Rezidor SAS Annual Report 2005 - Radisson Blu by suchenfz

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									Rezidor SAS Annual Repor t 2005




                                                                   Celebrating individuality!               The spectacular Radisson SAS Hotel, Frankfurt with its breathtaking
                                                                   architecture, exterior as well as interior is typical of the new generation of highly expressive Radisson
                                                                   SAS four-star plus and luxury hotels. Although always strikingly contemporary, these New Breed hotels
                                  Rezidor SAS Annual Report 2005   are all different in style, defying design monotony.
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                                                               executive Summary                                                                                                                                                                executive Summary                                                                 2               1                                         1                    1
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                                                                                                                                                                                                                                                                                                                                                                        1                                   Rezidor SAS locations
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This is Rezidor SAS
                                                                                                                                                                                                                                                                                                                                                                                                            AUSTRiA                                                 HUNGARy                                                   PoRTUGAL
                                                                                                                                                                                                                                                                                                                                                                                    1
                                                                                                                                                                                                                   AND AsiA
                                                                                                                                                          CoVeriNG 49 CoUNtries iN eUroPe, tHe MiDDLe eAst, AFriCA 1                                                                                                                                    1                   1                               Radisson SAS: Salzburg, Vienna (2)                      Radisson SAS: Budapest, Bükfürdö                          Radisson SAS: Lisbon
                                                                                                                                                                                                                                                                                                1                                                                                                           Park Inn: Vienna (opening 2006)                         Park Inn: Sarvar
                                                                                                                                                                                                                                                                                                                                                                                                        4   Country Inn: Vienna                                                                                               RoMANiA
                                                                                                                                                                                                                                                                                                                                                                                                                       1                                            iCeLANd
                                                                                                                                                                                                                                                                                                                                      3                                                                                                                                                                                       Radisson SAS: Bucharest (opening 2007)
there are 22,000+ rezidorites committed to Yes i Can! in 49                       with Rezidor SAS in several areas such as distribution, loyalty pro-                                                                                                                                                                                                                                                      AzeRBAijAN
                                                                                                                                                                                                   3                                                                                                                                                                             12 2   1
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Radisson SAS: Reykjavik (2)
countries worldwide. Rezidor SAS is one of the fastest growing hos-               grammes and sales. In the year 2005, Rezidor SAS saw a 11% RevPAR                                                                                                                                                                          1                                                                              Radisson SAS: Baku                                      Park Inn: Reykjavik                                       RUSSiA
pitality companies in the world with 263 hotels in operation and/or under         growth and group wide revenues reached MEUR 1,478 (1,247). Rezidor                                                                                                                                                                                                                            4    1 2                              1
                                                                                                                                                                                                                                                                                                                                                       1    2                      7                        Park Inn: Baku                                                                                                    Radisson SAS: Moscow (3; two opening 2007),
development in 49 countries across Europe, the Middle East, Africa and            SAS had 22,854 employees, of which 19,928 worked under the Radisson                                                                                  24                                                                                                                                                                                                                           iRAN
                                                                                                                                                                                                                                                                    7                                                                                                                    1                  BAHRAiN
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              St. Petersburg, Sochi (3)
                                                                                                                                                                                                                                                        29
Asia. The SAS Group has a 75% share in the company while Carlson                  SAS brand; 2,071 under Park Inn; 139 under Country Inn and 716                                                                                                                                        8                                                                                                                                                                           Unbranded: Kish Island                                    Park Inn: Ekaterinburg
Hotels Worldwide has a 25% stake in the company and works closely                 under Regent.                                                                                                                                                                                                                                                                                                             Radisson SAS: Manama
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    iReLANd                                                   SAUdi ARABiA
                                                                                                                                                                                                                                       12                               1                                                                                                                                   BeLGiUM            2                                    Radisson SAS: Athlone, Cavan (opening 2006), Cork,        Radisson SAS: Jeddah (2), Al Madina (opening 2007),
                                                                                                                                                                                                   12        29
                                                                                                                                                                                                                                                                        1                                                                                                                                   Radisson SAS: Antwerp, Brussels (2), Hasselt, Spa (2)   Dublin (2; one opening 2007), Galway, Letterkenny,        Riyadh, Yanbu Al Bahr
                                                                                                                                                                                                                                                                                                    3                                                                           1                           Park Inn: Liège                                         Limerick, Sligo                                           Park Inn: Al Khobar (opening 2007), Riyadh
                                                                                                                                                                                                                                                                    2
FiVe stroNG brANDs                                                                                                                                                                                                         7           35
                                                                                                                                                                                                                                                                                                                                               12 2   1                                                                                                             Park Inn: Dublin, Dundalk, Mulranny
                                                                                                                                                                                                                                                                                            1                                                                                                               BULGARiA                                                                                                          SLovAkiA
                                                                                                                                                                                                                                                                                                                                              4    1 2                          1
                                                                                                                                                                                                                                                                6                                                1                               7                                                                                                                  iTALy
                                                                                                                                                                                                                       2
                                                                                                                                                                                                                                                                                                                                                                                                            Radisson SAS: Sofia                                                                                               Radisson SAS: Bratislava
n	 radisson sAs – First Class – 179 hotels                                                                                                                                                                                                                                                                                                             1                                                                                                            Radisson SAS: Rome
                                                                                                                                                                                                                           1                                                    1
At Radisson SAS, the Yes I Can! culture translates into treating each and every guest as a true individual. Radisson SAS                                                                                                                                1                                                                                                                                                   CHiNA                                                                                                             SoUTH AFRiCA
                                                                                                                                                                                                                  19           7                                1
aims to achieve its goal of being a market leader by combining one-to-one hospitality with clever service concepts and                                                                                                                              5                                                                                                                                                                                                               joRdAN
                                                                                                                                                                                                                                                                4                                                                                                                                           Radisson SAS: Beijing                                                                                             Radisson SAS: Cape Town
New Breed hotel design.                                                                                                                                                                                                                                                     1                                                                                                                                                                                       Radisson SAS: Amman, Aqaba                                Park inn: Cape Town
                                                                                                                                                                                                                                                            1                                                1
                                                                                                                                                                                                                                                                                                                                                                                        2                   CRoATiA
                                                                                                                                                                                                                                                                                                                     2
n	 Country inn – Mid-market – 6 hotels                                                                                                                                                                                                                                                                                                                                                                                                                              kAzAkHSTAN                                                SPAiN
                                                                                                                                                                                                                                                                                                                                              1                                                             Regent: Zagreb
Offering a unique Country Concept with a cosy atmosphere and friendly staff, Country Inn is all about fireplaces in the hall,                                                                                                                                                   1
                                                                                                                                                                                                   1                                                                                                                                                                                                                                                                Radisson SAS: Astana (opening 2006), Medeu–               Radisson SAS: Mijas (opening 2007)
                                                                                                                                                                                                                                                1                   1
comfortable lounges and relaxing rooms. Country Inn has positioned itself as a mid-market alternative for travellers who                                                                  1                                                                                                                                                                                                                 CzeCH RePUBLiC                                          Almaty (opening 2007)
                                                                                                                                                                                                                                                                                                                                              1
                                                                                                                                                                                                                                                                                            4                                                                                                                                                                       Regent: Almaty                                            SwedeN
want a high level of comfort and excellent value for their money.                                                                                                                                                                                                                                                                                                                                           Radisson SAS: Prague
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Radisson SAS: Gothenburg, Helsingborg, Karlstad,
n	 Missoni – Lifestyle – 2 hotels                                                                                                                                                                                                                                                                                                                                                                           deNMARk                                                 kUwAiT
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Linköping, Malmö, Örebro, Östersund, Stockholm (5),
                                                                                                                                                                                                                                                    2
Missoni is a new lifestyle hotel brand developed in partnership with the international fashion house of the same name and                                                                                                                                                                                                                         2                                                         Radisson SAS: Aalborg, Aarhus, Copenhagen (3),          Radisson SAS: Kuwait City                                 Uppsala
                                                                                                                                                                                                                                                                                                                                                                                                            Frederikshavn, Odense, Bornholm, Silkeborg                                                                        Park Inn: Borlänge, Falun, Gislaved, Gävle, Haninge,
aims to attract the design and style conscious traveller with hotels in city centres and resorts, designed in a strong                                                                                                                                                                                                                                                                                                                                              LATviA
                                                                                                                                                                                                                                                                                                                                                                                                            Park Inn: Aalborg, Copenhagen, Vejle                                                                              Karlskrona, Kvänum, Nyköping, Sandviken,
contemporary style. Given Missoni’s growing global brand awareness, it serves not only as a suitable replacement for                                                                                                                                                                                                                                                                                                                                                                                                          Stockholm, Solna, Täby, Uppsala, Vargön, Värnamo
                                                                                                                                                          AHr, oCC AND reVPAr                                                                                                                                                                                                                                                                                       Radisson SAS: Riga
Cerruti, but is fundamentally a better proposition.                                                                                                                                                                                                                                                                                                                                                         eGyPT
                                                                                                                                                          MANAGed ANd LeASed oPeRATioNS,                               NUMber oF HoteLs                                     1                           FiNANCiAL HiGHLiGHts (Pro ForMA)                                                                                                                                                                                      SwiTzeRLANd
                                                                                                                                                                                3                                                                                                                                                                                                                                                                                   LeBANoN
n	 Park inn – Mid-market – 68 hotels                                                                                                                      RoLLiNG (PR deC)                                             RezidoR SAS 1
                                                                                                                                                                                                                            12 2                                                                        RezidoR SAS                                                                                         Radisson SAS: El Quseir, Sharm El Sheikh, Taba
                                                                                                                                                                                      1                                                                                                                                                                                                                                                                                                                                       Radisson SAS: Basel, Lucerne (opening 2006),
                                                                                                                                                                                                                                   4            1 2                                                                                                                                                         Unbranded: Sharm El Sheikh                              Radisson SAS: Beirut
At Park Inn, the focus is on offering the hospitality essentials better than any competitor within the same market.                                                                                     1                                   7                               1
                                                                                                                                                                                                                                                                                                        TeUR                              2005              2004                                                                                                                                                              St. Gallen
                                                                                                                                                          120                                                          Radisson SAS (179)
An international, mid-market, highly efficient, fresh and innovative brand, Park Inn is an uncomplicated and affordable                                                                                                               1
                                                                                                                                                                                                                                                                                                        Group-wide revenues 1,478,000 1,247,000                                                             eSToNiA                                                 LiTHUANiA                                                 Park Inn: Lully, Zurich
                                                                                                                                                                                                                       Country inn (6)
hospitality product that offers consistently well executed service with a warm and friendly approach.                                                                                                                                                                                                                                                                                                       Radisson SAS: Tallinn                                   Radisson SAS: Klaipeda, Vilnius
                                                                                                                                                          100                                                                                                                                           operating revenue         587,046              498,728                                                                                                                                                                TUNiSiA
                                                                                                                                                                                                                       Missoni (2)                                                  2
n	 regent – Luxury – 4 hotels                                                                                                                                                                                                                                                                           eBiTdA                        48,780            27,191
                                                                                                                                                                                                                                                                                                                                                                                                            FiNLANd                                                 MALTA                                                     Radisson SAS: Djerba (opening 2006)
An international hospitality legend, Regent is virtually synonymous with luxury hotels. With a well-defined service concept                               80                                                                                                                                            eBiTdA Growth, %              + 179,4          + 234,2
                                                                                                                                                                                                                       Park inn (68)                                                                                                                                                                        Radisson SAS: Espoo, Helsinki (3), Oulu, Turku, Vaasa   Radisson SAS: Malta (2)                                   TURkey
inspired by the Tao from the Far East, Regent has set the standard for high-end customer service by continuously                                                                                                                                                                                        RoCe, %                           12,2                  4,3
reinventing the luxury experience for guests.                                                                                                             60                                                                                                                                            Total investments             34,605            53,828                                              FRANCe                                                  THe NeTHeRLANdS                                           Radisson SAS: Ankara, Istanbul (2)
                                                                                                                                                                                                                       Regent (4)
                                                                                                                                                                                                                                                                                                                                                                                                            Radisson SAS: Aix-Les-Bains, Les Arcs, Biarritz,        Radisson SAS: Amsterdam (2)                               UkRAiNe
Rezidor SAS also has 4 unbranded hotels in its portfolio.                                                                                                                                                              Unbranded (4)
                                                                                                                                                          40                                                                                                                                                                                                                                                Bordeaux (opening 2007), Lyon, Marseille (opening
                                                                                                                                                                01       02      03           04       05
                                                                                                                                                                                                                                                                                                                                                                                                            2007), Nice, Disneyland Resort Paris, Paris (2),        NiGeRiA                                                   Radisson SAS: Kiev
                                                                                                                                                                 AHR (eUR)      RevPAR (eUR)       oCC (%)                                                                                                                                                                                                  Paris-Boulogne                                          Radisson SAS: Lagos                                       UNiTed ARAB eMiRATeS
                                                                                                                                                                                                                                                                                                                                                                                                            Park Inn: Arcachon, Lyon Ouest, Mâcon, Nancy,
                                                                                                                                                                                                                                                                                                                                                                                                            Nice, Orange                                                                                                      Radisson SAS: Dubai–Media City, Sharjah
owNersHiP                                                                                                                                                             Priorities -05                                                                ACHieVeD -05                                                     Priorities -06                                                                         Country Inn: Paris
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    NoRwAy

                                                                                                                                                                                                                                                                                                                                                                                                            Unbranded: Aix-Les-Bains                                Radisson SAS: Ålesund, Beitostølen, Bergen (2),           UNiTed kiNGdoM
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Bodø, Frederikstad (opening 2007), Haugesund,
                                                                                                                                                          n	 Continue to increase financial performance                n	 RevPAR growth increased by 11%                                                n	 Continue to increase financial performance                                                                                                                                                                         Radisson SAS: Birmingham, Bristol (opening 2008),
                                                               CArLsoN                                  75% – Europe’s fourth largest airline, the SAS                                                                                                                                                                                                                                                      GeRMANy                                                 Kristiansand, Lillehammer, Oslo (5), Spitsbergen,
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              Durham (opening 2008), Leeds, Liverpool, London,
                                                                                                        Group is listed on the stock exchanges in         n	 Substantially grow the Park Inn brand                     n	 Park Inn grew from 0 to 68 hotels                                             n	 Re-integrate Yes I Can! in the psyche                                                                                                                    Stavanger (2), Tromsø, Trondheim, Trysil (opening 2008)
          sAs GroUP                                             HoteLs                                                                                                                                                    	                                                                                	                                                                                                Radisson SAS: Berlin, Cologne, Cottbus, Dresden,                                                                  Manchester, Stansted, Belfast, Limavady, Edinburgh,
                                                                                                                                                                                                                                                                                                                                                                                                                                                                    Park Inn: Geilo, Haugesund, Stavanger, Rauland
                                                              worLDwiDe                                 Stockholm, Copenhagen and Oslo.                                                                                    in just three years                                                            and culture of the company in a more                                                              Düsseldorf (2), Erfurt, Fleesensee, Frankfurt, Halle-                                                             Glasgow, Jersey (opening 2007)
                                                                                                                                                          n	 Form a viable partnership with a design
                                                                                                                                                             	                                                                                                                                                                                                                                              Merseburg, Hamburg, Hannover, Karlsruhe, Leipzig                                                                  Park Inn: Bedford, Cardiff, Harlow, Lakeside, London
                                                                                                                                                                                                                                                                                                          prominent way                                                                                                                                             oMAN
                                                                                                                                                            house to launch a lifestyle brand                          n	 Rezidor SAS has partnered with design
                                                                                                                                                                                                                          	                                                                                                                                                                                 (opening 2006), Lübeck, Neubrandenburg, Rostock,                                                                  (2), Northampton, Nottingham, Telford, Watford, West
                                                                                                        25% – Carlson Hotels Worldwide is ranked                                                                                                                                                                                                                                                            Rügen, Wiesbaden, Wutzschleife                          Radisson SAS: Muscat                                      Bromwich, Newry
          75%                                                               25%                                                                                                                                            house Missoni and the first Missoni Hotel                                    n	 Acquire a higher level of self sufficiency
                                                                                                        amongst the largest privately held corporations   n	 Establish a higher level of integration
                                                                                                                                                             	                                                                                                                                                                                                                                              Park Inn: Berlin, Bochum, Chemnitz-Hartmannsdorf,                                                                 Country Inn: London (2)
                                                                                                                                                                                                                           will open in 2007                                                                                                                                                                                                                        PoLANd
                                              reziDor sAs                                               in the United States and is based in Minnea-        with Carlson                                                                                                                                n	 Increase portfolio with a particular focus
                                                                                                                                                                                                                                                                                                           	                                                                                                Cologne (2), Dortmund, Düsseldorf, Erfurt, Hannover,
                                                                                                                                                                                                                                                                                                                                                                                                            Kamen, Munich (2)                                       Radisson SAS: Gdansk (opening 2007), Krakow,              UzBekiSTAN
                                                                                                        polis, Minnesota, USA.                                                                                         n	 Carlson acquired a 25% stake in Rezidor SAS
                                                                                                                                                                                                                          	                                                                               on Russia, CIS, the Middle East and
                                                                                                                                                                                                                                                                                                                                                                                                            Country Inn: Timmendorfer Strand                        Poznan (opening 2007), Szczecin, Warsaw, Wroclaw          Radisson SAS: Tashkent
                                                                                                                                                                                                                                                                                                          Eastern Europe
                                                                                                                                                                                                                                                                                                                                                                                                            Regent: Berlin
       TABLE OF CONTENTS



