Morning, everybody. Welcome to the company presentation for Minor International. We welcome analysts and investors today to listen to our recent development, the recap of our results. The results have been released earlier, and we had a quick call earlier with some of the analysts. We saw some research reports coming out. We want to go through a little bit more detail in terms of the numbers, as well as focus primarily on the rationale behind the numbers, as well as the outlook that we tend to see for the rest of the year and for next year as well. This is the agenda. We start with the recap of recent developments, and then the numbers in the second quarter, as well as go through business by business, and corporate information at the very end.
We will talk about outlook strategies to achieve our goal that we set out at the very beginning of the year. Start with the quick recent development recap for both business, Minor Hotels and Minor Food. Minor Hotels, if you look at this quarter, this past second quarter, we have nine hotel openings in this quarter. Remember, in the first quarter, we roughly had about 12 hotels open. Altogether, in the first half, we already had 21 hotels open in the first half. This second quarter, we had an NH Collection Helsinki Grand Hansa open in Finland. We also have Avani Ratchada Bangkok Hotel, which is the managed hotels that opened in Thailand. In terms of NH brand, we have NH Bangkok Sukhumvit Boulevard, NH Bentota Ceysands Resort, and NH Kudafushi Resort Maldives, and NH Johannesburg Sandton.
All of them are managed, and they were converted from other brands and rebranded into our brands. This is happening in Thailand, Sri Lanka, the Maldives, and Africa, respectively. NH Collection brand, we also have NH Collection brand open, such as NH Collection Colombo, NH Collection Samui Peace Resort, and NH Collection Viti Beach. All of them are managed as well. As I said, they were converted and rebranded into our brand, echoing our ability to show our strength and strong operational and marketing capability to attract hotel owners to come to use our brands, and show that we have a lot of potential to amplify our asset-light, scalable strategy in the future. This NH Collection that I just mentioned happened in Sri Lanka, Thailand, and the Maldives as well. Apart from hotel openings, we also have the brand upgrades and enhancement.
We try to see any brand that in our portfolio can be rebranded into appropriate categories or even higher categories in order for us to capture higher ADR, higher room rates, and then continue to drive our RevPAR further. This quarter, we have NH Collection rebranded to Tivoli Palazzo Gaddi Firenze Hotel, and another one is NH, which was rebranded into Avani Museum Quarter Amsterdam Hotel. The two hotels are the one that we are rebranding the quarter. For Minor Food, we continue to have new product innovations and some of the promotional sales and marketing campaign initiatives launched on an ongoing basis. This quarter as well, we expand market reach and customer engagement. If you look at Minor Food leadership in Thailand, we dominate as the number one food chain, not only in Thailand but regionally. We have about 7.6 million loyalty members at the moment.
The Pizza Company, our core brand in the portfolio, introduced a 20-minute delivery guarantee, very first and outstanding in the market, and that helped sustain our leading position, trendsetter for the market. Dairy Queen as well, we expand this brand into new cities in Indonesia, including Bali and Bintan. Indonesia is the high-growth potential market with large populations and a lot of room to grow this market going forward, not only for Dairy Queen, but maybe for other brands in our portfolio in the future as well. Apart from that, we still have innovative products and store network expansion. The Pizza Company, we introduce value tier pizza, single-serve BiTE, you probably have heard, and opened a flagship store in Phrae Province in Thailand in order to retain our leading market awareness.
We jazz up the market by having this flagship, and then we cater more towards a single-serve menu to expand our customer base with this innovation of our products too. Sizzler, we reemphasized the combo menus concept, and then we also continue to have new thematic offerings for Sizzler. For example, the Sizzling USA Barbecue this quarter. That's a jazz up in track sales for Sizzler during the quarter and in the following quarter as well. We also try to have some outstanding and captivating customer experience. Swensen's this quarter launched attention-grabbing durian-themed experiential concept store in Thailand for the first time. This is something that I think is new in the market, so it's excited about it. We offer a wide variety of durian products from Swensen's in one pop-up location. On the corporate side, we successfully issue THB 8 billion bonds in July.
THB 5 billion of which was sustainability-linked bonds, and remaining THB 3 billion is the conventional bond with the tenor of 10 year. The sustainability-linked bond of THB 5 billion has a tenor of 3.5 year. But the remaining THB 3 billion plain vanilla bonds, it's offered at 10 years tenor at a favorable rate, I must say. It's attractive rate to help manage our funding costs as well. Moving on to second quarter performance recap. Again, this second quarter, we set up a new record high again for the quarter with core profit rising to achieve THB 3.2 billion. We achieved 8% growth in profit, which was contributed by the success of our hotel business, especially in Europe and Americas during the start of the high season. Also, we saw increased customer traffic at our restaurants in Thailand and Singapore in particular.
If you look at the results, we have some of the impact from revaluation from Forex that we mentioned in our brief call earlier in the week. If we exclude that impact from exchange rate, core earnings or core net profit would have grown by more than 30% year-on-year. Moving on to second half performance. Core revenue rising by 12% year-on-year. Again, backed up by the performance of hotels and food business, and given higher revenue of ours, combined with the cost optimization efficiency from our operating platform as well as some tax management, especially when we can utilize tax loss carried forward. Core profit increased by 22% year-on-year to THB 2.9 billion. Yes. This is just to show you our presence of our business now expand across 65 countries.
