Corporate Presentation February 2015 Disclaimer This presentation - - PowerPoint PPT Presentation

Corporate Presentation

February 2015

This presentation has been prepared with information about Hotels City Express, S.A.B. de C.V. ("HCITY" or the "Company"). The presentation is not intended to be exhaustive and does not necessarily include all the information the receiver should want to be informed of the Company. The forward-looking statements contained in this presentation are based on the current assumptions and outlook of the Company’s management. Actual results, performance and events may differ significantly from those expressed or implied in these forward-looking statements as a result of several factors such as the general and economic conditions in Mexico and abroad, interest and exchange rates, future renegotiations, pre-payments of liabilities or loans denominated in foreign currency, changes in laws and regulations, and general competitive factors (regionally, nationally or internationally). All communications, inquiries and requests for information related to these materials should be directed to the contacts listed below.

Disclaimer

2 Abelardo Loscos Corporate Finance and Investor Relations Director Tel: +5255 5249-8056 aloscos@hotelescity.com

13,350 10,929 9,326 8,092 6,973 5,562 4,991 3,836 2,850 2,173 1,542 1,061 586 2014 2015E 2011 2012 2013 2009 2008 2006 2007 2010 2003 2004 2005 3

We are the Leading & Fastest Growing Hospitality Platform in Mexico

# of Rooms (2)

5 10 15 20 26 35 45 50 62 71 Hotels(2)

Opening of first Launch of Launch of First international hotel opened in San Jose, Costa Rica

(1) Based on information prepared by the Company using publicly available information. (2) Number of hotels and rooms at the end of the period.

IPO

Business Platform that Provides a Unique Exposure to Hospitality in Mexico(1) Accelerated Growth in the Economy & Budget Lodging Segments Through New-Hotel Development

 The largest limited service hotel chain in Mexico  Fully integrated platform spanning the complete

hospitality value chain with best-in-class development and distribution capabilities

 Three distinct lodging formats designed to serve

the domestic business traveler and capture middle class expansion in Mexico

 Diversified geographic footprint geared towards

expected GDP growth in Mexico

 Consistent track record of financial performance

82 96

 Significant embedded growth in recently built

inventory

 Organic expansion potential in our target markets

due to lower density of hotels per capita, ADRs and occupancy rates

 State-of-the-art distribution systems at the

forefront of industry trends

Follow On

118

Launch of

4

Business Model Tailored to Best Serve Our Target Segments

…to Primarily Target Value Conscious Domestic Business Travelers

Hotel Industry Market Segments

Our Portfolio of Three Targeted Limited Service Hotel Brands...

Hoteles City Express Brand Portfolio Target Segment Description

• Flagship

brand

• Essential

amenities

• Economy

segment

• City

express product located in premium locations

• Budget

segment brand

• Same

quality but smaller rooms

• Extended-

stay brand

• Apartment
• style

layout

• Economy

segment Average Room Size 23 m2 (248 ft2) 23 m2 (248 ft2) 17 m2 (183 ft2) 30 m2 (323 ft2) Average Daily Rate (ADR) (MXN) $ 600 – 1,200 $ 1,000 – 1,500 $ 500 – 750 $ 750 – 1,700 Rooms per Hotel 100 – 150 70 - 150 105 – 134 26 – 120 # of Hotels(1) 71 (74%) 6 (6%) 13 (14%) 6 (6%) # of Rooms(1) 8,246 (75%) 806 (7%) 1,484 (14%) 393 (4%)

(1) As of December, 2014.

…Offers a Differentiated Value Proposition Within our Segment… Quality Value Convenience Consistency Geographic Coverage Safety

Market Segment Target ADR (MXN) > $1,500 $700 – 1,500 $500 – 700

5

Largest Hotel Chain in our Target Segment

Source: Information prepared by the Company based on publicly available information including, prospectuses, quarterly reports, websites and press releases.

