Pandox AB (publ) (PNDXB) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Pandox Q2 2020 Report Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Wednesday, 15th of July 2020. I'd now like to hand the conference over to first speaker today. Pandox, thank you, and please go ahead.

Thank you. Welcome to this presentation of Pandox interim report for the second quarter and first 6 months of 2020. My name is Anders Berg, I'm Head of Investor Relations at Pandox. And with me, I have Anders Nissen, our CEO; and Liia Nõu, our CFO. We also have 2 external guests with us today: Robin Rossmann, Managing Director, International at STR; and Johan Johander, Partner and Head of Research at Benchmarking Alliance. Robin and Johan represent leading independent research firms focused on the hotel market, and they will share their view on the hotel market with us a bit later. This report is divided into 3 parts -- this presentation, rather, is divided into 3 parts. First of all, Anders and Liia will present the business update and the financial highlights for the second quarter. Secondly, Robin and Johan will provide the external hotel market update. And after that, we open up for questions. Next page, please. And with that, I hand over to Anders Nissen, CEO of Pandox.

Well, good morning also from my side. I will start with Page #2. And Pandox is, as many of you know, one of the largest player in the hotel property market in Europe. We own a high-quality portfolio, including 156 hotels in 90 destinations and in 15 countries. The major strategy is to buy underperforming hotel and rent it out to a business partner that we sign a revenue-based agreement with a minimum level, and we share investment and risk and opportunities. At the moment, as I said, we own 156 hotels with 35,000 rooms for the market value of SEK 62 billion. The lease model, as I just present, and together with a business partner with a revenue-based lease agreement, representing 84% of the property market value of the company. And if this lease model would not work, we can choose to operate the hotel lease ourselves within our own platform. And at the moment, we operate 20 hotels with close to 5,700 rooms, and that's representing 16% of the property value. I move over -- hand over to the Page #3. And Pandox has a very strong pan-European position in size and recognitions and also in brands and partner. At the moment, we are active with 24 different hotel company or hotel brands, which give us a world-class network and of course, a place for knowledge-sharing, I believe, very useful in this current environment today. And if we then move over to our quarter report, as we have been guided before, the Q2 was a historical weak quarter. In my close to 40 years in this industry, I had never seen something similar. But with that said, the bottom was out in -- we bottomed out in April. And from the beginning of May, we have seen gradually improvement and the trends are quite strong. We also have been successful in the quarter, have improved and strengthened our financial equity position, which has now increased our credit facilities and liquidity funds up to SEK 5.5 billion. So -- but in general, a weak quarter, return on equity was normally at 15% to 20%. It was now 1.6%. The total net operating income was minus 60% and like-for-like Property Management was 43%. Let's look a little bit more closer into the numbers before I go back to the market update. So then I hand over to Liia.

