Minor International Public Company Limited (MINT) Earnings Call Transcript & Summary

Good morning, and welcome to Minor International Third Quarter 2022 Analyst Meeting. It's the pressure of introducing our presentation in which you'll hear from Mr. Chaiyapat Paitoon, our Chief Financial Officer; and Ms. Namida Artispong, Investor Relations Director. [Operator Instructions] And now I would like to hand over to Chaiyapat Paitoon and Namida Artispong for the presentation.

Good morning. Good morning, everyone. Welcome to Minor International Analyst Meeting today. As you probably have seen our third quarter results, which has been released last week, we're just going to go through usual agenda that we've starting with the third quarter results and review and then we'll go down to each business unit Hotels, Food, Lifestyle and also the foundation for position -- for recovery of the balance sheet and also the strategy that we have in place to capture demand recovery as we see now as well as the business outlook for both hotel and restaurants for you at the very end. Let me start off with the highlight of the third quarter, we reported core profit of THB 2 billion in this third quarter. It's significant growth year-on-year and also on quarter-on-quarter as well as we have surpassed the third quarter '19 or the pre-pandemic levels in every key metric, including revenue, EBITDA and NPAT for all of our 3 business units. So a very exceptional quarter indeed. Core EBITDA and net profit margins also outperformed the 2019 level as well, we will go into detail later on. For Minor Hotels, we reported profit of about $1.5 billion in the quarter especially with our European operation or NH reporting historically high third quarter operating results in this third quarter. For Minor Food, we continue to be profitable in this quarter, this is happening since 2020. So it has been 9th consecutive quarter that we report profitable profit at the bottom line level for Minor Food. And in this quarter, in particular, with our hubs reporting positive NPAT. Restaurants in Thailand and Australia saw strong performance growth, while China hub, which used to be a little bit of a drag in the first half, now return to profitability in the third quarter of the year as a result of COVID measure restriction easing in some of the key cities since the mid of this year. So if you look at the long-term outlook for our business, in terms of our hotels, we see a strong demand, be it leisure demand as well as business travel demand as well. We see a good traction in terms of hotel forward looking. Continue with no slowdown. Pent-up demand still coming so strong in contrast with a lot of people expectation that pent-up demand will probably going to die down, but it's not dying down. It's still coming in so strong. And despite economic challenge, MINT is pretty much resilient to any concerns on global operating environment, given that we are in upscale and luxury segments as well as our hotels are located in the primest location mostly. And in addition to a strong recovery of domestic and intra-European travelers and tourism, hotels in Europe next year, we expect that it's going to be driven not only by leisure, but like I said earlier, it will be driven by business travel as well as last scale group, which related to events or trade fairs as well as the long-haul flights will be restored as well in addition to short-haul flights. So once the -- a lot more countries we open fully this year, there will be more of the airline interconnectivity that will prompt airline to store more flight. And we hope that to see that as another growth catalyst for us next year. In terms of our business in Australia, it's still growing very strong, continue -- our MLR business continued to be above pre-COVID level with the increase in international arrivals to support hospitality industry. Our Australia operations still beat pre-COVID level at all fronts as we're going to explain to you a little bit more detail in subsequent slides. And we would -- we still believe that we still have a strong pricing power and the acceleration of seating capacity of the airline like I mentioned to you earlier, will drive performance of the Thailand hotels to regain to pre-pandemic level by next year. It lags behind other regions that we have our footprint in because the restriction has been eased after Europe and after other regions that we operate but now we start to see some more traction and more tourist arrivals coming in. Maldives continue to be strong. It's been beating our pre-COVID performance since last year, and it will continue to do so. And we continue to believe that with the destination and the location that we have, and also the marketing promotional campaigns and the brand strength that we have, we will continue to be able to command room rates, high room rates and raise room rates further going forward. In terms of some concerns on energy cost put pressure on share price earlier, we have to tell you that our energy cost is account for only a small portion of our revenue. And we also have hedging energy contracts in place. So together with the strong demand and our ADR maximization strategy, I think Minor Hotels expect limited impact from the rising energy cost or energy crisis that people are concerned at the moment. In terms of Food, restaurant store traffic in Thailand and Australia continue to improve with a good traction, while Minor Food China also still have to stay adaptive to local operating environment since they still have some restriction of COVID here and there in China, but it's much better than the first half that we saw. For liquidity and balance sheet management, we will continue to commit to strengthen our balance sheet and manage liabilities. We successfully sold 2 owned assets in Belgium and the U.K. at NH level. And for debt, we have a debt repayment together with higher equity base from profit generation and asset sales. That has been reducing our net debt to EBITDA -- net debt-to-equity ratio to about 1.19 at the end of the third quarter from 1.36 at the end of last year and 1.3 at the end of the second quarter of the year. So it's -- the trends coming down in terms of leverage ratio even though we still have waiver -- covenant waiver in place until the end of this year, but we have already -- the levers come down way below -- well below our internal policy and the covenant level already. And we would continue to optimize and use our fix-float split strategy of our debt in the rising interest rate environment. We accelerate our expensive debt repayment, especially floating rate debt and deploying some hedging instruments in the mid of the rising interest rates to reduce the potential impact from increased cost of debt. We still have ample liquidity with the positive operating cash flow and free cash flow. Our cash on hand hover around THB 27 billion with additional unutilized credit facilities of THB 30 billion at the end of the third quarter. So ample liquidity and strong balance sheet right there position ourselves to capture this demand recovery and position for growth -- good growth next year as well. Last column, just to highlight our foundations for recovery. We continue to leverage on our brands, sale initiatives and service and product offering to capture this demand recovery. The expansion, even though we will do it under asset-light business at the moment just to make sure that we have cash and liquidity in the mid of some small uncertainties around us at the moment. Minor Food also put effort to raise that revenue in all distribution channels and also streamline the cost structure to safeguard margin and even improve profitability, we still continue to come up with the new store formats, new product innovations and also the loyalty program and digital transformation will help us see growth more strongly and more efficiently as well. So longer term, we would respond to the new trend, both Minor Hotels and Minor Food, a focus on customer experience product innovation, technology and digital transformation and also bear in mind, sustainability or ESG that we always keep as a strategy that has been crafted alongside business strategy in every move and in every project that we do. So moving on to the next slide, just to show you our performance. Just to recap, we posted revenue of 35 -- core revenue of THB 35 billion in the third quarter, rising by 77%. This has already exceeded pre-pandemic level to 2019 level by 17%. Hotels in all regions saw an improving trend driven by strong travel demand and also on the Food side Lifestyle, we see a higher food traffic and store traffic with improved business operational environment. And we also see high flow-through from revenue improvement and more efficient cost structure that led to our core net profit to grow faster than revenue to about THB 2 billion in this third quarter. So all 3 business units report strong profitability, especially our European operation, NH, which deliver, like I said earlier, historically high third quarter operating results. If you look at quarter-on-quarter performance, core revenues also increased by 9% quarter-on-quarter due to the recovery of all 3 business units of our and correspond to our revenue recovery, core net profit also improved quarter-on-quarter or even higher to THB 1.2 billion in the second quarter from THB 2 billion in the third -- to THB 2 billion in third quarter. So with that, I would probably hand over to Namida to have her go through the detail of each BU, and I will standby too for a Q&A session at the very end. Thank you very much.

