Good day, and welcome to the Pandox Q2 2022 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw from the question queue, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Anders Berg. Please go ahead.
Thank you very much, and welcome everyone to this presentation of Pandox Second Quarter and Half Year Report for 2022. I'm Anders Berg, obviously Head of IR at Pandox, and I'm here together with Liia Nõu, our CEO, and Anneli Lindblom, our CFO. Also in line with our tradition over the past years, we have STR with us today represented by Thomas Emanuel, Senior Director at STR. Thomas represents, as you all know by now, a leading independent research firm focused on the hotel market, and he will share STR's view on this market later during this call. Please remember that the views expressed by STR are completely separate from Pandox, and the presentation is offered only as a service to Pandox stakeholders.
Thomas' presentation will be held after we, that is Pandox, have completed our earnings presentation, including a Q&A. This report presentation is divided into three parts. First of all, Liia, Anneli, and myself will present a business update with financial highlights for the second quarter 2022, followed by a Q&A session. After that, Thomas will provide the external hotel market update. Next page, please. With that, I hand over to Liia.
Thank you, Anders, and welcome everyone. I'm really happy to report the strongest result for Pandox in a very long time. The strong progress in the hotel market confirms our own research about how the recovery could be shaped. The strong earnings improvement is explained by increased revenue-based rent and improvements in own operations, which in turn confirms the power and performance of Pandox business model. It also reflects the strong execution and value of the Pandox team and our unique corporate spirit. Well done, everyone. Next page, please. We have a well-diversified hotel property portfolio. We have 156 hotel properties with approximately 35,500 rooms in 15 countries in 90 cities, and with a property market value of close to SEK 66 billion. We are divided into two business segments, property management and operating activities.
In property management, we lease hotels to strong and well-known operators under long revenue-based agreements. This segment makes up for some 83% of our property market value. In operating activities, we operate the hotels ourselves under different operating models, and operating activities makes up for some 17% of our property market value. Next page, please. We have one of the strongest networks of brands and partners in the hotel property industry. As you can see in this picture, we work together with several well-known operators. For example, Scandic and Nordic Choice in the Nordics, Jurys Inn in U.K., and Leonardo Hotels in Germany, among others. We also have long relationships with strong international brands such as Hilton, Holiday Inn, and Radisson Hotel Group, to name a few. In our operating activities segment, we also have some independent brands created by Pandox.
For example, our newly renovated Hotel Berlin, which is Pandox's largest hotel with over 700 rooms. Next page, please. No one is happier than me to report such strong numbers this quarter after more than two years negatively affected by COVID-19. It feels good to finally talk about the positive, profitable side of our business model. If we took a look at the hotel market, it developed very strongly in the second quarter with rising occupancy and high average prices in all our markets. The main drivers were strong pent-up demand, in particular among leisure travelers, but the business segment also contributed more and more during weekdays. As before, domestic and regional hotel markets developed the best, but larger cities saw the steepest rise in RevPAR and are now at the highest level since the outbreak of the pandemic.
The longer the quarter progressed, the stronger this trend became, and this is especially important for our operating activity segment, which has a larger exposure towards larger, more international cities like Brussels, Berlin, and Montreal. Now a look at the numbers. In the quarter, our net sales and total net operating income increased by 108% respectively year-on-year. For comparable units, the increase was 99% and 84% respectively, adjusted for currency effects. Like-for-like, property management increased net operating income by 39%. Our relationship with the banks remains strong, and we had almost SEK 4.1 billion in cash and unutilized credit facilities at the end of the quarter. At the same time, loan-to-value declined to 47.8% compared with 49.8% at year-end 2021.
Return on equity measured by annualized growth in EPRA NRV was approximately 13%. Next page, please. In the second quarter, the hotel market recovered strongly in all markets. This confirms the belief we have had all through the pandemic that demand would come back strong once restrictions were removed. Here we see a comparison of the occupancy levels for our business segment Property Management from 2019 until today. The numbers are on a comparable basis. As you can see, 2022 started weak due to travel restrictions but saw a strong bounce back during the spring and early summer. The comparison to 2020 and 2021 is gradually becoming less relevant as the current performance is now much more in line with 2019. In the second quarter, recovery was strong in most markets, both in terms of occupancy and average price development.
