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

What kind was that?

That was a Jack Russell. He was known because he barked a lot, and he was -- he seemed aggressive, but he wasn't aggressive. So he was just like me.

Okay. Martin, did you listen to Annika and Tove with the conversations we had?

Absolutely.

Yes. We have them here again now on stage just to sum up a little of what we've been talking about. Martin, what -- did you pick up anything special from what these 2 ladies said?

Yes. I think the -- Annika's comment on the economic growth was very interesting because I have a prediction that the things that were working are very quickly coming back. But the new projects, the new -- the really new stuff is very difficult to create without the on-site collaboration that you have with travel. So my thinking is that, yes, sure, right now, it's going okay, but I'm not as optimistic for next year's April as Annika Winsth is.

Would you comment on that, Annika?

Yes. I would say that I'm worried about Q4 and Q1 because it's cold period. And during that time, we have not vaccinated risk groups, and we still have restrictions in Europe, in Sweden and in a lot of other countries, I guess. But we don't need to vaccine all the people because as soon as we take those restrictions away, we will start to behave as normal as we can. We saw that during the spring and during the summer. And I guess we will see that this time as well. And we now know that next autumn will be much better than this. Hopefully, we have vaccine a lot of people during that time. So I think from a financial perspective, they will start to run as soon as they hear about those vaccines, the economy will start to turn around in the second quarter.

Tove, what did you come to think of when you listen to Annika and Martin?

No. But I think this theme of inequalities were very important to look at. So my perspective is that we have vulnerable groups in the society. And those are much harder hit by the pandemic. Those are the groups that go out and have the service, professions that can't work from home. So they have suffered much more of the disease in terms of loss of relatives, family members, but also, we have to look at these chronic consequences of this new disease that we don't know so much about yet. And also how -- because we know that these groups have more chronic disease, and now they didn't get the health care they needed. So there's been a lot of planned health care that have been delayed. So I think we will have some issues with a lot more sick leave next year than we had before the pandemic. But I found both talks very interesting, especially this recovery part, how resilient the society is and how we can get back after crisis, is very positive.

Annika, reflections on the 2 others?

Yes. I'm thinking what happened in the brain of people who are afraid for the economic situation, unemployed people and people who had to close down their companies and so on. It's really, really scary for a lot of people. I think there is a risk that we will see a higher debt level, and we will also see the people taking their life for, they're really depressive after this. And I think, therefore, it's very, very important to help those people to survive this period. And if you have restriction, again, I think it's very important to help people to think that, yes, during this period, I will receive help. And in Sweden, we are much more lucky to do that because we can afford it. If you take the States, for example, I guess a lot of people are really stressed there over their economic situation. As when you are unemployed there, you have no money coming in at all.

Well, last question is to all 3 of you. And Martin, are you still there?

Absolutely.

That's fine. The -- one of the most frequent questions in this era we live in is, when will everything be normal again? What's your take on that, Martin?

Normally, it's just a statistical expression. And right now, it's normal to be the way I am; to be distant and to try and do my best in my place. In back to the normality we had before the pandemic will be very quick, I would think, with the exceptions of a few industries. The -- I think the bar industry is going to have a little tick, the cultural scene will have a little tick down and they will be slower to recover. I think our industry is going to have a difficult time for a little longer time. And I think it's going to be some time before we're up to complete par also, unfortunately, when it comes to hotel industry. But apart from that, I think the normality is going to be very quick. I think the other ones are going to recover as well. I'm sure.

So Annika, how do you react to my question? When is everything normal again?

Yes. I don't think everything is going back to what you think was normal before this crisis.

I think so.

Everything is going back to normal?

Yes, yes.

No, I think things will change. Something will change. But I think that people will feel that everything is going in the normal direction, the second half of next year. And I hope that next Christmas, then we are feeling that we are living and...

That's a very clear answer.

Yes.

Do you agree, Tove?

I haven't seen the safety data from the vaccines yet. So that's what everyone is waiting for. We -- it's not -- just don't need to be effective, it also needs to be safe. And we also need to see how many are willing to take the vaccine. But I think a combination of widespread vaccination and rapid tests that are accessible at home. So you can just take some saliva and see if you're positive or not, that can open up the society next year. I'm also hopeful for next winter will be so much better than this one.

I draw the conclusion that not only our viewers, but also Martin, Tove and Annika learnt something from this conversation. Did you?

Yes.

Sure.

Right.