Select-Service Hotel Brands Limited-Service Hotel Brands

As of December 31, 2014 As of December 31, 2014 Limited Service Hotels Full and Select Service Hotels

Number of Hotels by Chain in Mexico Number of Hotels by Brand in Mexico

33 94 91 124 41 24 31 35 26 41 35 133 62 50 47 16 15 12 11 10 7 75 35 13 11 11 11 6 6 5 5 4 6 88 +

Strategically Planned Geographic Footprint and Deployment of Capital Aligned with the Key Drivers of Economic Activity

Hotels in Operation 2015 Openings

Strategically Planned Footprint Provides Diversified Exposure to Mexico’s Main Business, Industrial and Commercial Hubs and Corridors… … with a Balanced Leverage to the Main Drivers of Economic Activity A

• Recently enacted Energy Reform
• Opening of oil and gas sector to

private participants B

• Growth of Mexico’s manufacturing

sector driven by global economic recovery and increased labor and energy cost competitiveness

• Recently announced investments

by auto manufacturers and suppliers C

• Economic recovery of the United

States, Mexico’s main business partner

• Resurgence of maquila industry
• Decreasing levels of violence in

northern Mexico D

• Recently enacted structural

reforms in the mining sector E

• Resuming government spending in

transportation infrastructure

6

Energy Petrochemical, and Export Corridor Maquila Export and Logistics Corridor NAFTA Agricultural Export Corridor NAFTA Industrial, Manufacturing, Logistics and Export Corridors Corredor Minero Mining Corridor

A B C D E

36% 26% 13% 25% 7

Geographic Coverage and Portfolio Mix by Industry and Sector

Geographic Coverage by Country Presence in Mexico by Economic Activity

As of December 31, 2014 As of December 31, 2014, % of Total Portfolio based on number of hotels Colombia Costa Rica México 1% 98% 1%

Hotel Portfolio by Ownership

Owned Co-Owned Franchise and Management Leased 25 35 Consolidated 75%

Hotel Portfolio by Brand

71 74% 6% 14% 6% 6 13

As of December 31, 2014, # Hotels and % of Total Portfolio

6

As of December 31,2014, # Hotels and % of Total Portfolio

12 24 5% Agriculture Activities 15% Commercial, Financial and Tourism Services 42% 17% Manufacturing Energy & Petrochemical Activities 21% Exporting Activities

20 hotels on the Gulf of Mexico’s Energy Corridor

Macroeconomic & Industry Fundamentals

Ce Ples Patio Universidad México D.F.

9

Solid Macroeconomic Fundamentals Pointing to a Economic Recovery

Quarterly GDP Growth Public Construction Expenditure Contribution to GDP Growth Private Consumption Gross Fixed Investment Loans for Machinery & Equipment

Source: HSBC Economic Analysis, Santander Economic Analysis, SECTUR and INEGI.

10

Tourism Sector With Solid Growth in Recent Years

GDP Contribution by Economic Activity Airlines Passenger Traffic Growth Services Sector GDP Room Supply Growth Tourism GDP Growth

62% 61% 61% 36% 36% 36% 2013 2012 2011

100%

Secondary Primary Tertiary

Tourism GDP Total GDP %

Domestic Tourism Consumption Growth

92 97 102 107 112 117 2008 2009 2010 2011 2012 2013 2014

Domestic Tourism Private Consumption Total GDP Evolution Index 2008 = 100

• 10
• 5

5 10 2008 2009 2010 2011 2012 2013 2014

33 +7% 24 2012 26 2011 28 2013 2014E 30 2010 (Million Passengers) CAGR 2013 672,296 2012 638,494 2010 +2% 2011 660,546 651,160 Rooms

Source: HSBC Economic Analysis, Santander Economic Analysis, SECTUR and INEGI.

11

Fragmented Industry that Presents Consolidation Opportunities

Hotel Supply – Fragmented and Dominated by Independent, Non-Standardized Hotels Hotel Demand – Driven by our Target Customers

Source: INEGI, Ministry of Tourism, Ministry of Communications and Transportation, JLL, PwC, Euromonitor.

Hotel Rooms in Mexico by Quality – Breakdown by Number of Stars

2013

Breakdown of Independent and Chained Hotels

31 72 79 69 28 21 100 100 100 2013 (% of Rooms) Brazil United States Mexico Independent Chained

Occupied Room Nights by Nationality of Guests

2013 (% of Occupied Room Nights) 83 40 62 17 60 38 100 100 100 1 - 4 Stars 5 Stars All Hotels Domestic International

Tourism Spending in Mexico

2013 International Tourists Domestic Tourists (Million Passengers) 50% 55% 57% 60% 24.4 25.5 28.1 30.5 2010 2011 2013 2013 Low Cost Carriers Legacy Carriers Target segment 10% 90%

Domestic Airline Passengers

Mainly independent, family operated, non standardized hotels subject to substitution 179,968 135,986 113,961 62,265 180,116 5 Stars 4 Stars 3 Stars 2 Stars Others 46% of Total Rooms in Mexico