I wouldn't go into detail, but just want to say that the majority of the contribution, 78% still coming from overseas, while 22% coming from Thailand. I will hand over to Khun Namida to talk about business in detail.
First, we start out with our Minor Hotels. For Minor Hotels, we reported revenue increase about 11% year-on-year. This was supported by higher room rates and also higher travel demand, especially from our owned and managed hotels in Europe, Latin America, and in Thailand, as well as our managed hotels, particularly in the Middle East and Thailand as well. Also we have seen the increase in all of our regions. If you look at our EBITDA and net profit, it has grown at a slower pace compared to revenue. This is solely because of the unrealized foreign exchange loss that we recorded in the quarter, while last year, we recorded the unrealized Forex movement of gain in the same period of last year.
If we stripping out this revaluation impact, our core earnings would have grown at a much faster pace than revenue. The EBITDA margin would have expanded as well, and this was driven by higher operating leverage that we have it from revenue flow-through and also our efforts to manage our cost. In terms of each business model under Minor Hotels, the first one is own and lease. In terms of number of rooms year-on-year for own and lease was flat, but increased slightly by about 2% compared to 2019 level. Looking at the RevPAR number, we saw 14% year-on-year increase in RevPAR, and this was driven by our hotels in Europe, Latin America, and Thailand. This RevPAR was mainly driven by higher ADR and also higher demand as well.
If you compare to pre-pandemic level in 2019, our RevPAR overall increased and outpaced its 2019 level by more than 16%. Drilling into each region, Europe and the Americas, which is our biggest contributor, the RevPAR of our owned and leased hotels in Europe and Latin America grew about 8% year-on-year. You can see that the sustained leisure demand, strong growth in business segment, has drive our occupancy rate to about 73% in the quarter. Meanwhile, our brand upgrade initiatives has led to increase in room rates, 7% year-on-year to EUR 165 per room per night. If we compare to 2019 level, we saw the RevPAR outperform pre-pandemic level by about 44%. If we look into each region, for example, Spain, we continue to see very strong leisure demand, especially in key cities like Madrid.
While Italy also was driven by leisure segment, including in Venice and secondary cities. Meanwhile, Benelux and LATAM, the key drivers were the business segments. For the Benelux, we saw strong business segment in secondary cities. While in Latin America, the corporate demand was stronger in Mexico and Colombia. Lastly, Central Europe, we saw a good leisure demand, whether it is in key cities and in secondary cities as well. Starting from the middle of June, we started to get benefits from the UEFA Euro 2024 football event that happened in many cities across Central Europe and Germany. Next region is Thailand. Thailand RevPAR increased about 14% year-on-year, and this we get benefited from rising international tourist arrivals and our efforts to increase room rates as well.
Both Bangkok and other cities, key tourist destinations like Phuket, Samui, Chiang Mai, they were all reporting strong year-on-year RevPAR growth. If we compare to 2019 level, RevPAR has outpaced the 2019 level by 20%. Moving on into another business model, asset light. The first one is management letting rights, which is particularly our hotels in Australia and New Zealand. If you look at our RevPAR compared to pre-pandemic level, you will see that it has exceeded more than 30% year-on-year, and this was due to our successful pricing strategy. While average occupancy rate was very strong, more than 70%, which was on par with our 2019 level. If you look at a year-on-year basis, you would see a slight decrease in terms of RevPAR, about 7%. However, the decrease in RevPAR was in line with our expectation.
If you remember 2022, 2023, they were already high base. Last year it was a very, very high base for our hotels in Australia. In this quarter, although we saw growth in corporate segment, it was only partially offset, a softer domestic leisure. In terms of our hotels under management contracts, we continue to see strong RevPAR growth both year-on-year and compared to 2019 levels as well. RevPAR was above last year, about 14%, and was above 2019 level by about 21%. The hotels that drove the RevPAR growth was mostly in the Middle East and in Thailand. Looking at our expansion pipeline, you will see that in the first half of this year, we already opened about 21 hotels with more than 3,400 rooms in the first half of this year.
For the second half of the year, we will be opening more than 20 hotels with more than 3,000 rooms. If you look at the full year, you would see that more than 90% of our new hotels will be under asset light, which are under management contracts or under management letting rights. You would see that in terms of geographies, we will be expanding more. Half of it will be in Asia, and then followed by Europe, Middle East, the Americas, and also Oceania. In 2024 and 2025 and 2026, you would see we are going to open more than 40 hotels. Having said that, when we go along with the year, you would see higher management contracts because there are still more management contracts that we are still under negotiation.
If you see 2024 - 2026, we have nearly 90 management contracts that we already signed and were already agreed upon. We have more than 160 management contracts on hand that are under negotiation. We want to emphasize that all of our hotel expansion pipeline will be mostly under asset light, and we will be doing, continue to do cross-brand strategy as well. As you can see, we try to use Anantara, Tivoli, and Tivoli expanding into Europe and vice versa, like NH Collection moving into Asia and the Middle East as well. For the mixed-use business, this quarter you would see that the revenue from mixed-use business was on par with last year.