Thank you very much indeed for taking part in the Hotel Market Day, Martin, Tove Fall, Annika Winsth. Thank you very much. Okay a little reminder, friends. Don't forget to scan the QR code and take part in our poll, so we can get these interesting answers to deliver by the end of the event, okay? Now I want to share a little story with you, if it's okay? Because once upon a time, way back decades ago, I had the opportunity to work as a trainee at AP Dow Jones, Wall Street Journal. And there, I received this very brief lesson from one of their writing gurus on how you should attract readers, draw readers' attention in the best way ever to an article, and the recipe was simple, just include a dog in the first paragraph and they will read it. And I think, in a way, Pandox lives up to this spirit, this atmosphere of dogs. Let's have a look. [Presentation]

There were the dogs. And you will perhaps meet them again. I think it's time to stimulate our brains a little. Take a little, little thinking break, pause a little and to get some more energy. And the best recipe for that is to listen for a couple of minutes. Don't go away, just listen a couple of minutes to Isaac & The Soul Company. [Presentation]

Isaac & The Soul Company, thank you very much indeed. Now we have some more energy again. Welcome to the second block of this event, and now we're going fully on satellite. And I tried to call on Aldert Schaaphok, and he's in Amsterdam, I hope to see him on the screen, very soon here now. Hello, Aldert.

Good afternoon, everyone.

Good afternoon. Hello. Hello. Now you're listening to and talking -- listening to the Vice President of Pandox, responsible for international operations. And the reason we have Aldert here online now is that we should talk a little about the dominating trends in the hotel industry right now. I think Aldert has picked 6 of them. So let's start off, Aldert, with the first one, which we call Hygiene and Safety. And it's obvious that the situation we're in now has increased the claims for hygiene and safety in the hotel business a lot. What's your take on that?

Yes, exactly. As you say, hygiene, cleanliness and safety is at the forefront of everything we do all the time. All hotels have been audited and certified by independent agencies. And all team members have been trained and follow strict protocols. Also, the international brands, they all have launched their own brand-specific certification. Think, for instance, CleanStay from Hilton. And as Martin said, about this 100% predictability, it is important that we inform our guests through the entire booking process and confirmation process that they are informed what we are doing and to assure them that they will be staying in a clean and safe hotel. Also, we have launched new cleaning technology like Nano cleaning technology. We use new products like ozone motor. And what is also new that you see guests that are staying 1 or 2 nights, they don't have the need or the desire anymore for daily cleaning. So that is something I think will stay, that guests choose when and what they would like to have cleaned or changed. So that is something that maybe later on will also be taken out of the room price and be like an a la carte menu.

I tell you I tried many times to say you don't have to clean my room today, but they really want to do it anyway.

Yes. Yes, that is something that is part of DNA of a hotel. But like at home, you also don't change your bathroom linen, every other day or reorganize your room on a daily basis. So that will change, I think, and that is also good for the environment, of course.

Now, Aldert, a second trend is that more and more people use the word contactless, maybe a sign of the times we live in. But contactless, what does that mean to you as a hotel expert?

Yes. In itself, it's, of course, strange, talking about hospitality and contactless. It seems these 2 don't go together. But I think it is more about eliminating unnecessary administrative interactions between guests and employees or team members. And with today's digitalization technology at hand, there's no more need to wait at a reception desk and fill out forms. You can go directly from your booking, you do your online check-in via an app, while in the cab. You get a confirmation with the room number and digital key, you go straight up to the room, there's no more need to interact. I think in the long term, it will change that the people working at the reception will change from an administrative entry more to a host where they are there to help you, to assist you, to answer questions about the city. And more than anything else. And I think all these digital interactions need to be simple and simplicity becomes a hygiene factor, I think.

So Aldert, if we name the third trend, a little more general, new digital solutions, how do you interpret that?

Of course, in the hotel industry, like Martin also said, it is a very manual industry. We lag behind when it comes to introducing digital solutions. And that has now been accelerating at high speed, where not only it is used to offer digital solutions, but also to gather data that allows you a personalized communication and personalized services. It also is a fact that with these digital solution, traditional receptions will, for sure, disappear in mainstream hotels. We will see also in room, more touchless and voice control solutions like Google Home or Alexa, and we will see a personalization in these digital interaction. It means if you have a digital menu and you know that your customer that is looking at your menu is vegan, then you don't need to try to sell them steak tartar or burgers. So it will be tailor-made on the -- based on the profile of guests. And in the end, we will reduce useless administrative tasks that keep us busy still today.

So Aldert, talking about steaks and burgers. Food and beverage, what will the trends be there?

Yes, I think we will see also there the effect of contactless in a way that we will see less rich buffets but more portion control solutions. Also, we will see the digital introduction that you order through a [ GR ] code, you pay via a digital app via the same QR code. You will also see that through what we call geofencing and beacon technology, we are able to serve in the restaurant exactly where guests are sitting based on the location of the mobile phone. We see, I think, less choice, less waste and more quality over quantity. I think a new trend right now is what we call ghost kitchens or cloud kitchens. These are restaurants without a physical restaurant only kitchen and only based on delivery. And maybe we can start introducing something like that in our hotels.