12

Accelerated Growth in a Capitalized Industry

Growth of Hotel Chains in Mexico Special Focus in the Limited Service Segment

96 35 12 11 11 71 18 7 11 8 Hoteles City Express One Hoteles Real Inn Ibis Comfort Inn As of December 2014 As of December 2012 # of Hotels in Operation Increase in # of Limited Service Hotels(2) from December 2012 to December 2014

Source Information prepared by the Company based on publicly available information including, prospectuses, quarterly reports, websites and press releases

2012 2013 2014

IPO Fibra Hotel IPO Fibra Inn IPO Hoteles City Express FO Hoteles City Express Rights Offering Fibra Inn FO Fibra Hotel 500 1,000 1,500 2,000 2,500 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Fibra Hotel Fibra Inn Posadas Hoteles City Express Growth in Number of Hotels (4Q14 vs 4Q13) Capex

Capitalization Events for Lodging / Real Estate Investment Vehicles Cash Deployment of Main Players

Capex and Cash Balance as of 4Q14, number of hotels as of December 2014 25 17 5 3 Hoteles City Express Posadas Grupo Real Turismo Choice Hotels Cash Balance as

• f 4Q14

Business Model that Boosts Value Creation with Each New Hotel

Ce Chetumal, Quintana Roo

14

Our Fully Integrated Business Model Provides Broad Exposure to Hospitality in Mexico

FIBRAS

Fully integrated platform provides flexibility and control over investment cost, growth, marketing and customer experience Development

• 19,000+ rooms developed

by the Hoteles City team

• Systematic and

streamlined design and development – Low, predictable costs – Benefit from scale in development

• Strong ROIC track record
• Control over “going in” cap

rates Hotel Ownership Marketing and Distribution

• Strong brand recognition
• Own distribution

channels account for vast majority of reservations

• City Premios guest loyalty

program

• Corporate and local

agreements

• Targeted and cost-efficient

marketing

• At the forefront of digital

and social media distribution Hotel Management & Franchising

• 35 owned hotels (1)
• 25 co-owned hotels (1)
• 12 leased hotels (1)
• Primary focus on
• wnership and co-
• wnership of hotels

– 50%+ ownership in co-

• wned hotels

– Business partners contribute land and/or equity and local market insight

• Best-in-class operating

margins

• Standardized room layouts,

furnishings and processes

• Brand licensing to third-

party hotel owners under management contracts

Independent Hotels

(1) As of December 31, 2014; excludes managed and franchised hotels.

International Chains

Leading Hotel Development Capabilities at the Core of Our Strengths

Streamlined and Replicable Development Processes

• “Out of the ground” new hotel development in as little as 6 months

Construction Begins Month 3 – 5 Month 5 – 7 Month 2 – 4 Month 4 – 6 Month 6 – 9: Opening

Difficult to Replicate Hotel Development Capabilities

Proven In- House Hotel Development Expertise

• More hotel and room openings since 2003 than

any other hotel chain in Mexico − One new hotel opened every 6.8 weeks on average since our first opening in 2003

• Capacity to develop up to 22 hotels per year
• On-budget international development experience

Predictable Costs and Time

• f Delivery
• Economies of scale in construction contracting

and purchasing furnishings and fixtures

• Competitive and highly transparent bidding

process with high-quality contractors

• Track record of meeting budgeted times and costs

International Standards

• All properties built to comply with highest safety,

fire and environmental standards

• Key differentiating factor from independent, non-

branded hotels predominant in our target segment Scalable Infrastructure

• Standardized and streamlined processes allow

us to scale hotel development capacity − Processes scalable to new markets / geographies Maintenance, Renovations and Improvements

• Based on strict guidelines that enable cost

control and consistent quality − Terms in contracts of managed hotels ensure periodic renovations based on our guidelines

15

16

Proven Development Capacity Delivering on our Business Plan

We Have Fulfilled our Hotel Opening Schedule as Planned and Within Budget… …While Continuing to Build a Highly Visible Development Pipeline

Hotel Development Pipeline at IPO (Scheduled Openings for 2013) 2014 Hotel Development Pipeline