We saw positive growth in all of our sub-business units, like for example, our Anantara Vacation Club, our restaurants in the U.K. under the [Woodstreet group], retail trading, including Topmart, as well as Plaza and entertainment. However, because of the mismatch of our settlement of selling of the residential project, that is why we saw the mixed-use revenue was flat year-on-year. Last year we have been selling residential projects that we wholly owned. Compared to this year, we have sold some of the residential projects that we are joint venture with our partner. These are our projects, our current projects, and also projects that are in the pipeline. We make sure that we will have continuous revenue stream from the residential units which yield high margins. For this quarter, for the Anantara Vacation Club business, we have added another destination for the inventory.
We added Dubai for our membership so that they can enjoy more hotels in different geographies and different destinations. Moving on to Minor Food. The core restaurant of Minor Food revenue grew about 5% year-on-year. This was driven by our restaurants in Thailand, Australia, Singapore. As well as we have seen the increase in our profit contribution from the joint ventures. If you look at the graph on the right, in terms of operational stats, you would see that in the quarter we saw a slight decrease in terms of same-store sales, about 2.8%. Although our restaurants in Thailand and Singapore saw positive growth, it was only partially offset with softer performances in China and Australia.
In terms of outlet expansion, we saw about 3% increase in terms of number of outlets, and this was mainly driven by outlet expansion in Thailand and Singapore. In combination of same-store sales and outlet expansion, we achieved total system sales growth of about 2.5%. In terms of EBITDA and core profit, you would see that both EBITDA and core profit grew at a much faster rate than revenue for Minor Food, growing about 36% year-on-year to THB 581 million. This was driven by cost management and higher revenue flow through, especially our restaurants in Thailand and Australia. In terms of international presence, you would see that Thailand still being a key contributor for Minor Food accounted for about 60%, and the remaining 40% are in China, Australia, and in Singapore. Moving on into each hub, the first one is Thailand.
If you look at restaurants in Thailand, you would see that same-store sales increased about 1%. With the network expansion, we saw higher growth in terms of total system sales, growing about 7.4% year-on-year. The growth in same-store sales and total system sales were driven by all of our distribution channels, including dine-in, takeaway, and also delivery business as well. In terms of dine-in traffic, we try to launch new product innovation, to stimulate people to come in to dine at our restaurants. For example, The Pizza Company has promoted itself as a Western destination concept, not offering only pizza, but also pasta, steak, and salad to boost dine-in traffic. In terms of takeaway and delivery channels, we have launched new menu, and also we try to strengthen our loyalty sales.
For example, The Pizza Company launched a single-serve new menu called BiTE, and it was a success, with 13% sales mix for The Pizza Company. Also, The Coffee Club has increased its loyal members through that loyalty campaigns, especially through their varieties of beverages. Another thing that we want to highlight this quarter is that it's about the profitability margin of Thailand Hub. We have seen an increase in EBITDA margin for Thailand Hub through increased higher margin sales mix. A sales increase from dine-in channel have been increasing. This dine-in channel yields higher margins. Also we are benefiting from our own manufacturing units as well, such as ice cream, pastry, that we have our own R&D team to support all of our Minor Food brands. Next is China Hub. As everyone would know that China has experienced economic challenges throughout the year.
That's why we saw total system sales and same-store sales decline of about 23% and 20%. The economic challenges has led to a decrease in this customer counts and also some of the closures of underperforming stores. Having said that, we want to highlight that despite the challenging economic conditions, our Minor Food operations are still profitable, and we saw a solid margins as well. For the strategy in the second quarter, we try to relocate some of our stores into a higher traffic areas, and we are focusing on the locations with short payback periods and high returns on invested capital. The last strategy, we remain focusing on our cost control measures at all of our restaurants throughout the country as well. Lastly will be Australia Hub. Australia has faced the same thing in China.
We saw weak macroeconomic conditions throughout the country and that led to total system sales and same-store sales decline of about 5% and 4% respectively. We have seen low domestic consumer confidence and then also the pressure from higher cost of living as well. At store we saw lower traffic, and then we have to close some of our underperforming stores. But in the second quarter, despite the weak macro conditions, we are still proactive in terms of our sales initiatives. We have strengthened our coffee credentials. We have launched a new coffee blend, and with our skillful barista, actually we achieved higher customer satisfaction as well. In the quarter we have done a revamp in all menus, whether it's new menu or refreshing the menu.
And what we want to highlight is that in June, The Coffee Club in Australia excited customers and coffee enthusiasts with development in iconic MasterChef Australia. The contestants of the TV program were tasked with creating desserts by pairing with our The Coffee Club's new flavored coffee beans. We expect these marketing campaign initiatives to increase sales in the second half of the year as well. I will hand over to Khun Chaiyapat for corporate information, including our balance sheet, our CapEx, and also our business outlook.
First of all, I would like to touch upon the CapEx, or investment. As per our three-year plan, we aim to spend about THB 8 billion-THB 13 billion per year, during 2024 and 2026. In particular, in 2024, we aim to spend roughly about THB 13 billion, because we have a normal CapEx, maintenance CapEx, and also we have repositioning CapEx, renovation exercise, the brand upgrade, asset enhancement in order to command high room rate in the rest of the year and also in upcoming years. We have to make sure we get that done, so we have this CapEx spend in the first half. For funding source, we will use operating cash flows and cash on hand.