Let's move on to Asia business unit, starting off with Minor Hotels. Many Hotels reported strong financial results in the third quarter. For the core revenue, it almost doubled year-on-year, and this is from strong demand recovery in our business models and regions, which further led to an increase in room rate. And also for Q-on-Q, core revenue increased about like 7%, mainly driven by the hotel business, except for the mixed-use business that saw a very slight decline in terms of revenue from the slight decrease in sales of the restaurants in the U.K. And in terms of geography, Q-on-Q, every hub saw reported positive growth, except for the Maldives and the Middle East hub, and this was due to seasonality as normally Maldives RevPAR in the third quarter is lower than in the second quarter. Core EBITDA, EBITDA grew at a faster rate than revenue due to higher flow-through of the revenue, and this has resulted in expanding EBITDA margin. And for net profit, the net profit reported a turnaround from core loss of THB 2.4 billion in the third quarter of last year and returned to profitability with a net profit of THB 1.5 billion in the third quarter of this year. Moving on into each business model. First, owned and leased hotels. In terms of number of rooms, it increased -- it was flat year-on-year but increased slightly by about 2% compared to the same period of 2019. In terms of RevPAR, RevPAR owned and leased hotels increased nearly double year-on-year, and this was driven by both higher occupancy rate and also room rate and it has surpassed pre-pandemic level by 25%. And coming into October, the RevPAR continued to be above 2019 level by 28%. Going into each region of the owned and leased hotels business units, RevPAR of hotels in Europe and Latin America market marked another record high performance. RevPAR increased about 2x year-on-year. And this was from higher travel activities from both leisure and business travelers. The occupancy rate remained very strong in the quarter with an occupancy rate of about 70% and then ADR up about EUR 138 per room per night. And then looking at the month of October, the occupancy rate continued to increase from 70% in the third quarter to 73% in the month of October. And also for the ADR, it also increased from EUR 138 per room per night in the third quarter to about EUR 143 per night. And this results in the RevPAR beating 2019 horizon by 17% in October. Although operational stats will be a bit slightly softer month-on-month in November and December due to the seasonality, but we are confident that the RevPAR will continue to be above 2019 horizon. Moving to Thailand hub. The RevPAR of Thailand hotels increased almost 5x year-on-year following the removal of international travel restrictions since July of this year. Average occupancy rate escalated sequentially from like 31% in the first quarter to 43% in the second quarter and then 52% in the third quarter. And meanwhile, actually surpassed pre-pandemic level already since last quarter. And for this quarter, it surpassed 2019 level by 9%. So therefore, the RevPAR was about 75% of the pre-COVID level already without any comeback of the Chinese markets just yet. Looking into the month of October, the occupancy rate ramped up further to about 57%. And then ADR again remain above 2019 level by 9%. So therefore, in the month of October RevPAR gap between 2019 level has been narrower and narrower. So in the month of October, the RevPAR was about 86% of the pre-pandemic level. Moving into the Maldives region, Maldives RevPAR increased about like 8% year-on-year and outperformed pre-pandemic level by 18% from Minor Hotels strong brand recognition and our continuous effort to expand feeder market. Looking into the month of October, occupancy rate was about 47%. Although at this level, the occupancy rate was lower than in 2019 of the same period of about 56%. But having said that, the ADR surpassed 2019 level by as high as 40%. And again, therefore, the RevPAR has been above 2019 level in October continuously by 19%. Moving into another business model, asset-light business. For the first business under asset-light business the management letting rights, particularly in Australia and New Zealand for the RevPAR of MLR, it has exceeded pre-pandemic level by 42%, given the rebound of leisure and corporate travel activities. And looking again into October, the occupancy rate in Australia remained very solid at 84% with continued acceleration of the ADR, and therefore, the RevPAR continue to be both pre-pandemic level by 36% in the month of October. Lastly, the Managed Hotels, the RevPAR increased about like 62% and almost on par with 2019 level. And this was driven by improving RevPAR of the hotels in all geographies. Next is our hotel expansion plan. We will continue to pursue both asset-heavy and asset-light business models, but we will focus more on expanding our management contract portfolio. So in terms of asset heavy, we are going to open another 2 hotels in the fourth quarter of this year, mainly in Europe. And then for next year, we're going to open the doors for another 6 hotels in Europe and also in Asia as well. And then the rest, about nearly 60 hotels, we will open under management contracts and business. They are the management contracts that already have been signed, but we still have additional contracts that are under negotiation as well. Next slide is about mixed-use business. The revenue from mixed-use business increased by about like 15%, and then this is driven by improving operations of Anantara Vacation Club from higher number of points sold and also the increase in average price per point as well as the improved operation of plaza and entertainment business as well from the stronger traffic and the reopening of the shopping malls and entertainment outlets from last year. And in terms of residential projects, Minor Hotels still has several real estate projects available for sale and also to be launched going forward to ensure continuous revenue flows from real estate business. Moving into Minor