Thank you, Anders. Okay, now we're at page 5. Well, yes, as Anders said, demand in the hotel market was very low in the second quarter, and contractual minimum rent and fixed rent were Pandox's main sources of income. Some restrictions in most countries were lifted in the end of the second quarter, but this has only a marginal positive effect on the revenue-based rents and own operations in this quarter. The U.K. and Ireland were largely closed in the second quarter. Cost reductions undertaken in Operating Activities in the first quarter have full effect in the whole second quarter. We had negative unrealized value changes in both Property Management and Operating Activities, which reflects lower cash flows in 2020 and also 2021. I will come back to this in a minute. Trade accounts receivables have temporarily increased due to new and temporary payment terms for tenants in Property Management. Next page, please, Page 6. Currently, minimum rent and fixed rent are Pandox's main source of revenue. This amounts to approximately SEK 2 billion per year or approximately SEK 500 million per quarter. Agreements on temporary changes to payment terms are made where this is possible and appropriate, and rent collection has progressed in line with new and temporary payment terms. No reductions in hotel rents have been given. Revenues from pure revenue-based leases without minimum rent, which we have some 29 in the Nordics, increased gradually from low levels in the second quarter and are expected to increase further in the third quarter. Next page, please, Page 7. In the second quarter, Pandox valued the property portfolio according to the same method and model used since the IPO 2015 with internal valuations on the total property portfolio. No external valuations were made in the second quarter to some extent because of practical limitations due to COVID-19. We have made downward adjustments of property values due to lower cash flows in 2020. [Audio Gap] have been left unchanged since we still think transaction evidence is inconclusive. And of course, the valuation effects will continue to be monitored closely as the COVID-19 situation becomes clearer and valuation yields and future cash flows are expected to be able to be estimated with greater precision. In the second quarter, total unrealized and realized changes in value amounted to a negative SEK 602 million, out of which a negative SEK 320 million for Investment Properties and a negative SEK 282 million for Operating Properties. Please note that, according to IFRS, unrealized changes in value for operating properties are only reported for information purposes and is included in the EPRA NAV. End of period, the average valuation yield for Investment Properties was 5.42%. And for Operating Properties, it was 6.39%. Next page, please. If we take a look at -- quick look at our EPRA NAV and financial position, in the end of the period, EPRA NAV per share amounted to around SEK 177. This corresponds to an increase of approximately 2% on an annualized basis, adjusted for proceeds from the [ diet ] issue we did in November 2019. Loan-to-value amounted to 48.0%, and liquid funds and long-term unutilized credit facilities amounted to approximately SEK 5.5 billion. On top of this amount, there's an additional credit facility covering issued volume under Pandox commercial paper program. During the quarter -- during the second quarter, we secured new financing of previously completed acquisitions in the amount of approximately SEK 1.7 billion with a tenure of 4 years. We also extended our credit facility of approximately SEK 1.5 billion maturing in 2020 by 1 year. Other credit facilities with a maturity of less than 1 year amount to approximately SEK 4.7 billion, of which majority will mature in the end of 2020. Refinancing of these facilities maturing in the end of 2020 is expected to be completed during the third quarter. We have a positive and close dialogue with our lenders on new financing, refinancing as well as adjustment of terms and covenants in existing credit agreements with consideration to COVID-19. In the second quarter, lenders have given waivers in the individual credit agreements. Next page, please. And with that, I hand over to Anders again.