The U.K., Denmark, and Norway, which lifted their coronavirus restrictions earliest in the first quarter, saw a stronger development in the second quarter than Germany and Finland, where the reopening took place somewhat later and the recovery only really ramped up towards the end of the quarter, end of the second quarter. Hotel demand in many larger cities increased significantly while smaller and regional cities continued to develop well. Next page, please. Here we see Pandox total portfolio categorized based on the type of location with occupancy index versus 2019. As you can see, segments are now closing in on the 2019 level, and the strong development in larger cities the last few months is particularly encouraging.
You can also see that the spread in performance between the different segments is currently the smallest since the start of the pandemic, and this is a clear signal that the hotel market is under normalization. Next page, please. In the second quarter, we extended 15 lease agreements with Scandic in the Nordics. The extensions include a joint investment program of around SEK 700 million for product development, repositioning, and increased guest comfort. We are really happy about our partnership with Scandic, and this agreement shows that we have a strong relationship with a common commercial perspective. Next page, please. With that, I hand over to Anneli Lindblom, our CFO.
Thank you, Liia. Yes, as Liia said, we saw strong recovery across all our markets, however, with some difference depending on when in time the restriction were eased. In general, the U.K. and the Nordics performed strongly the full quarter, while, for example, Germany had a slower ramp-up but with a strong ending. All in all, we saw strong development for Pandox in revenue and earnings in the second quarter. It shows really how profitable we are when we have the market on our side. Revenues and earnings continue to improve in both business segments, with the largest effect in operator activities given our full exposure to the P&L. Please note that we did receive SEK 56 million more in government support in the second quarter than in the second quarter last year.
In Property Management, we received SEK 68 million compared to SEK 2 million the corresponding quarter last year, and that is shown as part of the lease and the revenue in Property Management. In operating activities, we received SEK 88 million compared with SEK 98 million the corresponding quarter last year, and that is shown as a reduced cost in operating activities. As you can see, it's different levels that different lines that are affected by this supporting package. This package was for previous financial years, and the late payment is explained by long processing times, particularly in Germany and Canada. We have also repayment of deferred rent, and that was made according to plan. Next page, please. Okay, on this slide, we can see a comparison of the variable rent in our leases over the past 6 quarters.
All in all, we have 96 leases with revenue-based rent and with the minimum contractual rent, and 32 leases which are purely revenue based without any minimum rent. On top of this, we also have eight leases that are fixed. In the second quarter, total variable rents amounted to SEK 258 million. The number of minimum leases generating variable rent continued to increase and reach 54, as you can see on the graph on the right side of the slide. These leases are mainly located in the Nordics and in U.K.. It is reasonable to expect that this number will increase in the coming quarters. Next page, please. Pandox performs internal valuation of its hotel properties each quarter.
Approximately 98% of the properties have been externally valued during the past 12 months, and the valuations are in line with our internal valuations. Value changes were positive in the period primarily explained by higher expected cash flow. In the first 6 months, total changes in value amounted to a positive SEK 1 billion, of which a positive SEK 667 million for investment properties and a positive SEK 381 million for operating properties. Investment properties are recognized at fair value. According to IFRS, unrealized changes in value for our operating properties are only reported for information purpose and is included in the EPRA NRV. End of period, the average valuation yield for investment properties was 5.41%, and for operating properties it was 6.38%. Next page, please.
Accumulated changes in value in our property portfolio since the start of the pandemic. During the most uncertain phase of the pandemic, we had a negative change in value in six quarters, mainly due to lower cash flows. From the third quarter 2021, based on gradually improving cash flows, changes in value have been positive. Next page, please. Pandox has two sources of financing. We have equity, and we have bank loans secured by underlying properties. We have no market financing in the form of bonds and no external rating requirements. Given our business model, which focus on hotels and and variable rent, this has proven to be the most efficient and predictable financing over time. On the right, we highlighted our capital structure at the end of the period.