Opened Hotel

• Scheduled Openings 1Q15
• Ce Chetumal

Opened: March 2013 Ce Santa Fe / CS Santa Fe Opened: June / August 2013

73/74

75

Ce Oaxaca Opened: October 2013

76

Ce Salina Cruz Opened: October 2013

77

Ce Patio Universidad Opened: December 2013

78

Ce La Paz Opened: December 2013

79

Cj Puebla Autopista Opened: December 2013

80

Ce Cali (Colombia) Opened: December 2013

81

Ce Cananea Opened: December 2013

82

Ce Irapuato Norte Opened: December 2013

83

Cj Cd. del Carmen Opened: February 2014

84

Cj Cd. del Carmen (Aeropuerto) Opened: February 2014

72

Ce Salamanca Opened: December 2014 Cj Villahermosa Opened: December 2014 Ce Tehuacan (Puebla) Opened: March 2014

86 85 87 88

Ce Paraíso (Dos Bocas) Opened: May 2014 Ce Monterrey Norte Opened: August 2014 Ce DF Central de Abastos Opened: September 2014 CS Puebla Autopista Opened: September2014

90 89

Ce Apizaco Opened: September 2014 Ce Cd. Victoria Opened: October 2014 Ce Matamoros Opened: December 2014

94 95 96

Ce Cabo San Lucas Estimated Opening: 1Q15 CS Cabo San Lucas Estimated Opening: 1Q15 Ce Tuxpan Estimated Opening: 1Q15

98 97 99 91 92

Ce Plus D.F. Satélite Opened: October 2014 Ce Monterrey Nuevo Sur Opened: December 2014

93

Development Pipeline for 2015

17

Hotels in Operation 2015 Openings Energy Petrochemical, and Export Corridor Maquila Export and Logistics Corridor NAFTA Agricultural Export Corridor NAFTA Industrial, Manufacturing, Logistics and Export Corridors Corredor Minero Mining Corridor

Hotel Portfolio by Brand

Pro-forma as of December 2015, % of total rooms

Hotel Portfolio by Investment Scheme

Pro-forma as of December 2015, % of total rooms

71% 9% 5% 15%

Ce Plus Ce CS Cj

Leased Managed & Franchised Owned Co-owned

81 9 18 10 31 12 28 45

40% 27% 9% 24%

Consolidated 73%

33 2014 2015E Change Hotels 96 118 23% Rooms 10,929 13,350 22% Cities 58 63 9%

55% 21% 5% 5% 11%3%

Proprietary Marketing and Distribution Platforms at the Forefront of Evolving Consumer Behavior and Industry Trends

Multi-channel Proprietary CRS

• Multi-channel reservation platform:
• State-of-the-art digital media platform:

2014 Room Nights Sold by Channel Walk-ins and direct bookings Call Center Internet website City @ccess

• nline system

OTAs CRS

86% of

reservations made through

• wn channels(1)

45% through

• ur CRS

24% through

electronic channels

(1) Includes walk-ins and reservations made directly at the hotel.

18

Market Intelligence

• 150+ regional, national and international in-

house hotel market studies

Leading Marketing and Distribution Platforms in Mexico

Sales and Marketing Levers

Marketing Programs

• City Premio loyalty program, accounting for

~20% of our reservations during 2014

• Active marketing on social media:

Central Reservation System (“CRS”)

• Own system that manages room night

sales, corporate agreements, third-party vendors and e-commerce − Efficient inventory, ADR and yield management Corporate Sales

• 26 sales executives across Mexico and an
• ffice in Miami for international sales
• 7,500+ corporate and local agreements,

accounting for ~60% of our occupied room nights during 2014 Corporate Alliances

• Airlines:

PR and Publicity

• Diversified media advertising

− Internet, pay TV, in-flight magazines, radio GDSs

Operation and Financial Perfomance

Ce Plus Patio Universidad, México D.F.

20

Portafolio Mix by Investment Scheme

Thousand Rooms

Installed and Occupied Rooms Nights Occupancy

Installed Occupied % % of Hotels

Average Daily Rate and Revenue per Available Room

MXN Millions

Total Revenues and Adjusted EBITDA(1) Consolidated Net Income

MXN Millions MXN +16.8% +26.6% +17.9%

2014 2,120 3,586 2013 1,675 3,040 2012 1,531 2,693 2011 1,223 2,230

737 722 683 668 436 398 388 366

2013

+3.9% +9.6%

2011 2014

+2.1%

2012 2012 2011 56.8% 55.1% 2014 59.1% 2013 54.8%

+4.0 pp

RevPar ADR

1,412 1,104 932 715 471 358 280

2011 2012 2013

+31.5%

2014

+27.9% +24.3%

• Adj. EBITDA

Revenue

143 84 26 10

2011

70.5%

2012 2014 2013

+189.6%

190

Growth has Been Accompanied by Consistent Improvement Across All Key Operating and Financial Metrics

(1) Adjusted EBITDA calculated as operating income + depreciation + amortization + expenses associated with the opening of new hotels.