Thank you, Liia. I am now at Page #9, 3 focus areas. When the COVID-19 arrived in Pandox market, we changed overnight our business model from buying hotels, valuing, adding investment and operating a quite large hotel operations to more a workout company focused on secured liquidity, frequent dialogue with banks and business partners and strong focus on reduced cost, an environment we have been into before. And I believe that we -- the experience we had was something -- was good for us. If you ask me, we have today a good control of our daily business, and we had on top of that strengthened our financial position since the start of this crisis. We call this working methodology, Respond, Restart and Reinvent. The Respond is to manage the acute phase as was into years before. The Restart is to talk about the recovery, which we did already at Q1, and we will now on the next slide -- and we will now [ move up ] very soon, an updated version 2.0. And also, we're spending time on what we call Reinvent, and that means what's next. In general, that is how the market and the platform hotel business should be when everything is back to normal again in terms of consumer trends, business models, investments, branding, distribution, to name a few interested areas. So let's go over to Page #10, and then starting to talk about the recovery which we see coming the next couple of months and an outlook also for the first half of 2021. And to make sure that everyone is starting on the same point, we're starting with on Page 10 to present this 6 development level. As we see, we need to return before we are back in old days. The first is that cities and countries had to open up and restriction has to gradually reduce. The second one is that hotel, because of this, can open for business. The third is that domestic leisure is returned. The fourth is that domestic business return after that. And then you will see international and meeting, who will -- picking up. And at the end, the group business, the group segment will return as the last segment in this phase. Every crisis is unique, even this is unique. And it's starting where you can see that restrictions gradually go down. If we then move over to Page #11, this recovery will -- or these phases will be managed over a few different phases. The first one has already happened. That was April to May when we saw a total lockdown in most of the countries and the demand bottomed out at the end of April and slightly recovery from beginning of May. The occupancy at that time was in Europe between 5% to 25%. It was -- all business were more or less gone. If we now move over to the second phase, what we call here, summer. So it's restrictions. When restrictions start gradually to reduce and domestic travel was allowed, you saw a strong pickup immediately in domestic individual leisure, first of camping and housing and then to resort, hotel, focus on also mid-market economy hotel. And that trend is strong. If you look at Nordic, we -- who was for just a few weeks ago, just at 15%, has now -- is now more than 40% in all hotels and 50% of all open hotels. And you see similar trends in Germany and in Netherlands and France. And next in line who will follow will be U.K. If we then move over to next phase, autumn and year-end. So let me say that given no second wave and given that restriction gradually will reduce, we believe that the hotel market in Q4 can be up at 25% to 55% occupancy, supporting by a quite strong leisure period the whole autumn. I believe that brands and hotel company will focus more on leisure campaign than normal, and we will see a good leisure domestic pickup. People like to travel, and it's easier to travel in domestic, and hotel will use that. But we will also see domestic business return, and we see that now also in China. That is 2 segments who really are strong. And then that gives also -- and that gives the reason why we believe that occupancy will grow more than we said in our Q1. We believe also, at the end of the year, we will see the first pickup in meeting segment in international travels. And we believe -- we think that -- or we had -- the report from flight industry said that 50% of capacity is back in Q4. We mean that has a positive effect on international travel as well. Let's move over to Page #13. So general comments about 2020. Demand recovery is faster than the outlook in Q1 report, and that's supported by this current trend and also what we see in market who is ahead of Europe, specifically in China. We can confirm still that food and beverage activity in hotels will be low during the rest of this year. There will be a lot of focus on hygiene, cleanliness and safety. And we will see more digital solution for contactless and cashless service. And a few words about rate, which are relatively stable per segment so far, but down because of sales mix. It's so easy as we're selling more to families than to international travelers will take down the price. But respectively, segment, people pay more or less the same as they did last year. And on this stage, I think that's also important to mention that we don't see any new consumer trends that change the fundamental of the hotel market. It is more or less as it always had been so far. What's holding back consumer are government restrictions. And when they're coming down, we see immediately a pickup in demand. Page #14, please. If we then look ahead into 2021 and take that then, including the domestic leisure segment, we'll continue to be stable as well as domestic business. And they are not back to normal, but they are much stronger than it was in Q3 and Q4, and that will continue to grow slightly. And we see more pickup of international meetings and international travels. And domestic meeting, we believe that occupancy will go up to about 60% in domestic market and to around 30% on international market, mostly deluxe hotel, deluxe market in capital -- large capital cities like London and Paris. In this environment, I think we have quite a good plan, Respond, Restart and Reinvent. And we have a strong financial and liquidity position as well. And if you also remember that the Pandox portfolio, 84% of our revenue coming from domestic and regional markets. I believe this trend is in favor for Pandox. The last page is 15, where you now can see where the hotel market development are on this stage. You can see that on #2, hotel open is U.K. You see a number of hotels who is at stage #3, domestic leisure return, and only 1 market is on domestic business return as well. That's China. U.S. is there also, but we just take China in here. And then you will see this step and step go up. So at the end of the year, you will see both domestic leisure, domestic business and first pickup in international meeting. And that will take market up to a level where most of the hotel will have a positive cash flow at the end of 2020. Thank you very much. Over to Anders Berg.

Yes. And this concludes the first part. And we'll now turn your attention to the external hotel market presentations, starting with Robin Rossmann. Please go ahead.

