DANUBIUS HOTELS GROUP ANNUAL REPORT 2010

ANNUAL REPORT 2010
Draft Statement by the Chairman for AGM/Annual Report
2010
Dear Shareholders,
I am pleased to report that, during 2010, Danubius Group continued to respond
purposefully to the challenges presented by the ongoing economic difficulties
in most of Europe and an extremely tough market for tourism,
particularly in Hungary. As we move into 2011, we can take some encouragement
from the recovery in Germany and the forecasts for a return to
growth in most other European countries. Nevertheless, many uncertainties
remain, which can influence the behaviour of tourists and business travellers.
These include questions about the future of the Eurozone, the effects
of the unstable situation in the Middle East, including on energy costs, the
unquantifiable implications on Japanese business from the earthquake and
tsunami and the extent to which cost-cutting programmes in several countries
might affect the rate of economic recovery.
Turning to the financial results for 2010, your Company proved resilient to extremely testing business conditions
and I would highlight the following aspects:
Revenues expressed in Euro slightly exceeded those of 2009, despite the negative effect of the volcanic
ash problem in the spring. As a result of the stronger Hungarian currency compared to 2009,
revenues reduced by 1% when translated into HUF.
Group occupancy increased by just over 1% compared to 2009, whilst in Hungary the occupancy increase
was 1.7% despite an increasingly competitive market.
The operating profits and cashflow of the subsidiaries in Czech Republic, Slovakia and Romania held
up well and helped to offset difficult trading conditions in Hungary.
The overall level of Group borrowings did not change from the beginning of the year and interest costs
reduced. Management exercised tight control over liquidity.
The net cash provided by our operating activities increased from HUF 3.8 billion in 2009 to HUF 4.3 billion
in 2010, due largely to effective management of working capital. Our loss after tax slightly increased from
HUF 756m in 2009 to HUF 882m, but, despite this, shareholders’ equity grew by just over 1%, due to translation
gains on subsidiary investments.
The continuing imbalance of supply and demand in Budapest, due to huge new investments in hotel facilities
not being matched by rising demand, has remained a problem for all operators in the market. We expect
it will take several years for this imbalance to correct itself and so all our efforts are directed at making our
activity more competitive. Tight cost control has been a key goal for the last two years and this will continue.
In addition, we have invested substantially in our websites, central reservation system and e-commerce
activities to assert our own strengths in the marketplace. Whilst many new hotels have been opened
in Budapest, many of Danubius’ properties are unique and have a special appeal to guests seeking to experience
Hungary’s history and traditions. We are constantly seeking out new initiatives to capitalise on these
attributes and to provide the best value.
It is encouraging that the new Government in Hungary is adopting a more positive approach towards
tourism, not least by allocating increased funding for tourism marketing in the 2011 budget. In recent years,
Hungary has slipped in its attractiveness as an international destination, whether for leisure or corporate
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