Based on the closing price yesterday, Pandox is valued at a discount to EPRA NRV at almost 40%. Next page, please. In total, Pandox refinanced loans to around SEK 4.6 billion during the second quarter, mainly at the maturity of 3-4 years and stable credit margins. We increased the number of lenders from 11 to 13, adding Swedbank and AMF Tjänstepension as new lenders. Loan-to-value amounted to 47.8%, while EPRA LTV was 47.0%. Cash and long-term unutilized credit facilities amounted to SEK 4.1 billion. Credit facilities maturing in less than one year amounted to SEK 12.1 billion, of which the majority in the first and second quarter next year.
Positive dialogues about refinancing are ongoing regarding all of these credit maturities, and the intention is, of course, to refinance this in good time before contracts expires. Pandox also have some commercial paper program that are used to optimize Pandox financial costs via interest rate arbitrage. At any given time, they are fully covered by Pandox RCF. Next page, please. Okay. On this slide, we show how some important balance sheet metrics have developed since the beginning of 2016. With the exception of the interest coverage ratio, these metrics have remained relatively stable over the period. Just a few highlights. Loan-to-value declined to 47.8 in the second quarter, which is actually lower than before the pandemic.
The interest coverage ratio is now improving from low pandemic levels, although the 4.7 recorded this quarter is a bit out of the ordinary on the positive side. With that, I will hand over to Anders Berg, Head of IR, to guide us through what happened in the hotel market in this quarter.
Thank you very much, Anneli. Yes, both Anneli and Liia have been talking already about some of the dynamics of the hotel market in the second quarter. We introduced this slide that you now see exactly two years ago to illustrate the phases and segments which we expected to drive the recovery in the hotel market. We think it has been a useful model for understanding how demand is gradually built up in the market. As you know by now, over the course of the pandemic, our markets have moved largely between phase I and IV, depending on the level of restrictions in each market. When we entered into the second quarter, restrictions had been removed in all our markets.
However, some countries like U.K., Denmark, and Norway were a bit earlier in lifting their restrictions in the first quarter than Germany and Finland. As a consequence, the first countries also experienced a quicker recovery. Germany started the second quarter slow, but demand ramped up strongly towards the end of the quarter. In total, the hotel market, as we see it recovered strongly throughout the second quarter, and that put it solidly in phase IV, with some signs of international and group travel as well. We think that in the final phases of the recovery, we expect the lines between the different demand segments to become a bit more mixed than before. That said, domestic demand is expected to remain the strongest driver also in the coming quarters. Next page, please. The second quarter saw strong and broad-based recovery.
As we said earlier, hotel demand was largely driven by domestic leisure, but gradually with increasing support from domestic business as the quarter progressed. ADR continued to develop strongly, which together with a positive occupancy trend made RevPAR year to date for 2022 exceed 2019 levels in a few markets. We also saw a continued strong relative recovery in larger cities versus regional cities, which further illustrates the ongoing normalization of the hotel market. Next page, please. With the recovery of the hotel market now entering into a more mature phase, we would like to introduce six new charts which track average daily rate, occupancy, and RevPAR for Nordic Regional, Nordic capitals, Germany, Frankfurt, U.K. regional, and London, and how they compare to 2019. The data points are monthly and year to date.
The bars on the charts are indexed to occupancy and ADR for 2019, and the lines are nominal RevPAR in local currency, except for Nordic regional and Nordic capital, where RevPAR are in Swedish krona. I start with Nordic regional. As restrictions were eased in the second half of the first quarter, demand came back quickly, and ADR began to rise from an already relatively solid level. We have talked about this before. The resilience and average daily rate has been strong all through the pandemic. 2022 RevPAR crossed over 2019 levels in March and have trended above 2019 since then. Year to date, 2022 RevPAR is also marginally higher than 2019. The recovery is broad, but Norway stands out as a particularly strong performer. Next page, please.