For our leverage ratio, it has come down further to 0.96 x, well below our debt covenant level of 1.75, and also below our internal policy level of 1.3. As at the end of second quarter of this year, we still have THB 15 billion of cash and THB 33 billion of unutilized credit facilities. Next we would like to talk about our commitment to see growth in place. We continue to come up with strategies to make sure that we have visible growth trajectory despite some uncertain macro backdrop that we saw. That has already factored into our three-year plan in terms of risk and also potential growth. For Minor Hotels, I would like to start with the overall theme first. If you look at our Minor Hotels thematic strategies for growth, we will strengthen our brand equity.
We will continue to strengthen our brand equity through strategic upgrades, as I mentioned earlier, offering tailored experience and memorable journey for our guests that cater to the unique demands of each locale. We want to make sure we have our brand on top of mind of our guests. Secondly, we want to continue expanding our customer base, in addition to engaging with our guests and staying attuned to the latest trend. The expansion of customer base is quite important for us, particularly in underrepresented markets. We have strengthened our sales network in target market like Israeli markets for Thailand, while we work proactively on markets like U.A.E., Saudi Arabia, and Australia for our Maldives hotels during the low seasons.
And if you look at the Anantara brand, our homegrown brand, it has expanded its market network to city locations in addition to original traditional resort type that Anantara used to have. For NH and NH Collection brand, we have broadened NH Collection brand and customer base to include the resort categories as well, in addition to gateway city location. Next is the distribution channel management towards own platforms as we aim to drive customer acquisition and retention to integrate all the brand into Minor Hotels own platform, booking platform. That is the key three strategies for Minor Hotels. In terms of market by market, the key market that we have, say for example, Europe and America.
Say in Europe, the opportunities, we still see demand coming quite strong either from leisure market or business segments, as well as demand that come along with the entertainment events and sport events, as we have seen in the first and second quarter. We are probably going to see more events in upcoming quarter as well. As for key initiatives for Europe, we, like I said, continue to rebrand, repositioning to cater to a more premium market and to command higher room rates as well. We also do some lease extensions for profitable hotels to get more revenue stream into our P&L. For Thailand, we still see the benefits from a macro standpoint. The government tourism scheme has become more visible this past few months since the new government took on. We saw visa-free policy. We saw increased flight and air connectivity has been restored.
The macro backdrop and the government policy is very conducive for our growth as well. But in terms of our own key initiatives, we intend to scale our sales network, like I said, in Thailand into unrepresented markets like Israeli for a number of hotels and also Middle East market as well, in addition to other key markets that we used to have already. We also do some hotel renovation and room upsell strategy for Thailand as well, in order to push up our effective ADR room rates. In Australia, we start to see government supporting scheme and also income tax reduction and energy rebates. We see the revenue opportunity enhancements from corporate and MICE meeting incentives segments, in addition to the leisure segments, which tend to be a little soft lately.
But we have corporate and business segments to come into play to compensate for that softness for leisure. We also strengthen our cost management initiatives to be able to safeguard and protect our profitability as well. On Minor Food, the high level thematic strategies, three key strategies that we use to maintain our growth trajectory is to introduce new products, especially designed for each channel and occasion. This product innovation has been key for our sales enhancement and to increase customer spending, enhance store traffic and capture new customers. All the brands are adjusting menus and develop new menus to cater to each distribution channel, including dine-in, delivery, takeaway, and drive-through. Second strategies, we focus on strengthening customer engagement through loyalty and digital marketing rewards programs. Brand ambassadors, you probably have seen some of our brands. Viral communications campaigns, still very active to create excitement in the market.
These efforts also aim to increase our loyalty members and repeat sales from our existing customers. The third thematic strategy for Minor Food, as we expand the number of restaurants, our operational excellence remains the backbone of our execution. We want to make sure that we have high efficiency, high quality, and still maintain consistency in customer experience and profitability. So we are committed to maintain the high standard across process, services, and products for all the brands. If you look market by market, of course, the key Thailand market and also other ASEAN markets, we continue to see the ability for us to increase market share and benefit from the government program, especially in Thailand. The upcoming digital wallet will be part of the scheme. Our shop will be part of the scheme in the middle of registration process.
On macro front, it tends to be conducive to our growth. As for our own key initiatives, in addition to what Namida mentioned earlier, for the past quarter, in upcoming quarters, we continue to expand categories to attract a more and broader customer base and customer segments. We try to introduce value layers, so different tiers of menus to offer to various dining occasions for our customers. Also we try to come up with new store format, innovative store formats to cater to different segments and different sort for all the brands across our portfolio. We launched GAGA in Indonesia for the first time. That is on top of the Dairy Queen that we set our footprint initially. We tend to see potential for more brands to put into that market, a large potential market as well.
In Australia, we see the opportunity to match with the local preference. We add our fresh pastries, and then we enhanced our store design. We refurbished a majority of our stores there just to match with customer attention and preference and lifestyle. Also we reactivate our Sizzler brand in Australia, and collaborating Sizzler menu at The Coffee Club, Australia. In China, we explore additional revenue stream and benefits from the government stimulus towards domestic consumption in the first half of 2024. You probably have seen some of the Chinese government measures that has been announced that gears more towards consumption rather than conventional manufacturing and other segments of the economy like before. That will help try to prop up the spending for our restaurant in China.