But still, when I listen to you, Aldert, I get -- hesitate a little about the fifth trend I was going to ask you about, which is sustainability because all these pre-portion stuff you make now, that's not very sustainable. Is it?

No. That there is potentially a conflict. Of course, you can maybe use reusable materials. But one thing is clear that when you talk about sustainability, I think people are much more aware now than they were that basically, the planet doesn't need us, the planet and nature were better off without our activity. You will see that this increased awareness might lead to a stronger focus on sustainability. I think shorter supply chains will become more important also as an act of solidarity, what we see today, that we try to support more and more local economy with an emphasis on local and seasonal sourcing. You will also see a strong development that vegan and vegetarian will become super mainstream more than before. And I think we will see a trend where we are more busy with preservation of resources than consumption. So less choices, less waste, and more a focus on preservation.

So Aldert, do you think that the hotel business can be really trustworthy in connection with the term sustainability? Do you think so?

I think in the short term and the midterm, this is our key focus. There's no way around having a true sustainability agenda. And if anything has learned this crisis is that we need to look better after our local economy.

Yea. We talked about 5 trends now. Let's talk about #6, which is something we call local experiences. What is that?

Yes. We expect that for the coming months, we are all fighting for the same limited number of guests. So it is clear that in order to outperform our competitors and to stand out from the gray masses, I think we have to connect our guests more with the local experience and local community than we've ever done before. And this means that just a nice room and a good bed and good shower will definitely in a market where there's oversupply, that will not do the trick and the only way forward is to link our guests very strongly with the local community and to put the locality of the hotel more in the forefront than I think we have done so far.

Would you say, if you look at the list here with the 6 trends we talked about, is there 1 or 2 that are much more important than the others?

It's difficult to say. It's all about balance. But for our industry, I think digitalization and sustainability are the 2 most important elements moving forward, more than anything else.

That's what I expected you to say, Aldert. Thank you very much for your trend check here in the Hotel Day.

Thank you.

Thank you very much, Aldert Schaaphok from Amsterdam.

You're welcome.

Thank you. So we will keep on talking about the hotel business. We will dive into the subject of demand and distribution and brands. And we are still doing this only online, and I hope to be able to connect now with Vassilis Syropoulos in Brussels. And there you are, Vassilis. Hello.

Hello, everyone.

Hello. Hello. I've learned that you are head of RMC. Before this day, I didn't know what you mean with RMC, but I think it's the Revenue Management Center of Pandox, right?

That is all about revenue management. Absolutely.

Yes. Now I let you take over the show now because I know that you have a very interesting guest based in London to talk with. So I leave like 9, 10 minutes to you now and see what happens. It's going to be very interesting. Vassilis, go on.

Thank you. So we welcome today, Robin Rossmann, who is in London. Hello, Robin.

Hello, Vassilis. How are you? Hello, everyone.

Very good. Nice to talk to you again.

You too, fantastic. And I'm excited to participate in the Pandox Day. It's the first time I've done it, but I've heard about it for many years. So thank you for inviting me along.

Well, there's no better person to speak about where do we stand from a hotel performance and what can we expect for the future. And I would have a thousand questions to ask you, but we'll just concentrate on 3 ones and possibly 1 bonus at the end. Shall we do it?

Sounds great.

Perfect. So we've been a couple of months in this now.

7, 8.

Where do we stand so far? 7. Where do we stand so far in this sort of crisis? And what have we learned from the beginning to the summer and moving on into, let's say, autumn?

