Scandic Hotels Group AB (publ) (SHOT) Earnings Call Transcript & Summary

Welcome to the Scandic Hotels Q4 2021 Report. Today, I am pleased to present Jens Mathiesen, President and CEO; and Jan Johansson, the CFO. [Operator Instructions] And please note that this call is being recorded. Please begin, speakers.

Thank you very much. Jens Mathiesen here. And welcome, everybody, to this morning call, and thank you for joining us on our presentation of Scandic's fourth quarter report. We start on Page 2 for a brief summary before I later on hand it over to Jan for the financial walk-through. Our results continued to improve significantly compared to last year, and we are especially pleased with the strong cash flow during the quarter, with a net debt reduction of more than SEK 800 million in the quarter and SEK 1.3 billion in the past 6 months, however, supported by some positive one-off effects, which Jan will come back to. The strengthening of demand that started during the summer last year continued into October and November, but we saw reintroduced restrictions during December that resulted in low occupancy during the final weeks of 2021, especially in Norway, Denmark and Germany. We have a positive view on market development in 2022 despite a slow start of the year. January is normally a relatively slow month for us. And this year, it has also been negatively affected by restrictions. But we do foresee a significant market improvement during this year. As almost restrictions -- most of the restrictions have now been lifted or are being lifted in all our markets. Please turn to Page 3, where you can see our quarterly adjusted EBITDA that came in at SEK 436 million in the fourth quarter despite a weak December. This corresponded to a margin of 11.5%, actually 1 percentage point higher than we had in the fourth quarter of 2019. Our results in the quarter did, however, include state aid of SEK 111 million, and there was also some effects from our Norwegian quarantine business. When we adjust for all of these items, our underlying margin was around 7% and results remained positive in all segments. We are quite pleased with this performance considering the weak December. Please turn to Page 4. Here, you can see monthly market occupancy in the Nordic countries. We have seen a similar pattern in all countries within Scandic. We had a very weak start of last year and a rapid improvement from the beginning of last summer that continued into October and November, with occupancy rates of around 60% in Sweden, Norway and Denmark and just above 50% in Finland. Thereafter, we saw a clear slowdown in December, and that continued into January with occupancy rates of 24% to 27%. December and January are months that are normally seasonally weak for us, but this year has also been impacted by the reintroduction of government restrictions on all our markets. If you turn to Page 5. Here, you can see the development of the number of occupied rooms for Scandic on a 7-day rolling basis. The start of 2022 was slow, but we still see a clearly higher level than in the beginning of last year. And the trend is positive. You can also see how quickly the market turned during last summer. The number of occupied rooms basically doubled from the beginning of June to mid-July last year on the back of lifted restrictions, and our customers acted with very, very short lead time. The pattern from last year shows that underlying demand is robust, and that the market turns quickly once the restrictions are being removed. We have now a situation where restrictions basically have been removed in all our markets or are being removed these days, and we are now seeing a positive trend, both in bookings and in occupancy. Please turn to Page 6, that shows market statistics on development of average room rate. Rates have more or less been on levels back to pre-COVID in all Nordic markets at the year-end, and development has been especially strong in the Norwegian market with prices higher than during the latter part of 2019. This is, of course, somewhat impacted by mixed effects, but pricing is very much a key priority for us. We have a lot of focus on yield management that, of course, is crucial for Scandic's profitability during the market recovery, especially now when we are seeing some signs of inflationary pressure. Please turn to Page 7. Scandic has improved our workforce efficiency during the pandemic, and we are, as you can actually see, ahead of 2019 levels when it comes to working hour per sold room. This even despite the lower occupancy in December, and we are still below the levels before pandemic. We have increased our headcount significantly since last spring, and we do still have a need to further increase the number of team members on the back of expected increase in demand. We do have also implemented permanent reductions in central functions, and we have a more efficient organization than we did before. We remain highly focused on cost efficiency and on flexibility in order to drive profitability and to further improve our resilience over time. Please turn to Page 8. Here, you can see a very nice picture of a beautiful new hotel in Sundsvall in Sweden that we recently signed together with Skanska. We have, for obvious reasons, been -- had very few additions to our pipeline during the pandemic. But this is a really exciting hotel with a great location. The hotel is entirely built of wood with very high environmental standard and is climate neutral. It will have 210 rooms, and we plan to open it in 2024. Please turn to Page 9. Here, you see our growth pipeline that amounts to around 4,000 rooms, but it's just above 3,100 when adjusting for planned exits of 5 hotels. We have a very busy 2022, as you can see, with 8 openings in the first half of the year. One of these hotels is Scandic Spectrum, our largest hotel yet that we will open before the summer at a unique location in Downtown Copenhagen. We will also strengthen our position in Sweden with new hotels in Gothenburg, Helsingborg, Örebro and in Kiruna. And in addition, we will, in March, open Scandic Macherei in Munich, which is a new destination for us, and it becomes Scandic's fifth hotel in the German market. We have a clear ambition to add new hotels to our pipeline already this year and to grow the business over time, but it's important for me to say that we are not stressed by this. We are coming out from an extreme period, and our main focus near term is to ensure that we become as efficient and resilient as possible so that we can grow from a position of strength. In parallel with that, around 15% of our lease contracts expires during 2022 and '23, as you can see on Page 10. The majority of these contracts expire at year-end '22 and in the first quarter of '23. So we are now involved in a lot of relatively large number of negotiations with the landlords, which is progressing well. With that, I hand it over to Jan, who will take you through the financials.