           2005 HIGHLIGHTS
               paGe 8

        LeTTeR FROM THe CeO
              paGe 0



              THE GROUP
                PAGE 14
              Financials 20
              Operations 24
               Markets 26



             THE BRANDS
                 PAGE 28
                Brands 32
     Marketing, Sales & Distribution 36



          THE PROPERTIES
                PAGE 38
              Properties 42
         Property Highlights 44
        Business Development 48



        THE RELATIONSHIPS
               PAGE 52
             Employees 58
              Awards 60
             Customers 62
         Partners & Owners 64
             Purchasing 65
      Community & Environment 66
      Governance & Management 68



            THE FINANCIALS
                 PAGE 76
   Statement Of The Board Of Directors
        And Managing Director 77
     Auditor’s Compilation Report 78
      Board Of Directors’ Report 79
           Group Highlights 82
          Income Statement 83
            Balance Sheet 84
   Statement Of Changes In Equity 86
         Cash Flow Statement 87
Notes To The Pro Forma Group Account 88

                                          
It has many nicknames: Blue Heaven, Giant Coin, Cube in a Coin and so on and so forth. as cute as the nicknames are, the Radisson SaS
Hotel in Frankfurt is not to be trifled with. This futuristic building, designed by London-based architect John Seifert and hospitality designers
Matteo Thun and adam Tihany, is the first thing to catch the eye as one drives away from the airport towards the centre of Frankfurt.

    Whether guests want their shirts laundered
    in three hours, check-out late at  p.m. or
    log on to the Internet for free from anywhere
    in the hotel, at Radisson SaS, it’s all part of
    the service package.


5

Resisting generic design solutions, the New
Breed of Radisson SaS hotels are kicking
hospitality design up a notch to surpass all
expectations and offer travellers an experi-
ence and an adventure, a story that can be
taken home without packing anything extra in
the suitcase.




                                               
                                               2005 Highlights




                                                            PERFOR m ANCE:


                                                            RevpaR reached eUR ,
                                                            an increase of %.
                                                            Group wide revenues grew
                                                            to MeUR ,8 up 8.5%.
                                                            eBITDa increased to
                                                            MeUR 8.8 (2.2).




    N E w B R A N D:


    The Missoni Deal
    Rezidor SaS chose Missoni to make
    its mark in the lifestyle hotel market
    due to the truly unique and identifiable
    style of the famous fashion house.




                                                            DEALS:


                                                            expanding park Inn
                                                            in the UK
                                                            park Inn took over management of nine
                                                            hotels across the UK and there are plans
                                                            to renovate and upgrade the current
                                                            product to park Inn standards for approxi-
                                                            mately MeUR 2 over the next two years.




8
                              2005 Highlights




                                           CORPORATE :


                                           The Carlson Deal
                                           Carlson Hotels Worldwide, chaired by
                                           Marilyn Carlson Nelson, acquired a
                                           25% stake in Rezidor SaS, securing
                                           the brand portfolio until 2052 and
                                           reducing licensing costs.




G R O wT H :


In 2005, Rezidor SaS
opened  hotels and
increased the supply of
number of rooms by
%. This is the most
signifi­cant organic growth
in the industry in europe.




                                           SCALE:


                                           Radisson SaS, known for
                                           its innovative design and
                                           striking architecture, is
                                           now ranked the second
                                           largest upscale brand in
                                           europe.



                                                                                  
     Letter from the CeO




                           ”Yes I Can! is the driving mechanism
                           of the genuine hospitality culture
                           that energises all our brands and
                           proves our commitment to superior
                           guest service and satisfaction.
                           Through Yes I Can! we constantly
                           build on an enthusiastic hospitality
                           culture that creates true value for
                           customers and owners alike.”

0
                                                                   Letter from the CeO




Turning an enthusiastic Hospitality Culture into Value



Today, Radisson SAS is the second larg-                  To grow organically, it is necessary to have truly    another key strategy – diversification. We believe
est upscale brand in Europe and second                   competitive brands and products, that not only        it’s important to explore various avenues for
to none when measured on organic                         proactively meet the needs and preferences of         growth and consolidation, and at the same time
growth. Its younger sibling, Park Inn, has               customers but are also easy to find and easy to       hedge against market and country risk. Today,
had a flying start, going from 0 to 68 ho-               buy. An aggressive growth strategy coupled            we have hotels in operation and/or under devel-
tels in just three years.                                with a clear understanding of customers and           opment in 49 countries in Europe, the Middle
                                                         what they want are our key value drivers. This is     East, Africa and Asia. We manage city centre and
I have sometimes been accused of being a                 true at every level: brand, hotel and individual      suburban hotels, airport hotels and resort hotels.
growth junkie and there is certainly some truth to       service provider.                                     Our properties vary from 900+ room high-rises to
this. I do believe that outgrowing the competition          Each of our five brands has a distinctive          boutique properties with just 46 rooms.
is the only way to secure a position in a market-        brand promise which meets clearly defined
place as dynamic as ours. The hotel industry has         consumer needs and profiles and is delivered
changed drastically in the last decade, as have          by committed people. As customer needs and            By 205, we aim to have 00
all travel-related industries. Our industry is chal-     preferences change, so do our brands and what         hotels and to achieve this goal
lenged by complex business patterns dictated             they offer. Radisson SAS is a good example of         we will need to grow by at least
by contrasting developments. However, there              how we’re responding to change in buyer needs         0 properties annually, across
are a number of strong underlying currents that          and preferences. Although clever functionality is     all brands.
you have to deal with to stay in business, espe-         still the backbone of the Radisson SAS brand,
cially if you want to stay ahead.                        we know that upscale guests are looking for a         The year 2005, was a year of change, of the
    To have sharply defined and widely recog-            great experience, something truly memorable           market turning around, of progress and also,
nized brands has become a major success fac-             from their stay. The New Breed of Radisson            sadly a year in which the world witnessed natu-
tor. Global brands and industry majors are               SAS hotels with their spectacular architecture        ral disasters of large magnitudes and terrorism
consistently increasing their market share, while        and design – with service elements to match –         found its way to our doorstep. On the 9th of
local brands and regional companies are finding          are redefining contemporary upscale hospitality.      November, the Radisson SAS Hotel, Amman in
it hard to compete. To a great extent, success           Some of these new hotels clearly have “destina-       Jordan was the target of a vicious attack and a
in this business is about critical mass – to be eli-     tional” qualities, while all of them create delight   member of the Rezidor SAS family, Yousef Ho-
gible in the hotel business race you have to be          and add value to a holiday or business trip. In-      maisi, a young waiter, lost his life, along with 30
there. And to be there, you must grow.                   creasingly, we are building share of market by        of our guests. Seeing the damage saddened
    We have a long history of fast growth. We            gaining share of heart!                               and enraged me, as this company, in many
have multiplied tenfold since we started operat-            We will also bring more heart to the market        ways, is my life. The team at Amman showed
ing as a separate company in 1993 and now                with our new lifestyle brand, Hotel Missoni. Bold     the true value of Yes I Can! and kept the hotel
rank among the five largest hotel management             and highly contemporary, Hotel Missoni will build     running while cooperating with authorities and
companies in Europe. In fact, Rezidor SAS is             on the typical Missoni look of iconic home-ware       taking care of guests.
one of the fastest growing hospitality manage-           design and offer the next generation of lifestyle        This year saw the long-time franchise partner-
ment companies in the world. We intend not               hotels. We entered into an agreement with the         ship with Carlson Hotels Worldwide develop into
only to keep up this pace but to accelerate it. By       famous Italian fashion house after exhaustive         a shareholder agreement when Carlson acquired
2015, we aim to have 700 hotels and to achieve           partner evaluation that led us to conclude that       a 25% shareholding in Rezidor SAS from the SAS
this goal we will need to grow by at least 40            Missoni is one of few fashion houses with a truly     Group in return for renegotiated commercial terms
properties annually, across all brands.                  unique and identifiable style, well-suited for re-    of the current Master Franchise Agreement (MFA).
    But it’s not only a question of growing fast, it’s   scale in a hospitality format. If Hotel Missoni can   The Carlson deal was a major step towards secur-
vitally important to have profitable growth. To a        capture any of the wonderful warmth and re-           ing our future, and made a favourable impact on
great extent that depends on how we fuel the             markable finesse of the Missoni family, and not       our bottom-line from the day the deal was signed.
growth. Mergers and acquisitions are a fast track        least the spirit of Rosita Missoni herself, I know    Licensing costs were reduced as part of the deal,
to growth, but nothing matches the power of pri-         it will be a great success. The first Hotel Missoni   improving pre-tax profits for the company by
marily growing organically, building momentum            will open for business in 2007, and the aim is to     MEUR 6 in 2005. The agreement brings additional
from within. In 2005, we increased our supply by         have 30 hotels by 2015.                               scale and profitability to Rezidor SAS and further
16% in terms of number of rooms, the most sig-              Our brand portfolio with focussed hospitality      enhances development opportunities by giving us
nificant organic growth in the industry in Europe.       products from mid-market to full luxury reflects      an even better platform for growth.

                                                                                                                                                              
                                                                   Letter from the CeO




properties in operation/under development and revenue growth


        No. of hotels                                                                                           Group-wide revenue (MeUR)


                                                                                                                                       263
                                                                                                                          247


                                                                                                            200
                                                                                               182
                                                                                    160
                                                                          146
                                                            127
                                              113
                                 100
                    80
         61




Goals and targets


 CORPORATE       ■ To be the preferred alternative in hotel management with        CUSTOmERS         ■ To achieve 93% customer satisfaction and loyalty for each
                 distinctive brands and treating hotels as individual units in                       brand in 2006, with year on year improvement.
                 order to optimize profitability.




 FINANCIAL       ■ EBITDA margin of 10% and annual EBITDA growth of 15%            EmPLOyEES         ■ To be the employer of choice by accentuating personal
                 over a business cycle.                                                              development, career development and empowerment. For each
                                                                                                     brand to achieve a consistent and improved level of employee
                                                                                                     engagement/retention. To increase Rezidor SAS overall Climate
                                                                                                     Analysis scores with 2 percentage points in 2006.



     mARkET      ■ At least 700 hotels by 2015, as a result of growing the         RESPONSIBLE       ■ Maintain industry leadership in environmental performance
                 number of hotels by at least 40 properties annually, across all    BUSINESS         by continuing to increase efficiency per guest night at
                 brands.                                                                             property, brand and group level and ensure compliance with
                                                                                                     corporate ethical and human rights standards.




  LOCAL          ■ Continually improving RevPAR penetration to become the
COmPETITION      leader within our competitive set in every market we serve.




2
                                                                    Letter from the CeO




More importantly, the agreement secured our             gramme was rolled out in December 2005 and                 The key driver of our financial development is a
brand portfolio until 2052, extending the original      will continuously be in action from now on.                11% growth in the company’s Revenue Per Avail-
MFA by 20 years. It also ensures that the com-             Yes I Can! is about attitude – about Yes! Hav-          able Room (RevPAR). The European hotel market
panies align and grow the brands globally,              ing the right attitude is what makes Rezidor SAS           as a whole continued to develop favourably with a
through loyalty and rewards programmes as               people different from everyone else. Not every-            RevPAR increase of 4-5% on average, but Rezidor
well as a commitment to re-energise service             thing is possible, but almost everything is. At            SAS was able to capitalize on this growth by being
delivery across all brands.                             Rezidor SAS we do our utmost to make things                present in the right markets at the right time and
   Initially a Carlson programme, Yes I Can! is the     happen, to say Yes and mean it.                            by doing the right things to maximise potential.
driving mechanism of the genuine hospitality cul-          Yes I Can! – it’s personal. It’s about me as an            A multi-continental company with Scandina-
ture that we have taken fully into our hearts. We       individual service provider. We never forget that          vian roots, Rezidor SAS has a very strong pres-
introduced Yes I Can! at Rezidor SAS 10 years           hospitality is delivered on a one-to-one basis             ence in Scandinavia. With the Nordic capitals
ago, and it has been at the core of our operation       and it’s up to each of us to create that memora-           gaining strongest RevPAR in 2005, Rezidor SAS
ever since. It is our mission and vision alike. It is   ble hospitality experience for our guests. This is         has benefited significantly from the market recov-
our policy to hire by a Yes I Can! attitude and to      a personal responsibility. Our industry has now            ery in these regions. Despite the terrorist attacks
train our people in Yes I Can! scenarios, not only      become so sophisticated that sometimes it’s                in London, the UK hotel market performed at 4%
                                                        easy to forget the very foundation of it all – to be       increase in RevPAR over the last year. The Middle
                                                        a good host. I can assure you that this will not           East, Russia and Eastern Europe have shown
In 2005, we increased our                               happen in our company.                                     tremendous growth potential for revenue yield.
supply by % in terms of                                  Finally, Yes I Can! is about competence and                In 2006, the company will continue with its as-
number of rooms. This is the                            empowerment – about Can! To be able to actu-               sertive development strategy with an increased
most significant organic growth                         ally deliver you must not only know what to do,            focus on developing Russia, CIS, the Middle East
in the industry in europe.                              how to solve the problem, but also be empow-               and East European markets while reinforcing a
                                                        ered to make decisions to do the right thing in            strong presence in the home markets. In first
frontline but on all levels and in all areas in the     the first place, or make it right if it is not. In 2003,   quarter of 2006, we opened eight new properties
company. Everyone in Rezidor SAS embodies               we reorganised the company, moving decision-               for business and signed another 10.
Yes I Can! and creates value in all the company         making as close to the customer as possible,                  I believe we have found the right rhythm in
functions, in good times as well as bad.                empowering front line staff to make the best out           our trading cycle with the ability to sustain and
   In fact, we attacked the many challenges of          of each situation, be it a good one or initially a         even accelerate organic growth from existing
the economic downturn in the last couple of             not so good one. Things go wrong, that’s the               hotels, new properties won over one by one or
years with our Yes I Can! approach.                     nature of business, which is why service recov-            in portfolios, as well as newly-built hotels start-
   “Yes I Can! secure a fifty percent profit con-       ery is a very important aspect of Yes I Can!               ing to trade. That said, I certainly do not rule out
version of every revenue increase and all cost             I’m very proud of how strongly we have man-             acting on bigger business opportunities that
savings.”                                               aged to reset our minds to Yes I Can! on an                may cross our path.
   “Yes I Can! get more customer value out of           even higher level. I’m confident that it will ener-           I’m very confident that the platform we have
less resource consumption.”                             gise all our brands and prove our commitment               built positions us well for future growth. The
   The past years have made us very good at             to superior guest service and satisfaction.                right market conditions are there. The right ini-
cost management. I dare say that we are indus-          Through Yes I Can! we constantly build on an               tiative is here.
try leaders in this respect! However, from 2005,        enthusiastic hospitality culture, that creates true
we have shifted our focus to revenue genera-            value for customers and owners alike.
tion, while keeping costs on a very short leash.           The year 2005 showed healthy commercial and             Brussels, 30 March 2006
In March 2005, we organized the Revenue Gen-            financial development. The company generated
eration conference in Berlin for Rezidor SAS            group wide revenue of MEUR 1.478, an increase
employees and partners to shift the whole com-          of 18%. Earnings Before Taxes (EBT) was MEUR
pany into an accelerated growth phase.                  31 versus MEUR 4.2 in 2004. This includes MEUR
   To take full advantage of the upturn we re-          6.2 gain from the sale of shares of Radisson SAS
launched Yes I Can! by taking it to a higher level      Hotel, London Stansted Airport. With this sale we
of intensity and enthusiasm across all our              have divested all real estate and operate as a pure        Kurt Ritter
brands. A system-wide refresher training pro-           hospitality management company.                            A devoted Yes I Can! Rezidorite since 1976

                                                                                                                                                                   
Generating revenue!                  Rezidor SaS is one of the fastest growing hospitality companies in the world working rapidly
towards its goal of 00 hotels by 205. The company is aggressively growing new home markets, seeking out new opportunities
and taking full advantage of the market upturn while growing critical mass and facilitating behind the scenes efficiency.
5
                                                                                                                              
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UK - Travel
The latest ad campaigns strongly deliver the
brand message that Radisson SaS hotels are
stylish, upscale, innovative, contemporary,
edgy, easy, friendly and unpretentious. With
targeted outdoor advertising on billboards
and in print media, Radisson SaS gives trav-
ellers a sense of always being with them.