Thank you, Vassilis. I think firstly and most importantly, one thing -- sorry, we have learned is that no matter how hard I try, and I do try hard, my jokes don't get any better. So we've been -- we've been doing a number of regular updates, webinars on hotel performance across the world and Europe. And it's been fascinating to track how this pandemic has impacted our industry. And I say fascinating, not in the sense that it's been fun, but I think it has been important to do that and to share what's going on. And so we do try and make it a bit light hearted. I'm not sure I've got any better on that. But there you go. In terms of what we've learned from the pandemic, I guess I'd summarize it in the following 3 things, and I've shared some of these recently. Number one, I think we can all agree that COVID is definitely a horror movie for humanity and certainly, for our industry. And I think the first thing is horror movies usually have sequels. And I think we've seen, as we've headed back into the winter for Europe, in particular, we are having a sequel of the horror movie of the drops in performance and the closures and lockdowns that we saw in March and April. Second thing that we've learned is that they're predictable. Horror movies are usually predictable and perhaps in hindsight, these lockdowns and this decline in performance, hindsight is 2020. And if you look at it now, it was fairly obvious. We haven't found a cure. It's a virus. It came back in the winter. And we thought that might happen, but we hoped that it wouldn't. We hoped that with social distancing measures, people washing their hands, that as things reopened, we could continue life without there being this threat of hospitals being overrun. But that hasn't happened. And so we are back into a period of really depressed performance across Europe. That being said, the last thing, I think we've learnt, and these are sort of recent observations, is that just like in a horror movie, it is possible to survive. You just have to follow some basic rules. And they are never go to sleep, never ever go to sleep. Keep your eyes open, make sure you're looking around you and be ready to run fast. And when I look at the performance of the industry and hotels across the industry, as we've gone through and come out of these lockdowns, particularly in Europe, those 3 things are true. Number one, don't go to sleep. Don't close your hotel. It might seem like a good idea to close your hotel to save money, to save cost, but what we saw coming out of the pandemic is those hotels that remained open through lockdowns outperformed their competitors at a revenue level by about 20 percentage points at occupancy. So just think about the cost of missing out on that. And it makes sense, right? It's all about loyalty. It's all about those guests that are traveling through the pandemic will still be there when things reopen. And if you're closed, you lose valuable staff and you lose the connection with those customers. So number one, don't go to sleep. Number two, keep your eyes open. What I mean by that is you have to look at what's going on in the market. You have to look at what other hotels and competing hotels are doing. We've never seen a bigger range in the level of performance of hotels in a market. Usually, you look at a market and most hotels trade within a maximum 20% to 30% variance on occupancy, right? So the top hotel is doing 100%, the worst hotel is doing 70%. In the pandemic, it's a 70 to 80 percentage point margin. So the top hotels are doing 18%, 19%.

That's very interesting.

And the bottom hotels are doing 20%, 10%, 30%.

Who are the winners and who are the losers here?

So the winners and the losers, it does depend. A lot of it is down to the hotel type you are, your location, how big a hotel you are. We found that smaller hotels have done far better than bigger hotels. It comes down to if you're an extended stay versus short stay. It also comes down if you stayed open or not, that was another big driver. And then a big part of it is -- and this one is where it's really difficult to pin it down to something tangible is -- and I speak more from not just my STR experience, but my advisory experience with Deloitte is it comes down to the team running the hotel. How hungry they are, how motivated they are, how much they really care about the performance of that hotel. And that's the real hidden thing, which is -- you'll never find easily on a spreadsheet. But it is so important, a good general manager, a good revenue manager can make or break the performance of a hotel. So and then the last thing, last thing we learnt is an important thing to survive is you've got to be ready to run fast. You've got to be ready to react because things can change like that. And you need to have a team that's on top of it.

Don't go to sleep. That's what I'm taking. Don't go to sleep, don't close, stay open, stay hungry.

Yes, absolutely.

All right. So if we switch a little bit on the traveler side, you did a traveler panel, interviewing regular travelers or maybe not regular travels and you asked them, "Hey, are you going to travel in the future?" What was the result of it? Is there some positivity in there?

So again, sort of 3 major takeaways. And they were, firstly, and I'm afraid to say this. Size does count. It's something that's always worried me personally. The size does count in the sense that when we asked about their types of accommodation that they were looking to stay at, their interest in staying in short-term rental and self-catering and small hotels actually has gone up versus what it would have previously been. Their interest in staying in branded hotels is about the same. That hasn't changed. Independent hotels are back a bit, about 10%. And camping and hostels are back about 30% and 70%. So there you go for all those people that used to want to go camping apparently, there are less now. So that was the one. The second is, when we looked at what influenced their decision to book accommodation, the key takeaway there is cleanliness is a given. If you think that going out there and spending your time marketing the fact that you're COVID safe is going to ultimately drive or change your consumer's perception. I think that's wrong. Most people -- 78% said location, 47% said price and value for money, and only 1 in 5, less than 1 in 5 said that adherence to social distancing and perceptions of cleanliness were important. And to me, that doesn't say that they don't think it's important. I think it says, they think it's a given. And so that was the second one. And then final one, in terms of intention to travel, are they going to travel more or less? I think the key takeaway here is, it depends on where. And something we've been saying for a while and something that's been true of the pandemic so far is it's domestic travel that has held things together and it's obviously international that's disappeared completely. And as we look into the future, we ask them where are you going to travel in the next 2 years? That -- there were -- 75% said they were as likely or more likely to travel domestically. And only 25% said that they'd travel less domestically. So domestic will remain resilient and strong and in many cases, actually grow, but internationally, that's where there's still perceived weakness. 55% of people said they were less likely to travel internationally over the next 2 years.