Thank you, Jens. We'll go to Page 12, where we show -- where we focus on sales and results for Q4. First, going into Q4 in particular here. 2021, of course a very, very complicated year, 6 reasonable months and 6 bad months. If we zoom in on Q4 in particular, October and November was good months, as Jan said, and I will say something like up to mid-December was reasonable. And then when the restriction was then launched around mid-December in many of the countries, we lost a lot of occupancy during those weeks. It almost got to the half of the level we have had in the beginning of December there. Anyway, despite this turmoil, this volatility, we managed to get a positive EBITDA for the full year of SEK 6 million. Looking into Q4 in particular, we have a margin there which we have posted of SEK 11.5 million -- percent, thank you there, and that's SEK 446 million, that comes to million, improvement over last year of SEK 700 million. We have had governmental support of some SEK 100 million that is coming from previous periods. So that is not attributable to Q4. As such, that is coming from earlier periods. We have also had some quarantine business in Norway. If we exclude for those items, we have an underlying margin of around 7%. Having said that, bear in mind also that we have rent rebate, supporting the results for 2021 of around SEK 500 million, around SEK 300 million the first 6 months and around SEK 200 million the second half. We will probably have another SEK 100 million supporting us into 2022 year, predominantly then the first 6 months of 2022. Another thing, which is worth pointing out here, is that we have segments. All segments are actually positive during Q4 also when we exclude for the governmental support, which I think is the first quarter in a long, long, long time which we have all segments positive. Having said -- as we said, we have reinstated restrictions here in December and January that will also lead to -- that we expect further governmental support, which we expect to support results in Q1 there. That should be an amount of between SEK 100 million and SEK 200 million, as we see it, which would help Q1. Very good. We'll go to the next page, the cash flow there. Positive cash flow for the full year, SEK 185 million. We had some, I would say, payment delays during year-end. It was something between us and the banks here. And that if we exclude for that, we have more or less 0 cash flow. So what you see here is this positive working capital movement. If you exclude for those payment there, the working capital movement will be around SEK 900 million, something like that. It's normal when you increase sales. So how much as we have done that you get the working capital movement, which is positive due to that we have prepayments from the customers, and you pay other stuff afterwards. It's also so that when you have this strong sales increase, you come a little bit after with the rents. So you build up kind of a ramp up. All these things means that we will need to settle some stuff in Q1. So we see that besides the net normal nice negative working capital, which we are having in Q1, you should count on an extra negative effect of SEK 600 million during Q1, which we have also pointed out in the report. Regarding net debt, then it's on SEK 3.1 billion. And of course, that is helped by this payment in the Skanska, so that should have been closer than to SEK 3.2 billion -- a little bit more than SEK 3.2 billion if everything had worked perfect there. Available cash is SEK 2.8 billion. We have here during the autumn started to amortize the extra credits, which we got when we got into this crisis. You remember that we extended the credit lines with SEK 1.1 billion in the beginning of the crisis. That has been partly amortized during the quarter then. But SEK 2.8 billion is a good cushion also now for Scandic. Going into the next page, where we have the financial net. We can see that it's a very high number, this minus SEK 1.6 billion here. 75% of that or SEK 1.2 billion is interest expenses, which refers to the IFRS 16, i.e., the interest component on the lease liability of over SEK 40 billion. The remaining SEK 400 million, which we are having is the convertible bond, which, for the full year, amounts to SEK 100 million. We have around SEK 36 million per quarter, which you can calculate with here to the termination of the convertible here. The maturity of the convertible is October 2024. This is not rent, which is paid. So this is a payment in kind interest component, which goes into the capitalized amount of the convertible. However, we do have interest components which we pay, and that is to the lending banks. Our current banking agreement and with the current indebtedness, you should calculate around SEK 260 million per year in paid interest. You see a higher amount here, and that is due to the refinancing we had during the year mainly. And then finally, here, a few comments on the IFRS effects, which were having. The most significant effect is, of course, the leasehold accounting. We have a lease of debt of SEK 32 billion in the balance sheet. This year, it has been a very big difference between the non-IFRS 16 and IFRS 16 on net income, SEK 581 million. That is due to that we have posted quite big rent rebates and that increases the difference. As I said this year, those will be much smaller. And 2023, they will go away. And those means that the effects, the difference between IFRS and non-IFRS will be smaller. On the other hand, as Jens said here, we have a good and significant pipeline that will increase the lease of debt, and that will also then increase the difference between the IFRS 16 and the non-IFRS 16. So our best estimate today is that we will have a difference of SEK 380 million for 2022. And if we assume no other changes in the portfolio, we should have a zero difference between IFRS 16 and non-IFRS in 2027. However, that's the [ CRF ] calculation as you probably realize here. And also the convertible bond, also in IFRS accounting, the maturity value of this one is SEK 8.1 billion, and that will gradually increase the debt element of this accounting up until maturity then. The nominal interest cost of this is 11% as calculated by Åsa. I think that this concludes my part of the presentation, and I leave the word back to Jens.