Thank you so much, Anders. So I think we're on Slide 16. Why don't we turn over to Slide 17? And really, what I'll look to cover over the next few minutes is to give you all a bit of context around where the world is in its recovery cycle and how that differs by region. And I think that gives us good insight to what we can expect to see in Europe, and on to the second point there, which is how much of the summer season can hotels salvage through to the end of the year. So moving on to Slide '18. And clearly, it is the beginning of summer holidays, and I'm sure many of you prefer to be starting or next to a fire than being on a conference call right now, but that is not the reason why I put a picture of coals there. It's actually -- if you move on to Slide 19, because I think the best analogy that I've come across in terms of what we can expect for, particularly hotels and the recovery cycle coming out of coronavirus, is demonstrated by the heat profile of the meat and fat in a slow cooker when you're barbecuing meat in a slow cooker. And so what I mean by that is, if you look at the temperature of fat, that is a normal recovery cycle coming out of a downturn for hotels, which is it's low and then it picks up quite quickly and then flattens out until it gets to full recovery. However, what we are seeing and what I expect we'll continue to see is the temperature profile of sponge or meat in a slow cooker, where there's sort of a sharp jump up to a level of occupancy where it flatlines or plateaus until there is a cure for coronavirus because there are just certain types of demand that will not come back to hotels fully until there is a wider cure for the disease. So more on that in a bit. And as we move over to Slide 20, I'll just give some context on where we've come as an industry around the world and how that's impacted hotel performance. Here, you can see, across the, globe color-coded the level of impact in the hotel industry back at the middle of May, where red is all hotels enforced to be closed. Oranges, they're allowed to open, but there's no real demand yet. Yellow is where domestic leisure has returned, and you can see at the beginning of -- middle of May, it was really only China that was at that stage where domestic leisure was coming back. Green were domestic business, then international, then group. So moving on to Slide 21. You can see that by the end of May, things definitely started to get better. And that's when things started reopening for Europe. So importance, end of May, Europe starts to reopen, not much demand yet. But as we move now on to Slide 22 and the 30th of July, you can see certainly some more pleasing colors, a lot less red, really only in Central and South America enforced closures left. But for the whole of Europe, the hotels are now allowed to reopen or, indeed, domestic leisure has already come back. And they're moving across the right there, it's important to see that domestic business is now coming back to China. So getting a bit more granular, moving on to Slide 23, and just to give you a bit more color on the shape of this recovery around the world. What we've got here is all the different submarkets that we track over 1,000 different submarkets around the world and breaking up the occupancy of those submarkets. And seeing red, less than 25%; orange 25% to 50%; teal 50% to 75%; and green, greater than 75%. And this is the occupancy of open hotels. So it excludes those that are temporarily closed because of coronavirus. And you can see back at -- for the week ending -- last week of May, that really only China was in that position where there wasn't that much red left. Most hotels are either greater than 25% or indeed even greater than 50% occupancy. U.S. was just coming out of its closures at the end of May. You can see not many markets less than 25%, then most between 25% to 50%. And Europe, at that stage, as I said, still mostly shut, just starting to reopen at the end of May. So just a quick one on this one. So U.S., about a month behind China and Europe about a month behind the U.S. And as we move on to Slide 24, you can see that what happened is China has remain broadly the same or static in terms of overall makeup. The U.S. has caught up to China. So now really mostly orange and some teal coming through. And a month later, Europe starting to open, far less red and most markets at the 25% to 50% occupancy. Before I talk about those occupancy levels, though, it is important to note, moving on to Slide 25, that what we also need to take into consideration are all these hotels that have closed and are starting to reopen. And here, you can see, from January all the way through to July, across the major countries in the world, the percentage of hotels that closed and then the extent to which they've reopened. So moving from the bottom of the chart upwards, you can see that in China and the U.S. Actually, not that many hotels closed, only about 20% in the end. And in both of those markets, China, almost all those hotels reopened and U.S. getting closer to it. Then I think quite encouragingly, even in Europe and Germany, where over half the hotels were closed, the dotted black line, now only 15% are still closed. Moving further up to France, the U.K. and Italy that had well over 80% of hotels closed, now at 40% to 50% closed. And then right at the top, Spain, due to some seasonal closures that are unlikely to open this year, still 60% to 70% closed at the beginning of July. Now the reason we show that closure information is that, when we move on to Slide 26 and just start to look at the actual occupancies of these markets and regions around the world, and this is for the week ending the 5th of July, we show 2 different levels of performance. The