As you know, it has been a general trend that larger cities with a high dependence on international demand, have seen a slower development than smaller regional cities all through the pandemic. During the second quarter, Nordic capital cities recovered strongly, both in occupancy and ADR. In 2022, RevPAR touched 2019 levels in both April and June, but it's still trailing 2019 by almost 20% on a year-to-date basis. Next page, please. Restrictions in Germany, as we said earlier, were not lifted until late in the quarter. That was more exactly on the twentieth of March, which meant it entered into the second quarter on a lower comparable level than most of the Nordic countries.
As you clearly can see, occupancy and ADR improved steadily as the quarter progressed, with 2022 RevPAR actually exceeding 2019 levels in June. However, year to date, Germany has still some catching up to do being some 32% below comparable 2019 levels. Next page, please. Frankfurt is a good illustration of the rapid recovery in larger and more international destinations in the second quarter. Starting in April, both occupancy and ADR improved strongly throughout the quarter with RevPAR exceeding 2019 levels in June. Also here, year to date, 2022 RevPAR is almost 40% below 2019 levels. Next page, please. Again, U.K. regional remained the best performing market in the second quarter.
The U.K.'s open early strategy meant that U.K. regional really hit the ground running in the second quarter, already at that time being at relatively high occupancy and ADR levels. With the exception of January, 2022 RevPAR in U.K. regional has actually exceeded 2019 every month this year. Year to date, RevPAR is approximately 15% higher than 2019. Next page, please. We talked about Frankfurt earlier. London is also in the same category, although it's a mega city, of course, and it has also progressed well. So far this year, with 2022 RevPAR trending largely in line with 2019, measured from March onwards.
As you can see from the chart, it had a slow start to the year, and that was explained by restrictions, closed offices, and limited international travel, which means that year to date RevPAR is still some 6% below 2019 levels. Next page, please. To summarize, we currently see the hotel market solidly in phase IV with some clear elements of international meeting as well as group demand, and we also think that in this phase of the hotel market recovery, our focus is shifting more towards the two final demand segments, which should help drive further demand in larger, more international cities such as Brussels. We also see that from a relative perspective, hotel markets are converging towards a more common performance level.
Still Germany and Finland has some way to go before catching up to the leading markets. Next page, please. With that, I hand over to Liia again.
Thank you, Anders. We are now in a completely different market stage compared to how the year started. Remember in January, we had only 14% occupancy in our property management business segment. In June, we had close to 70%. The RevPAR U.K. regional and Nordic regional is higher year to date 2022 than in 2019. We see high ADR in all of our markets. A large percentage of Pandox revenue is variable, which offers protection against both increased costs and higher interest rates. We therefore have a good starting point in terms of growth and profitability as we head into future quarters. With the rising cost of input goods and more expensive financing, we focus on investment projects and acquisitions with high value creation potential.
All in all, we expect good growth in revenues and earnings for 2022. Next page, please. We now move over to the Q&A. Operator, we are now ready for questions. Please do not forget to hand the call back to us afterward for Thomas' presentation.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Fredrik Stensved with ABG. Please go ahead.
Thank you, and good afternoon, everyone. Congrats on a great quarter. A couple of questions from me. First of all, the sort of COVID relief money that you received and you recognized in this quarter, which related to previous periods. How should we think of these type of payments going forward? Are there anyone left that you have applied for or are we all done here, if you will?
Yes. We are still waiting for some more money that will come in Q3.
Hopefully.
Hopefully. Because it seems to be very long payment terms of those. We're still waiting for some. We will have the last-
And how-
Yes.
How is it possible to quantify the amount that you're waiting for?
No
hoping to receive?
No, I can't really quantify it. It's a bit less than we have received for this year, but it seems to be very uncertain figures. We're supposed to have it all in the Q3.
All right. Understood. I have a question on the operator segment margin, which was very strong here in the quarter. I appreciate that there's COVID relief payment in there and Q2 is seasonally strong. How should we think about sort of the NOI margin or the operator segment margin going forward? I was kind of expecting a lower margin in a rebound after COVID. It's a bit hard to get all the employees back to the hotels, et cetera. Are we targeting, you know, pre-pandemic levels or is it possible to get even higher than that as you did here in Q2?