Thank you, Jan. So if we then move to Page 17, and then finally a few comments on our outlook. Our occupancy was around 25% in January. And January is normally a slow month for us, as you all know. And this year, we were also impacted by restrictions. So January was above last year, but below a normal level. We are seeing a positive trend in occupancy and bookings at present on the back of the recent lifting of restrictions in the Nordic countries. As I mentioned before, development last year clearly showed that underlying demand is robust, and our customers acted very quickly when restrictions are being removed. Our meeting bookings for the second quarter are on a good level, and we expect more events during the summer than we did last year, which is expected to drive wholesale demand. So all in all, we have a positive view on the hotel development in the coming year. And we are entering 2022 with improved efficiency and an attractive and well-invested total portfolio. Also, we are putting a lot of efforts into further strengthening resilience of our business model in order to ensure higher and more stable earnings over time. Before I hand it back to you, operator, I would like to take the opportunity to say thank you to Jan who will actually leave Scandic at the end of this month. Jan has been with Scandic for 5.5 years now, corresponding to 22 interim reports. I really appreciated our cooperation, and he has been very important for the company's development and growth during this period of time. He has really strengthened our financial organization, and he has really done an outstanding job together with the entire team in handling the effects of the pandemic during the past 2 years. So I'd like to extend my warmest thanks to you, Jan, and wish Jan all the best in his future career. Jan's successor, Åsa Wirén, will start in the beginning of March. And we, of course, look very much forward also for her to join Scandic. And with that, I hand it back to you, operator.