The key initiatives, we will continue to build capability of the expansion of our brand in China, not only for existing brands and for new brand and new business model, that we try to cater to franchise models. So we build our own resource capability and we try to make sure that we are ready for the expansion that can happen in the upcoming quarters. We plan to launch new concept, targeting casual dining for franchising business model. That is the alternative to the original fish brand that we have, Riverside, that we have in China. So we see opportunities to scale up under a franchise model in the future for Minor Food China. Next slide is the same slide as before. We just put it here just to reiterate our objective and goal, 8%-10% revenue growth per annum over the next three years.
We see the potential to expand margins. Our profit growth should be higher than revenue growth. We target profit growth at 15%-20% per annum over the next three years with ROIC, return on invested capital, higher than 10%. We aim to increase the number of hotels to 780 hotels or more. I think that the number that I showed you earlier, it showed that we are on track in terms of signed contract, and potential deals under negotiations, which will help us get there in upcoming years. For food, 2,645, we aim to get to 3,700 outlets in the next three years with a leverage ratio to get down to a ratio that close to 0.8x for net debt to equity and to 4.3 x for net debt to EBITDA. We still have commitment to get there.
Our leverage ratio is continuing declining in the past few quarters, and we hope that in the next upcoming quarters, we will come down even further. At the very bottom of the slide, just to show you key strategic pillars that we have as per our long-term plan that has been with us for years. We still think this is still valid. Winning brand portfolio, value capture and productivity just to increase profitability and margin as well. Investments or partnership, portfolio management is still key. Not only investment in terms of M&A, but also partnership with franchisees, partnership with hotel owners under hotel management is also under this category. These will enable by innovative digital strategy, our people and workforce that are ready to adapt to a changing environment. Lastly, we still have our sustainability and ESG in mind.
We still always consider ESG whenever we come up with a new strategy, always. That's previous strategy. Next slide. I won't go into detail. It's the same as last quarter. At the very high level, drive organic growth, actively leverage, and expansion to asset-light business models. Just put it in here just for your reference. Now, we end the presentation, and we open the floor to Q&A.
You can either raise your hands, or you can type it in into our chat box or Q&A box.
First question is regarding sustainability bonds. How is the management confident that MINT could achieve the ESG-related KPI as targeted in the bond? Well, we are quite confident, and we will try our best to stick to our milestone that is set in terms of sustainability targets. We already announced ourselves to be net zero in 2050. If you look at the sustainability bond, we have two KPI. The first one is GHG or gas emissions intensities. We have to reduce scope one and scope two GHG emission intensity to the level that we set as a milestone before we get to the We have the milestone set per year and per timeline. KPI 2, water withdrawal intensity.
We aim to reduce water withdrawal intensity towards the level, I wouldn't go into detail, but we set the level, and then we have a commitment to get to that level. I am still confident that we will get there.
Next question is on our debt profile on fix and float for 2024 and end of 2025. Currently, the fixed portion is about 56% and floating is about 44%. Mm-hmm. And then-
Well, yeah. Right now, if you look at fixed float, including this is 56% fixed and 45% float. We still, I would say at the end of the year, it wouldn't change much from here. We try to see, well, in the declining interest rate trend, we try to increase float. At this point, it is too soon to increase float in a dramatic way. We still keep monitoring the situation and we try to remain agile in terms of adjusting out this portion.
The next question is on our target of reducing net debt to equity, which is now at 0.96 x and we aim at 0.8 x at the end of the year. What is the strategy in the second half to achieve this target?
Well, we continue to reduce our debt level, even though in the first half we did not reduce absolutely debt level. That was only because we have some CapEx repositioning, rebranding CapEx exercise that we have to do in order to capture higher room rates in the rest of the year. That is something that we expected to do already anyway. Also, in the first quarter, it was the last making of cash softness quarter for our low season European operations. So some of the working CapEx expenses has been held back in the first quarter, and we have to spend in the second quarter. Most of the repayment schedule is more concentrated in the second half as well. We hope that our earning recovery and our earnings go to repay debts in the second half as well.
We also have some other alternative strategies, like asset sales, asset rotation in place to see if we have to use it to reduce down our debt level. In terms of equity, we still have profit contribution that continue to strengthen our equity base. In this past second quarter, we have the fair value of land uplift in some of our assets in the portfolio to help strengthen equity base. We try to see if there is any room to see our equity strengthen further in the rest of the year as well. We want to get close to the committed 0.8 net debt to equity target as much as possible by year-end.
Can you update the key regions business momentum for hotel and food business in the third quarter of the year?
Well, if you look at the business potential in each region, start with Europe and Americas. I can give you some color on the third quarter to date, maybe. For Europe and America hotels, we still see RevPAR growth in July, roughly about 14%. ADR still rising more than 10%, double-digit growth in terms of ADR in July. In August, we see on the book, total revenues up by 18% so far, compared with the same time last year. So that Europe, we still see strong trend in terms of, as I said before, leisure demand and also business demand still coming strong, and with more events that will help drive more business to us, and also our effort to drive ADR further.
But even if ADR, in terms of demand, we not only bank on demand strengthen in the upcoming quarters, but we also, like I said, try to uplift the value of our supply in order to capture high room rates at the same time. For Thailand, third quarter to date, in July, we see RevPAR growth of more than 20% year-on-year in July for Thailand hotels. Then if you look at room revenue in August, overall, it shows double-digit growth for us in 10. If you look at room revenue, both in July and August, still show very strong double-digit growth.