Makes sense, makes sense. Yes, domestic will be the driver. Absolutely. You're absolutely right. So we had some very good news from different companies last week, this week, that vaccines are sort of starting to get developed. So there's light at the end of the tunnel. How does that affect recovery? How should we think about it? And also in the previous discussions, the previous panel just talked about, hey, we are sort of optimistic about semester 2. How do you think about all that? Would you agree? Would you see it also in that way?

So I certainly hope semester 2. But I would -- I think it's less important to make a call on the exact timing and more important to know what triggers to watch for. I mean clearly, having a vaccine that works was a very important positive sign. And now having 2 that we understand will work is particularly important. And so then the question is, what are the triggers as it pertains to those and other vaccines that will enable recovery? And the way I think about it is the reverse of how things impacted our industry on the way down is that we saw there were 2 triggers. There was first companies started pulling and stopping employees from traveling because of health and safety concerns. And then secondly, governments stopped entire populations traveling because of the risk of hospitals being overrun. So those were the 2 triggers on the way down. And I think that when we have line of sight that those 2 triggers can be mitigated, we will see the reverse of that coming out of this and probably in that reverse order, that when governments have been able to sufficiently immunize the vulnerable portion of the population, and it is so important that it is the vulnerable that get immunized first both from a humanitarian perspective and from an economic perspective. Because as soon as we know that hospitals are not going to be overrun, governments are going to be more able to take risks around reopening economies. And we need economies to reopen for travel to reopen. And then secondly, and I think it's going to be many, many, many years before COVID is beyond us in a global sense. It's just too catchy. It's too catchy and it's going to be too difficult to immunize everybody at the same time. So it'll be with us for a long time, and then that brings us to sort of business and international travel, which will really probably only be able to meaningfully recover when we're able to have private vaccinations or have government paid vaccinations, which can be captured within a travel passport or something like that. So that Australia, the Middle East, China, these countries that have blocked their borders will be able to reopen because they won't want to reopen until they're 100% sure that the people traveling there aren't going to create a new wave of infections. So I think those are the 2 things...

We're being wary of time, Robin. So basically, what you are saying is, watch for these signs in reverse what's caused it and what's been in reverse and that will sort of give us some indication. Perfect.

Absolutely.

Thank you very much. I have one last question where you can answer very, very quickly. That is my bonus question, which is a good segue to next conversation. What do you see as effect, let's say, on different hotel brands and distribution landscape, OTAs? Is there one takeaway we can take out of there?

I mean, I could answer that, Vassilis, but why don't you? Surely, you're close to like what's your view on that?

So I would say, and I hope you agree that today, there's many more options and you can choose as a hotel owner, let's say, to consolidate, for instance, with different brands. And you can choose to consolidate with the technology side, which is the different OTAs. So we have much more options, I think.

I think that's right. I think you've either got to consolidate with the brand or you've got to consolidate with the tech platform because scale will matter increasing as we come out of this.

Thank you very much, Robin.

Thanks, Vassilis.

Thanks a lot to Vassilis in Brussels and Robin in London. Thank you for a very interesting analysis. And now I think it's time to check if we have any results from our poll, the questions in the poll. I do think we have. What has the pandemic made you miss the most? Yes, it's traveling, number one, meeting friends and relatives and events such as matches and concerts. I would have voted events, I think. Next question, when the pandemic is over, I will work from home more than before, just as much, less than before. Speaks for itself. Let's check the third one. I will travel just as much as before the pandemic, 171. That's pretty interesting isn't it? It proves that I'm right, back to normal, isn't it? I don't know. Interesting results. That was our poll. And now I think it's time to make a new introduction of new people on stage. And this time, it's about a man who really, in my view, identifies this hotel Market Day very much. An experienced academic, a master of excellence, has moderated quite a few of these HMDs and also a senior adviser for Pandox. He will talk to the CEO of Pandox, but let's take a look here. [Presentation]

Welcome, Bengt Brodin together with Anders Nissen.

Well, Anders, here we are.

Here we're, Bengt. I suspect...

To talk about -- yes, to talk about market changes and also the very important topic of business model.

Yes.

Could you, as an introduction, give an overview of the business models that are in the hotel sector?

Yes, we normally talk about 4 business model in our industry. One is the lease model, of course. We have the management contract. We always include the franchise and the independent model. Let me explain. A lease is when an operator sign with an owner of hotel and operate hotel and pay a lease to the owner. And management contract means that someone manage the hotel on behalf of the owner and the owner pay the management company fees, so other way around. A franchise agreement normally means that we and owner decide to operate the hotels itself and need a flag on the property and sign up with a well-known brands for getting distribution, sales and support. And the last one, again, the independent model means that an owner decide to operate itself, but want to create his own brand. So these are the 4. And by the way, Pandox is one of the few company in Europe, will really use all 4. So we have a quite good overlook.