Food. For Minor Food, revenue increased about 54%. If you look at the operational stats, same-store sales increased about nearly 17% in the third quarter from the sales rebound of Thailand and Australia hub. And then coupled with outlet expansion mainly in China and Thailand, the total system sales of the overall portfolio jumped up by about like 41% year-on-year. For core EBITDA and net profit, it remained positive since 2020 and with all hubs reporting positive net profit. So the restaurants in Thailand and Australia saw strong performance, while China had returned to profitability in the quarter already. And Minor Hotels, the core [indiscernible] of Minor Food also exceeded 2019 level. Going down of Minor Food into each business unit, first on Thailand. Same-store sales increased about like 11%, given the recovery of in-store traffic compared to the temporary closure of some stores last year because of the operating restrictions in the country and with an addition of network expansion and also the reopening of the stores from last year. Total system sales grew at a faster rate than same-store sales, growing about like 51% in the third quarter. Looking into the month of October, same-store sales growth remained positive, albeit at lower magnitude as low base effect has started to taper off. Nevertheless, Minor Food Thailand will continue to enhance our innovation in terms of store formats and menu reengineering. And for example, Dairy Queen recently just launching new pop-up stores. format. They just started to have like a small dining area to elevate and excite the customer experience. Moving into China hub. Total system sales of China hub was flat year-on-year, and this was driven by the success of full store expansion, which fully offset a decrease in the same-store sales decline of about like 11% in the quarter. And this was an immense improvement Q-on-Q from the easing of COVID measures up since June of this year. For the month of October, same-store sales saw a decline due to periodic controlling measures in certain regions. I haven't say that China continues to put efforts to maintain its positive profitability. So cost-saving initiatives in China hub, as Khun Chaiyapat mentioned earlier, we will stay adaptive to the local changing operating environment. Next would be our Australia hub. Same-store sales of our Australia has increased about like 36% year-on-year in the third quarter following the removal of profit risk friction since April. And because of the reopening of last year's closed stores as well. Total system sales, again, grew at a faster rate, growing by about like 42% in the quarter. And then looking in the month of October, same-store sales remain positive, grew about like 27% from improved operational trading with Minor Food continuous strategy of strengthening brand awareness as well. So this is the end for Minor Food and next slide will be on Minor Lifestyle. The revenue of Minor Lifestyle increased about like 25%. And this was from higher store traffic for both fashion and also the home and kitchenware segments as well. So core EBITDA and net profit turned to positive territory in the third quarter compared to core losses in the same period of last year. So this is the end of our recap on the third quarter operating results of each business unit. And then next slide, we will highlight the recent development in terms of our balance sheet management. So for the third quarter, we have done quite a few activities in terms of managing our balance sheet. So the first one in terms of asset rotation. So in the third quarter, we implemented sales of 2 owned assets NH Brussels Louise in Belgium and also NH London, Kensington in the U.K., and this -- the sales were completed with the sale about like EUR 46.5 million. And this, we have a net gain of about like THB 480 million. And in terms of liquidity management, in the third quarter, we have redeemed our THB 15 billion perpetual bonds. And then we have reissued this with our THB 13 billion bond in the same quarter. And for NH, they have early repaid the ICO loan for EUR 100 million in the third quarter. And they plan to accelerate their debt repayment further in December as well to pay another EUR 100 million of its ICO loan to mitigate any impact from the rising interest rate environment. In terms of CapEx and leverage ratio, our plan remains unchanged from the previous quarter because we are on the path of recovery this year and to remain -- to manage our liquidity and cash balance, we would spend about like THB 6.4 billion in terms of CapEx for 2022 and as we are driving beyond COVID already for next year. So in the next subsequent years in 2023 and 2024, we're going to ramp up a little bit in terms of CapEx spending about like THB 10 billion per annum. In terms of leverage, MINT remains to have on covenant testing waiver until the end of the year. Nevertheless, we continue to strengthen our leverage ratio. And the net interest bank debt to equity ratio has come down from 1.3x from the previous quarter to 1.19x in the third quarter, and this has been much lower than our covenant testing level of 1.75x. And in terms of liquidity, we have cash on hand of about like THB 27 billion with additional THB 30 billion unutilized credit facilities at the end of the quarter. And on top of that, we still have warrant 7, warrant 8 and warrant 9 ready to be exercised, and this would give us additional amount of another THB 13 million. Next would be on our cash flow position. Minor continues to report positive operating and also free cash flow supported by stronger operating performance, and we expect continuous improvement in the subsequent quarter as well for our cash flow. So in the third quarter, we reported operating -- positive operating cash flow of THB 5.8 billion. And meanwhile, free cash flow was positive at above -- nearly THB 12 billion in this quarter. Moving on to our debt profile. We continue to execute strategy in response to rising interest rate environment. We normally maintain our fixed-float split of about like 