Like I said, the government policy as well as the more air connectivity, the number of tourist arrivals, and our campaign to attract our travelers, our loyalty programs, all of that will help bring in more business throughout the rest of the year and beyond.
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May I ask some follow-up questions regarding the debt repayment? We expect most of the debt repayment schedule to happen in the second half. Would that also mean your interest expense would also start to lower in third quarter onwards?
Well, we will see some of the debt repayment schedule coming in in the second half. As I said, also in the first half, we probably have more CapEx to spend because of the repositioning and renovation, rebranding exercise that we have already scheduled during the beginning of the year. Also, like I said, we have more CapEx in the first half because we hold back some of the CapEx that we have to spend early on the year or during low season, because we want to make sure we have enough liquidity and we spend when we are going into high season. That has been spent in the second quarter. We would expect maybe less spending and also more repayment in upcoming months. That is on the debt side.
We try to see if there is any strategies like assets. We are modeling some strategy of asset sales, asset rotation, to see if we can do that to bring more proceeds to reduce debt level. Also at the same time, equity will be strengthened as well, as I said earlier. Yes, repayment, we will tend to see more repayment and absolute debt level come down maybe in the second half, third, fourth quarter.
Okay. Can we also assume then that your interest payment will also lower, Khob, in third quarter onwards?
Well, it wouldn't lower that substantially, but we try our best to work against the dramatic rising interest rate that happened in the past. We have been enjoying low interest rates because we lock in low rates for a long time. Some of the refinancing activities that happened make our cost of funds went up in the past year, or if you look at our cost of funds in 2023, it was 4.9%, but in 2024 it has increased to about 5.4%. If we didn't do any proactive refinancing at the favorable rates, it could have gone up much higher than this, but we keep it at 5.4%, and then we think that maybe likely in the fourth quarter rather than third quarter, that we'll see it come down.
I'll say, if you look at our cost of fund in the second quarter, it hovered around 5.4%, which is not much change from first quarter. In third quarter, I would expect it not going to reduce that much. But in the fourth quarter, we're probably going to start to see a lower cost of funds overall. Third quarter will come down, but only slightly. But in fourth quarter, we'll probably see a little bit more. That's our forecast based on our expectation on rates trend and market consensus on rate as well.
Okay. Thank you. Another question I have is with regards to your outlook. I understand that for the hotel business in the second half, at least for the past month and a little bit so far, things have continued to be quite strong. Do you have any forward data into the remaining of the year and fourth quarter? Also maybe if you can provide some expectation for next year in 2025. There's been some concern with demand slowing down in some parts of the world, mainly in the U.S. But I'm wondering if that could also lead to a softer demand outlook in Europe as well next year, Khob.
Well, I already talked briefly about the trend that we've seen in third quarter so far, right? It still delivered higher RevPAR growth and ADR growth than our original budget assumptions. Fourth quarter probably going to follow the same trend. If you remember, at the very beginning of the year, we give our guidance, our earnings guidance, and operating stats guidance. Say, for example, Europe, ADR increased by low to mid-single digit. But if you look at the real number, it already far exceeded our original assumptions. So to answer your question, we will continue to see stronger than our original guidance and expectation in the rest of the year.
But the number that we can give out and actual number on the book, already told you both in key market like Europe and Thailand, we see double-digit growth in terms of RevPAR and ADR, which is far exceed our guidance and our expectation at the beginning of the year.
Okay. Thank you, Khob. That's all questions I have.
Thank you, Khob.
Khun Sukrit, you have raised your hand. Please go ahead.
Hi. Thank you, Khob. Thank you, Khun Chaiyapat. I have a couple of questions. Let's start from the hotel side first. You talk about expanding the customer base through cross-selling, new sales team, and loyalty program. If I may ask for the feedback from customers or loyalty member programs, how is your loyalty program right now doing compared to the global hotel chains? This has been a push from the global hotel chains and a key driver of their RevPAR in several markets. For you guys, how is it looking right now after we've added in each loyalty program into yours, and how is it growing? Can you share more on that, please?
Yeah. I think the growth in terms of percentage will be substantially higher than other hotel chains because we just start combining our Global Hotel Alliance platform originally, from this part of the world with Minor Hotels Europe and America loyalty platform just last year. We just combined loyalty program last year and make us one of the largest hospitality loyalty program in the world. The benefit of that just start to show just this year. It should show more in upcoming years, especially when we have cross-brand expand strategy in place and people see our brands all over the world. When the loyalty programs combine, become more stabilized, and more brands of ours get put in several more locations in the world, we will likely see more cross redemption, cross usage of points. The benefit will be much, much more in upcoming years.
To compare with the global player, as I said, we just start having, all of a sudden, big, large loyalty member programs just last year. Coming from that base, we see more of the percentage growth potential this year-
Okay.
-and next year.
Thank you. That is fair. The second question is on something you also just recently done, is bring NH over to Asia side, right? How has that been, the feedback, either in terms of management contract or own and lease hotel, but how is the NH brand being received in Asia?
Well, putting an NH brand in Asia does not mean that we have to cater to all the Asian travelers. We cater to world travelers, and world travelers, a lot of them are already familiar with the NH brands. So when they trust NH brands, where they used to travel in Europe or elsewhere, when they see NH in Asia, they tend to come to the brand that they are already familiar with. So it has been well-received by world traveler and all the feeder markets, because even though NH is new to Asia, but now we try to promote NH to Asian market feeder. But at the same time, market feeder that are not familiar with certain brands that we have in our portfolio, we try to become more proactive to those brands, too. Not only for NH.