Well, I think, hi Liia here. I think the target is to gradually achieve a higher NOI target. But then of course, the recovery pattern, there has been, as you see in the high ADR, the possibility of getting sort of the costs through has been very good. There is some challenges to get people in place. I think the cost will increase gradually. We expect to see the margins we had prior to the pandemic or slightly above. Also due to the fact that we have learned and we've become more efficient.
All right. Thank you. Next question is on the average interest rate, which was flat Q-on-Q. You did some refinancing, and you mentioned there were at similar terms as previously. I mean, the three-month STIBOR in Sweden is up maybe 80-90 basis points from end of March to end of June, and you're still at 2.5 on average. I guess it has some effect on the floating part of the debt. Can you add any color on margins or discussions with the banks as of today?
Before I hand the word over to Anneli, because I'm still in my old CFO role, unfortunately. Remember that 30% of our portfolio, which is Swedish krona, we have a lot of different currencies, of course. You can al-
Sure.
You have to also remember that we are sometimes in a sweet spot in the sense that where you have negative EURIBOR margins or whatever, and when you hedge, you're actually in a sweet spot. Even though the interest rates are increasing back to zero, then because the financing agreements typically have zero floors. You actually have an increase in the underlying interest rate, but it doesn't actually hurt you as a business. You on the opposite side, if you have hedging derivatives, you actually get a positive one. As you've seen in our balance sheet, we have SEK 1.5 billion worth of derivatives. These are, of course, a dampener on this one.
There is a dampener in the sense that it is a REIT. Yeah. Anneli. Yeah, that's basically what you were gonna say. Sorry.
Bank margins, if we talk about sort of bilateral bank margins rather than the underlying EURIBOR or STIBOR, is that similar? Is it, you know, flat Q-on-Q or year-on-year?
Yes. It's still on the same level you could say. It's not-
Thank you.
Changed.
That's good. Thank you. Last question related to the you sent out a press release a couple of weeks back after you signed the new lease agreements with Scandic. I remember back in the beginning of COVID, there were a lot of discussions about operators wanting to sort of shift towards 100% turnover based leases rather than a mix of fixed rent and turnover rent. This or these signed lease agreements obviously prove that your stance is correct in terms of the Nordic. I'm wondering if there are any sort of geographical differences here. Are negotiations or discussions similar in Germany or the U.K., or are there any differences?
As you know, all of the agreements which we've done with the latest transactions have been outside the Nordics. These are long-term agreements, which have another 10, 15, 20 years on them before we're actually gonna renegotiate them. These 15 leases, which we did with Scandic, have been sort of renewed at existing terms. I think, as you know, the normal contract is a turnover based contract with a minimum floor. The ones we have had without the minimum floor come from historically the first Pandox model. The standard generally is to have a minimum floor. We see that in the
We have had some few new renegotiations when we did Motel One last year. That's what, again, started that turnover base with a minimum floor.
Understood. Thank you. That's all for me.
Again, if you'd like to ask a question, please press star then one. Our next question comes from Fredrik Cyon with Carnegie. Please go ahead.
Good afternoon and congratulations to a great quarter. A few questions, starting off with the government support within property management. Which regions have been positively impacted in the second quarter?
Especially Germany. In Germany and Canada. Canada is on our own. Exactly. Property management in Germany, mainly Germany, and some in Belgium, but the big portion is in Germany.
Okay.
The government support, yeah, for generally.
Yeah. The money you're still waiting for, is that also in regards primarily to Germany?
Yeah, Germany and some in Canada, but the big portion is in Germany because they have been very, very slow. Slow but good. Generous. Slow.
I see. It usually is tedious, those processes. Looking at generally the consumer confidence in Europe is turning a little bit sour now. Have you seen any indication of that hurting demand in any of your markets with regards to the leisure segment? Is it early days to speculate about that?