50%, 50%, but we have adjusted this split up a little bit. Our fixed rate now has become 59% in the third quarter. And in addition to optimizing fixed-float split, we also use hedging instruments well. For example, interest rate swap, the CCS and also we were going to pay down early some of the expensive debt going forward. So at this quarter, the data set for the euro debt, which accounts for about like 69% of our total debt. The proportion of fixed has come up to 59% compared to about like 40-plus percent in the first quarter. And for Thai baht, we also beef up our fixed proportion as well. So in the second quarter, the fixed proportion was about like 43%. And in the third quarter, it has come up -- come up to about a 40% level in terms of fixed proportion. And for our U.S. dollar, it remains the same, more than 90% of the total USD debt for us has already been fixed. So this is our solid hedging for the USD debt ready. And lastly, for our Australian dollar debt, we -- the Australian dollar debt that we used to have it used to be 100% floating from last quarter, but then we have done a lot of refinancing during the quarter. So right now, the proportion of fixed has been increased to like 85%. Although cost of debt would rise, I mean current environment, but our strategy to accelerate the repayment of expensive debt and also the expanding revenue base from strong demand will help elevate such impact. Next slide is our response to inflationary pressure. We have already covered this for last quarter already. So for -- to combat the rising raw material and packaging costs, we continue to implement proactive supply chain management and also in terms of managing wage, we remain to adapt labor model and also utilize technology and simplify processes in order to improve efficiency for growth. And lastly, particularly in Europe that a lot of investors have concern on the rising energy costs. I mean, Minor Hotels has carried out mitigation plans since the end of last year already to help to limit the impact of such increase. The energy cost actually contributed by only 4% of the total revenue in 2019. And if you look at the proportion of the energy consumption of hotels in Europe, electricity accounted for about like 60% followed by natural gas, 25% and then water 15%, but actually, the high price increases have been seen mostly on electricity. So therefore, only 60% of the energy consumption has been seeing the high rise of energy costs. Meanwhile, natural gas price has not rise as much as electricity. And in terms of water, the price of -- the price has been very minimal. To come back of the rising energy costs, we have been using hedging energy strategy, and we have locked in our energy contract already. For 2022 this year, almost like 100% of our forecasted energy usage was already locked using the 2021 prices, and therefore, there will be very, very limited impact of the rising energy costs on us for 2022. And for our next year, more than 60% of the energy usage in the forecast have already been locked as well. And although we have been seeing the energy price coming down a little bit in the last 1 to 2 months, however, the price that we have locked since the first half of this year still weigh below the current market prices. So therefore, given the arrangement of our hedging energy contracts and also because of the continued strong demand and our pricing maximization strategy, we are confident that the rising energy costs would have limited impact for us. Moving into business outlook. Khun Chaiyapat has already mentioned a little bit on that. For Minor Hotels, we have seen good tractions of hotel forward bookings. I mean a lot of people were speculating that there would be a slowdown of the leisure pent-up demand already in the third quarter and fourth quarter, but actually, we still see no sign of slowdown in pent-up leisure demand just yet. And because we are in the upscale and luxury segment, we think that this is a good buffer for us in terms of resiliency despite the external economic challenges. Drilling down into each portfolio. For our European portfolio for next year, we think that the business segment will be the name of the game for us. On top of the leisure demand, we think that our occupancy rate next year will be driven by the return of international long-hauls especially from Asian markets and also the North American market flow. And then we also have been seeing the return of the travel on demand of large corporates and also the large-scale business events, trade fairs and also meetings lining up for next year already. And as to mention, for the business segment, actually, this business segment they have -- relatively less price-sensitive. So -- and coupled with NH prime locations for their hotels, we are confident that there will be more room for us to increase our room rate further. For our Thailand portfolio, in the third quarter, our RevPAR was already 75%, above pre-pandemic level already, and we expect that it would be getting back to 2019 horizon or even surpass the 2019 horizon by next year. And this will be driven by our strategy to expand feeder markets and also the ramp-up of the seating capacity of many airlines. And to update going into the high seasonality of Thailand in the fourth quarter, in November, we have seen occupancy rate coming up above 60%, while ADR remains above 2019 level for our hotels in Thailand. For Australia portfolio, apart from strong recovery of domestic leisure and corporate travels that we have been seeing this year, next year, we expect that the rise in international arrivals will further support our hotels in Australia. And the Maldives, of course, we have -- we remain to enjoy positive demand and also escalated average room rate given unique characteristics of the destination and RevPAR continued to stay well above 2019 pre-COVID level. So this is the wrap up of our third quarter snapshot. And now we would like to open the floor for Q&A. You can either raise your hands in the function or you can type your questions into the chat box.