2011 62

24% 16% 34% 26%

2014 96

25% 13% 26% 36%

2013 82

22%

15.7%

13% 28% 37%

2012 71

24% 14% 28% 34% Managed and Franchised Leased Co-owned Owned

26.5% 30.0% 32.4% 33.3% 1.4% 2.7% 7.6% 10.1% Margin Margin Net Income

366 388 398 436 405 413 414 451 350 375 400 425 450 475 500 2011 2012 2013 2014 Total Chain Established Hotels

21

35 45 50 62 27 26 32 34 62 71 82 96 2011 2012 2013 2014 % of Non-Established

(1)

Non-Established Hotels Established Hotels 668 683 722 737 682 691 714 720 650 675 700 725 750 2011 2012 2013 2014 Total Chain Established Hotels

(1)

44% 37% 39% 35% 54.8 56.8 55.1 59.1 59.4 59.8 58.0 62.6 50 54 58 62 66 2011 2012 2013 2014 Total Chain Established Hotels

(1) (1)

Significant Embedded Growth In Recently Built Inventory

Occupancy

%

Number of Hotels in Operation

# of Hotels in Operation at the End of Each Period

Average Daily Rate (“ADR”)

MXN

Revenue per Available Room (“RevPAR”)

MXN

(1) Defined as hotels with at least 36 months in operation at a defined period.

+350 pbs +3.4% +2.4%

Solid Capital Structure Geared to Support Growth

22

Total Debt Outstanding: MXN 1,902.7 Million

Balance Sheet Structure

64% 77% 4% 4% 32% 19% 100% 100% Assets Liabilities + Shareholders' Equity Cash and Equivalents Hotel Assets Recoverable Taxes and Other Current Assets Financial Debt Other Liabilities Shareholders’ Equity MXN 9,921 Million MXN 9,921 Million

Financial Debt Maturity Schedule

As of December 31, 2014

Access to Diversified Financing Sources

Bank Debt by Counterparty as of December 31, 2014 As of December 31, 2014 35% 23% 17% 9% 5% 11% HSBC Bancomext IFC Banamex Corpbanca Otros 7% 11% 8% 12% 36% 8% 7% 6% 5% 2015 2016 2017 2018 2019 2020 2021 2022 2023

Corporate Governance to Support and Lead Growth

Ce Plus & CS Santa Fe México D.F.

Long Standing Commitment to Maintaining Corporate Governance Best Practices and Social Responsibility

Board of Directors Audit (100% Independent) Corporate Practices (100% Independent) Planning & Finance Procurement & Construction Compensation Nominations

Solid Institutional Sponsorship with a Broadly Diversified Investor Base Institutionalized Governance Aligned with Best Practices

Board Committees

Commitment to the Environment

EDGE Certification (IFC) – First certified building worldwide – 9 hotels certified + 9 in process of certification Biosphere Responsible Tourism (UNESCO) – First hotel chain worldwide in process

• f certification

– 39 certified hotels + all hotels expected to be certified by 2016 It is in our DNA. Why?

• 1. Because we care
• 2. Because our guests

and partners care

• 3. Because we strictly

comply with regulations

• 4. Because it makes

business sense – 30% and 40% reductions in energy and water use, respectively, at our EDGE-certified hotels LEED Certification (USGBC) – First hotel in Latin America – 6 certified hotels + 8 in process of certification

24

Social Responsibility and Sustainability

We collaborate with different

• rganizations focused on

promoting social awareness and nature preservation We support initiatives aimed at creating long-term value within

• ur communities through

education and entrepreneurship − Mainly independent Board of Directors (8 out of 9 Board members are independent)

9% 7% 57% 27% Morgan Stanley REF Affiliates IFC Affiliates Free float Other investors with holdings of less than 5% individually

Hoteles City Express – A Unique Hospitality Investment Opportunity

1

Leading Position in Markets with Attractive Dynamics, Solid Fundamentals and Untapped Growth Potential

4

Embedded Growth in Recently Built Properties and a Solid Balance Sheet Support our Continued Expansion

2

Fully Integrated Hospitality Platform Provides Unique Exposure to the Lodging Industry in Mexico

3

Clearly Defined and Executed Business Plan has Delivered Exceptional Growth Accompanied by Strong Financial Performance

5

Deeply Ingrained Ethos of Corporate and Social Responsibility