Say, we work on Asia market feeder for NH, but we maybe work hard on European market feeder or U.S. market feeder for our Anantara in Europe, say, for example.
Understood. So is it fair for me to say that the NH that has been opened in Asia are generally well-received with occupancy and RevPAR comparables to other hotel chains that you have here? Just a ballpark, it does not need to be an exact number, but just want to get a sense.
Well, some of the new hotels need time to ramp up, and that is pretty normal, too. Not just only NH brand, but for other brands as well. In terms of locations, in terms of the market that we have to do marketing campaigns. I will say most of the NH hotels that we have in this part of the world, it is just new. So it needs time to ramp up as per natural course of hotel opening anyway. But so far, we receive good feedback. As I said, world travelers are not hesitant to book to an NH brand because they know the brand standard, brand criteria, and the experience they used to have with NH somewhere else. Then we have our agent around the world. So the agent can talk to a potential customer about NH brand in Asia.
Mm-hmm. Sure.
Even more.
I see.
Yeah.
Thank you for that. Two more questions from me. The first one is on the renovating and rebranding of the hotels. You have been very successful in that and congratulate for that. My question is, what is limiting it to only 30 - 40 hotels that we have on plan? Is it just the location, or the cash flow, or there will be more down the line, just right now it is a near-term target of 30 hotels?
Well, there will be more down the line as we identify, but like you said, we have to strike the right balance in terms of CapEx, the growth, and then also the potential ADR that we can capture. So, there are various factors coming into play.
Okay.
We try to identify more to see if we can do, not only in Europe but elsewhere across our world portfolio as well. Like I said earlier, Thailand also did some renovations to capture higher room rates. We will only do it during low seasons.
Yeah, there could be more.
Understood.
But as I said, we will not overly spend, especially when interest rates not coming down. So we have to be very selective.
Okay. And last question is for the Australia operation of Oaks. So if I look at it, you have a couple of new hotels coming up in next year. But the idea is that the market has been stagnant for a while for us, right? It hasn't really been growing. So the question is, what is the strategy here going forward as it still contributes quite a big portion to our top line and bottom line in that sense?
Well, we continue to, like I said, now Australia has a very strong base in 2022, 2023, right? And then the south that's just coming from low base and coming mainly from leisure demands. So now we try to beef up the corporate market segment as well, or business segments, to make up for shortfall. And also we try to bring more international travelers to Australia. So that's probably our strategies. Occupancy is very high already, over like late 1970s or early 1980s all year round. But we try to see how we can attract more travelers in terms of room, in terms of attract higher RevPAR in terms of room rates.
Sure. Thank you, Kap. That's all from me.
Oh, just to add, from the team, in Australia, if you look at Minor Hotels, our occupancy, as I said, is high, like late 1970s or early 1980s. And we have to say that we beat competition in the market. Our occupancy is higher than our peers. Our peers' occupancy stands at 72%, while ours 80%, even though our ADRs are on par with peers at around AUD 136, AUD 137 . So, despite the drop in RevPAR, we still maintain market leading position. I guess that is what the whole market experience, the softness of RevPAR year-on-year.
Yeah.
But as I said, we come up with new, unique, and differentiate our strategies to focus on segments that can help potentially come in to compensate for soft leisure segment. So focus on MICE, we focus on international long haul as well.
Thank you.
The question, what was the CapEx in the first half of the year? I think it hovered around THB 4 billion-THB 5 billion in the first half. Roughly about THB 2 billion in the first quarter, and roughly about up to THB 2.5 billion-THB 3 billion in the second quarter. As I said, a lot of CapEx has been slid from first quarters to second quarter of the year.
Is some of CapEx captured in cash flow from operations? The answer is no. The CapEx would capture in investing activities, or it can be captured in financing activities. For example, last year it can be captured in the net cash paid to non-controlling interest from change in interest and subsidies. For example, last year we have increased our stakes of NH from 94% to nearly 96%. So that CapEx will be embedded in cash flows from financing, not the cash flows from investing. The next question would be, what should we expect the ADR percentage rate lift up from your maximization strategy? How many hotels can be uplifted in this year, and next year?
Well, as I answered to Chajit question earlier, ADR uplift, we have seen, say for example, in Europe, still up like late single digit point, high single digit point in year-on-year. That was a result of demand and also our own effort to drive room rates as a result of repositioning and rebranding exercise. The brand upgrade in the past, well, I think I used to give you some examples that we have seen. Let's say if we upgrade or rebrand our in-house to NH Collection, we can uplift our ADR by more than 40%. If we upgrade NH to Avani, let's say the one that we did in the past, its ADR go up by more than 50%. In certain case, when we upgrade NH Collection to Anantara, the ADR are more than double.
But having said that, it also depends on location, the timing, and the seasonality. But that's the benchmark that we've seen in the past.
I see Brian raise your hand. Please go ahead.
Hi. Can you hear me?
Yes, we can hear you.
Great. Just two quick questions on the restaurant side, F&B side. I am struggling to see any bright spots in the China space and it is effective on the whole market, not so much your business as well. Do you mind sharing where you see the bright spots there, if any, and how you plan on expanding there? The second point is a longer-term question. If you look back at your three-year aspirations, you are looking at 3,700 outlets plus for the F&B side. At our current pace, we are not really heading towards that. Does that imply there is some sort of M&A you are looking at, and how should we think about that number?