first and the one that we usually focus the most on is we call reporting occupancy. So this is the occupancies of the hotels that are open. And the second, the smaller bubbles is the occupancy of the whole market of all those hotels, which are temporarily closed by coronavirus were to be opened and what that would bring the occupancy down to. And so you can see for the China and for North America that reporting occupancy pretty close to economic occupancy at just below 50% as most of the hotels reopen that. Whereas compared that to Europe, where hotels that are open currently at around 27% occupancy. But if you add back all those closed hotels, still at around 15%. Now that's important context as we move on to Slide 27 and then on to Slide 28, which is what does the future shape of the recovery look like for Europe? And this is where I'll bring us back to that barbecue analogy. And I'll start by looking at China, which is the blue line, which, as you can see back at the beginning of February, had occupancies at below 10%. It stayed below 10% pretty much for the whole of February. And then at the beginning of March, started its 3-month recovery. And it took 3 months for China occupancy to get from around that 10% to just below 50% at the beginning of June. And that's when we started asking the question when will performance start to plateau? And it looks like it might not. And you can see that little spike just in around the 13th of June where it blipped over 50%, but then we had a resurgence of cases in Beijing, in particular. And you can see that China occupancy has fallen back down a bit and then recovered to just below 15%. So it does look like until there is a wider cure that we're beginning to see that point at which occupancy is flatline or plateau in China where it cannot recover further until those other sources of demand come back. Moving on to the U.S. It didn't decline as far. And you can see occupancy has reached the bottom at the end of March and then started to recover at the beginning of April. And again, it's taken 3 months from the beginning of April to where we are now at the beginning of July to get occupancy just below 50%. At which point, it does seem like they're a bit flatlining there. And we'll see what comes through for the holiday week, 4th of July holiday week. But given what we're seeing in cases there, I think we can expect occupancy to broadly flatline at that level. Middle East, similar story, flatlining, a bit lower. And then we get to Europe. But before I talk about Europe, let's move on to Slide 29, because what I was showing you was reporting occupancy, which was fine for China and the U.S. because most hotels were open. But as I mentioned before, for Europe, still many hotels opening up. And on Slide 29, you can see that, on an economic occupancy basis, Europe hotels really only started their recovery at the beginning of June and are up to about 15%. So if I followed the lines of the U.S. and China, it would take 3 months to get up to that sort of 40% to 50% occupancy. And you'll see later on the presentation we think that, that will be the case. Or indeed, we think it will be even a bit faster than that as the reopening has happened at a time where peak leisure demand is coming through. And it's the leisure demand that's driven this first phase of the recovery. So we do expect that purple occupancy line for Europe to jump up much closer to the U.S. and China lines over the course of the next month or two. What will it look like when it gets there? Well, moving on to Slide 30, this is just showing you a bit more for China, the degree to which occupancy is versus same week in the prior year. So it's really the same data from the previous slide, but you can see it was recovering to just about 20% below prior year levels, and we had that flare-up again and it's now at between 40% to 50% below prior year occupancy levels. And importantly, though, there is a big difference between major gateway Tier 1 cities and other cities with Tier 1 cities, gateway cities having a much slower recovery and still much lower than prior year levels, rather unsurprising given the high density is less appealing at the moment and because of the risks associated with coronavirus. Moving on to Slide 31. So far, I've been talking many about occupancy. Obviously, revenue and profitability is more important. So let me talk about RevPAR quickly here, and you can see that RevPAR in China are a bit further below where occupancy levels were. And for Mainland China at around about that minus 40% to 50%. It's worse in Tier 1 cities and not quite as bad, so about minus 30%, outside Tier 1 cities at the moment. Do you expect it to still recover from here? Yes, I hope so. But as I mentioned before, we do think it will flatline there a bit for a while until there is a wider recovery. Moving on to the U.S. on Slide 32. Here, you can see RevPAR versus prior year percentage change. Again, similar story. At its peak, minus 80% behind prior year, currently trading at minus 44% behind prior year. And we expect it will improve a little bit from there, but probably stay at that case -- at that level for a while whilst cases are going up. Moving up to 33. Clearly, the performance does differ by class of hotels, and we've seen that luxury top-end hotels are struggling more and that the mid-scale and economy certainly being a bit more resilient with RevPARs there in the U.S. 25% to 30% below prior year levels, whereas luxury, upper upscale, 50% to 60% behind. And that is because of the type of demand that's come back. It's that high-paying business, international-led demand that hasn't come back yet, which is why that performance at the top end is struggling more. So moving on to Slide 34 