[Operator Instructions] Our first question comes from the line of Adela Dashian of Handelsbanken.

My first question relates to your activity levels going forward. And specifically, you mentioned earlier that you've increased the headcount significantly. But do you feel comfortable with the current level to meet the increased activity levels from here on with restrictions now being lifted? Or do you see some challenges or risks to that front -- on that front?

A very good question. I think we are definitely -- we employed approximately, I think, just above 5,000 people between May and end October last year, but we are still quite below. We ended, I think, around 15,000 when we were on the max. Included in that number, we also have some temporary workers in. But we are definitely below what we did see in '19 levels, where we were approximately almost 20,000 when we were at the high peak summer season. So yes, we still need to employ more people. We are on a good level now. We are, as you saw in the report, following this very, very intense and clearly to secure that our efficiency is even better than it was before the pandemic. So this is something we track and -- but we will employ more people, especially also with all of these new -- 8 new openings between now and the summer. So the combination of new hotels and, let's say, a very strong upgoing trend will demand more people. But we are we're having good models to follow this and secure that we put in the people to secure the right efficiency.

Okay. And then also maybe on the new hotels and new concept, is it time to revisit the Scandic GO concept now that you announced at the Capital Markets Day in 2020?

Yes, absolutely. And thank you for that question, which I really enjoy because we have been putting Scandic GO on hold for natural reasons during the last 2 years. We were announcing this on the Capital Market Day, as you mentioned, and then it was put on hold, unfortunately, due to this COVID period. But yes, we have restarted that project now, and I expect us to actually open the first Scandic GO hotel maybe even in the latter part of this year. I don't know exactly when it's something we will come back to. But hopefully, during the later autumn, we will be ready with the first Scandic GO. The first Scandic GO will be a conversion of an existing hotel to secure that we do it. And I can also tell you, it will be in Stockholm because we wanted to be very close to where we are in the headquarter to secure that we actually create the first Scandic GO as we really would like them to be. But yes, it is a concept that we now intend to put to the market.

Our next question comes from the line of Karl-Johan Bonnevier of DNB Markets.

Yes. Good to hear that we are talking about the continued normalization of the market, and you seem to be able to get your right exposure towards that. And continuing on the previous question, just looking at that pipeline and now suddenly bringing a lot of new capacity into the market into your portfolio here in the first half of this year, given the, say, the macro environment, Omicron and all these kind of things going on now, are you dealing with these upstarts and pre-openings in a different way this time? Or should we have a different thinking about the burden of these openings in the first half of this year?

Thank you, Karl-Johan. And yes, it's absolutely -- we do have a different approach because, normally, when we open new hotels, historically, we have employed a lot of external workforce. We still do that, but we are more focusing on what we call Scandifying the hotels, meaning that in order to deliver the needed efficiency levels, et cetera, we do move people from some of the other already existing hotels in our portfolio to secure that we are, let's say, Scandifying the efficiency levels and service levels and securing the culture from day 1. So that is, let's say, a change, which we are more cautious about. So -- but definitely, it is -- I think also one thing, which is good to mention, is that some of these openings, we have actually delayed. So some of these openings was originally expected to be last year. But we have, of course, together with the landlords, have been working not that fast in order to secure that we waited with the openings until COVID was over. So I think timing is much better to open all these hotels during this year than it was if we had opened half of them last year.

Yes. And it looks like you are bringing them to the market, that's just the right time now as it seems. So -- and just on those tight exits you mentioned, is there -- are these renewals for '22, '23 that you are now decided to basically walk out away from?