                                               
With tactical advertising, brand-specific imagery, coordinated
marketing programmes and strategic partnerships, Rezidor
SaS brings its brands to life and effectively educates customers
about how each brand meets their needs better than anyone
else in the market.


8
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even though europe saw an aver-
age RevpaR growth of just –5%,
Rezidor was ahead of the market
with a RevpaR increase of %
due to being in the right markets at
the right time and by doing the
right things to perform optimally.
                                                                      Financials




Restoring profitability in a Tricky Business environment



It was yet another banner year for Rezidor          CONTINUING TO PROSPER                                tion system were 43,900 (39,400) – an increase
SAS, a year that saw the financial results          In the year 2005, operating revenues, including      of 11.4 (16)%. In total, 22,854 (18,642), fulltime
taking a big jump towards reaching the              owned and leased hotels reached MEUR 587             equivalent employees worked under the five
company’s overall goals. In 2005, Rezidor           (498,7); an increase of 17.7% Earnings Before        Rezidor SAS brands, 19,928 (16,400) of whom
SAS signed 29 new hotel contracts (15               Tax (EBT) was MEUR 31. This result includes a        worked for Radisson SAS.
Radisson SAS, 13 Park Inn and one life-             gain of MEUR 6.2 from the sales of the shares           Of the 217 hotels in operation, none (1) are
style) totalling almost 5,000 rooms. A bold         of Radisson SAS Hotel, London Stansted Air-          owned, 60 (49) are leased, 81 (66) are managed
business development strategy resulted              port. The key driver of this healthy financial de-   and 76 (72) are under franchise agreements.
in the opening of 21 new Park Inn and 16            velopment is a 11% growth in the company’s           While lease or management operation is the
new Radisson SAS hotels across Europe               RevPAR.                                              core business for Rezidor SAS, franchising is
and the Middle East. At the end of 2005,               RevPAR reached EUR 67 (61) and Earnings           playing an increasingly important role in reach-
the Rezidor SAS portfolio included 263              Before Interest, Tax, Depreciation and Amorti-       ing critical market awareness. In addition, fran-
hotels, of which 46 are under development,          sation (EBITDA) was MEUR 48,8 (27,2). This           chise fees are a secure income source,
encompassing approximately 50,000 rooms             positive development in 2005 is mainly due to        regardless of the health of the local economy.
in 49 countries.                                    comparable units increasing EBITDA by MEUR              Owned and leased hotels contributed to 89.6
                                                    20,0 over 2004.                                      (89.6)% of the operative revenue and the re-
Rezidor SAS capitalised on strong market               This was the eleventh year of consecutive         mainder came from management and franchise
demand and growth to have very favourable           growth in terms of number of hotels and busi-        contracts as well as other income sources.
results. In 2005, all key ratios including Occu-    ness volume.                                         Room revenue accounted for 55 (53)% of the
pancy, AHR (Average House Rate), RevPAR                At the end of 2005, 217 (190) hotels were         operating revenue, and Food & Beverage reve-
(Revenue Per Available Room), and GOPPAR            under operation and 46 (57) were under devel-        nue accounted for 31 (31)%.
(Gross Operating Profit Per Available Room)         opment, totalling 263 (247) hotels in 49 (48)
were well above the previous year.                  countries. The number of rooms in the reserva-




FINANCIAL HIGHLIGHTS

                                                   2005 PRO FORmA            200 pRO FORMa                   200               2002               200
Group-wide revenue, TeUR     )
                                                          1,478,000                  ,2,000           ,2,000         ,0,000          ,00,000
Operating revenue, TeUR                                      587,046                    8,28           8,            8,5            ,
eBIT, TeUR                                                    34,987                     ,22            –2,50             ,08             2,22
Financial items, net, TeUR                                        487                     –,            –,08             –,80             –2,5
Net income, TeUR                                              26,448                       ,52           –2,5              ,8             ,
eBITDa Margin %                                                    8.3                        5.5              –.0                 .2                  –
eBIDTa, Growth, %*                                              179.4                      2.2               –8                –                –
equity, TeUR   )
                                                             158,520                    28,             ,52             ,8           0,20
Balance sheet total, TeUR                                    364,433                    8,2           2,            2,0            28,88
Dividends paid, TeUR   2)
                                                                     0                     ,             ,8             ,             ,
Total investments, TeUR                                       34,605                     5,828             5,280             0,             8,
key ratios
profit Margin %, (GOp %)    )
                                                                    35                                         0                                  
Return on capital employed %                                     12.2                         .             –.                 8.              .
)
   Including minority interest, following IFRS.
2)
   Group Contribution in Norway in 200, 200 and 2005.
)
   Gross Operating profit (GOp), including leased and managed hotels.
)
   Revenue in leased, managed and franchised hotels.
* pro forma for 2005 and 200 – prior years are also prepared in accordance with IFRS.



                                                                                                                                                       2
                                                                      Financials




GETTING AHEAD OF THE mARkET                         RADISSON SAS                                          MEUR 173.6 (102.0) in 2005. Occupancy was
In the year 2005, the European hotel market         By the end of the year 2005, 147 (138) Radisson       at 56.5 (56.7)% and RevPAR was EUR 36 (32),
continued to develop favourably with a RevPAR       SAS hotels were in operation, offering 33,287         while AHR reached EUR 64 (57). The GOP for
increase of 4–5% on an average. With a 11%          (31,400) rooms through the reservation system.        leased and managed was 35 (32)% in 2005.
increase in RevPAR, Rezidor SAS has been able       In addition, 32 hotels are under development.
to capitalize on this growth due its strong pres-      Group-wide Radisson SAS revenues includ-           COUNTRy INN
ence in Scandinavia. Nordic capitals gained         ing owned, leased, managed and franchised             At the end of the year, 6 (6) Country Inn hotels
strongest RevPAR in 2005: Copenhagen                hotels, reached MEUR 1,242 (1,095) in 2005.           were in operation, representing 515 rooms in
+19.4%, Oslo +13%, Stockholm +10.2% and             operating revenues for owned and leased ho-           the reservation system. Group-wide revenues
Helsinki +9% and Rezidor SAS benefited signifi-     tels rose to TEUR 460.3 (406.6). Revenues from        for Country Inn, including leased, managed
cantly from the market recovery in these re-        comparable units increased by 13 (0.8)%. The          and franchised hotels, reached MEUR 13.6
gions. Despite the terrorist attacks in London,     GOP margin increased to 37 (34)% in 2005 for          (13.5) in 2005.
the hotel market there performed at 4% in-          owned, leased and managed hotels.
crease in RevPAR over the last year. The Middle        Occupancy for comparable units increased           REGENT
East continues to perform at a mixed pace,          to 70 (65)%, due to increase in volume, both in       At the end of 2005, 3 (3) Regent hotels were in
while Russia and Eastern Europe have shown          the business travel and meetings and events           operation offering 703 rooms in the high-end
tremendous growth potential for revenue yield.      segment. RevPAR increased to EUR 72 (63)              luxury market segment. Group-wide revenue for
   Occupancy for comparable unites increased        and AHR rose to EUR 102 (97).                         Regent, including leased, managed and fran-
to 70 (65)% due to an increase in demand and                                                              chised hotels was MEUR 25.9 (18.0) in 2005.
rates. AHR went up to EUR 99 (95), and RevPAR       PARk INN
rose by EUR 67 (61). As a result, the Gross Op-     At the end of the year 58 (40) Park Inn hotels were
erating Profit (GOP) margin increased to 35         in operation, representing 8,728 (6,300) rooms in
(34)%. The GOP, the total operating revenue         the reservation system. Park Inn grew by leaps
minus operating expenses, is the basic opera-       and bounds in 2005, establishing its presence in
tion efficiency indicator.                          the UK, Germany and France. In addition, 10 (18)
   Rezidor SAS maintained a RevPAR advantage        Park Inn hotels are under development.
after taking operational efficiency into account,      Group-wide revenues for Park Inn, including
with a GOPPAR above the industry average.           leased, managed and franchised hotels reached




OPERATIONAL PROFILES

BY DeC , 2005                              REzIDOR SAS          RaDISSON SaS            paRK INN        COUNTRY INN           ReGeNT          MISSONI
Number of hotels                                       263                8***                   8                                                 2
Number of hotels in operation*                         217                50***                   58                                                 0
Number of rooms                                     43,900                ,8              ,                              0                 –
Number of rooms currently trading*                  33,354                  ,8                5                             0                 0
Countries of operation*                                  48                                      0                                                 0
Occupancy**, %                                           70                     0                 5                   –              –                –
aHR**, eUR                                               99                   02                                     –              –                –
RevpaR**, eUR                                            67                     2                                    –              –                –
GOp**, %                                                 35                                      5                   –              –                –
* Including franchise hotels
** Not including franchise hotels
*** Includes unbranded hotels


22
                                          Financials


UNIT COST DEvELOPmENT, 2001– 2005                  NUmBER OF ROOmS, 2001– 2005
RezIDOR SaS, eUR                                   RezIDOR SaS, GROUp-WIDe




   60                                              50,000

   50
                                                   40,000

   40
                                                   30,000
   30
                                                   20,000
   20

                                                   10,000
   10


        01     02     03      04     05                     01     02      03    04   05




REvENUE PER AvAILABLE ROOm, 2001– 2005             OCCUPANCy, 2001– 2005
RezIDOR SaS, eUR                                   RezIDOR SaS, peR CeNT




   80                                                  80

   70                                                  70

   60                                                  60

   50                                                  50

   40                                                  40

   30                                                  30

   20                                                  20

   10                                                  10

        01     02     03      04     05                     01     02      03    04   05




GROUP-wIDE REvENUE, 2001– 2005                     GOP PERCENTAGE, 2001– 2005
RezIDOR SaS, TeUR                                  RezIDOR SaS, peR CeNT




1,500                                                  40

                                                       35
1,200
                                                       30

  900                                                  25

                                                       20
  600                                                  15

                                                       10
  300
                                                       5

        01     02     03      04     05                     01     02      03    04   05




                                                                                           2
                                                                       Operations




Building excellence from the Bottom Up



De-centralisation has been the main focus            while the distribution team looks for various on-      Part of this process includes the creation of an
for Rezidor SAS for the past couple of               line opportunities to promote individual hotels        Activity Plan by the General Manager of the
years as rapid growth and the need to                and drive revenue.                                     hotel to raise the Gross Operating Profit (GOP)
support expansion has made it vital to in-                                                                  by an achievable percentage. The Regional Di-
crease hotel autonomy and accountability.            NEw OPENINGS                                           rector and Area Vice President work closely with
Rezidor SAS has evolved from being                   A dedicated team, which is part of the Brussels-       the General Manager to ensure success.
a top-down company to becoming a                     based operations together with their respective           The Director of Revenue Development in
bottom-up company with every General                 Area Vice President/Regional Director facilitates      each region is responsible for sustaining and
Manager carrying full responsibility for his         and coordinates the entire pre-opening proc-           supporting revenue generation. Tools provided
or her hotel.                                        ess. The main aim of this team is to open all new      to each hotel include a checklist, a best prac-
                                                     hotels, whether new builds or conversions, on          tices guide, profiles and fact sheets to help rev-
A new operations structure, headed by Execu-         time, on budget and with all key executives well       enue development.
tive Vice President and Chief Operating Officer,     placed and well trained.
Werner Kuendig, was introduced in 2005 to                The Directors of Revenue Development               ALL ABOUT QUALITy
strengthen decentralisation and empowerment.         (DRDs) together with their respective Regional         The Quality Performance Review (QPR) Pro-
This new structure is supported by the Corpo-        Directors/Area Vice Presidents are responsible         gramme aids the consistent delivery of the
rate Sales, Marketing, Finance & Accounting,         for the efficient launch of hotels in terms of iden-   brand promise. The QPR involves quality in-
Revenue Development, People Development,             tifying and optimising revenue opportunities           spections and has been developed around spe-
Safety & Security and Future Openings depart-        with the help of established tools and check-          cific brand service and operating standards. It
ments. The goal is to streamline hotel opera-        lists. New hotel profiles, fact sheets and hotel       focuses exclusively on the customer experience
tions, offer support to increase revenue and         web content is created based on market stud-           in relation to product, service and brand. The
maintain a high standard of quality and cus-         ies conducted by DRDs, and this collateral is          QPR is performed by an impartial consultant
tomer satisfaction.                                  then distributed to the Global Sales Organiza-         who uses a checklist to inspect specific areas
                                                     tion (GSO). The GSOs then start driving sales          of the hotel with a focus on ensuring the contin-
OFFERING SUPPORT                                     long before the hotel opens its doors.                 uous adherence to the Yes I Can! culture.
– THE BIG REORGANISATION                                 For new openings, the corporate and regional          The QPR monitors basics such as the check-
General Managers are supported by Regional           team is responsible for managing the pre-open-         in experience, the quality and service of the res-
Directors and Area Vice Presidents, who work         ing budget, room configuration and defining the        taurants and bars, hotel security, meetings and
closely with the COO to define strategies and        scope of work in order to manage the overall           events facilities and the check-out experience.
develop tools designed to increase revenue and       development of the project. This includes regu-        The consultant also reports on the overall clean-
optimise operations.                                 lar interaction and dialogue with the technical        liness, maintenance and repair, interior décor
   Hotels propose their own revenue goalsbased       development and regional operations team.              and design plus the service and friendliness of
on local parameters. Once the revenue goals are          Conversions on the other hand require exten-       hotel staff.
accepted by the head office in Brussels, hotels      sive employee training and coaching, and sup-             The QPR goal for both Radisson SAS and
decide on how best to reach those targets.           port for the General Manager, Director of Sales        Park Inn was set for 85 for 2005. Both brands
   Hotels now determine locally the best course      and Revenue Manager. The main focus in a               effectively achieved the required target and the
of action in terms of sales and marketing and        conversion is on transforming the hotel into a         company plans to raise the bar in upcoming
are supported in their efforts by the regional and   true brand representative.                             year/s, by setting the goal to 87% for both
corporate offices. The marketing and sales                                                                  brands in 2006.
teams offer brand guidelines and support the         TOOLS FOR SUCCESS                                         Hotels that scored below 85 are required to
hotels by helping to create advertisements, bro-     Rezidor SAS pays special attention to the              develop a Management Action Plan (MAP) to
chures and other print and online collateral.        needs of hotels that are performing below par.         rectify issues and report to the relevant Regional
Hotels are given communications and public           The operations team follows up with these ho-          Director/Area Vice President, who in turn are
relations support from regional PR teams that        tels every month and coaches the hotel Gen-            responsible for follow up. Information regarding
work closely with the Area Vice Presidents and       eral Manager on a regular basis to keep                QPR, including reports, check lists and brand
Regional Directors. The local Global Sales Office    communication lines open and offer help and            information are available on the company’s in-
help hotels by going on targeted sales calls,        tools to increase revenue.                             tranet library for reference.