In terms of gross profit, we don't provide it by each business model, but for the gross profit of our hotels it actually in the third quarter, it actually increased year-on-year and it also surpassed 2019 level. Are you seeing industry consolidation in the hotel and restaurant space? Yes, like, for example, like in the hotels, most of the boutique hotels and independent hotels have been going off of the business because of the -- they cannot breach financial facilities during COVID. So we have been seeing quite a number of assets for sales available. And we think that this will give us opportunities going forward for us.

I think smaller players with less brand strength and not as much deep pockets like the big and strong brand -- multiple brand portfolio, a player like us has been impacted so much during COVID. And also past COVID, now the revenge travel pretty much focused around people who can afford high airfares and those who can afford high airfares will be resilient and less price sensitive in terms of their accommodation purchase as well. So we are in the upscale and luxury segments, we kind of resilient, but I think the smaller player in the budget category, a lower category we probably have to suffer a little bit more. So that's why some of them have been going under the same as Food. So what I'm trying to say is we -- the category and the target market that we're in and the location that we have make us resilient in terms of the looming recession concerns or slowdown of the economic concerns. Even that happened now, we haven't seen the slowdown in this category as yet.

Is there like that effect in terms of energy price increase in euro, meaning we will see a major price increase as we progress into the fourth quarter in 2023? I mean like for 2022, as most of -- almost 100% of the energy price -- energy usage, we already locked for it. So therefore, for this year, there will be like very limited impact from the rising energy cost. But of course, for 2023, we will start to see the impact from the rising energy costs because we have locked for about like more than 60%. So there is still another remaining that might be floating. But as we mentioned earlier, energy costs accounted for only 4% of our total revenue, and it's quite small. And then we have -- apart from the hedging strategy that we did, we try to expand our revenue base well. We are increasing occupancy rate from the business segment and also the continued room rate maximization strategy. So we think that the impact from the rising energy cost would be quite insignificant. So for 2019, the energy costs accounted for about like 4% of the revenue. Energy costs for next year for hotels in Europe will probably go up to about like 5% to 6% of the total revenue.