So what regard to the market trends? What are the most important market trends that you think will affect the business models.

Yes, one, for sure, what's happened now, and was interested to listen to Robin and Vassilis said before, is that as we speak, the domestic business is going much better than the international. That is nothing new when in crisis time, but this time is even more. And on the top of this, it is an individual leisure, who is the driver. So before it was partly international, it was a lot of corporate business travelers. Now it's more dominated strongly by domestic business and about -- and less so. And that will, of course, have an impact in the business models. And probably, we will see that the regional brand or local brand will be stronger. We probably will see the -- probably open the door for independent hotels, I would say. I think it can come with a modernization of current management contract something we need to do with things about it and a new version of franchise, yes. And of course, they have to also be developed for lease agreements. So quite big change will happen if this continue this trend by more domestic. And if you allow me, I have a continue there. I think that is a reason to say it will continue. And the reason is that that is too strong way, why it should continue. One is that people continue to travel, but want to travel shorter, safer and simpler that drive to domestic. And the second one is, of course, the ongoing trend with the sustainability. We also drive people maybe to go more shorter trips. So that will be something who will be more of domestic trends than we had seen before.

And if the low situation for international traveling will be there for at least a few years. How will that affect the different parts of the hotel industry, like the brands, for instance?

Yes. First, if I -- just to comment that first, that is that they will more of domestic is not necessarily negative for the industry. Let me explain that one. Because I believe that this -- that people -- that is that markets or countries that we already had a very strong local or domestic consumptions like Germany, U.K. and partly France, Spain and partly in Nordic. That would definitely mean as I see it, more trips, shorter trips and more trips, and that will even push demand higher for the industry. So I think that's positive. Then of course, we need the international as well later on for having also the rate on the top. But it's important to know that the biggest, the largest segment in our industry is domestic stand for -- in Germany, it's 8 of 10 people who stay in hotel or German people or we are similar everywhere. So that, again, that this is -- that the domestic is the driver. I find that very, very attractive for the industry.

Is that good or bad for the big brands?

Well, yes, for the big brands, they need to be much better than to come to a segment, which has more local drivers, and that hasn't -- we haven't seen that yet. Even if their brands in general has, at the beginning, has -- it has a stronger brand and independent, I think that will change when people learn that to contactless or cleanless is something that is easy to copy. And then the other maybe will coming after.

Could we dive a little bit deeper into the question how the market changes will affect the various business models that we identified?

If we start with a management contract, which has historically been a platform for global brands of 2 reasons. The first is that they have a strong position to international travelers and the second one there, at least their historical skill for operate hotels. If we now see a situation where there will be less international travelers, of course, they will lose a bit in power. If you then combine that with that the -- most of the big brand has chosen an asset-light strategy, more focus on branding and distribution and less on operations. That means that they are maybe not the perfect partner for many passive owners. So I believe that some owners will -- are today, looking at it, or we're looking at it to say, of course, we want to have -- continue to have a management contract, but maybe easier for us to go to this third-party player, as we call, a new generational company who is definitely not global, they're very local, very good in management. They know exactly every corner in the city. And this generation of company we see that trend in U.S. and partly in U.K. already happening that they are very good at to be a strong partner for big hotel property. A big, big property company has one of few hotels, so they don't have their own expertise. And that is interesting for this new player. They look at the market a little bit different. They very often choose a multi-brand strategies. And that can open for, I would say, independent hotels. And we see that already for -- on this trend that those companies, those who has a premium independent profile, they are now having a strong weekend traffic or at least up to the last restrictions. And one example is Grand Hotel in Stockholm, which has outperformed all international brands and all other brands over weekends because they have positioned itself as a very strong destination for these segment calls [ stay on ], which is basically is a high prime individual leisure who normally travel international now are staying in the home countries. And in Sweden, they go to Stockholm or they go to other, this sort of strong independent hotels, we have a little bit extra profile and ask for extra service.

So if we specifically go back to the business model, which you mentioned, which ones will grow and become more frequent and which one will lose?

Yes, if you look at from the brand side, I think they will go more over for franchise. And I think they are very good at that. So they maybe -- can be that more natural position for them. But to be successful there, I think they need to modernize the franchise agreement as it is today, more key element for distributions and a little bit different profile for this loyalty program. Today, it's about -- you have one free night. I think it's more important to get more of -- they had this, but I think they need even more of this with sustainability and CSRs that you can earn points. And I think, as I said, this a third-party players. They are good at what they are doing. I believe that those who is for the lease side, that also need to be modernized, I believe, and they have to be more focused on industrial questions. So more revenue based leases will be there, less fixed lease. But to get that happen, then the -- I think there is 2 things that need to be on the table. The first one that owners really need to understand hotel business better, understand how it's created value out from hotel property. That's number one. But also very important that the operator to stimulate this owner to get from fixed to variable. They also need to come up with substantial minimum levels and good guarantees and had a little bit more transparent way of looking at their owners, forget that happens. So that is a few of the players of the winner.