It's early days to speculate about that, and no, we haven't seen that yet. There's still this very much pent up demand. Everybody you speak to are planning the travels, maybe not for this year, but also for next year. People are willing to pay quite a lot for actually traveling and living in a hotel. In combination that of course there will also be a segment mix in the sense that today we have a large proportion of the hotel spend, which is leisure. Even though there may be a dampening effect or not, then we still missing the international big meeting events, et cetera.
On the gross operating profit margin within operating activities, if I try to strip out the impact from government support, I get to a gross operating profit margin of about 24% for the second quarter, which is not far from the levels that we saw in 2018, 2019 thereabout.
Yeah.
I understand that probably efficiency has increased due to staffing not being at the same level, but I would imagine that you're looking to staff up. Is the 24% margin, at least the number I got to, kind of unrealistic to maintain in the short term or do you think the pent-up demand will support similar margins in the next 12 months or so?
We believe they will be supported, sort of, closing back to 2019 levels.
Perfect. The final question, anything we should bear in mind looking at rental income from property management Q1, Q2 versus Q3? Any seasonal impacts, adjusting for the government support that we should be aware of?
Well, Q2 is typically the strongest quarter in a normalized world where all the occupants is back and all the seasonal normalization pattern is back. The Q2 is normally the strongest quarter. Having that in mind, then Q2 should be a stronger quarter than Q3. We have markets coming back later when it comes to Germany, Finland. When we look at what we have on our books, which probably is also sort of represented then to some extent also for the property management, then of course, bigger meetings, events, et cetera, are being on the sort of 2019 levels for the second half of 2019. The seasonal patterns are getting there. The exact effect of quarter-over-quarter, we'll tell you next quarter.
It's getting more and more normalized.
Thank you. I understand there are many moving parts. Those were all my questions.
Great. Thank you. Thank you.
This concludes our question and answer session. I would like to turn the conference back over to management. Please go ahead.
Okay. Thank you very much for this. We will now hand over to Thomas Emanuel for the external market presentation. Thank you for your questions and being active on the call. We really appreciate it.
Thank you very much, Anders. Good afternoon, ladies and gentlemen. Pleasure to be with you this afternoon. Thank you to Pandox for the invitation. As was mentioned, I'm gonna talk to you about the performance data that we're seeing. We'll have a look at a global level, but we'll really drill down and focus on Europe. I'll touch on obviously occupancy rates, average rates, as well as demand and some forward-looking data as well. If we can firstly move to the next slide, which is slide 28 in your pack. We have got here occupancy on a rolling 28-day basis indexed to 2019 for four major regions around the globe. You can see actually Europe, the U.S., and the Middle East are all really rather aligned in terms of their recovery trajectory.
The latest day we have available, Europe is 94% recovered when indexed back to 2019. You can see there China lags a little bit behind, but that is really as a result, of course, of the zero-COVID policy there. If we move down now to the next slide, please, we can see there that weekend occupancy has recovered a little bit more strongly than weekday occupancy, which is still about 10% behind. We are seeing, as you can see on this chart, very much an upward trajectory as we move towards the present day. Of course, weekend demand has been a little bit stronger as much of the recovery thus far has been driven by the leisure sector, but we are increasingly seeing corporate demand return to those midweeks.
If we look and think about what is really holding us back, if we then move to the next slide, please, you will see that it is group demand. That was referenced previously. It's still around 40% behind where it was in 2019. If you compare that to transient demand, we have been now fully back up above 2019 levels for some time now. Groups are lagging, but we are starting to see that shift. If you move to the next slide, please, you will be able to see that. We've just taken a selection of four European markets and looked at business on the books as of the beginning of this month for the next 180 days.
We can already see it's festivals, it's concerts, it's equestrian shows even in Vienna, all clearly showing that this event business is starting to return. If we move to the next slide, please, you'll see even in Germany. I think this is really important for the health of the European hotel industry. German markets have relied for many years on big events, the big Messen, of course, and we can see that we've got the European Athletics Championships in Munich, but then you've got those typical corporate Messen events clearly being visible from a business on the books perspective. The good news is those corporate events are coming back and it's people's expectations that they will attend those and get back to normality effectively. If we move to the next slide, please, you'll be able to see leisure is also very similar, a positive trajectory here.