and how quickly can Europe get back to temperature. Well, I've given some answers away already, but I think important to look at some granular country level detail. And on Slide 35, you can see occupancies for the week ending 5th of July of open hotels range from just below 10% all the way up to 40%. But I wouldn't focus too much on that. I'd move on to Slide 36, where you can see that, when you add back those temporarily closed hotels, there are some significant differences there, particularly Spain, France and obviously, the U.K., where many hotels haven't opened up yet. The big difference between reporting occupancies and actual occupancies, including all those temporary closures. And moving on to Slide 37, if you pull out and you only show full inventory economic occupancies, then the countries that are at the forefront of the recoveries for Europe are definitely the Dock countries, so Germany, Austria, Switzerland as well as the Netherlands, seeing some stronger recovery than many others. Moving on to Slide 38. I think just moving -- referencing back to the China points, certainly, what we're seeing in Europe is a big divide within countries between Tier 1 or main cities and regional cities or regional markets with a much stronger recovery coming sooner within those regional markets. So think about it in Germany as Baltic coast versus Berlin or coastal towns versus city centers where lesser demand is coming back and bringing that occupancy higher there versus the city center towns. Moving on to Slide 39. And just touching briefly on rate, and it really is important to not draw too many conclusions yet on average room rates because, where there are significant declines in rates versus prior year, this is really more due to change in mix than it is to discounting at this stage. But once again, when you look at performance of regional markets versus main cities, you can see that regional market rates are much more resilient and in some cases, actually above prior year levels with that pent-up demand coming through and enabling leisure destinations to price more versus main cities where it's definitely weaker than prior years. But again, don't draw too much from that at this stage because if you move on to Slide 40, whilst we do expect there to be pressure on rates as we come out of this recovery cycle, when you look at average room rates in London versus U.K. regional markets here, London, the orange dots, U.K. regional is the blue dots, you can see London usually trading at room rates of pretty much double what you would get in regional cities. However, that gap has almost completely closed in the last couple of months. But again, that's really due to change in mix, not due to discounting. And you can already see it starting to open up again in the first week of July. So before those major cities, what can they expect in terms of demand coming back? If we look on business on the books and move on to Slide 41 and then Slide 42, I think the context to start with here, this shows you net change in future bookings by week going back from March all the way to where we are now. And we can see that for pretty much the whole of March, there were more cancellations than new bookings into the future, pretty much wiping out all business on the books. And so when you look at Slide 43, this is showing you a selection of major gateway cities around Europe and showing how much business is on the books or rooms already sold in July, August, September all the way through to June next year. You can see that, for most months, it's ranging between 6% and 14% or significantly less than what it would be. At this stage, usually, particularly for the key summer months, it would be usually 2 to 3x at least to this. So because of all those cancellations, there's not really much left on the book. So not a lot of visibility for hoteliers out there. However, moving on to Slide 44, we are seeing pickup going positive. So for the first time in a long time, you can see that, through the month of June, we saw a positive pickup for business in July across most of those gateway cities, and that was very late last-minute leisure pickup coming through. Beyond that, still in August and beyond, still negative, but we do expect that to pick up quite a lot this month in July. And when you move on to Slide 45, this is looking at daily data for the same business on the books pickup, you can see pretty much unanimously positive in the short term in July and then in August picking up again, but we do expect that to pick up. So on to Slide 46 and then Slide 47 for some conclusions. When we do our forecast together with tourism economics, we do a range of about 30 different cities across Europe. And we've aggregated them up here and compare them to occupancy levels in 2019, the blue line. And you can see that where we are is we hit the bottom in April, and we have recovered in May and June to that, just below 25% line. And we are expecting it to continue to recover, as I said, in July and August. And by August, get back up to that just about 40%, 50%, 60% occupancy. And then we do had a big caution line here because we are expecting it to continue to recover. This do feel optimistic, I will say, but we are expecting it to continue to recover. The big caveat here is, of course, if there is a second major outbreak of coronavirus in the second half of the year, which would cause more stricter lockdowns and this recovery not to occur. But as it stands, we're positive that demand is coming back. Hotels are being able to open. And there is definitely pent-up leisure demand. And as long as confidence continues, we expect that to continue and recovery towards the end of this year. And with that, I'll hand over to you, Anders.

