will soon expire. In such cases competition is often lower, and we can invest our financial and industrial knowledge capital in profitable work.
Generally speaking, we are not interested in fixed leases or low-yielding ‘trophy assets’. Our strategy is based on entering into long-term, revenue-based leases with a strong and skilled operator. By creating common incentives and sharing investments, upsides and risks, we create a sustainable and profitable business model.
We have a good reputation in the transaction market thanks to our ability to act quickly, clearly and with a high degree of deal certainty. We keep our promises."
Pandox had a strong financial position at the end of the year. What opportunities do you see going forward?
"At the end of the year our loan-to-value ratio was 45.2, which is at the lower end of our policy of 45–60 percent. Our interest coverage ratio is stable, and net debt/EBITDA is at a low level. Overall, we have a strong financial position that makes us well placed to grow both through investments in our existing portfolio and through new acquisitions.
Liquidity in the transaction market has increased steadily over the past year, and we are now evaluating more potential acquisitions than for many years. However, it is important to point out that an acquisition process often takes between six and nine months to complete. Also, we won’t rule out the sale of properties if we believe that we can get a better return on our capital elsewhere."
2024 has included various repositionings and renovations. Can you tell us about some of them?
"Every year we invest over SEK 1 billion in renovations, repositioning, and other strategic measures that strengthen cash flow and thus increase property values over time. We can use the tools we have at our disposal to create value in many different ways. The most profitable way is usually to create new rooms in existing hotels. Two good examples are Scandic Go Sankt Eriksgatan 20 and Scandic Malmen, where during the year we created 38 new rooms – a 7 percent increase in the total number of rooms in these two properties.
In 2024 we successfully repositioned several hotels that have now reopened under new brands, including Citybox Brussels and Scandic Go Sankt Eriksgatan 20. Both hotel concepts have had a very positive response in the market.
We have completed a long list of value-creating projects during the year. For example, together with the Fattal Group, in 2024 we renovated various hotels in Germany, the UK, and Ireland, including properties in Baden-Baden, Frankfurt, Glasgow, and Galway.
We are excited about what awaits us in 2025; for example, we will open Hobo in Copenhagen together with Strawberry, and we expect to complete renovations at hotels including Scandic Malmen in Stockholm and The Hotel in Brussels."
Pandox launched science-based targets in 2023. How have things developed in 2024?
"Our MEUR 29 green investment programme covering Scope 1 and 2 is still in place and allows us to be flexible as regards reprioritising. This means that new circumstances that emerge from detailed studies of the properties, looking at things like heat pumps and solar panels, may affect implementation. We want to start installing heat pumps and other technology in 2025. We have also evaluated new AI technology and sensors for optimising energy use in guest rooms.
Within Scope 3, which includes tenants’ energy use and renovations, we have energy-mapped 38 properties in Germany and the UK. The reason we are focusing on these countries is that they have a higher carbon-intense energy mix compared to the Nordic region, so the money invested has a greater climate impact. We aim to present a transition plan in 2025 for joint projects with our tenants.
We have also developed a new bathroom concept together with Scandic to reduce the climate footprint of
by up to 30 percent. The aim is to renovate 600 bathrooms by 2026. Two pilot bathrooms have been developed – combining operational, commercial, and sustainability aspects – and are expected to be put into operation in 2025."
You are reporting in accordance with CSRD this year although that is not a requirement until next year. Why is that?
"We want to be a step ahead and reinforce those areas where we need to develop. A third-party analysis shows that we already have around 75 percent of the relevant data points in place. Our focus has therefore been on covering the remaining 25 percent, work that will continue in 2025. This has involved investing in processes, documentation, and structure, as well as strengthening the sustainability team."
Pandox is working actively to increase its green financing. How has this work progressed during the year?
"In addition to the green loans we took out in conjunction with the acquisition of three hotels in central London in August, we have also made great progress on sustainably linking our loan portfolio. During the year the percentage increased from 6 percent to 45 percent of our total loan stock. Our ambition is to sustainably link all loan agreements."
The hotel market has now reached a new normal following the pandemic. What is your assessment of growth going forward?
"We have a positive outlook and expect some RevPAR growth in the hotel market in 2025, driven by both increased occupancy and higher average room rates. Group travel and a continued increase in intercontinental travel into Europe are expected to make a positive contribution. The acquisitions and repositionings we carried out in 2024 will also have a positive impact.
I would like to pass on my great thanks to all our colleagues for their strong commitment and hard work in 2024. You inspire and motivate me every day. Thank you to our partners for successful collaboration and good results during the year. A big thank you also to our shareholders for your support and trust, which enables our work to create long-term value.
Finally, a heartfelt thank you to our office dogs, the 'Pandogs', for your playfulness, optimism, and the joy you spread – you are a valued part of our working day."