I've taken Edinburgh as the example. Lots of leisure demand, of course, into Edinburgh, particularly in the summer months with the Fringe Festival and other events. We can see here that actually 2022 versus 2019 business on the books is effectively tracking at the same level. That leisure-driven event demand very much back to where it was pre-pandemic. Groups are starting to improve. Let's move now to the next slide, please, and drill down on a country level. What we have here is, again, rolling 28-day occupancy index to 2019 for some major European countries. Now, there is some variance in performance. We can see there Ireland leading the way, followed by Poland and the U.K.. The laggards as such, Belgium, Austria, and of course, Russia, as you would expect to see.
What is quite interesting, I think, is that we have seen relatively little movement in the last few months. Pretty much recovered to a good extent to 90%+ in most markets. Just waiting for that last little nudge to take it back over to above 2019 levels on a country level there. If we scroll now to the next slide, please. This is just looking at the month of May. This map is looking at all the hotels that submit their data to STR, and we've indexed occupancy for the month of May versus the month of May in 2019. You can see there's still a lot of red on this chart. There are still a lot of markets that are behind. You can make out some countries still lagging a little bit further behind.
We have got a lot of positives here as well. You can see there in the U.K., in France, and also a lot of coastal markets as well across Spain, across Turkey, across Cyprus as well. We're starting to see some clear pockets of recovery in those markets. If you move to the next slide, please, you will see this quite clearly with our business on the books data. I think these are some quite impactful slides really. Firstly, you've got the staycation market. We've taken Devon and Cornwall in the southwest of England, which is very much a leisure-driven market of course. You can see here business on the books this year versus the same time last year, and it's very much in line.
Even though people are able to travel a lot more, it's a lot more open as such. We're still seeing strong demand for staycation markets, and I think that will be another positive summer for those markets this year. Looking to the other side of the chart, we've got the Balearic Islands, and I think this is where you see a big difference between this year and the same time last year. Significantly more business on the books this year than last year. People are able to travel for the first time in three years confidently. Although, of course, we are seeing some challenges at airports which may help our staycation markets. Generally speaking, very much people are encouraged and feel positive about being able to take those long-awaited holidays. Confidence very much returning.
If we can move now to the next slide, please, and you'll see May again, the month of May indexed on 2019 for our major European gateways. It's a pretty positive chart. I think some markets already recovered fully from an occupancy perspective. There you can see Paris, Warsaw, Istanbul as well. Those that haven't quite, they're quite close in most cases. We've got a few outliers, Prague and Budapest, I think a bit more challenged due to the lack of group business yet to recover fully. Then of course, the further east you go in Russia and the Ukraine, for obvious reasons, occupancy somewhat softer. Moving then to the next slide, please. We've taken a selection of those key European markets and looked at occupancy on a rolling seven-day basis right up to Sunday, just gone.
Actually it's a more positive picture. I think for these markets you're gonna see more positivity in June and again subsequently in July. If we look on a rolling seven-day basis for the last available week that we have, so effectively looking at the last calendar week, Berlin, Lisbon, Madrid, Paris, Warsaw, Rome, all above 2019 levels. Some real positivity coming through there when we look at our key European markets as we move closer to present day. If you could please now forward to the next slide and we're gonna change tack, and we're gonna have a look at average rate, which as previously mentioned, has really been rather strong. This is showcasing again average rate on a rolling 28-day basis indexed to 2019.
You can see there the U.S . And Europe very closely aligned at about 20% above where we were in 2019. The Middle East again, fully recovered. We've got some flexing of that line, but that's due to the shift in Ramadan. China again lagging behind because of zero-COVID. Certainly good news story from a rate perspective in Europe. This is, however, nominal. If you could move to the next slide, you can see that we've actually looked at real ADR indexed from 2019 as well. You can see that the positive there is effectively we are recovered in real terms when stripping out inflation as well. Of course, inflation is helping to increase average rates as we are today, but when we look at real ADR, it is still a fully recovered metric. We believe that this will continue.