2
Quality is all about exceeding expec-
tations, again and again! From Berlin
to Beirut and Copenhagen to Cape
Town, all Radisson SaS hotels offer
a consistently high level of service
and put a high emphasis on quality.
                                                                      Markets




Taking advantage of the Market Upturn



Throughout 2005, the hotel industry, in            13% growth in RevPAR and Stockholm where              property market is at the top of the cycle with
general, faced a number of challenges,             RevPAR increased by 10.2%.                            yields dropping to their lowest levels for the last
including natural disasters and the con-              Oslo also recorded the highest growth in oc-       five years.
tinuing threat of terrorism. Hotel perform-        cupancy in 2005, with an 11.5% increase to               Despite a plethora of new supply, the Irish
ance remained resilient despite these              68%. The potential for growth in Scandinavia is       economy in general, and the Irish hotel busi-
events and any adverse effects they had            for mid-market hotels, with limited growth for full   ness in particular, continue to perform surpris-
on trading were short lived. RevPAR con-           service hotels. Norway is a very mature and           ingly well.
tinued to record positive growth through-          consolidated hotel market with the major brands
out the year across Europe, the Middle             already established as the big players.               EmERGING EASTERN EUROPE
East and Asia. International visitor arrivals         Copenhagen is the most international market        Hotels in Eastern Europe can be proud of their
rose during 2005 and are expected to in-           in Scandinavia, although there is a strong varia-     performance in 2005, as RevPAR increased
crease in the coming years.                        tion in demand with peak seasons in the sum-          12.5%. With the continued lack of internation-
                                                   mer and a low season in the winter. Any               ally branded hotels and increasing demand,
Hotels in the Middle East posted a hugely im-      expectation of price increase is limited in this      there seems to be no end in sight in the growth
pressive RevPAR growth of 21.4%. Hotel per-        region where there is, currently, no dominating       of average room rates in the big cities. In War-
formance across Asia slowed during 2005: the       market leader.                                        saw, RevPAR grew an impressive 15%, driven
region recorded a healthy increase in RevPAR of       Unemployment is still a considerable problem       primarily by increasing demand. An increase in
9.1%, but this is a far cry from record-breaking   in Sweden and the social system is being fi-          the number of low-cost airlines servicing the city
results achieved in 2004, when RevPAR grew         nanced by high taxes to reduce the official un-       continues to bring in more tourists and conse-
by 25%. In Europe, growth was steady and the       employment numbers. In Sweden, as is in the           quently the supply demand imbalance that has
average RevPAR was up by 4–5% on average.          rest of Scandinavia, growth will be seen in the       existed for the last few years is finally being
   The enlargement of the European Union cre-      mid-market brand with opportunities for portfo-       redressed.
ated new opportunities for the hotel and travel    lio deals.                                               In addition, Hungary, the Czech Republic and
industry, with a high demand for quality accom-                                                          Slovakia are also expected to experience strong
modation in the new member states. Hotel           UP AND UP Uk & IRELAND                                economic growth in the coming years. A marked
branding is expected to grow across all catego-    The UK hotel market recorded a 4% RevPAR              increase in prosperity is also predicted in the
ries with a strong focus on mid-scale brands in    growth in 2005. While there were fluctuations in      Baltic countries. Bulgaria is preparing to be-
Eastern Europe. A common currency and bor-         the fortunes of hoteliers around the country, the     come a member of the EU in 2008 and is poised
derless Europe, coupled with the perception of     overall improvement in annual room yield clearly      for growth across all industries. Expansion is
safer tourism are expected to foster hotel reve-   demonstrates the strength and resilience of both      also expected in key destinations such as Sara-
nues and increase tourism from countries like      London and regional hotel markets.                    jevo, Ljubljana, Montenegro, Dubrovnik and
India and China that are experiencing an eco-         London recovered remarkably quickly from           Belgrade.
nomic boom.                                        the July bombings to remain at the head of Eu-           Though existing hotels are doing well in the
   Rezidor SAS anticipates that hotel perform-     ropean performance rankings in terms of overall       region and will continue to do well, the road to
ance across the Middle East and Asia will race     RevPAR, but the fact that the rest of the UK          expansion in Eastern Europe is made somewhat
ahead in 2006, while trading across Europe will    grew almost twice as much highlights the terrific     bumpy by the emergent nations’ underdevel-
remain steady. As the hotel industry begins to     performance of hotels in destinations such as         oped legal systems and high levels of
consolidate and new brands enter the market,       Gatwick, Aberdeen and Liverpool.                      bureaucracy.
a steady but sustainable growth in business           Nine UK destinations dominated the top 10
performance is expected to help keep the in-       European occupancy table and included                 CRISP CENTRAL EUROPE
dustry moving in the right direction during the    Heathrow, Gatwick, Edinburgh, Manchester,             Most large European countries showed positive
coming year.                                       London, Cardiff, Newcastle, Bath & Bristol, and       results in 2005, with performance indicators
                                                   Glasgow.                                              generally on the rise. The economic downturn
STRONG SCANDINAvIA                                    However, the buoyancy of the UK economy            faced by the EU15 countries, especially Ger-
Scandinavian hotels top the growth in Europe       is expected to marginally slow down in the com-       many, France and the Netherlands is starting to
for 2005 as the region saw RevPAR growth of        ing years. The Bank of England is considering         reverse.
6.7% with Copenhagen recording the highest         lowering interest rates in order to encourage            Economic growth was moderate in Germany
growth at 19.4%, followed by Oslo that saw a       customer spending and retail sales. But the           in 2005, as the German elections led to a wait-

2
and-see policy by many leading economic play-
ers over the third quarter. But now in the spotlight
as host nation to the 2006 World Cup, Germany
is enjoying a stable political situation and is
showing a slight improvement in performance.

SOmBRE SOUTHERN/mEDITERRANEAN
EUROPE
Southern Europe was the weakest performing
region during 2005, with no RevPAR growth. Its
performance was dragged down by the signifi-
cant RevPAR declines in both Lisbon and
Athens. Both cities hosted major sporting
events in 2004 and naturally could not sustain
                                                                                                                         The hotel industry in Stockholm
this performance during 2005.
                                                                                                                         did extremely well in 2005 with
   A number of Spanish cities are suffering from
                                                                                                                         a 0.2% increase in RevpaR
over-supply and as a result the country only re-                                                                         – the coming year promises to
ported a very modest RevPAR growth of 1.3%.                                                                              be just as good.
In 2006, in the four-star plus segment, RevPAR
is expected to increase due to a rise in occu-
pancy, while in the mid-scale segment, any in-
crease will come from a rise in room rates.
   The strength of the individual business travel
sector in France has helped compensate for the
drop of the leisure clientele and the lack of any          ROARING RUSSIA                                      rent unstable situation in the Middle East means
real movement in the seminars sector. Turkey               Moscow performed exceptionally in 2005, with        that West Africa is becoming an increasingly
and Greece continue to offer great potential, al-          a RevPAR increase of 30.4%. The Russian travel      important source of gas and oil. In many coun-
though the political instability in both countries         market remains lucrative with the number of out-    tries, the upward shift in both manufacturing
creates difficult trading environments.                    bound travellers reaching more than 20 million in   and services is supported by diamond trading
                                                           2005; Russians purchased approximately two          and government-sponsored economic reforms
mAJESTIC mIDDLE EAST                                       million package holidays during the year.           that attract foreign investments.
The Middle East once again exceeded expecta-                  As Russians continue to gain additional dis-        Other destinations such as South Africa, Sey-
tions by recording solid growth in 2005. Diverse           posable income, the potential of the vast Rus-      chelles, Kenya, Tanzania, Morocco and Tunisia offer
and changing economic development show                     sian market continues to expand and the speed       good, if limited, tourism potential and leisure travel-
high GDP growth in Qatar, Bahrain and Kuwait.              of development will prove crucial to financial      ler arrivals have increased in the sub-Saharan re-
Middle East travel and tourism, growing nomi-              success. Russia is encouraging private invest-      gions. Internationally branded hotels are achieving
nally, is expected to increase by 4.4% per                 ment through economic reforms, liberalisation,      higher occupancies, rates and GOPs than in Eu-
annum from 2006 through 2015.                              privatisation and greater transparency.             rope. The vast majority of African accommodation
   Governments are encouraging industries and                 However, government bureaucracy and in-          is unbranded and offers great potential for hotel
services to reduce dependence on oil and drive             consistencies in the rule of law have the same      development and brand coverage.
revenues through other sources. Tourism is play-           adverse effect on expanding business in Russia         However, Africa is perceived as having low
ing a major part in this effort to diversify, especially   as they do in Eastern Europe.                       safety and security, which limits business and
in Dubai, Oman and other main feeder markets.                                                                  leisure travel. The continent suffers from corrup-
Dubai is slowly claiming the spot as one of the            AmAzING AFRICA                                      tion in certain countries and a lack of adequate
top tourist destinations in not just the Middle            A number of African countries are on a healthy      infrastructure. Other challenges faced by the
East, but the world and the hotel business in the          path of growth and recovery. The highest GDP        hospitality industry include mobilization of
city is booming. The future is, however, difficult to      real growth was seen in Equatorial Guinea, An-      project financing and restriction on the import of
predict, due to instability within the region.             gola, Morocco, Tunisia and Tanzania. The cur-       equipment and materials.

                                                                                                                                                                  2
Redefining lifestyle hotels!                      Rezidor SaS is ready to make its mark in the lifestyle hotel market with its new,
bold, highly contemporary Missoni brand. In 2005, Rezidor SaS entered into an agreement with the famous fashion house to
develop and launch Missoni Hotels. The lifestyle hotels will interpret the current Missoni look of their iconic home-ware range
and will develop this into the next phase of lifestyle hotel design.
2
 Instantly identifiable, rich in colour, vibrant in
 texture! Missoni is not just a creation to fit a
 short-term marketing opportunity, but a his-
 toric brand with a great story. Three genera-
 tion of Missoni women have stayed faithful to
 the deep emotional roots of the brand and
 are committed to doing the right things for
 its longevity and success.




0

                                                                 Brands




Building Brands, Boosting Business



A multi-brand organisation, Rezidor SAS       Rezidor SAS brands are carefully positioned,        Rezidor SAS, at the corporate level, also has
offers hotel brands that meet the needs       both in the company’s portfolio and in their glo-   defined core values and developed graphic
of every type of traveller, whether they      bal competitive set, to create maximum portfo-      guidelines. The multi-brand sales team uses
are looking for the ultimate in luxury at a   lio and market dynamics. All brands have a          multi-brand sales collateral, which include the
world-class hotel or simply seeking a         distinctive personality and every new hotel in      Rezidor SAS World Wide Directory, a Rezidor
good night’s sleep in a fresh and clean       each brand helps carry the baton of individual      SAS Meeting Planner Guide and brochures for
hotel. Rezidor SAS guests are guaran-         brand identity one step further.                    the marketing and business development
teed a consistent standard of service all        To guard against brand confusion, all brands     departments.
over the world from Europe and the            are meticulously and strictly defined with brand       All Rezidor SAS brands share a positive serv-
Middle East to Africa.                        manuals and other brand identity collateral to      ice attitude and have a strict focus on safety and
                                              secure strict brand control. In addition, quality   security for guests and employees alike. This is
                                              assurance inspections follow up on individual       the foundation of the company’s strong com-
                                              hotel compliance and the audits involve hotel       mitment to the environment, local community
                                              visits to monitor quality and performance, ac-      and the Rezidor SAS Responsible Business
                                              cording to pre-defined service criteria.            programme.




     REzIDOR SAS, BRAND POSITIONING


                                                                                                                          Four Seasons
                                                                                                                                Regent
                                                                                                       missoni

                                                                                                                  Inter-Continental
            luxury
                                                                                                            Radisson SAS
                                                                                                            Hilton
                                                                                                            Marriott
                                                                                                            Sheraton
        fi­rst class
                                                                               Park Inn
                                                                               Country Inn
                                                                               Holiday Inn
                                                                               Novotel
                                                                               Scandic

      mid market

                                                                      Ibis



         economy

                         Formule 1


           budget
                       minimum service                              limited service                                          full service


2
Rezidor SaS offers an im-
pressive selection of hotel
brands, designed to suit a
variety of budgets, require-
ments and occasions.
                           Brands




     Radisson SaS defines the New Breed in hotel architecture and design as it scales
     new heights with spectacular properties. From the aquaDom in Berlin to the
     fabulous architecture of the new hotel in Frankfurt, Radisson SaS distinguishes
     itself as a contemporary and progressive, first class hotel brand.

     at Radisson SaS, the Yes I Can! service culture means treating every guest as a true
     individual. By combining attentive one-to-one hospitality with clever service concepts
     – most of them focusing on choice and making the stay easy – Radisson SaS offers
     a unique service experience which truly celebrates individuality.




     Country Inn is the hotel of choice for travellers looking for a cosier and homely
     experience as well as great value for money. Combining all the consistencies and
     standards expected from a major international hotel brand with all the comforts
     of home is the Country Inn way.

     Country Inn hotels are all about fireplaces in the hall, comfortable lounges, relaxing
     rooms and an all-embracing country hospitality that meets and greets each guest
     the moment they walk into the hotel.




     Contemporary in style and culture, Missoni hotels will put a great emphasis on
     design, plus certain key hardware and software elements, including – but not limited
     to – bars and restaurants, bathrooms and the service culture.

     Missoni is one of the very few fashion houses with a truly unique and identifiable
     image and the hotels will interpret the look currently exemplified by the iconic Missoni
     design. Missoni hotels will target well-travelled, stylish individuals who are willing to
     pay for an experience that is reflective of how they see themselves and their values.




     park Inn hotels focus on offering hospitality essentials better than anyone else in the
     same market. Spotlessly clean, easy and safe, park Inn hotels are youthful, colourful,
     energetic and fun with a warm and relaxed Yes I Can! approach to service. The brand
     is deeply committed to providing the key essential of any hotel experience, a good
     night’s sleep.

     a value-driven and flexible concept with the most striking new brand identity in the
     current hotel market, park Inn promises to be the best in its class, the hotel of
     choice in the mid-market segment.




     The brand heritage of Regent is one of unashamed luxury for all the senses. Regent
     follows its unique Tao, drawing service inspiration from the Far east: to serve others
     is to serve oneself, to hear without being told, to see without being shown and to
     know without being asked.

     Regent guests are a special breed of truly discerning and cosmopolitan individuals
     who value superior hospitality and timeless traditions. They choose Regent for
     business and pleasure knowing they are guaranteed a highly personalised level of
     world-class service from employees with a passion for excellence and the greatest
     attention to detail.



   Rezidor SAS also has 4 unbranded hotels in its portfolio.
                        Brands




Number of hotels:




179
                    Number of hotels:




                        6
Number of hotels:




    2
                                        Number of hotels:




                                        68
                                        58
                    Number of hotels:




                        4
                                                            5
                                                      Marketing, Sales & Distribution