No, we have -- we made -- I would say, you also heard it a bit when we did the Capital Market Day. We were -- we are much more, let's say, into the detail of a property. And if we don't see that a wholesale long term fulfill our targets and needs for delivering the needed margins or results, then once they run out of the contract, then we will -- either we need better deals and secure lower levels of lease agreement or we will simply get out of them. So you -- I'm sure you will see that also in the years to come that we are more prepared to leave a hotel if it doesn't fulfill also the financial needs for Scandic. That's mainly why we are here as well. We like our business, but we also need to make the right profits. So this is, let's say, underperforming hotels we're actually leaving.

Very good. And on that topic as well, looking at, say, rebuilding the pipeline, obviously, that has not been the main question now for you for the last, say, 2 years or something. But looking at, say, rebuilding the pipeline for '24, '25, is that something that now becomes a key priority for you on the top management level?

It is absolutely a priority, and we will invest more in the business development department to secure that we have more opportunities on the table. I'm not at all stressed about it. Very important to say because I think we have a lot to do in the coming 2 years to really get Scandic back on track in all levels. With 280 hotels in operation, it's a big machinery. And that has a lot of focus, but we are still on the side of that. Of course, expanding our activities and securing that we have more opportunities on the table to now start to build the pipeline. But it's not important whether we sign 1, 2 or 5 this year, it's important that we start to work and that we will be adding to the pipeline in the coming years.

Our next question comes from the line of Jamie Rollo of Morgan Stanley.

I'm just wondering if you could talk a bit more about the marked improvement you expect this year. I mean I assume that's relative not just for the January figures, which are down about half versus 2019, but also versus the second half of last year, which was a bit more normal. But maybe you could talk a bit about the shape of the year when you think RevPAR might turn positive? Could it get there in the second half of the year? And also within that, are you sort of a bit worried about the staycation benefit last year perhaps reversing as international travel normalizes?

Thank you for that question. It's also something that -- of course, some of this will be assumptions or estimates from my side and our side. And I think we have some clear signals of the autumn, like you mentioned, where we saw that, clearly, I would say, general corporate business is coming back. We saw normal corporate business coming back quite heavily. Meeting business was also quite strong in the autumn, but still not at the levels we knew before the pandemic. This is something we are extremely aware of, and we are prepared for that part, the meeting part, might not come back to the full. On the other hand, I think there's a big chance that leisure and international leisure will continue to grow and will, over time, outperform the corporate segment. And this is also something you see when you look at all the new openings that we are looking much more into the leisure segment and securing with par facilities, et cetera, that we also cater for that. So I think you will see that, over time, staycation weekends, leisure business will continue to -- all signs shows, at least to us, that there's a huge demand for that and that the people request still a lot of post vacations and people are traveling quite a lot when it comes to vacation-wise and leisure. So I think if we should be concerned anyway, I'm more concerned or following what will happen with the meeting segment. And we will clearly, over time, see that the average square meters versus number of hotel room, that will decrease. And that's something we are aware of, and we're already bringing into the way we overlook the properties when we look at configurating and looking on how to also renovate the existing hotels.

So I mean I appreciate January is not a big month, but it's clearly a very big drop in RevPAR. But is it fair to say that for the year as a whole, the company's RevPAR will probably still be below 2019 levels, even if it sort of turned positive towards the end. Is that a fair assumption?

Yes, absolutely. Absolutely. As you mentioned, even though we see a strong recovery these days, the first quarter will, of course, need to -- people need to get back to the jobs. We need still to get rid of the last part of the Omicron. There's still a lot of people that are affected by Omicron. And the sick leave percentages are higher in companies. So of course, we will be affected into the spring, but I think we see very good signs of recovery. And when I flew in Monday morning from -- between Copenhagen and Stockholm, I saw a full airplane and much more people in the airport than just the week before. And we see the same pattern. You can say, day by day, occupancy is going up. So it's -- there's a lot of requests also for meetings into, especially, I would say, from March and mid-March and ahead. So yes, I was attending a meeting yesterday in one of our hotels, and the whole meeting facility was fully sold out. So it's really nice to see that people are coming back. I think the summer, where we have a lot of events also and we have -- there's concerts and Tour de France will start in Denmark, and then we have a lot of things that will come during this summer, which did not -- we didn't have last year. And of course, that is supporting on top of what we saw last year. But I think we will also maybe hit nice levels in certain regions and certain -- maybe even certain months. But for the full year, absolutely not. There's still a road to go before we are back on that level.