If you move to the next slide, you'll see here weekday versus weekend. Again, weekend has recovered that much more strongly. But ultimately, if you look at the trajectory towards present day of weekday average rate percentage change, it's growing. As we've seen in those key markets, we're starting to see more and more corporate demand come back, more and more group demand as well. Expect this trend to continue. Moving to the next slide, please. We're looking then at country level. Rolling average daily rate, 28 days, indexed to 2019. Positive across the board. The Russian number I think is very much inflation driven, about 17% inflation in Russia at the moment. But if we discount that market, you can see other European countries all significantly above where they were in 2019. If we move to the next slide again, please.
That's the same slide as we saw, but for occupancy. You'll see the difference, though. The sea of green, all of those green dots pretty much universally across Europe, it's a really positive picture. If we can move on now to the next slide. I'd just like to touch on staycations again. This is a slide that shows summer 2021 average rate indexed on 2019. You can see there right across the continent, all of these markets that are driven predominantly by leisure demand, really strong average rate growth. We would expect that to continue this year, but we'd also expect to see the introduction of those fly to markets as that sector, international leisure demand recovers more strongly as well. Moving on to the next slide, please.
You can see here luxury hotels continue to lead the way in average rate change this year. This is May year to date. Indexing very, very well when compared to 2019. Of course, less pricing sensitivity at the top end of the market. We are seeing a slight case perhaps of the squeezed middle, and we will be looking at that ever more closely as we move forward and average rates continue to be positive. Moving to the next slide, and just drilling down and having a look at key European markets indexed on 2019. This is just for the month of May again. Again, it's a sea of green. Most markets above, and in some cases, significantly above where they were pre-pandemic.
Those that aren't, as you can see in the nineties, very much close to getting back to where they were. If we move to the next slide, again, echoing what was previously said, it's not just the gateways, it is our regional markets. I've taken the U.K. here as the example. You can see here across the United Kingdom in our secondary and tertiary cities, average rates, again, for the month of May indexed to 2019, significantly above where we were previously. Again, we do expect that to continue. If you move to the next slide, please. You will see business on the books, again, just underlying the returning demand. You've got concerts there, of course, in Birmingham. The Commonwealth Games are upcoming, which is going to be a major demand driver.
Then if you're a wrestling fan, you will struggle to get a room in Cardiff in September. Again, underlining the events coming back not just to the big cities, but the secondary, tertiary markets as well. Moving to the next slide, just one slide on GOPAR here. You can see again, it's positive despite rising costs, of course, for hotels. Those average rates are really helping to drive forward the bottom line, along with the efficiencies that were mentioned previously. Looking at the next slide then, the sun is shining at the moment, and it's certainly our belief that the forecast for the rest of this year is universally a positive one. It should be good. We do need to bear in mind, and it was mentioned by one of the questions previously. If you move to the next slide.
This is data from our traveler panel. The biggest barrier to future travel is now all about cost. It's not COVID, it's cost. You can see that is the biggest concern. We do say enjoy the sunshine at the moment, and we do have to consider that potentially there are some more challenging times ahead. If you move to the next slide. I have to say I'm not a Game of Thrones fan, but I have it on good authority that this is very applicable, that winter may be coming 2023. We may see some more challenges because of the cost of living crisis. If we move to the next slide. I think we do have to say we've got to remember we've come an awful long way.
Things are very positive at the moment, and of course, winter will not last forever. I think we end on a positive note that ultimately the industry is in a good spot, and we will ultimately enjoy it while it lasts. With that, the last slide, just a thank you to you all for your attention and again to the Pandox team for the invitation. Thank you very much indeed.
Thank you, Thomas, for this hotel market update and for your formidable weather update as well. This is all, folks. Thank you for participating in this call. We really appreciate your time and interest in Pandox. Our interim report for Q3 is published on the 27th of October. Thank you. Have a great summer, everyone. Stay at our hotels and enjoy life.