Creating accessibility In all Channels



Marketing brings brands to life and this            SLEEP wELL. LIvE wELL. – PARk INN                     which, the company believes, is the only way to
life-giving marketing operation at Rezidor          The Park Inn philosophy of offering the very best     drive business and get repeat business.
SAS is both aggressive and proactive. By            service and accommodation in its market sec-             In 2005, search engine optimisation, keyword
implementing strategic and tactical ad-             tor has made it a genuine up-and-coming               buys, pay-per click advertising, plus paid place-
vertising, co-ordinated marketing pro-              brand. Park Inn’s appeal is generally local and in    ments for brand websites and individual hotel
grammes and strong partner relationships,           autumn 2005, Park Inn ran an extensive regional       websites helped drive traffic and increase online
the company and its marketing staff em-             image campaign to increase brand awareness,           bookings. Web-sourced room nights went up
bodies the key Rezidor SAS message of               using different marketing tactics in different        by 68% in 2005, including bookings from third
delivering positive brand associations              regions.                                              party websites and brand websites.
through strong customer service and an                 In Germany, a major outdoor campaign was              The Meetings, Incentives, Conferences and
indelible Yes I Can! spirit.                        launched to cover the entire tram network with        Events (MICE) segment was a key focus for the
                                                    Park Inn branding, while viral e-mail marketing       distribution team for 2005. In support of this, a
100% GUEST SATISFACTION                             was very successful in Sweden. In the UK,             dynamic meeting facilities search engine was
GUARANTEED – RADISSON SAS                           advertisements were placed on the Heathrow            launched, both on the Radisson SAS brand
The Radisson SAS advertising campaign               Express and proved successful in further estab-       website and on individual hotel websites. Quick
launched in 2005 used a combination of con-         lishing the Park Inn brand.                           and easy to use, this tool enables meeting-plan-
temporary illustration with photography, sug-                                                             ners to match their precise business needs to
gesting rather than promising. The campaign         LUxURy FOR ALL THE SENSES – REGENT                    the right Radisson SAS hotel.
strongly delivered the brand message: Radisson      In 2005, Rezidor SAS invested aggressively in            For the travel trade, Rezidor SAS continues
SAS hotels are stylish, upscale, innovative, con-   promoting the Regent brand as a world-class           to leverage the strengths of Look To Book™, a
temporary, edgy, easy, friendly and unpreten-       international luxury hotel. Regent hotels in          unique, online loyalty programme for travel
tious. The goal of the campaign was to increase     Berlin, Zagreb and Almaty share the same feed-        agents booking through systems such as
brand awareness, achieve maximum exposure           er markets and generic advertising and PR             Amadeus and Galileo. This programme allows
and change the buying behaviour of the busi-        campaigns were implemented in the UK, the US          members to earn points that can be redeemed
ness traveller.                                     and Germany. High-end travel and lifestyle            for a wide range of awards. The scheme pro-
   Well-targeted billboard advertising, coupled     magazines in these regions helped promote the         vides a platform for targeted marketing com-
with a print advertising campaign, gave travel-     Regent brand with advertorials and editorials.        munication and system-wide offers that
lers the sense that Radisson SAS was always            On the public relations front, the big coup was    currently reach over 250,000 members world-
there, with them and for them. In 2006, the         when influential magazines such as Condé Nast         wide. In 2005, Look to Book enrolled agents
Radisson SAS image campaign will focus on           Traveller and BA’s High Life magazine ran articles    generated more than MEUR 56 in revenue for
Free Broadband, a new and unique service            about the Regent brand in Europe. Regent also         Rezidor SAS hotels. This figure is up 14% from
concept offered by all Radisson SAS hotels          sponsored the Condé Nast Traveller Awards in          the year before.
since the end of 2005.                              the US, a two-day event that allowed Regent to
   Individual Radisson SAS hotels are using the     convey its brand message to 150 top North             OF mICE AND mEN!
new creative style as an integral part their own    American travel agents. With the help of PR           A STORy ABOUT THE GSO
tactical advertising, with an emphasis on the       agencies in the US, UK and Germany, along with        The Rezidor SAS Global Sales Office follows
leisure market. Advertisements were also            exposure in luxury travel magazines, Regent           one simple, golden rule: get the right people in
placed in magazines usually not used to adver-      continues to establish its position as a highly de-   the right places. In order to achieve this, the
tise the Radisson SAS brand; a shock tactic to      sirable up-scale brand with impeccable service.       GSO changed structure to become more con-
jolt travellers out of any preconceived notions                                                           solidated throughout Europe and brought the
and help them reassess the Radisson SAS             AT THE CLICk OF A mOUSE                               Scandinavian market under one GSO. To help
brand in a whole new light.                         – E-COmmERCE & DISTRIBUTION                           capture more of the American market a GSO
   The unique service concept of Yes I Can! sets    Easy to find! Easy to book! That’s the focus of       was opened in the United States, which proved
Radisson SAS apart from its competitors. It         the Rezidor SAS e-commerce and distribution           to be very successful. In 2005, the US outbound
stands out in a crowded market and changes          strategy. The goal is to earn the trust of guests     business to Europe – mainly booked through
attitude, attracts attention and alters buying      by offering them a consistent buying experi-          travel agencies and online partners – increased
patterns.                                           ence, relevant information and credible rates –       room bookings by 44%.




    Marketing, Sales & Distribution




                                         Currently, there are 52 sales people in seven
                                         offices, each dedicated to offering complete
                                         support to individual hotels. Each region has its
                                         own GSO team focused on top national and
                                         international key accounts in all relevant seg-
                                         ments. Their primary role is to sell and co-ordinate
                                         client events within their region and market.

                                         mEETINGS, INCENTIvES, CONFERENCES
                                         AND EvENTS (mICE)
                                         The focus for 2005 was largely on MICE. The
                                         sales force aggressively pursued this market
                                         and increased its share of the overall revenue to
                                         20% (17%) in 2005. To help achieve this positive
                                         result, the company launched the Weekly MICE
                                         Challenge of acquiring MEUR 1 business every
                                         week. The GSO met this challenge and busi-
                                         ness worth MEUR 50 was confirmed in 2005.
                                             A broad range of innovative sales tools were
                                         launched to aid the sales process and boost rev-
                                         enues for products and brands. Important new
                                         sales tools included the Rezidor SAS Meetings
                                         Facilities Directory, the Rezidor SAS World Wide
                                         Directory, and individual brand brochures.
                                             These new tools promoted MICE extensively
                                         and the weekly MICE reports gave sales forces
                                         across the company an incentive to become
                                         even more competitive. MICE sales rose as a
                                         result of these efforts in key growth markets, in-
                                         cluding UK, France and Germany.
                                             Park Inn launched Colourful Meetings in the
                                         first half of 2005 in Europe. The campaign had
                                         two goals. The first was to develop guidelines to
                                         ensure consistent service delivery and minimum
                                         standards across the brand. The second was to
                                         define a communications concept and unique
                                         client offering. Colourful Meetings offers four
                                         types of meeting themes, each with flexible and
                                         creative elements to help guests create their
                                         perfectly customised meeting or event. Colour-
                                         ful Meetings has proved to be an excellent sales
                                         tool and a great communication platform. Ef-
                                         forts to promote Colourful Meetings will contin-
                                         ue throughout 2006, with new tools, including a
In 2005, search engine optimisation,     Best Practices Guide that will help hotels offer
keyword buys, pay-per click advertis-
                                         ever more innovative meetings options.
ing plus paid placements for brand
websites and individual hotel websites
helped drive traffic and increased on-
line bookings by 8%.
                                                                                         
zero to 8 in three! park Inn has seen rapid growth in the past three years, mainly through cluster
conversions such as the take over of nine Queens Moat House hotels across the length and width of the UK in late
2005. park Inn growth will follow the successful pattern of Radisson SaS with greater penetration in home markets
and further expansion into Northern european markets.

     Focusing on mastering the essentials, park
     Inn offers an affordable hotel experience
     that’s warm and casual, spotlessly clean,
     easy to use, safe and fun. But above all else,
     park Inn strives to provide ”the best sleep in
     town” and that’s what makes them stand
     apart from the crowd.

0

                                                                        properties




The Building Blocks of Success



Rezidor SAS is one of the fastest growing
hospitality companies in the world with a
range of clearly differentiated hotel brands
offering excellent investment opportuni-
ties. Rezidor SAS offers a broad spectrum
of solutions that are designed to meet the
needs of each individual hotel owner. The
options available range from lease and
management agreements to franchise
agreements.

BRAND NEw!
Rezidor SAS opened 37 (28) hotels in 2005,
increasing the total number of hotels in opera-
tion and under development to 263 across 49
countries in Europe, the Middle East, Africa
and Asia.
   In 2005, Rezidor SAS signed contracts for 29
(50) new properties. At the end of the year, Rezi-
dor SAS had 66 leased, 117 managed, and 80
franchised properties. Of the hotels in opera-
tion, 147 hotels were Radisson SAS, 58 were
Park Inn, three were Regent, six were Country
Inn and three remain unbranded.

DEvELOPING THE RADISSON SAS BRAND
In 2005, several groundbreaking Radisson SAS
hotels were opened. The most notable example
was the Radisson SAS Hotel in Frankfurt, a su-
perbly impressive landmark property that exem-
plifies the New Breed of Radisson SAS design.          GROwING THE PARk INN BRAND                          also opened hotels in Baku, Azerbaijan and
The elegant Radisson SAS Media Harbour                 The expansion of Park Inn will focus on city cen-   Ekaterinburg, Russia in early 2006.
Hotel in Düsseldorf follows in the spectacular         tre, suburban locations and transport terminals.
design style of the New Breed.                         Strategic growth is planned in Scandinavia,         GIvING BIRTH TO A LIFESTyLE BRAND
   The boutique-style Radisson SAS 1919 Hotel,         Germany, France, Benelux, Switzerland, UK/Ire-      In 2005, Rezidor SAS entered an agreement
Reykjavik opened in 2005, as did the charming          land and Russia. Growth in key destinations is      with the famous fashion house Missoni to de-
Radisson SAS Hotel, Paris-Boulogne which is            anticipated with newly-built flagship properties,   velop and launch Missoni Hotels. Rezidor SAS
just 10 minutes from the Eiffel Tower.                 but the bulk of the growth is expected from fran-   chose Missoni because it is one of the few fash-
    Hotels were also opened in destinations such       chising and conversions.                            ion houses with a truly unique and identifiable
as Kiev, Dubai Media City, Jeddah, Hasselt, and           Park Inn grew by 21 hotels in 2005, mostly       look. The lifestyle hotels will interpret the Missoni
Rostock. New resorts with strong appeal for the        due to the franchise agreement for a portfolio of   look of their highly individual and iconic home-
leisure traveller were opened in Les Arcs, El Quseir   seven hotels in Germany—previously operated         ware range and will develop this style into the
and Malta. The hotel in the Disneyland Resort,         under a Holiday Inn franchise—and the conver-       next phase of lifestyle hotel design.
Paris, the hotel and spa in Cork and the hotel on      sion of nine Queens Moat House Hotels in the           Missoni intends to make a significant mark in
the Bosphorus in Istanbul will cater for both the      United Kingdom. The Park Inn Hyde Park was          the lifestyle and boutique hotel market, with 30
business and leisure market.                           another strategic opening in 2005 and Park Inn      hotels in the next ten years.




2
                                                                    properties




PROPERTy mAINTENANCE                                About 98 rooms at the Radisson SAS Norge            areas; and a new building is in construction as
Extensive renovations of Radisson SAS hotels        Hotel, Bergen were renovated in Urban style; full   well, which will house the reception, the confer-
were done in an effort to upgrade the properties    renovations of 144 rooms in Ocean style, in-        ence area and the lobby bar.
to New Breed levels defined by new hotels in        cluding bathrooms and six guest floor corridors        At the Radisson SAS Hotel, Edinburgh, all
Frankfurt, Paris, Düsseldorf and Dubai.             were done in the Radisson SAS Scandinavia           guestrooms were renovated and a new lobby
   At the Radisson SAS Scandinavia Hotel,           Hotel, Oslo.                                        bar, Itchycoo was launched. The new concept
Gothenburg, all 246 bedrooms and suites were           At the Radisson SAS Plaza Hotel, Oslo, 607       Pulse Bar was opened at the Park Inn Heathrow
renovated in Ocean and Chilli styles, as were       rooms were renovated in Milan Chic and Plaza        and Regent Berlin expanded its meeting
the three corridors that lead guests to their       room style, the 66 remaining rooms will be reno-    facilities.
rooms.                                              vated by the end of 2006. Construction of the          Guests at the Radisson SAS Hotel, Sharjah
   The kitchen and first floor conference facili-   new annex of the Radisson SAS Gardermoen            can now enjoy a new swimming pool, restau-
ties were upgraded at the Radisson SAS Ar-          Hotel began in 2005 and is expected to be           rant, lobby, landscaping and cabanas. The
landia Hotel, Stockholm; while 78 rooms at the      completed in early 2007. The entire conference      Radisson SAS Hotel, Riyadh has newly refur-
Radisson SAS SkyCity Hotel were renovated           area of Radisson SAS Hotel, Bodø was updated        bished guestrooms; while the Radisson SAS
in Ocean style.                                     in January 2005 and the renovation of the lobby     Hotel, Jeddah has renovated its guestrooms,
   The Radisson SAS Royal Viking Hotel, Stock-      area and most of the rooms is scheduled to be       meeting rooms, lobby area and reception.
holm was reinvigorated with extensive renova-       finished by fall 2006. The Radisson SAS Hotel,
tions of 18 Junior Suites in Urban style, and of    Tromsø is going through extensive renovations
the swimming pool and gym.                          of most guestrooms and some of the public




DEvELOPmENT STRATEGy



Radisson SAS will see growth mainly through contracts                           concept will be applied to new constructions as well. park
with financial commitments in mega, capital and secondary                       Inn will focus on growing in city centres, suburban locations
cities and by joint ventures in emerging markets. The                           and transport terminals with strategic growth in Scandina-
Radisson SaS brand will see growth in city centres, airports                    via, Germany, France, Benelux, Switzerland, UK/Ireland
and resorts in mass tourism destinations. Russia and                            and Russia. Growth in key destinations will be made
France will be developed as home markets, while strategic                       possible with newly built flagship properties.
growth is planned for southern and eastern europe as well
as in the Middle east. Radisson SaS hotels will enter new
markets through capital and/or major cities only.                               a luxury legend, born in the Far east, Regent immediately
                                                                                attracts interest and business at the very high end. The
                                                                                brand is only made available for management and lease
Regardless of size, every Country Inn hotel has the charm                       contracts and is expected to see growth in premier
and service values of a small, family-run hotel. The brand                      destinations and capital cities.
has a narrowly-defined concept that has a broad appeal and
is an attractive option for newly built properties, especially
in off-centre locations in major and secondary cities.                          The missoni brand will be developed through leases and
                                                                                management agreements, including sliver equity partici-
                                                                                pations, where needed. The focus will be on mega and
Franchising forms the core of the Park Inn growth strat-                        primary cities, as well as resort destinations, with care-
egy, but management and lease contracts are also consid-                        fully selected growth in major european and Middle
ered. park Inn has developed the industry’s most cost                           eastern markets.
effective conversion package for rapid expansion. The




                                                                                                                                                      
                                                                       property Highlights




Some property Highlights 2005




 RADISSON SAS HOTEL,                                            RADISSON SAS HOTEL, HASSELT, BELGIUm                      RADISSON SAS HOTEL AT DISNEyLAND ®
 FRANkFURT, GERmANy                                             www.hasselt.radissonsas.com                               RESORT, PARIS, FRANCE
 www.frankfurt.radissonsas.com                                  Housed in the TT tower, one of the most fashionable       www.disneyland.radissonsas.com
 The Radisson SAS Hotel, Frankfurt provides the city            shopping malls in the centre of Hasselt, the Radisson     The elegant and comfortable, Radisson SAS Hotel at
 skyline with a unique point of interest: a stunning cen-       SAS Hotel boasts unique room styles and excellent         Disneyland Resort in Paris is located on Golf Disney-
 tre of attention for visitors and locals. Visually, it looks   dining facilities. The rooms are designed in an Ever-     land, right next to the Disney Parks and the Disney-
 like a glass cube held in a shining blue disc. Among           green style drawing inspiration from juniper plants and   land Resort Paris Convention Centre. With excellent
 the spectacular facilities are a wellness centre, a top-       the local flora, while the Hazeltek rooms feature the     golf, nearby amusement parks and luxurious wellness
 floor swimming pool and an array of dining venues in-          colour of hazel trees blended with exotic technologi-     facilities, this hotel is perfect for families on holiday,
 cluding Coast Brasserie & Oyster Bar, Gaia Restaurant,         cal undertones. The Koper Bar & Restaurant is al-         meetings and conferences. The hotel offers delicious
 Wunderbar Lounge and Jam coffee shop.                          ready gaining popularity and offers a contemporary        dining options with the exclusive Pamplemousse Res-
                                                                menu in an old Flemish setting.                           taurant and the casual Brasserie Birdie.

 RADISSON SAS mEDIA HARBOUR HOTEL,                              RADISSON SAS BOSPHORUS HOTEL,                             PARk INN HyDE PARk, LONDON, Uk
 DüSSELDORF, GERmANy                                            ISTANBUL, TURkEy                                          www.hydepark.parkinn.co.uk
 www.mediaharbour.dusseldorf.radissonsas.com                    www.bosphorus.radissonsas.com                             A London landmark building, the Park Inn Hyde Park is
 The Radisson SAS Media Harbour Hotel in Düsseldorf             The Radisson SAS Bosphorus Hotel in Istanbul enjoys       conveniently located close to the bustling heart of the
 is modern, creative and awash with style and ele-              a breathtaking location on the banks of the Bosphorus     city. Just a step away from the serenity of Hyde Park.
 gance. Located in the middle of Medienhafen, the               Strait that joins the Sea of Marmara with the Black Sea   The hotel’s Bistro serves English and international cui-
 exciting new area being developed south of Düssel-             and separates Asia from Europe. Close to the airport,     sine, while the Bar is ideal for a pre-dinner cocktail or
 dorf, the hotel enhances the architecture and lifestyle        the business centre, and shopping malls, the hotel is     nightcap. The hotel also offers a 24-hour fully-equipped
 of its surroundings. Designed by the famed Italian             perfect for business and leisure travellers. Both the     fitness centre as well as 24-hour room service.
 designer, Matteo Thun, this hotel embodies the es-             Cruise Lounge Lobby Bar and StarBoard Café offer
 sence of being in a port city.                                 stunning views of the Bosphorus Strait and bridge.