Well, for China, the economy conditions is soft across the board, right? We slowed our expansion in terms of outlet opening. The opening of outlets is slower than our original plan. We try to see selectively the location that we can expand with short payback periods and high return on invested capitals, as Namida mentioned to you earlier. What we have to do here, if we cannot expand sales, what we can do is just to implement cost control and cost optimization to maintain our profitability. I will say that is probably our priority at this point. In terms of expansion, more outlets, we will see the economy conditions to show some sign of improvement. We only selected locations, like I said, with the appropriate IRR and return. Your second question is? Sorry.
It's related to your long-term goals of 3,700 outlets. We're not really at a pace to get there, so does that imply we need M&A to get there? Can you just give us some thoughts on that?
Well, we would try to do both organic growth and inorganic growth. Nobody knows because we're very opportunistic in nature. So that 3,700 outlets are the goal that also include franchise stores as well. As I said, we'll continue to expand using asset-light business model, and we tend to do so on both hotel side and restaurant sides. On the restaurant sides, we try to focus more on franchise expansion going forward. So I would say that target include organic growth, which should come around by about 5%-8% per year, or the asset-light business expansion via franchise. M&A can come into play in the future, but we wouldn't bet much on it because we try to be conservative.
Great. Thank you.
I have to say, we slow down and decelerate M&A, not only during COVID, but post-COVID. During COVID, we have to preserve liquidity. Post-COVID, since we have been in high interest rate environment, so we have to be very selective in M&A, anywhere post-COVID, just to make sure that we don't spend too much and we don't have enough proceeds to reduce down our debt level in the high rate environment. But when we can control our cost of funds, and when rates start to come down, which already show the sign of coming down, we probably look at M&A. But as I said, we remain optimistic. We have to make sure that M&A deal bring in high enough return IRR that can compensate for the high cost that, high inflation cost environment that we're in, and also high rate environment.
Otherwise, we continue to be very selective and conservative.
Great. Thank you.
Well, the question is, can we talk about QSR restaurant business in the second half? I think I provide some outlook that we try to come up with the new product innovation, marketing viral campaigns, engage customers more, focus on operational efficiency. Well, in the third quarter to date, so far we still see strong sales from some of the brands that we have, especially core brand like The Pizza Company. As we revitalize the brands, as we add more new concepts to the brand, such offering has allowed us to see higher or positive same-store sales growth in the core brand in the third quarter so far. Sizzler as well, have seen some of the higher and strong positive same-store sales in third quarter to date, as well as The Coffee Club that has seen positive same-store sales growth.
But, some of the brands probably experience slight decline or negative same-store sales. But you cannot look just at just one month or two months. You have to look at the whole year or whole quarter. Because each month, different brand taking turn to be a star performer. Even now, throughout the rest of the year, we should see a pretty more decent same-store sales growth number, operating stats number. But for third quarter to date, we still see good performance, good same-store sales growth from core brand like The Pizza Company, Sizzler, The Coffee Club. Well, there is a question. Why do we say CapEx was higher in the first half and is being front-loaded? If we look at your guidance, we still have a lot remaining in the second half. We do not lower CapEx guidance for the full year.
The CapEx plan that we put in the slides is from the plan that we have as a guidance, and includes some buffer just to make sure that we have room for cash flow in the future to reduce our debts. We make some buffer for our CapEx in case there is some overrun of cost, some overrun of some of the CapEx in the first half or some of the extra CapEx that we have to spend, just to be conservative. At this point, if you look at normal CapEx and repositioning CapEx, it should be a little bit more in the first half. In the second half, as I said, the guidance also includes some buffer.
I don't think we have other questions. Okay, Khun Chajit just raised his hand again. Please go ahead.
Hello. [Non-English content] Just one follow-up question for me again. Regarding the FX loss that we saw in the second quarter coming from mostly, as you mentioned, Brazilian real and Sri Lankan currency fluctuations, can you provide some outlook in third quarter and second half on the impact from these currency swings? Have you seen these currencies starting to stabilize? Or have we already been able to hedge for these further fluctuations for the second half?
Well, it depends on direction of exchange rate between U.S. dollars and Brazilian real, right? And U.S. dollars and Sri Lankan rupee. So, it depends on your assumptions. Now that if you look at the strength of U.S. dollars has softened a little bit. So up to your Forex assumptions, you will never know. If you look at the spring and on the whole year basis, I don't think this gain and loss will have material impact, because the only impact that we saw in the second quarter was the volatility that we see in the exchange rate, and we see the strengthening of U.S. dollars so much in the second quarter. If you look at the previous year, for example, it's the other way around. So, depends on your view on exchange rate in the rest of the year.
But at this point, I think, we probably going to see U.S. dollars come back to probably lower level considering rates coming down and then market condition, potential recession that people talk about. Yeah, that's probably the assumption that we see. I think most of the FX strategies in the market that we consult with also see as well.
Okay. Thank you Sir.
I think that there's no more question, but if you have follow-up questions, please feel free to contact our IR team. We are more than happy to answer any questions any time after this. Thank you for the participation, and hope to see you next quarter.
Thank you all. See you next quarter.