And then the other question is just on inflation. You've talked about working hours per room better than 2019. But how about cost per working hour and also other cost lines, particularly energy?

Yes. We -- I think -- and Jan, you can also support maybe some of the comments related to the energy, et cetera. I think when it comes to manning, of course, we do see the pressure on salaries as well as all other industries right now. And the pressure will definitely be here since we need to employ a lot of people. But also, we have our union agreement settled also for this year in all markets. So we do not need to go into these, let's say, blue collar workers settlements because that's fixed in the agreements already for the full year. So that's not the biggest issue. But of course, we do see with certain -- let's say, certain workforce groups that there's a pressure. And with all restaurants opening up and all hotels reopening for the fall, of course, there will be -- we will be lacking shifts here and there and then we will see a pressure on that. But I think we are following this quite well, and then -- and we're also adjusting then our offers to make it more lean and simple in order to not overcomplicate things, to secure that we can handle it with lower manning if needed be. So it's very important for us to secure that we are so focused on securing, let's say, efficiency levels that are even stronger than we were before. And especially for everything above hotel level, we have decreased and we want to remain that decreased. Maybe, Jan, a comment on the energy part.

Yes. We have a hedging regime in place. We have had that since many years here. So of course, it's impossible to hedge everything because we have this price areas within the Nordic here, and you have price differences there which occurs from time to time, which you cannot hedge. But I would say that even with this significant price increases, which we have had on energy here during the winter, I wouldn't see that. The maximum effect for 2022, it should have been more than maybe SEK 50 million to SEK 70 million for the full year, something like that. So it's not good, of course, but I think, from our point of view, I think we have as good as control about that as we can have. Thanks to the hedging, which we are doing.

And if spot rates remain where they are and the hedges roll off, what's the sort of possible worst-case increase maybe for next year?

Yes. Well, as I said, I think somewhere between SEK 50 million to SEK 70 million, I would say, is the worst case, as I see it.

No. I mean for next year once the hedges roll off?

No, no. We hedge it into maybe 3 years ahead.

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

I was a little bit curious on salary inflation as well, actually. And I guess you kind of answered what you could answer on that on the prior question. But connected to that, how do you see the churn on your employees? There's a demand for your type of employees, so are you seeing any movement on that side?

Yes. I think also a very good question, Stefan, because I think it's -- we have definitely seen that -- I mentioned that we were employing more than 5,000 people last year between May and October. And of course, a few thousand of those were former Scandic employees that came back. But we also -- which we managed to get back and because they like the company. But we also got some thousands of people in that were new to Scandic and maybe even new to the industry. So we have a lot of training we need to do with them. When we look ahead and the pressure is on when all, let's say, as I mentioned, hotels, restaurants, the industry is opening up now for full, there will be a pressure on this one. But I see us handling it quite well. I don't see this as a major problem for us. That will be a pressure in general, but eventually, it's all about pricing as well for us. We need to increase prices to cover for all these increases. So both when it comes to salaries and when it comes to cost increases, there's kind of only one that can pay for that in the end, and that will be our guests. So we will adjust prices accordingly. So that's the only way to do it, like restaurants are doing, Stefan.

Okay. Second question I had was a little bit about sort of a new capacity. If you could help us, just maybe -- which, if you look at your larger destinations, where do you see opportunities and gaps to open more you're looking at? And is there any destinations where you might see a little bit too much capacity coming to the market at once?