                                          property Highlights




RADISSON SAS HOTEL, BIRmINGHAm, Uk                               RADISSON SAS HOTEL, kIEv, UkRAINE

www.birmingham.radissonsas.com                                   www.kiev.radissonsas.com
                                                                 Built in 1903, the Radisson SAS Hotel, Kiev is a monu-
enviably located in the centre of the city, the Radisson         ment of architecture that has now been completely
                                                                 renovated to offer first class service. The hotel offers
SaS Hotel, Birmingham is a -storey glass structure             fabulous views over the Dnipro River from its rooms and
                                                                 public areas, alongside excellent dining facilities includ-
that brings true european flair to the heart of Birming-         ing the French restaurant Bistro Côté Est and Mille
                                                                 Miglia Ristorante & Enoteca, which specializes in Italian
ham and is part of the city’s ongoing renaissance. The           cuisine. The hotel is within walking distance of govern-
                                                                 ment offices, numerous parks, golden churches and
hotel is just minutes away from the Bullring Shopping            shops which line the city’s main street, Khreschatyk.

Centre, the railway station, theatres, and galleries.            RADISSON SAS HOTEL,
Filini, the hotel’s all-day dining restaurant offers an excel-   ROSTOCk, GERmANy
                                                                 www.rostock.radissonsas.com
lent menu inspired by Italian and arabic cuisines.               The brand new Radisson SAS Hotel, Rostock is in the
                                                                 heart of the city and is already considered to be a city
                                                                 landmark. Offering fabulous views of the harbour and
                                                                 the Baltic Sea, the hotel is close to the pedestrian area
                                                                 and Kröpeliner Tor, making it the ideal location from
                                                                 which to explore the city. The hotel has an exclusive
                                                                 400-sq metre Fitness and Wellness Centre, an excel-
                                                                 lent bistro-style restaurant and an irresistible lounge
                                                                 bar, all of which contribute to a very memorable stay.


                                                                                                                           5
                                                                property Highlights




Some property Highlights 2005




 RADISSON SAS HOTEL & SPA, CORk,                            PARk INN EkATERINBURG, RUSSIA
 IRELAND
                                                            www.parkinn.com.ru
 www.cork.radissonsas.com
 Offering a high standard of style and service to both      Newly constructed in the city centre, park Inn ekaterinburg
 business and leisure travellers, the newly opened
 Radisson SAS Hotel & Spa is just 10 minutes from the       has a bright interior, and offers park Inn’s renowned excellent
 centre of Cork. The highlight of the hotel is the Relax
 Spa & Fitness Centre with a hydrotherapy swimming          service. Close to the commercial, shopping and business
 pool, luxurious Elemis treatments and a relaxation
 suite. The hotel’s restaurant, the Island Grillroom        districts and located just 20 kilometres away from Koltsovo
 serves imaginatively prepared food in an intimate
 ambience.                                                  airport, the hotel is ideal for business and leisure travellers.
                                                            park Inn ekaterinburg is one of the fi­rst hotels to be built by
 RADISSON SAS HOTEL,
 DUBAI mEDIA CITy, U.A.E.                                   Rezidor SaS and the company’s partners for hotel develop-
 www.dubai.radissonsas.com
 Discover luxury, comfort and convenience in the bus-
                                                            ment in Russia: IFU, Swedfund and Finnfund.
 tling media hub of Dubai at the Radisson SAS Hotel.
 This modern property, with its chic interior and high-
 tech amenities, has a contemporary design ethos,
 which sets it apart from other hotels in the region. The
 hotel offers a wide selection of dining options – from
 the Asian fusion restaurant, Mandalay – to the Arabian
 and Persian influences at the Chef’s House.




                                                                            property Highlights




RADISSON SAS 1919 HOTEL,                                   RADISSON SAS RESORT, ARC 1950,                             RADISSON SAS GOLDEN SANDS RESORT
REykJAvIk, ICELAND                                         FRANCE                                                     & SPA, GOLDEN BAy, mALTA
www.1919.reykjavik.radissonsas.com                         www.arc1950.radissonsas.com                                www.goldensands.malta.radissonsas.com
A unique four-star hotel in the heart of Reykjavik, the    The four-star Radisson SAS Resort, Arc 1950 offers         One of the most exclusive five-star resorts in Malta, the
Radisson SAS 1919 Hotel is a superbly designed life-       opulent rooms and breathtaking views of the Mont           Radisson SAS Golden Sands Resort & Spa is brilliantly
style hotel that offers outstanding service to both        Blanc. Designed to embody the local style, the hotel is    located on the edge of a cliff overlooking the unique
business and leisure travellers. The hotel is located in   built with mountain stones and wood and is decorated       Sandy Beach. This brand new resort offers unforget-
premises built in 1919 and is generally acclaimed as       with genuine alpine paintings. Arc 1950 is the brand       table views of the breathtaking sea and the country-
one of the most beautiful historical buildings in Rey-     new extension of the world-famous ski area in France,      side, alongside luxurious accommodation and the very
kjavik. The hotel’s highlight is the trendy and vibrant    Les Arcs, offering 239 runs spread over 425 kilometres     best in hospitality service. An extensive Spa & Leisure
Salt Restaurant that offers a super-chic menu in an        and 2,000 metres of uninterrupted vertical drop.           Centre is the most sought after on the island.
upscale atmosphere.

RADISSON SAS EU HOTEL, BRUSSELS,                           RADISSON SAS RESORT, EL QUSEIR, EGyPT                      RADISSON SAS HOTEL, PARIS-BOULOGNE,
BELGIUm                                                    www.elquseir.radissonsas.com                               FRANCE
www.eu.brussels.radissonsas.com                            Adorned with several pools, waterfalls and fountains,      www.boulogne.radissonsas.com
Right behind the European parliament and Schu-             the Radisson SAS Resort El Quseir invites guests to        The Radisson SAS Hotel, Boulogne blends the trendy
mann area, the newly built four-star Radisson SAS          unspoilt beaches, crystal clear waters and first class     ambience of a boutique hotel with a quiet resort at-
EU Hotel is within walking distance of one of the          service. The resort is built with the same architectural   mosphere. The hotel boasts a mix of exotic wooden
main shopping districts, the Louise area and just 3        aesthetics as the old townhouses in nearby Quseir,         textures, chic furniture and contemporary colours,
kilometres away from the centre of Brussels. Willards      and feature natural stone, tiles and plasterwork. In       which are accentuated by its green gardens and ter-
Restaurant is a trendy open kitchen and serves a           addition to excellent dining facilities, the resort also   races. The hotel is just 10 minutes from the Eiffel
variety of cuisines. The hotel also offers excellent       offers a wellness and fitness area as well as an Ay-       Tower and the Champs Elysées – a perfectly chic little
meeting facilities, ideal for small intimate board         urvedic Spa.                                               haven in the romantic French capital.
meetings and large cocktail receptions.


                                                                                                                                                                                  
                                                               Business Development




Making New Deals in New Markets



2005 was a good year for the hospitality              Rezidor SAS chose Missoni because it is one of        tors to pursue every new opportunity and to
business. The EU expanded by an unprec-               the few fashion houses with a truly unique and        grow the company’s portfolio through lease and
edented 10 countries, creating new op-                identifiable style and a distinguished history. The   management contracts as well as franchise
portunities for the hospitality and travel            lifestyle hotels will interpret the current Missoni   agreements – the main objective being to fur-
industry. The European economic down-                 look of their iconic home-ware range and will         ther expand geographical coverage.
turn started to rapidly reverse and RevPAR            develop this into the next phase of lifestyle hotel
went up by about 4–5%—with all but four               design. Missoni hotels will be contemporary in        mORE THAN Ok – Uk & IRELAND
European markets reporting an improve-                style and culture. The hotels will place great em-    The UK hotel market recorded a 4% RevPAR
ment compared to 2004.                                phasis on design and on certain key hardware          growth in 2005. The economy remains buoyant,
                                                      and software elements, including – but not lim-       despite the July 2005 London bombings and
Rezidor SAS Is one of the fastest growing hos-        ited to – bars and restaurants, bathrooms and         the continued threat of terrorism, while both the
pitality management companies in the world,           the service culture.                                  Irish economy and the Irish hotel business con-
offering a great portfolio of brands, as well as                                                            tinue to be robust. Primary growth in the UK will
being a profitable business for shareholders.         PARk INN ExPANSION IN THE Uk                          be via Radisson SAS and Park Inn, while Ireland
Over the past eleven years, Rezidor SAS has           Park Inn took over the management of nine ho-         offers limited growth potential due to high mar-
seen incredible growth, taking the company            tels in the UK, which increase its coverage across    ket penetration.
portfolio from 29 hotels in 1994 to 217 hotels in     the region, including the greater M25, the Mid-           Park Inn had a booming 2005 and fits the
operation at the end of 2005.                         lands and Wales. The portfolio, previously part of    market perfectly with its colourful and flexible
   Market coverage has expanded from the              the Queens Moat House Group was sold by               concept. Rezidor SAS continues to work to-
original home markets of Scandinavia to the rest      Goldman Sachs and Westmont Hospitality.               wards adding more dots on the UK map, target-
of Europe, Russia, the Middle East and Africa.           The new portfolio totals 1,196 bedrooms in         ing primary and secondary cities. Park Inn
Rezidor SAS added four new home markets in            hotels located in Nottingham (172 rooms), West        began 2005 with one hotel in the UK and ended
2005, in addition to Scandinavia, reflecting our      Bromwich (168 rooms), Bedford (120 rooms),            the year with 12, mainly as the result of con-
increased market coverage in the UK, Ireland,         Telford (153 rooms), Lakeside (97 rooms),             tracting a portfolio of nine hotels in October
Germany, France and Belgium. Rezidor SAS              Northampton (145 rooms), Cardiff (132 rooms),         2005. Rezidor SAS intends to add another 25
expects to grow through financial commitments         Harlow (119 rooms) and Watford (90 rooms).            Park Inn hotels in the UK in the next five years
in capital and secondary cities, joint ventures in       All properties offer a restaurant and bar, con-    through leases, management contracts and
emerging markets such as Russia, Eastern Eu-          ference facilities and a health club. The majority    franchise agreements.
rope, Africa and the Middle East, and franchises      are located at major motorway junctions and               One of the first Hotel Missonis, the compa-
in small markets.                                     close to a business park. Rezidor SAS plans to        ny’s lifestyle hotel brand, will open its doors in
                                                      renovate and upgrade the current product over         two years on the Royal Mile in Edinburgh. Rezi-
THE CARLSON DEAL                                      the next two years, bringing them in line with the    dor SAS continues to look for carefully selected
Carlson Hotels Worldwide acquired a 25%               Park Inn brand.                                       opportunities for leases or management con-
share of Rezidor SAS and the two companies                                                                  tracts in primary cities to expand this exciting
re-negotiated commercial terms of the existing        SUPER SCANDINAvIA                                     new lifestyle hotel brand.
Master Franchise Agreement (MFA) and ex-              Scandinavian hotels top the growth in Europe              Ireland is one of the company’s most suc-
tended it until 2052. This agreement brings ad-       for 2005, as the region saw an overall RevPAR         cessful markets and Rezidor SAS continues to
ditional scale and profitability to Rezidor SAS       growth of 6.7% with Copenhagen recording the          enjoy a great reputation with a total of 13 hotels
and further enhances development opportuni-           highest growth at 20.1%, followed by Oslo that        in operation and/or under contract. Two stun-
ties by giving Rezidor SAS a better platform for      saw a 11.5% growth in RevPAR and Stockholm,           ning properties, the Radisson SAS Farnham
growth. It also ensures that the companies align      where RevPAR increased by 10.2%.                      Estate Hotel in Cavan and the Radisson SAS
and grow their brands globally, particularly              The region is characterised by mid-scale ho-      Royal Hotel in the centre of Dublin will open their
through their loyalty and rewards programs.           tels, which has facilitated – and continues to fa-    doors in 2006 and 2007 respectively. In early
                                                      cilitate – the growth of Park Inn hotels. Brand       2006, Rezidor SAS added another feather to its
THE mISSONI DEAL                                      recognition for Radisson SAS is very high in this     cap with the opening of Park Inn Dublin the
Rezidor SAS and the famous Italian fashion            region. This enables further growth of both           heart of the city.
house Missoni have entered into a partnership         Radisson SAS and Park Inn in key destinations             Rezidor SAS is actively focusing on the
to launch the lifestyle hotel brand, Hotel Missoni.   by actively working with developers and inves-        growth of Park Inn in Ireland, with four proper-

8
                                                                                                             The Middle east is lately becoming more
                                                                                                             tourist friendly, with cities like Dubai and
                                                                                                             Muscat emerging as bridges between the
                                                                                                             east and the West. Rezidor SaS is taking
                                                                                                             full advantage of this and is planning rapid
                                                                                                             growth in line with its multi-brand strategy
                                                                                                             and Radisson SaS leading the way.




ties in operation or under contract in Dublin,       in cities with potential for international four- and   Antwerp and a brand new one in Hasselt. In
Dundalk, Ballinasloe and Mulranny. The com-          three-star properties, where Rezidor SAS does          addition, a Park Inn hotel is under development
pany is pursuing opportunities for management        not yet have a presence. After the spectacular         at Liège Airport. Rezidor SAS is actively looking
contracts and/or franchise agreements in pri-        openings in 2005, the company is positive the          for opportunities for both Radisson SAS and
mary and secondary cities.                           coming year will open opportunities for Radisson       Park Inn in the Flemish and Walloon regions of
                                                     SAS in Munich and for Park Inn all over Germany.       the country, especially in places such as Brug-
THE CHALLENGE OF CENTRAL EUROPE                         The Radisson SAS Hotel, Lucerne, on the             es, Ghent and Namur.
The overall European hotel business is prosper-      banks of Lake Lucerne will open to high expec-
ing. However, Germany lags behind with low           tations in June 2006. Rezidor SAS is targeting         HEATING UP SLOwLy – SOUTHERN AND
occupancy, no significant increase in room rates     Geneva and Zurich in Switzerland for both Re-          mEDITERRANEAN EUROPE
and an underperforming luxury segment. In            gent and Radisson SAS, and is also actively            There has been a steady slowdown in the econ-
contrast, the Netherlands, Austria and Switzer-      looking for opportunities in Lausanne, Davos           omies of several Southern European countries
land remain steady and are performing within         and St. Moritz. Growth for Park Inn in the region      where the global increase in GDP is expected to
expected parameters.                                 is expected through conversions and franchise          remain below 2% with an unemployment rate in
   Both the Radisson SAS and Park Inn brands         opportunities.                                         the excess of 10%.
have remarkable presence in Germany, with 19            Park Inn and Radisson SAS will see growth in           In the four-star plus segment, RevPAR is ex-
and 14 hotels respectively. In 2005, the Radis-      other Austrian destinations, such as Graz, Linz,       pected to increase due to a rise in occupancy,
son SAS Hotel, Rostock, and the elegantly de-        Innsbruck and Kitzbühel.                               while in the mid-scale segment, any increase
signed Radisson SAS Media Harbour Hotel,                In 2006, special focus will be on The Nether-       will come from a rise in room rates.
Düsseldorf were opened. The architecturally          lands where the aim is to further establish Rezi-         There are a total of 18 Radisson SAS and Park
stunning, Radisson SAS Hotel, Frankfurt              dor SAS presence through a Radisson SAS in             Inn hotels in operation in France. The hotels are
opened its doors in November 2005 and almost         primary cities like Den Haag and Rotterdam,            spread over prestigious locations such as Paris
immediately won the award for Best Hotel             and secondary destinations such as Utrecht             (Champs Elysées, Paris-Boulogne, Charles de
Opened in the Year at the 6th Worldwide Hos-         and Eindhoven. Radisson SAS already has a              Gaulle, and Disneyland), Nice, Biarritz, and Lyon,
pitality Awards. In 2005, Park Inn signed a mul-     strong presence in Amsterdam with a hotel in           as well as secondary destinations. In addition,
tiple franchise agreement for a portfolio of seven   the city and the airport, and Park Inn is working      Rezidor SAS is targeting new developments in
hotels in Germany, previously operated under a       on making its mark on the market as well.              Toulouse, Lille and Strasbourg. Following the
Holiday Inn franchise.                               Rezidor SAS operates six hotels in Belgium, of         conversion of eight hotels in France owned by
   In Germany, strategic development is planned      which two are in Brussels, two in Spa, one in          the Groupe Partouche to the Park Inn brand, the