So 2 follow-up questions. One is, I got the feeling from what you say that there is some development work concerning the business model that needs to be done and who will take the lead in this development process?

That's the owners. That is the owner, who need to do that. Because they are the one, you need to -- if you look at hotel, it's maybe 80%, 85% of the investment is coming from the owner side. And how stupid that you can hear it, but had been dominated by brand without invest anything else. And that will, of course, change that problem has been for a long time. But I mean that this COVID-19 could accelerate that and really have a balance between risk and reward. So that is something, I believe, the owner need to do. But for the rest, I mean, brands, they are smart people, and they understand that they need also to change and go with the flow for the new trends. I will see that they are coming up with new things, maybe less brands, but there will be more focused on maybe also creating domestic brands. Because if you see where they are domestic brands, people always say that, yes, but Hilton and Marriott, they are good. They are much -- they are strong in U.S. Yet there, they are domestic brands. But in Europe, they are global brands. So in Sweden, for example, there's very few of these flags up here. And if they not continue, be more interested of talking to owner and give them out of models, that will not happen that no flag come up. So they had to be more focused on being also a domestic player.

So Anders, to sum up, one point from you?

One point from me?

Yes.

One point in for me that this COVID-19, I bet, good things also coming even with bad things. So I will say, the development of the hotel company will accelerate. Because of this you, will see new players coming up. And I think for the Pandox side, this -- what's happened now is give us a chance of really grow the business ever further.

From my point of view, I said in the introduction that the hotel sector will never come back to where it was. What that, I meant that my experience is after a long life in business and the academic world that when dramatic changes happen, one thing is for sure that if there is a fall in demand, for instance, that will not be solved by a simple downsizing by all parties. So they get half the size or whatever. No, what will happen? Definitely, I can assure you is that business model and the organization of the value chain will be necessary to do. And that is what we actually have been talking about.

And that is super important that you say about value chain because I think specialization is gone. You need to have a model that you are active in the full value chain. If you are there, then you can pick up opportunities. And I think that's a key driver.

Thank you.

Thank you very much.

Ladies and gentlemen, I'm only sure of one single thing. I bet you have missed the dogs. Take a look now. [Presentation]

Time to have a brief discussion about Pandox position and strategy. Please welcome to the CFO of Pandox, Liia Nõu. Welcome, Liia, joining Anders. We have to make some things clear now, approaching the end of the seminar. And I just mentioned the first question. What is actually Pandox present position, Liia?

Well the short answer is that we are both confident and strong. And the slightly longer answer is that we have a very clear and solid business model, as Anders explained. It's been proven. We've been around for 25 years. We've gone through a lot of different crisis. Now we're facing the mother of the crisis. But there are a couple of facts that makes me confident. We have a very talented, experienced organization, resilient. We work a lot with like Vassilis, we have our own Professor Turner, who's the Head of Business Intelligence. We try to take a lot of decisions based on facts versus fear and uncertainty as much as possible. We have 85% of our business comes from turnover based rents from our tenants. So we share both upside and risk, but we have a minimum guarantee level. So we are even in the worst of times, we are cash flow neutral or even positive.

Still, Andres, it's a very tough situation, isn't it?

It is a tough situation, of course, and that has changed a lot. But it's also that this will happen now as something maybe need to be happened because we saw at the beginning of this year that a lot of new capital come into the market that were picking up new hotels a little bit everywhere. Now that is gone. So I think the platform for the industry is much better. A lot of opportunity investor is not there anymore. Many crazy new hotels will not be coming out. So I'm rather more optimistic now than I were in January, how funny it is could have from your side.

Liia, it must be a pretty challenging situation to have a strategy when you meet circumstances, you've never been close to before. What's your strategy?

Well, we have -- we do have, as in our toolbox, we also has -- we have the capability of running our operations. So of course, we have these 3 phases, we have the 3 focus areas. We have respond, restart and reinvent. Respond, that's what we've been doing, like 24/7 for the major part of 2020. We've been trying to elevate all the different crisis and things around the turmoil from the pandemic. But also, we have the capability, as I said, if we have a tenant that would be in trouble, we are actually able to take over the business. We don't want that, but we will and we will, of course, have done it before in order to secure our assets. And then also, we are working very much with -- we have 11 great banks that actually have proven to a great relationship during this time. So we have SEK 5.5 billion close to SEK 5.5 billion in liquid funds and credit facilities, which enables us to be even a little bit more optimistic and starting looking at possibilities as well.