So as you have seen, our ADR has been beating 2019 level so much. And we continue to do so going forward since we have the ability to command pricing power, that will provide us with some cushion to absorb any cost pressure especially from this energy concerns that we talk about. So that will help safeguard our margin to a certain degree.

How much the electricity price that we hedge in 2023 increases compared to the price in 2022? We are not able to share at what price we have hedged in and then what exactly how much it will increase, but we can guide that for 2019, energy cost accounted for about like 4%. And then 2022, it wouldn't deviate from 4%. And then for next year, it's probably going to go up to about like 5% to 6% from 4% in [ 2019 ]. And in terms of residential units, again, we cannot comment on how many units left for available for sale, but we can say that right now, at least there are 3 existing projects that are available for sale and that is mainly in Thailand and then another 2 projects in Malaysia and Indonesia that are available for sale as well.

Yes. I have to emphasize, this is something that we told analysts and investors before earlier in previous years. The reason we didn't want to disclose because this information will affect our selling and negotiation power with the buyers. So that's why we have to ask for -- reserve this information.

In terms of booking, hotel bookings. For this year, actually the OTA account for able like 16% of the total compared with the 2019 level, the OTAs has accounted by more than 28%. So we have seen this as a structural change for our hotel businesses as consumers started to shift that bookings through direct bookings and stay because they want to have more flexibility in terms of changing the hotels, in terms of changing the dates and something like that. And then also, they want to make sure that what is the security and for the safety of the hotel. So therefore, we have been seeing the rise of the direct booking channels for us. And apart from the structural change, it's because of our efforts as well. We have been ramping up our direct bookings channel. So we have upgraded our Anantara, AVANI website. And also, we have launched the mobile application of our own brands to facilitate more convenience for our hotel guests.

And one thing that I would like to highlight is that we now have a very strong loyalty program. We have a new GHA DISCOVERY loyalty program and NH just joined us in June 2022 making our GHA DISCOVERY to be one of the 10 largest loyalty programs in the hospitality sector. So we would use this and then leverage on this, and that will probably help propel growth for us going forward as well.

In terms of seasonality, in the normal year, hotels in Europe their peak season would be in the second quarter, while Thailand and the Maldives, the peak season will be in the fourth quarter and then the first quarter. So overall, I mean, because the European portfolio accounts for the largest total contribution. So that's why in the normal year, we would see second quarter would be the peak results for us. But nevertheless, because of the pent-up demand and everything, this third quarter actually beat our second quarter results as well. And actually, the third quarter that we just reported, we already -- beat 2019 level already. In terms of guidance of the margin for 2023. The margin, probably it's going to expand, for sure, in terms of year-on-year. And then we are going to expand in all metrics in terms of revenue, EBITDA, net profit and in terms of EBITDA margin as well. And we expect that because of the strong -- continued strong demand and also our continuous effort in terms of cost control, we will continue to beat and be on par with 2019 level. In terms of the 2023 expectation in terms RevPAR growth for hotels in Europe. For this year 2022, we expect occupancy rate of about like 60%, and this should drive up to almost 70% next year. And in terms of ADR because next year, we think that the demand-driven will mainly come from business segment, which has more resilience in terms of price sensitivity. So we think that for next year ADR of operations in Europe with increase from like mid-single digit.