                                                                                                                                                          
                                                                                                                            In the past  years, Rezidor SaS
                                                                                                                            has seen unparalleled growth, tak-
                                                                                                                            ing the company portfolio from 2
                                                                                                                            hotels in  to 2 hotels in
                                                                                                                            operation or under development in
                                                                                                                             countries at the end of 2005.




company is actively developing Park Inn based         include The Regent Esplanade Zagreb in                    is now ready to make its mark in this region with
on a dynamic franchise strategy.                      Croatia; the Radisson SAS Carlton Hotel, Brati-           hotels in primary and secondary cities. Regent
   In Southern Europe, Rezidor SAS has proper-        slava in Slovakia; the Radisson SAS Hotel, Riga           and Hotel Missoni will follow closely, in line with
ties in Lisbon, Rome, Istanbul, Ankara and Malta.     in Latvia; and the Radisson SAS Hotel, Sofia in           a multi-brand strategy.
In 2006, a strong focus will be on Spain, Italy and   Bulgaria. However, Radisson SAS will actively                The first two Park Inn hotels are scheduled to
Portugal, especially in capital and primary cities    pursue key destinations like Sarajevo, Ljubljana,         open in 2007 in Riyadh and Al Khobar in the
such as Madrid, Barcelona, Seville Milan and          Montenegro, Dubrovnik and Belgrade.                       Kingdom of Saudi Arabia. In addition, Radisson
Florence for the Radisson SAS brand.                     In the next few years, Rezidor SAS aims to             SAS will open its fourth property in Saudi Arabia,
   Rezidor SAS is also working towards consoli-       rollout the Park Inn brand throughout Eastern             in the holy city of Al Madinah at the end of 2007.
dating its position in Turkey, where it currently     Europe, and is looking for opportunities in key              Dubai is growing to be one of the top tourist
operates three properties and sees strong             primary and secondary destinations.                       destinations in not just the Middle East but the
growth potential, especially for the mid-market                                                                 world. Radisson SAS opened a new hotel in
Park Inn brand. In order to accelerate growth,        mOvING ON UP – THE mIDDLE EAST                            Dubai Media City in 2005, the first international
the strategy is to identify portfolio deals, which    Travel and tourism in the Middle East grew by             hotel chain within the United Arab Emirates’
will rapidly enhance the presence of Rezidor          4.8% in 2005 and is expected to grow by 4.4%              freezone, and will take over management of
SAS in the entire region.                             per annum between 2006 and 2015.                          the five-star InterContinental Hotel in the heart
                                                         High occupancy was seen in Kuwait City,                of the business district in October 2006. Rezi-
STARS OF EASTERN EUROPE,                              Oman, Doha and Dubai with the highest levels in           dor SAS plans for further expansion in Dubai
AND CIS COUNTRIES                                     Dubai. Dubai is emerging as a bridge between the          with a Radisson SAS hotel at the Trunk and a
The expansion of the EU has breathed new life into    East and the West. Middle Eastern governments             Hotel Missoni on the Crescent on The Palm,
the economies of Eastern Europe and the Baltic        are encouraging industries and services to reduce         Jumeriah, to be ready in 2008.
and Balkan countries. Poland, Hungary, the Czech      dependence on oil and drive revenues through                 Kuwait is an established market since the
Republic, Slovakia and the Baltic countries are       other sources, including tourism, especially in           opening of Radisson SAS Hotel, Kuwait in
expected to see strong economic growth, while         places like Oman and Dubai. However, due to cri-          1980. Following a strategy of further penetrat-
Bulgaria is set to offer a wealth of new opportuni-   sis, instability and conflict in certain countries in     ing existing markets, Rezidor SAS plans to
ties when it joins EU in 2008. In addition, Turkey    the region, the future is difficult to predict. Despite   add two more properties in Kuwait by 2008,
and Greece continue to offer great potential, de-     the uncertain future, the Middle East is a competi-       a Hotel Missoni and a Regent, with Park Inn
spite residual difficult trading environments.        tive market with great potential for management           following closely.
Rezidor SAS has established itself firmly in East-    agreements without financial commitments.                    Rezidor SAS is actively seeking opportunities
ern Europe with properties in nearly all the capi-    Rezidor SAS currently operates 15 hotels in               for hotels and residences, exclusively through
tal cities. The company currently has 15 hotels       seven countries in the Middle East and the ho-            management agreements, in Lebanon, United
in operation and/or under contract across eight       tels fall under the umbrella of the first class, full     Arab Emirates and the relatively new markets of
countries in this rapidly growing market. Hotels      service Radisson SAS brand. However, Park Inn             Qatar and Libya.

50
                                                             Business Development




FROm RUSSIA, wITH LOvE
Positive macro-economic indicators reveal
healthy signs for the hotel industry in Russia
with the GDP real growth at 5.2% and unem-
ployment down to 7.5%. As Russians continue
to gain additional disposable income, the exist-
ing vast potential of the Russian market will con-
tinue to grow, creating endless opportunities.
   There is tremendous potential for internation-
al-standard, quality hotel accommodation in
Russia and CIS countries in more than 50 cities,
each with a population of over 300,000. Rezidor
SAS has established a representative office in
Moscow to better service our ambitious expan-
sion plans and promote management agree-
ments for the Radisson SAS and Park Inn brands
with Russian and international investors.
   Rezidor SAS has entered a Joint Venture with
Finland’s Finnfund, Sweden’s Swedfund and
Denmark’s IØ to build and manage hotels in
Russia. Radisson SAS hotels in Moscow, St
Petersburg and Sochi, and the goodwill gener-
ated by the JV helped Rezidor SAS add seven
hotel projects to its management portfolio in
Russia and the CIS, including two Radisson
SAS hotels under development in Moscow.
These new properties strengthen the presence
of Rezidor SAS in the entire region.
   The company and its brand values, com-
bined with innovative design concepts are a          OUT OF AFRICA                                      Currently, Rezidor SAS operates two properties
perfect fit for the needs of the growing Russian     The economic patterns might be patchy in           – the Radisson SAS Waterfront Hotel and the
and CIS markets. The fastest growth in the re-       Africa, but several countries are on a healthy     Park Inn Greenmarket Square – in Cape Town.
gion has been planned for the Park Inn brand         path of growth and recovery.                       The Radisson SAS hotel in Lagos and the
with focus on large regional cities where the de-       Many African governments are forging eco-       Radisson SAS Resort & Thalasso in Djerba are
mand for mid-market hotels is very high.             nomic reforms to attract foreign investments and   due to open in 2006. The company is also pur-
   Over the next year and a half, Rezidor SAS        internationally branded hotels are achieving       suing several projects in South Africa, Botswa-
expects to add 10 hotels to the Rezidor SAS          much higher occupancies, rates and GOPs than       na, Zimbabwe, Zambia, Malawi, Kenya, Nigeria,
portfolio of hotels, and negotiations are well un-   in Europe. The vast majority of African accom-     Ghana, Senegal, D.R. of Congo, and
derway in a number of cities in Russia as well as    modation is currently unbranded, which Rezidor     Morocco.
in the Ukraine and Kazakhstan.                       SAS sees as a great potential for growth.             The company plans aggressive growth of
   Within the next 10 years, Rezidor SAS aims           In 2005, Rezidor SAS signed a Joint Venture     both Radisson SAS and Park Inn brands,
to have 50 hotels under various brands in the        agreement with four Nordic government funds        through individual projects and portfolio deals,
region. Some of these properties will be under       (IFU of Denmark, Finnfund of Finland, Norfund of   with a special focus on management agree-
the JV ownership, but the majority of the hotels     Norway and Swedfund of Sweden) to expand its       ments for city hotels as well as resorts.
are expected to be contracted through man-           presence in Africa. Rezidor SAS expects to have
agement agreements with Russian real estate          10 hotels in operation in the near future and is
investment groups and individual owners.             targeting over 50 hotels in the next ten years.



                                                                                                                                                     5
Celebrating quality service!                 Radisson SaS celebrated the tenth anniversary of Yes I Can! in 2005
and elevated the service concept to be the company’s mission and vision. The company strives to have its service
delivery, across all brands, be fully animated by a Yes I Can! attitude.
5
5
Yes I Can! sets Rezidor SaS apart from its
competitors and is the way of life for all em-
ployees at all levels, including the executive
committee, to ensure that every guest leaves
a Rezidor SaS hotel happy.
                                            55
                                Relationships




Building and Benefiting from Successful Relationships

     STAkEHOLDER       SUCCESS FACTOR                        GOAL/AmBITION


     CUSTOMeRS         ■ High customer satisfaction          ■ To increase customer satisfaction
                       ■ High rate of returning customers      index to 91
                       ■ High brand awareness                ■ Increase unprompted brand awareness
                                                               in all regions




     pROpeRTY OWNeRS   ■ High return on investment           ■ Maintain high GOP
     & INVeSTORS
                       ■ High Gross Operating Profit (GOP)   ■ Increase number of hotels
                       ■ Trusted and recognized brand        ■ EBITDA growth of 15% as an average
                       ■ High market penetration               over a business cycle
                                                             ■ An EBITDA margin of 10%


     eMpLOYeeS         ■ High job satisfaction               ■ Increase job satisfaction index to 85
                       ■ Safe working environment              (out of 100)
                       ■ Personal development and growth     ■ Zero tolerance for work-related injuries

                       ■ Continuous training and education




     SUppLIeRS         ■ Quality products for good value     ■ Stable and long-term relationships
                         for money                           ■ To provide a unique products experience
                       ■ Continuous sourcing of innovative     to the guest
                         product solutions                   ■ Use local purchasing power




     COMMUNITY         ■ Local employment and training       ■ At least one community activity per hotel
                       ■ Local purchasing                    ■ Partner with international charity, research
                       ■ Community involvement                 and interest organisations




     GOVeRNMeNT        ■ Stable and secure tax payer         ■ Ensure all hotels comply with local
                       ■ Regulatory compliance                 and national legal framework




     eNVIRONMeNT       ■ Minimise negative impact            ■ Energy efficiency
                                                             ■ Water conservation
                                                             ■ Waste reduction
                                                             ■ Receive Third Party recognition




5
                                           Relationships




ACTIvITy                                       RESULT


■ Re-launch of goldpoints plus                 ■ Overall customer satisfaction index at 91
■ Various advertising campaigns                ■ Successful launch of goldpoints plus
                                               ■ Received numerous awards




■ 50% profit conversion programme              ■ 11 years of consecutive economic growth
■ Revenue related programmes                   ■ Opened 37 hotels
                                               ■ Signed 29 new contracts
                                               ■ Increased RevPAR penetration




■ Internship programmes                        ■ Job Satisfaction Index at 84.5
■ Mentor programmes                            ■ Six mentees moved into GM positions
■ Recognised individual performances           ■ 355 employees trained in Management School
■ Management School




■ Enhance usage of PIN system                  ■ Hotels joining one of the company’s brands save
  (Purchasing Information Network)               10–15% of their total purchasing cost
■ Close market evaluation                      ■ Increase turnover e.g. buying power through
                                                 contracted suppliers of 33% compared with last year




■ Hotels Environment Action Month              ■ 133 hotels from all brands joined HEAM, an increase of 60% since
  September each year                            debut in 2003
■ Gold Point members given opportunity         ■ Local charity project amounted to TEUR 694
  to donate points to Save the Children        ■ TEUR 81 in donations to the victims of the tsunami and South Asia
                                                 earthquake through money boxes in hotel lobbies and goldpoints
                                                 plus members donations
                                               ■ Finalisation of the UNESCO restoration project at Bahla Fort, Oman


■ Regional environmental legal database        ■ In legal compliance
  for regulatory compliance                    ■ Environmental legal database in place
■ Checklists for compliance                      for four countries, and expanding to an
                                                 additional three countries by February 2006




■ Hotels set up local RB Action Plans          ■ Increased resource efficiency in most hotels
■ Focus on RB Training and energy saving       ■ Energy saving at the hotels by 6%
■ Chairing ITP Executive team, forum for       ■ Employees with RB training 79%
  environmental managers                       ■ 28 hotels with third party environmental label,
                                                 five Norwegian hotels with Swan eco-label

                                                                                                                      5
                                                                        employees




Turning attitude into a Competitive edge



Hospitality is a people-to-people business              Despite the decentralisation of the company,
and managing our brands is in the hands              Area Vice Presidents and Regional Directors
of every individual service provider. How-           work closely with General Managers who then
ever, being a good host is an innate talent,         send out a monthly Yes I Can! status report to
something that cannot be learnt and this             the head office in Brussels. The Rezidor SAS
is why we focus on personality when hir-             Management School played an active role in
ing new people. The result has been a                promoting Yes I Can! by offering several Hotel
strong service brand and a solid relation-           Trainer Certification Workshops for both Park Inn
ship with guests and other stakeholders.             and Radisson SAS employees, to ensure that
Quite simply, the right and only attitude at         every hotel has dedicated Yes I Can! trainers.
Rezidor SAS is the Yes I Can! attitude.                 In 2005, Rezidor SAS forged ahead with its efforts
                                                     towards decentralisation and high-quality service by
In 2005, Rezidor SAS had 22,854 employees,           announcing that each hotel will nominate a Host/
of which 19,928 worked under Radisson SAS;           Hostess of the Month and Host/Hostess of the Year,
2,071 under Park Inn; 139 under Country Inn          instead of announcing an Employee of the Year.
and 716 under Regent.
                                                     DRIvING EmPLOyEE SATISFACTION
yES I CAN!                                           Becoming the most attractive hotel chain to
Yes I Can! celebrated its tenth anniversary in       work for is an important part of the company vi-
2005 with a re-energised campaign. To empha-         sion. The annual Climate Analysis checks em-
sise the importance of this unique service atti-     ployee opinions and perceptions of work
tude, Rezidor SAS has made Yes I Can! the key        conditions, career opportunities and manage-
to the company vision. All hotels organised rein-    ment performance. In 2005, the climate analysis
vigorating Yes I Can! meetings and held refresher    survey was revised to place a stronger empha-
training programmes in November and Decem-           sis on engagement, loyalty and retention. New
ber 2005. The aim of these sessions was to re-       questions were added and some old ones were
integrate the Yes I Can! attitude into the culture   removed to enhance the quality of the results.
of the company in a more dynamic way.                    In 2005, 13,535 (12,041) employees at 140
   A special activity calendar was created to        (133) hotels, including managed and franchise
help hotels and staff carry out certain key Yes      properties, participated in the Climate Analysis sur-
I Can! activities every month. The activities vary   vey. The result was 84.5 (81) out of a possible 100.
from month to month, ranging from on-job             The loyalty index was 74% and the goal for 2006
skills training and departmental Yes I Can!          is to increase the total result from 84.5 to 86.
meetings to the selection of the Host/Hostess
of the Month. Instead of having annual per-          ALwAyS LEARNING                                          The Management School continued to attract
formance reviews, employees will now have            Rezidor SAS is committed to developing each              members from all brands, with 355 (194) em-
twice-yearly performance reviews to keep the         employee to his or her full potential. At each hotel     ployees attending in 2005. One course, Profit
lines of communication open and increase em-         a minimum of 1% of total revenue should be spent         Planning Framework, was added to the curricu-
ployee satisfaction.                                 on education and training. Training at Rezidor           lum, enhancing the current focus areas of Rev-
   All Department Heads and General Manag-           SAS has a two-pronged goal: career develop-              enue Enhancement, Sales, Business Planning
ers had been trained in the Leading Yes I Can!       ment and personal development. Much of the               and Training Techniques.
programme by the end of 2005. All members of         training is brand specific, including induction train-      In 2005, Rezidor SAS extended its learning
the management team spent two days together          ing, service programmes and brand standards.             portfolio by introducing customised eLearning
attending Yes I Can! Delivering the Promise and      Other basic and advanced resources are cross             resources to support the face-to-face Manage-
Leading Yes I Can! before the programme was          brand. The Management School is not just a train-        ment School forum. Learning anywhere, at any
launched in hotels. All Rezidor SAS employees        ing platform; it is also a medium through which to       time, offers staff the opportunity to blend this
have attended the Yes I Can! Delivering the          convey both the company culture and an under-            teaching method with others and maximise
Promise course.                                      standing of the hospitality industry as a whole.         learning outcomes. Time is of the essence in