Thank you very much, Robin. And our next speaker is then Johan, who will talk about the Nordic market. The floor is yours.

Thank you, Anders, and thank you, Robin. I will start at Page 49 to have a brief look at the Nordic capitals, to just give a picture of how the recovery looks in our region. It's quite a mixed picture with some markets having a much quicker recovery than others. We can see, for example, Riga and the Baltics has picked up pretty quickly. And the Baltic countries opened up quite early for international travel within that particular region. And they seem to have benefited from that. Both Riga and Tallinn had seen quite significant growth from very low figures at the bottom of -- in the middle of April. And we also see that some markets are struggling more than others. Stockholm, for example, the dotted light yellow line, is quite flat. Stockholm is, of course, very much affected by international travel, business travel, larger events and groups. So they have not yet benefited from the increased domestic leisure travel as other markets have. And we also see Reykjavik down at the bottom, and that's also a market that is very much affected by air travel, of course, the way to get there, and international travel, not much domestic travel at all. And if we turn to the next slide, Slide 50, and just compare 2 of the markets to where they are at a normal -- in a normal situation. We can see Riga, the dark blue line from the previous slide and the lighter blue line showing where they were last year. So even if we have a start in a pickup, we still have quite a long way to go. Looking at Oslo, their line from the previous slide in dark red and the corresponding line from 2019 above. We also see that it's a significant gap still, but it's closing in. And we're about half way in most markets in terms of occupancy and a little bit higher in some markets like Norway, but that's in the shorter term where we have a quite downturn normally during summers. If we look at the recovery path in a little bit longer perspective from the beginning of the year and also a bit longer average, this is 30 days rolling average on occupancy on Page 51. We see that, for Sweden as a whole, we have had a clear turn upwards from mid-April, and it has had a bit of a kick in the last couple of weeks since the summer started. And it's, of course, as both Robin and Anders mentioned earlier, the leisure segment that has taken off, and we're in that phase now with the summer. And if we look at typical leisure markets, I took Kalmar and Sweden as an example here. We can see at the 7-day rolling average on Page 52 that for the shorter trend, weekly trend, we can see that it's actually up to levels where we were last year. So the domestic leisure has really helped the typical leisure and summer markets for the short term. And hopefully, this will last during the whole summer then. And at the other end of the scale, we have a typical meetings market in Sigtuna, outside Stockholm, almost exclusively meetings and events. And they have come down to much lower levels at the bottom, and the upward turn has been much, much slower. And they are at similar levels like last year, but that's mainly due to the -- they are a normal market going down this period of the year, of course. And they have compensated this by focusing -- refocusing on the leisure segments, at least trying to refocus on that. But they have still the 50% limit for gathering to meetings to handle. And that's, of course, a trigger for when we will see that segment coming back. Turning to Page 54, looking ahead a bit at the occupancy on the books. We have Stockholm and Oslo on the top, representing the main markets. And at the bottom line, we included 2 more typical summer markets. If we look at Stockholm and Oslo, we can see similar patterns, quite a bit behind where we normally are in -- on the books figures. There's quite a huge gap compared to same month last year. And the pickup is very, very slow, at least to Stockholm. And Oslo, it has taken off a bit more. If we compare that to the pickup in Helsingborg and Kalmar at the bottom, we see that they have much, much higher pickup even a month before. And if we dig a bit deeper into that or Helsingborg, for example, at Page 55, we can see that the pickup is extremely short. Well, in the coming week, #29, it's this week we're in now, we see that, just for the last 3 weeks, including how it looks as of Monday this week, the pickup is really strong. So they look at high occupancy levels, and it will -- the outcome probably be a bit higher, closer to 90% this particular week because the pickup is so short. And we can see that nothing really happens beyond 4 weeks ahead. So it's 1 to 4 weeks and really 1 to 2 weeks ahead that we have a pickup right now. Not so much negative pickup into the future. That's what's really already occurred. So it's quite flat, not much happening there in any market that we cover right now. So if we turn to Page 56 to just sum up a bit. We do see this clear start of a recovery. And the question is, will it last? We have roughly half the occupancy levels overall, but it's mainly driven by leisure. And the big questions are, will we see the prolonged leisure season to lasting into the fall? And will that also be followed or having -- being accompanied by the business segment coming back, events and also international travel? Those 3 are the big question marks right now. We think -- and for Sweden, we saw that the summer started in mid-summer. The leisure segment really took off at mid-summer, and the domestic market really captured quite a bit of the international travel. The pickup is extremely short, and we also have to remember that the hotels now compete for the domestic travelers with campaigns, with other segments of the -- that has also been hit by this crisis. So it's really tricky for the hotels, not to lower the prices too much to compete with the lower-price alternatives, of course. And we see that some destination suffers much more than others from being cut off from the world at large. And that's, for example, then Stockholm that really has to see some international travel and the business segment returning to see a rise in occupancy. They have not been able to capture any leisure travel so far to any large extent. Yes, that's pretty much what I wanted to say. So I hand over to Anders again.