Yes. Just to add, we're in the middle of doing budget and also finalizing our 3-year plan to submit to the Board in the next week or 2. But like Namida said, in Europe, in particular, even though we see -- we have seen strong performance already this year, next year, the team is also confident that we're going to see continued stronger performance momentum in 2023, like occupancy is probably going to go up by higher than 10 percentage points from average of this year and then ADR probably going to go up to a high single-digit growth next year as well, probably hover around like 5% to 8% or even higher than 8% next year.

There's a question about your European RevPAR. European RevPAR seems to be higher than peers versus pre-COVID. Can you talk about what are you doing better than peers? And what are the areas that you can improve further in year? What we have been -- I mean like the RevPAR growth that we have seen, it has been majorly driven by the room rate. And we have -- because of the prime location and the strong brand recognition of a niche, that's why we were able to increase ADR better than peers. And the areas that we think that we have more room to add, which is the mobilize of the feeder market. So the Asian markets actually account for only less than 2% of the total feeder market of NH Hotel Group. And because Minor International have a large phase of Asian markets. So we try to mobilize our Asian feeder markets into Europe and then vice versa and trying to bring more European feeder markets to this part of the world as well. How do you think higher interest rate environment impact the hotel industry? And do we expect higher pricing to sustain in the midterm or could we see a reversal.

Well, Namida just went on about how we manage interest rate risk at the very high interest rate environment. We have done a lot of days -- for example, we accelerate early repayment of our expensive debt, especially expensive floating rate debt, and we're also using some of the hedging instruments to help alleviate the impact. So if you look at the rise of the benchmark rate, let's say, if it go up by 200, 300 bps, we managed to control our interest cost or average cost of funds like half of that rise of benchmark rates. For example, if it go up by 200, 300 bps, we managed to see our cost of funds go up by only above 100 or a little bit more than 100 like 120, 130 bps. So that's adjusting fixed float split right now, our fixed proportion is going up to 60%. And then we will continue to pay down expensive debt, especially at the -- in this level -- for example, the ICO loans that we got from the government, which is quite expensive. We already accelerated prepayment and we will continue to do so this year-end, and then we'll retire the whole thing next year as well as other hedging instruments like IRS or interest rate swaps that we use as well. So that will control the volatility and make our funding costs more under control than what we have seen a sharp rise in benchmark rates elsewhere.

Question on Minor Food. We see percentage same-store. So actually, same-store sales growth in October is flat about like 0.6%. But if we look at sales, that's an increase month-by-month. I mean if we look at average sales in the third quarter compared to October, actually, the sales in October has increased month-on-month. Can you talk about debt repayment target? For -- at the end of the third quarter, our outstanding debt is about like THB 127 million. And then at the end of this year, actually, we expect that it would go down even more to about like -- probably at THB 120 million. And then next year, it will further be reduced to under THB 120 million. So therefore, we expect our net leverage ratio to continuously improve in the subsequent quarters.

Can I please speak. Because I couldn't hear you very well. I did ask about the Thai operations. How much of loss did you make for Thai hotels in quarter 3, please?

It's very mere loss. It's a very like very, very low. We almost -- when go back to breakeven or [indiscernible] Thailand hotels, just only like mere loss in the third quarter.

Okay. Another question, which you may have answered, but I did not hear. What was the guidance for 2023 again, please?

We do not have the revenue growth and EBITDA growth for guidance this year. Because 23 budget will be upon Board of Directors' approval on the 25th of November. So we have to wait for the approval of -- from the Board first. But I mean, like in terms of RevPAR, our majority hotels in Europe, we think that we will be able to increase RevPAR by at least like nearly 20% from the occupancy rate and also from the ADR as well.

And did you talk about fourth quarter, please?

Fourth quarter, I mean like the stats that we have seen, it's -- like in some, we have October stats, some we have November stats, but mostly only October. So as we mentioned earlier, for example, all the hotels in Europe, October has been very strong for us. Occupancy rate was up about like 73% compared to about like 70% in the third quarter. And then in terms of ADR, it ramped up to about like EUR 143 per room per night, compared to about like EUR 133?