You want to add anything there, Anders, to the strategy issue?

No. I mean what Liia said, very strong financial position in these days. And that, combined with the business model of having both knowledge in property and hotels and together with also a lot of leases were minimum level give us a very strong position for the next level. And that is what we're more and more sort of looking at now.

As you've heard, through some questions all the way through the event. I seem to urge that everything will be back to normal again. But people oppose me and that's good. And will there be permanent changes to Pandox business idea after this, Liia?

There will be one permanent change, we'll definitely have more dogs in the office.

Okay. Okay. That's important, yes.

That's important. But also, we -- of course, what we heard from Aldert, we heard from and under last year at Hotel Market Day, where we talked about sustainability, we talked about digitalization, et cetera, et cetera. These things started obviously prior to pandemic, but they have accelerated. And of course, there will be sort of footprints from that.

Are there permanent changes that would happen?

No. I think also Alder was introduced, too. They can tell a little more digitalization and more focus on sustainability, that is 2 things. And that, of course, combined with what you see now with more domestic business, which will -- which happen as we speak. And that will also be something that I believe will continue for such a long time.

I talked a little with Martin Ingvar about management during these strange times we live in. Are you changing your leadership in the company, Liia due to this?

Hopefully, not changing, but it's even more important to be, as always, but even more so now being visible being out being active. And I think Pandox is a great organization because we are agile. We are -- we don't have so much prestige. We act very quickly, and especially in these times when things -- one thing was on Monday, without prestige, you need to change your decision on Friday and try to, as much as possible base that on facts, not fear, not uncertainty, but sort of to use -- to look at opportunities.

The reason I asked the question, Anders, is that when you have such big crowds of people working for you, there may be lots of people who actually feel depressed, go downwards due to the numbers you see and all that. Have you changed your management style?

Well, of course, we had been a little bit more visible in terms of web meetings since before. For the rest, it's more or less the same. I would say that is 3 strong driver for Pandox leadership. The first one is constantly grow the company. Every day, trying to find something that we can do better as a sport team. And you know that, Jan, what that means that you're trying to go to the training every evening and trying to improve yourself. The second one is what Liia had been into before intelligence have the capacity of understanding, put numbers together, do the analysis, so you have an advantages to other. And the third one, and now I comment that are most important to have fun. And really have fun go to the job with a smile in the morning that the leadership are super important how open, as Liia said, low prestige, low key, that sort of attitude where I think maybe we have a small advantage to be in Scandinavian that we have that letting from mother nature. I believe that, that is highly appreciated. We do that normal, but it's highly appreciated. I think these 3 drivers will continue and that will continue to help us to the next level.

Final question to you, 2, [ hand on how ]. Have you learned anything today Liia? Have you picked anything interesting that you will think about afterwards?

Absolutely. Yes.

Yes. Like what? Take an example.

[indiscernible] with around how the brains and how we work I think that's the -- absolutely.

What do you think Andres?

Yes. Well, it's like music. You be humble when you're sitting and listen to all these very knowledgeable people. And that -- what I always take with me when I meet these people have been working with the hotel market, you always can improve yourself. And if you have that appetite, things normally go well.

So we say, thank you, Liia Nõu and Andres Nissen. Thank you very much. Once again, I second this whole company pushes some energy into us. We're not done yet soon, but there's a little left. And I'm absolutely sure you will be interested in finding out if the dogs have fun right up to the end. Let's take a look. [Presentation]

In just a couple of minutes, there will be a rather unconventional farewell greeting to you from the Chairman of the Board of Pandox. Before that, I just want to add that there will be a chance to pick up a report from the day later on. You will get info about that, a sort of summary of what's happened today. So just wait for that. I also want to say that if you wonder how this event was made possible, not only due to Pandox and the idea from 1996, it was produced by the event manager, [ Sophie Bruel from My Agency ], together with all the colleagues from the technical staff at [ Paralympics ], if you're interested in that. So very soon now, time for the finishing little movie. And after that, you will, of course, be entertained by Isaac and The Soul Company, whom we thank a lot already now for the good music and good songs. So thank you from me. I say goodbye to you, and let's listen to Christian Ringnes, the Chairman of the Board of Pandox.

As the Chairman of Pandox, it's a big pleasure for me to wish you good day. Today's team may seem a bit somber. You could call it corona, you could call it COVID-19. You could call it SARS COV 2 and love child has many names. It's almost like we play a game of chess these days, where the good represented via as all Pandox and the people fight the bad, which is the corona. And as the Board, but humble Chairman of Pandox, I will now show you how victory will come in 2021, despite a very, very tough fight in 2020. [Presentation]

And now our kings and queens, the guests of Pandox Hotel [ Callaghan ], sleep safely and well in our hotels. They will be filled up too.