Yes. As you can see, one market that we, of course, following closely is recovery of Finland and Helsinki area because Helsinki has been very much also this nation that historically has been positively helped by the long-haul traffic from Finnair to Asia. And since that is -- Finnair has now used the float of airlines and planes into other markets. They are flying more from Stockholm to U.S., et cetera. That is helping us there. But of course, we are following whether they will reintroduce all this traffic and be the hub to Asia again or not. So short term, Helsinki. And we have one opening in Helsinki this year, and we had one last year. That might be a bit slower than we -- what we see in some of the other markets that will recover much faster. We're opening a huge hotel in Copenhagen and a small hotel in Copenhagen. But historically, you saw it also after the financial downturn that Copenhagen actually recovered quite fast, and then Copenhagen has quite a lot of international flights from all lines. So less dependent on, for instance, Asia or one market or one area. So I think if we should have an extra on something, it will be Helsinki. That might take a bit longer. And I hope definitely to see that both Stockholm and then Copenhagen will recover faster.

Our next question comes from the line of Stuart Gordon of Berenberg.

Yes. I was just -- a couple of questions. First of all, just some thoughts on CapEx for '22 and '23, particularly, obviously, quite a bit more activity on new properties and furnishing there. And the second question, I think in previous presentations, you've spoken about cash flow being positive with occupancy of around 50%. Well, we obviously did 51%. And I think outside of the working capital, it would have been still negative once taking into account interest and CapEx. It looks to me as if that's going to end up more like 55% for breakeven. And if we normalize that CapEx, probably somewhere around about 60% for breakeven. Is that fair?

Yes. Well, I think that's a very negative calculation, I have to say. I mean it's a dynamic world we are living here. And as Jens said, also, there is lots of measures here, continuously here to develop the business here. But I think the model, which we have worked with during the pandemic with an EBITDA breakeven of a little bit more than 40% and a cash flow breakeven of around 50%, has been quite accurate actually. I'm almost surprised myself how accurate the result has been.

And maybe a comment, Jan, if I can add. A comment to that, that you need to look into when you look at it from your side is that the mix between the occupancy in the hotel portfolio, we have still -- even though we had a good recovery also in the major cities, we -- this has been highly driven by the outskirt hotels that were -- a lot of them back on '19 levels or even above. We have hotels that were all-time high. So in order to have the perfect world, we need a better mix. So we are securing that the big cities are coming up, where also these contracts are higher. So -- but...

To elaborate a little bit on your question there, of course. I mean it's reasonable to believe that, I mean, looking at Scandic in 2021, it's almost half the revenues than Scandic had in 2019. It's reasonable to believe that this business will continue to develop on the double-digit growth rates. And of course, that would mean that you will get support from positive working capital variation, as you will. You have prepayments from the customers. You pay employees a little bit afterwards. That's normal. And it's also so that you would probably incur kind of a rent debt every year due to that. You underpay slightly. It is because you will not be able to pay according to the long-term estimate, just that you pay according to the current situation. So you will have a positive working capital moment. With regard to CapEx, of course, there is many openings this year, but I mean the committed CapEx for that is not higher than it was for 2021. Concerning 2023, I think, I mean, there is very, very few commitments for the moment when it comes to 2023. So I think that will be a question during this year, how management will allocate those resources here. It might be that you work with pipeline, which you would like to extend, but it's also so that you might look into the current existing portfolio and see that you will allocate money there. But for the moment, there is very, very, very few commitments beyond 2020, and that gives also perfect possibilities to control the cash flow. I think even if I -- this is my last [indiscernible] in Scandic, I think my last word will be here, to secure -- that you secure -- we secure financial flexibility and continue to focus on debt reduction. And that will be extremely important because that's the only way to secure some freedom.

Okay. So just to be clear, the CapEx for '22 will be similar to the CapEx for '21?

Yes, in that order. And very [indiscernible] commitments thereafter, yes.

[Operator Instructions] And our next question comes from the line of Andre Juillard of Deutsche Bank.