So just to add, we are confident that fourth quarter will continue to carry on strong momentum in terms of financial performance. Like Namida just said, on the hotel side, we still continue to see pent-up demand still coming strongly and seasonality is not relevant anymore for this year. So we still continue to see a strong fourth quarter even in Europe and elsewhere, Thailand start to see good traction, occupancy climb up every single day and then also ADR has already surpassed almost surpassed pre-corporate level with RevPAR now almost touch 80% of pre-COVID level. So I'm confident that in the fourth quarter, going to high season with festive season and everything, high season place like Thailand and the Maldives will continue to reap such a benefit, while NH will continue to see strong pent-up demand together with travel-related -- business-related travel and big group, big corporates going into next year as well. So in terms of guidance just now, like Namida said we're finalizing budget approval from the board and then a 3-year plan. But what we can tell you, like I said earlier, in terms of... [Technical Difficulty]

Chaiyapat, I think you're on mute.

I didn't hear your voice after that. But I don't know what's wrong, but because someone unmuted and muted me. Could it be that fourth quarter is better Q-on-Q, both in terms of revenues and earnings?

Okay. Can you hear me?

Yes, we can hear you now.

Well, I cannot say explicitly about this earnings guidance for upcoming fourth quarter. It's probably against the rule. But what I can tell you is that we are confident that we still will continue to see strong performance momentum in the fourth quarter. That's all I can say. I don't know how -- I don't know when my line was cut off just now. Did you hear me talk about the guideline for '23.

Please repeat. Please repeat, we didn't.

Well, we talk about -- well, first, I talked about fourth quarter -- like I said, we're still confident because in Europe, we still see a very strong pent-up demand and seasonality probably not relevant for this year because we still see pent-up demand, right? And also, we start to see strong forward booking from business-related travel, big corporates, big groups coming in for Europe. And then we will continue to command a good pricing power, i.e., we continue to be able to raise rates, room rates even further. So that's on Europe operations. On Asia, like Thailand, Maldives, especially Thailand, we start to see good traction in terms of international tourist arrivals and with more flights being restored. And coming into festive season, we would likely see higher traction good traction for Asia and Thailand hotels here. As you -- as Namida reported to you earlier, we started to see occupancy of Thailand going up higher than 60%, almost touched 70% already. So right now, RevPAR, Thailand almost touch 80% of pre-pandemic level. So in the fourth quarter, we have a good hope that it will gain good traction right there. Going into '23, even though we cannot give you a revenue profit guidance, since we're still finalizing with the Board approvals pending next week or so. But what we can say is occupancy of Europe like NH can still go up by more than 10 percentage points, like I mentioned to you earlier. And ADR in Europe as I said, we can still command pricing power. Maybe it can go up to another 5% to 8% in the next year. Thailand, since it's lagged behind others this year, but next year, it will catch up others really well. Occupancy next year probably go up higher than I would say, 12 to 15 percentage points, while ADR will hover around 8% to 10% increase at least. Elsewhere, Maldives, single-digit improvement in occupancy and ADR as well as Australia. So that's just rough ballpark figures. But I can update you when we finalize with the Board, and we can share some guidance with you later on after the Board meeting.

Just to go back on fourth quarter ADR, you mentioned it can be raised further. This is for Europe. Do you mean further Q-on-Q or year-on-year?

Pretty much year-on-year. And then we...

What about Q-on-Q?

We're confident that we're confident that it will probably going to be higher than pre-pandemic level. But Q-on-Q, it depends on the location and it depends on, like I said, the flow of occupancy. So that still remains to be seen.

There is another question regarding the margins. Do you think the mitigation plan would fully offset the rising fuel costs, energy cost and also labor costs in the fourth quarter and next year?

You mean compare with 2022, definitely, we're going to see margin improvement from '22 level to '23. So because of '22, margin has been dragged so much in the very first quarter. So on the whole, for the full year 2023, it should be expansion of margins, both EBITDA margin and NPAT margin.

What kind of market share with bold country-wise and segment-wise, is there any improvement expected?

When we look at market share, we don't have like aggregate market share for the whole BU because we always benchmark ourselves with our concepts in the same location with the same operating environment. So for example, we benchmark our Anantara in Bangkok hotel with other hotels in the same neighborhood in the same area. We look at their occupancy, ADR, RevPAR and performance as well. But at the very at the very high level, it's really hard to get the market share number on an aggregated basis.

If there are no more, I would like to end the session here. And if there are more further questions, our IR team are more than happy to take them any time of the call. Thank you so much for your time today, and have a good day.