Thank you very much, Johan. And operator, we are now ready for questions.

[Operator Instructions] Our first question comes from the line of Fredric Cyon from Carnegie.

Three questions from my side. Starting off with the Property Management hotels, 136 in total. What proportion of them do you expect to run at minimum rent in Q3, Q4, roughly?

Majority will be at minimum rent. We have 29 Scandic hotel, which we don't have any minimum rent, and we see a good pickup there. But for the rest, I believe that it's minimum rent.

Throughout Q4 as well?

Excuse me?

Is that also viable for the fourth quarter?

Yes. Third quarter, yes, yes. We believe that -- was. Now in the fourth quarter, we will see a more pickup on revenue, specifically in the Nordics, given no second wave.

And then the second question relates to threshold on occupancy to receive additional income besides the minimum rent. Generally speaking, what kind of threshold do you have on occupancy to get there?

Nordic 50%. International 50%, 55%.

Okay. And then -- that's very clear. And then my final question. In connection with the Q1 results, you said that you would be approximately breakeven in Q2 on profit before value changes. That was what you managed to do as well. Can you give us some guidance on Q3? Should we expect some kind of pickup, I guess, for Q3? So you should be clearly above the breakeven then.

Yes. Well, they will be slightly better because the market is stronger and you will see a pickup in variable rent. You will see the, say, minimum rent, they will be stable. And you, hopefully, can see the first pickup in the end of the -- end of the year in our own operational platform, specifically for hotel in Netherlands and Germany, maybe not in Belgium and in Canada where they are still closed -- or very close to close.

Your next question comes from the line of Simen Mortensen from DNB Markets.

Few of my questions is very similar to Cyon's questions, but one final question could be then minimum -- in terms of the payment of the minimum rents. You say it has been according to plans. Can you please elaborate a bit on that? What does that mean? Does that mean you have agreed for postponed payments? And to what extent? And how much of rents have been actually paid? And also, perhaps, a comment on that for Q3 as well.

Yes. Thanks. Well, the -- as we said in the last quarter, we have had discussions and agreements with some of our tenants to change payment terms. And typically, that has been like quarterly in advance, 2 monthly arrears, especially in this pandemic times. It would have been cruel otherwise. There was some impact already in Q1. And as we see, working capital has sort of increased or the receivables have increased with some SEK 150 million or so in the second quarter. These are temporary payment terms, which we expect -- well, this is what we have been having, and we expect to have it during 2020. But there is no changes in the minimum rent. This is purely payment terms. And as you know, for example, in Germany, there has been some governmental restrictions and some possibilities for some tenants to actually postpone the full second quarter payment to later, and that's also included in this.

Just a final question then. In terms of you have a segment reporting, where you guided on the revenues or report your revenues per country both in the Property Management assets and the Operator Activity assets. We do get them by country, and we do get the quarter-on-quarter stuff from you. But what can you tell us about the levels, which we have seen in the revenue for the Property Management in this quarter, which is, in some cases, just down 20% in terms of the breakeven levels in those countries versus the operator assets? And especially on the operator assets, how is the run rate now at July versus what you reported in Q2?

The Operator Activities is about -- now it's 20 hotels. And I think we said in Q1 that most of this hotels would be on a very low level. And like us, we had -- because we were one of the few who has had open hotels, meaning when in Montreal, when the city needs 800 soldiers for the city to do share of the job, we get them all. So we had an occupancy of our hotels close to 60% over 6 weeks. And that, of course, gives us a much stronger profits out from these 2 hotels than we had forecasted. We also have see -- we were also one of the few who had a hotel open at Heathrow, our Hilton Garden Inn, where we have had so stable occupancy for 40% to 50% during this quarter. Now all hotels is open at Heathrow. So that means that our occupancy will make a bit down, but we are still open. You see also a good pickup in the Hague, where it is the same trend as in Nordic when the resort hotel in [ Segevång ], sorry for the pronunciation, are very strong and we have a good hotel there. And we see the first pickup in Germany, specifically in Lübeck and in Hanover. But if you then go for Brussels, it's very quiet.

Your next question comes from the line of Stefan Andersson from SEB.

Three questions for me as well. First, on your partners. If you look at your group of partners that you work with, would you say that all of them are healthy? Or do you see concern somewhere? I connected to that, you have been taking over hotels in Copenhagen, for instance. I haven't seen any more announcements like that. So my question #2 to that is then, are you seeing any risks/opportunities to -- during the summer, taking over hotels?

The first question about the current status of our business partner. What we know, they are strong. We work, as you know, with a large company, and they are probably stronger in this weak environment. We know that many of them have taken actions with the new share issue, taking of bank loans. We see a few of them selling assets. We see some of them get out of business where they have been into where it has not been in their favor. So they have been very active. And from that, our conclusion is that they are in healthy condition. And we also see, combined with a stronger market, that the most -- the acute problem for hotel market will be over the end of this year across our business partners, which are good news for us. And the second one, if we're taking over. No, we don't want to taking over any hotels from our business partners. We would like to gather up, go to the next level together and be active together when this crisis is over. So we have no plans for that. But if they don't, if they cannot pay rent or if there is other problems, we have then, of course, we are ready to do it, but it's definitely not a strategy.