Two questions, if I may. Coming back to the international market you are addressing, you're mentioning that the exposure on the Asian market will probably take more time to recover. Do you have any visibility on the diversification of clientele you could expect in the Nordic market and give us some more color about the trend that you've been able to see through the past few months? First question. Second question is about the structure of the Nordic market and the pipeline. You were mentioning that you are refocusing a little bit more on development and, in the meantime, renegotiating some hotels. Do you see any opportunities or do you expect the market to reopen in the next few months and some private owners to be more tempted to deal with you to boost their occupancy and therefore boost your pipeline?

Thank you for that. When we start with the international traffic, we clearly saw signs during the autumn that, you can say, that both -- it started with inter-Nordic travel and then it opened more and more up for, I would say, certain parts of Europe that started to travel more into the Nordics. And when I look at the -- let's say, comparing with history and historically numbers, then remember, if we look at '19, around 80% of our turnover was into Nordic business. And that we see a very fast recovery of. That we have 20% left, and just more than half of that was European and a bit less than half of that was international, 9% was international of the total. So of course, we expect the international part to maybe not come as fastly back as we would see the European business. We expect the European business to kind of come back pretty fast during this year. I think a lot will travel. I think we will see much more European travelers into the Nordics, but I also see more Nordic people traveling to Southern Europe, the summer versus what they did before. So I think we will see a more normalized pattern in Europe from the summer and ahead. So -- but of course, how much the Americans will start to travel to Europe and Asian people will increase their traffic to Europe is yet to be seen. It is -- it covered approximately 9% of Scandic's business before pandemic, so that's what we need to measure again. Some will come back fast and some will wait a bit longer. So -- that's why we also say that this summer and this year will be much stronger, of course, than last year. But that we might need to come into 2023 before we really see full year effects like we saw before the pandemic.

So if I may, you're still expecting the full recovery to take place more or less in '23?

Right now, it's -- your assumptions on that is as good as mine. But if we do see strong recoveries and the pandemic is over, we might see some smaller incidence or it might come back within some smaller variant next winter, but it will be like the flu. Eventually, we need to live with that. So yes, that's what I think. But I think there's also -- you need to -- if you look at Scandic as a whole, we are moving out of some smaller hotels and we are opening quite some larger hotels, et cetera, that will also support. So if you look at the size-wise, turnover-wise, Scandic has a good chance at least in '23, '24 to be back on pre-pandemic levels on that. To your other question linked to what will happen in the industry, I'm pretty sure that a lot of operators, they are a mixed picture because some are now extremely eager to recover and get back and secure to pay back some of their loans or whatever they sit with. And you will also see definitely some that are tired and want to get out of the industry. So there will be hotels that will change ownership. And I'm sure you will see that, that market will open again. I think Scandic, we are always both before and on time after, we will be looking for opportunities to grow. But it's very important that we want to grow from a position of strength. We want to secure that our platform is healthy and back to an operational normal and then we can build from that. So we are very cautious when we sign new contracts. Also with the vast contracts we have signed, we are putting in collapsed clauses, et cetera, to cover for future incidents. So we are taking care of the learnings from the past 2 years.

And just a follow-on question in terms of types of contracts. You still see -- do you still see, sorry, a large majority of lease contracts in the Nordics? Or do you see a trend to see more management contracts in the future?

I don't think we will see booming shift between leases over to management, but I'm sure you will see changed lease contracts where it's more normal to secure a split risk. So there will be a focus on securing another type of risk split in the future. But we -- I've said it many times before and I'd like to say it again, there's a reason for why we operate with these contracts, we really like these contracts. And in a normalized market and until the pandemic, this has proven to be a very healthy way of operating hotels with full control of all manning and full control of our offers to the guests and also securing very stable earnings in 95% of our properties. And so I think this is a model we will definitely continue with to lease hotels, but we will -- we are much more careful when signing up new leases that we also secure ourselves for some, let's say, future collapses in market. It might not be a pandemic next time, it can be war, it can be something else. And then we need to share risk with landlords.

And there are no further questions at this time. Please go ahead, speakers.

Then thank you very much for joining in this call, and thank you for your time. And I wish you on behalf of Scandic and Jan here, you all have a very good day. Thank you very much.