58
                                                                       employees




today’s world, and eLearning allows all students      ownership in every process they manage and to        Rezidor SaS Values
to fit their learning into their busy lives, with a   participate in decisions that affect them. A fun-
flexible learning schedule and individualised         damental element of the 100% Guest Satisfac-
learning content.                                     tion Guarantee programme is the empowerment          Trust
   The Per Axel Brommesson fund was founded           of staff to make things right.
in 1989 in the honor of the former chairman of the                                                         To earn trust and show it; to
company, Per Axel Brommesson. The fund was            FAST TRACk GENERAL mANAGERS                          offer mutual respect, honesty,
awarded for 16th consecutive year in 2005 and         The Rezidor SAS Mentor/Mentee programme is           integrity and loyalty
offers the possibility for talented Rezidor SAS       designed to identify and develop employees within
employees to develop their management knowl-          the company who show high potential talent to        Confidence
edge at leading universities around the world.        become future General Managers of Rezidor SAS
                                                                                                           To believe in ourselves, in what
   Rezidor SAS hotels are continuing to be pop-       hotels. This supports the company culture of pro-
                                                                                                           we have achieved and in where
ular amongst internship students. A large             moting from within and is a sound management
number of schools in Europe and the USA are           method for a fast-growing hospitality company.
                                                                                                           we are doing it, but also to
visited twice every year to introduce the stu-           A Mentor is a father figure, a teacher, a role    remain humble
dents to career opportunities in the company.         model, an approachable counsellor, a trusted
                                                                                                           Open
   Growing through growing people is one of           advisor and a challenger. A Mentor is a leader
the four basic beliefs of the People Develop-         with extensive experience who understands all        To be frank, transparent, acces-
ment strategy. It reflects the importance of          the intricacies of being a General Manager and       sible and flexible; to listen to and
human resources in the value building process         is able to pass this information on.                 consider all options
and translates into employee policy according            A Mentee, an employee with great potential,
to which, the company also has a responsibility       is handpicked by a General Manager. A Mentee         Yes I Can!
for improving the quality of life for employees at    has worked in several departments and had            is our attitude and driving force
every level.                                          budget and personnel responsibility. By working
   The company believes in communicating open-        with a Mentor in a different hotel for a period of
ly and honestly within the company, in all direc-     up to 12 months, the Mentee will acquire
                                                                                                           empowerment
tions. The flow of ideas concerning how to develop    enough knowledge and experience to become            To enable and equip employees
the company, each hotel, each function and each       a General Manager.                                   to make the important decisions
job are strongly encouraged as are creativity and        Rezidor SAS constantly evaluates Mentors
the search for new solutions and opportunities.       and Mentees and looks within to train and cre-       Fighting Spirit
   Rezidor SAS believes in responsibility and         ate General Managers who are deeply rooted in
encourages and empowers employees to take             the Rezidor SAS hospitality culture.                 To always be entrepreneurial,
                                                                                                           opportunity driven and hungry
                                                                                                           for more

CLImATE ANALySIS, 2005                                GEOGRAPHICAL DISTRIBUTION OF EmPLOyEES               z-factor
OF MaxIMUM 00                                        peR CeNT
                                                                                                           To dare to be different in ways
100                                                   Nordic countries (22)
                                                                                                           that are fun and rewarding
 95
 90
 85
 80
 75                                                   Rest of europe (0)
 70
 65
 60
 55
                                                      Middle east
 50
        01       02       03       04        05       africa & China (8)


                                                                                                                                       5
         awards




                      Rezidor SaS hotels around the
                      world are recognised for their
                      impeccable service, excellent
                      dining, marketing efforts, busi-
                      ness sense and overall efforts
                      as a group of highly-acclaimed
                      hotels.




                                                         




 2               



0
                                                                    awards




an Impressive array of awards in 2005



■ The Radisson SAS Hotel, Frankfurt was          ■ The Radisson SAS Hotel Glasgow won               ■ The Radisson SAS Hotel in Kuwait won the
awarded “Best Hotel Opened In The Year” at       “Best Hotel in the Customer Care” section at       “Best 5-Star Business/Corporate Hotel” and
the Worldwide Hospitality Awards held during     the Scottish Thistle Awards in December 2005.4     the Radisson SAS Resort, Taba won the “Best
November 2005 in Paris.1                                                                            Environmental 5-Star Hotel” at the Middle East
                                                 ■ Radisson SAS hotels in Tallinn, Estonia;
                                                                                                    and North Africa (MENA) Travel Awards held in
■ The brand new Radisson SAS Hotel,              Vilnuis, Lithuania and Bratislava, Slovakia were
                                                                                                    Dubai in May 2005.
Birmingham won the prize for ”Employer With      named leading hotels in their countries at the
Fewer Than 250 Staff” at the Birmingham          2005 World Travel Awards in London.                ■ Radisson SAS scooped the Gold (2nd place)
Employer Coalition Awards.                                                                          for “Best Hotel Group UK” at the Buying
                                                 ■ Other winners at the prestigious 2005 World
                                                                                                    Business Travel Awards in London.
■ The Radisson SAS Hotel & Spa, Galway           Travel Awards were Radisson SAS Saga Hotel,
received the award for the “Best Sales and       Reykjavik (Iceland’s Leading Hotel), the           ■ The Czech gourmet guide, Grand Restau-
Marketing Strategy” at the 9th Annual HSMAI      Radisson SAS Resort, Sharjah (Sharjah’s            rants 2006, named the Radisson SAS Alcron
(Hospitality Sales & Marketing Association       Leading Hotel) and the Radisson SAS Roe            Restaurant as second in the Czech Republic’s
International) Awards in 2005.2                  Park Resort (Northern Ireland’s Leading Hotel).    Top 20 Best Restaurants.
■ The Sea Grill Restaurant at the Radisson       ■ The Radisson SAS Golden Resort, Sharm            ■ Christian Lohse, chef de cuisine at Fischers
SAS Hotel, Brussels was awarded 19 points        El Sheikh was awarded the “Marque of               Fritz at The Regent Berlin, won a much-
out of 20 and the coveted second place in the    Excellent” by Thomas Cook UK for quality           coveted star by the world-renowned Michelin
GaultMillau 2006, a leading gastronomic guide    of service and accommodation, and “Best            Guide. GaultMillau also awarded him an
for Benelux. Yves Mattagne, the head chef        Tropical Resort 2005” by First Choice UK at        impressive 17 out of 20 points.
received two Michelin Stars in appreciation of   the 2005 World Travel Market.
                                                                                                    ■ Hasan Sivrikaya (Switzerland), Chef de bar
his culinary expertise. 3
                                                 ■ Radisson and Radisson SAS were awarded           at the Park Inn in Rümlang, won third place at
■ Rezidor SAS was named the ”Best Inter-         the coveted title of “Best Worldwide Hotel         the World Championships of the International
national Hotel Company,” a prestigious Russia    Group” in May 2005 at the Advantage Annual         Bartenders’ Association (IBA) in Helsinki.
Travel Industry Award at the MITT2006 fair in    Conference in Sorrento, where 800 leisure and
Moscow.                                          business Advantage Agents from the UK vote
                                                 for their 20 top suppliers in various categories




                                                                                                                                                
                                                                      Customers




Delivering the promise



In 2005, Rezidor SAS celebrated ten years            the company determine and serve the needs of        “Spend Now and Earn Later” where members
of Yes I Can! with a re-launch of the su-            customers more accurately. It adds new insights     could book an Award Night stay before they
preme service concept that has made it               into the development of the brands, providing       even earned any Gold Points. This feature is
stand out from the competition. Yes I Can!           tracking data to compare with historical per-       exclusive to goldpoints plus and is part of an ef-
embodies the vision and philosophy of                formance and benchmark scores for products          fort to differentiate goldpoints plus from the loy-
Rezidor SAS in all activities, especially            and services across countries.                      alty programmes offered by competitors.
customer service. Radisson SAS hotels                   For 2005, the Delight Score, which repre-           Of all partner programmes, SAS EuroBonus
offers 100% Guest Satisfaction Guarantee,            sents the percentage of guests marking the top      remains the top room night contributor and is
a pledge it delivers to all customers                score for Willingness to Return was 93 (92) and     responsible for over 39% of all transactions.
through the Yes I Can! culture. Yes I Can!           the Overall Satisfaction Index was 92 (90). As a    However, goldpoints plus comes a close sec-
is a key, brand message that encapsu-                result, the Golden Question index, overall expe-    ond with 24% of guest award stays, while
lates the true spirit of hospitality.                rience, value for money and likelihood to return,   Lufthansa Miles & More is in third place with
                                                     improved from 90 to 91.                             11% of total partner transactions. In total, all 31
Delivering consistently on brand promises is a          The Quality Performance Review (QPR) pro-        global airline partners generate an impressive
crucial factor in ensuring customer loyalty. All     gramme aids the consistent delivery of the          14.5% of all room nights at Rezidor SAS hotels.
Rezidor SAS brands operate with clearly de-          brand promise. The QPR involves an annual           Rezidor SAS partnered with Sixt Car Rental and
fined product and service standards and the          quality inspection, which has been developed        extended partnership contracts with Emirates
Quality Performance Review programme en-             around specific brand service and operating         Airlines, Air Berlin and KLM/Air France Flying
sures that delivery is continuously secured.         standards. It focuses exclusively on the cus-       Blue, Lufthansa and Icelandair to include Park
                                                     tomer experience in relation to the product,        Inn hotels.
PUTTING THE IT IN HOSPITALITy                        service and the brand.                                 goldpoints plus won a warm reception from
In 2005, Radisson SAS once again raced ahead            These are effective operational tools with       its members who voted it into the top three at
of the competition by becoming the first inter-      which the General Managers can evaluate the         the 2004 Freddie Awards where frequent travel-
national hotel chain to offer Free Broadband to      performance of their hotel, and at the same time    lers nominate their favourite reward based loy-
all guests as part of its E@syConnect service        help Area Vice Presidents and Regional Direc-       alty programmes. The 2005 Freddie Awards,
concept. Many competing hotel chains offer           tors to assess the situation in their regions.      due be presented in mid 2006, bodes well for
free Internet access, but only to select guests.                                                         goldpoints plus.
Free Broadband at Radisson SAS hotels in-            TImE TO REwARD LOyALTy
cludes high-speed and wireless Internet ac-          The Rezidor SAS loyalty program was re-             GET mORE LEISURE AND PLEASURE
cess. Most Radisson SAS hotels are wired so          launched as goldpoints plussm to expand its ap-     The Get More leisure programme has quickly
that hotel guests can access the Internet from       peal and enable members to redeem points in         become the cornerstone of leisure marketing
anywhere in the hotel – rooms, meeting facilities    Asia Pacific and North America as well as Eu-       for Rezidor SAS, helping the company establish
and public areas – simply by using their name        rope, the Middle East and Africa. It also gave      a targeted and extensive leisure customer da-
and room number.                                     Rezidor SAS the opportunity to work closely         tabase. This fresh and stylish programme has
   By the end of 2005, all Radisson SAS hotels       with the Carlson loyalty programme of the same      attracted over 30,000 subscribers worldwide
offered IT Concierge, which offers seamless          name. goldpoints plus is the second largest loy-    and generated more than 45,000 room nights
technical support for any guest in need of assist-   alty programme for Rezidor SAS, after SAS Eu-       in 2005.
ance with IT related issues. This includes solving   roBonus, in terms of room nights generated             The programme has been extremely suc-
Internet access issues, printing documents and       from over 130,000 members. Member enrol-            cessful in Scandinavia. As a result, in 2006,
help with peripheral equipment such as LCD pro-      ment almost doubled in 2005 due to the re-          Rezidor SAS will launch Get More Scandinavia:
jectors and audiovisual equipment. IT Concierge      launch and renewed marketing efforts. The goal      a Get More programme for guests travelling in
is available seven days a week from 7 a.m.           for 2006 is to increase the number of enrolled      Denmark, Norway and Sweden. Members will
through 10 p.m. Support outside of these hours       members to 230,000.                                 have to stay four nights in Scandinavia but will
is offered by a local service provider.                 goldpoints plus offers its members a com-        be able redeem the free fifth night in any Rezidor
                                                     pletely customised online experience with rele-     SAS hotel in EMEA.
SUCH A DELIGHT!                                      vant features and functionality. In 2005, new
The Rezidor SAS customer satisfaction moni-          features were offered to make goldpoints plus
toring programme (the CST programme) helps           even more attractive. One such initiative was

2
                           Customers


                                   GUESTS DELIGHTED
                                   per cent




                                       80

                                       70

                                       60

                                       50

                                       40

                                       30

                                       20

                                       10

                                              01   02      03   04   05




CLIENTELE mIx
Room nights, per cent



Business individual: %


Leisure individual: 22%




Leisure groups: 0%




Business groups: %

Retail rates/rack: 5%




                                   wILLINGNESS TO RETURN
                                   per cent




                                   100


                                       80


                                       60


                                       40


                                       20


                                              01   02      03   04   05




                                                                          
                                                                partners & Owners




Securing Good Return on Investment



Rezidor SAS is one of the most dynamic               THE PROPERTy OwNERS                                  contracts are preferred for strategic locations.
hospitality companies in the world, with a           Understanding property owners and their needs        Rezidor SAS offers centralised reservation serv-
carefully segmented portfolio of great               is a fundamental success factor in hotel devel-      ices; worldwide sales offices; marketing and
brands. A demanding associate, Rezidor               opment. Rezidor SAS has been a property              advertising programmes as well as experienced
SAS often challenges partners, but it is             owner and therefore understands the wants            technical services; safety and security services;
always fair, equitable and constantly on             and needs of property owners better than most        a mature, responsible business programme and
the lookout for new and more efficient               other hospitality management companies.              central purchasing services. Rezidor SAS is a
ways of doing business.                                 Various types of owners are involved in the       serious, flexible and accessible partner, operat-
                                                     hotel industry. Some owners and investors            ing strong brands and providing a good return
THE COmPANy OwNERS                                   focus on the construction, development and           on investment.
The SAS Group has a 75% stake in Rezidor             ownership of buildings. They consequently
SAS and brings business to Rezidor SAS by            enter into lease contracts. Other investors focus    FRANCHISING
booking room nights for airline crew, staff, dis-    on the construction, development and manage-         Franchising is a successful and expanding
tressed passengers and employees on duty             ment of hotel properties and therefore enter into    method of marketing, selling and distributing
travel. Both companies belong to the same in-        management contracts with hotel management           goods and services. It combines the skill and
dustry, making it easy to package deals like the     companies. Other property owners operate             experience of the franchisor and the goodwill
popular 2005 SAS Christmas Calendar. As              their own businesses, running their properties       created by the brand. Franchised hotels consti-
2006 progresses, Rezidor SAS and SAS plan            as a brand agreed through franchise deals.           tute an increasingly large share of the Rezidor
to continue offering customers a variety of             Rezidor SAS offers a broad spectrum of solu-      SAS hotel portfolio. At the end of 2005, 30
travel offers that combine an airline ticket with    tions, ranging from lease and management             (34)% of all Rezidor SAS hotels in operation
a hotel stay.                                        agreements to franchise agreements, depend-          were under franchised contracts.
   Carlson Hotels Worldwide has a 25% stake          ing on the requirements of each individual hotel
in the company and works closely with Rezidor        owner, the hotel’s strategic fit and other
SAS in several areas such as distribution, loyalty   parameters.
programmes and sales. Rezidor SAS brings
European business to Carlson Hotels World-           CONTRACT STRATEGIES
wide in the United States, and Carlson brings        Rezidor SAS offers both valuable brands and
business from America and Asia Pacific to Rezi-      professional hotel management services to en-
dor SAS. The two companies have integrated           tice hotel owners to choose the company. The
their customer and travel agent loyalty pro-         Rezidor SAS focus on up-scale brands – Regent,
grammes, goldpoints plus and Look to Book. In        Radisson SAS and Missoni – is primarily based
2006, Rezidor SAS will introduce Gold Points         on management and lease agreements. The Park
for Meeting Planners, another successful exist-      Inn brand is expected to grow through franchise
ing Carlson programme.                               agreements, though lease and management




NUmBER OF HOTELS

                             1995        1996        1997        1998        1999        2000       2001         2002        2003       2004        2005
Owned                             5                                                      2             2          2          2                      0
Leased                                                       2          25          28            0        2          5          5         66
managed                          2                             5                    8            2        2          88        0         117
Franchised                       2          2         28          0          25          2            2                  5          8         80
TOTAL                                      80        00                 2                     0      82         200         2         263



                                                                      purchasing




providing Solutions as Well as Goods and Services



Hotels cite purchasing benefits as one of           OLD SCHOOL, NEw SCHOOL                                chasing need and demand of each hotel based
the most compelling reasons to become               Traditionally, Purchasing Services answered           on region. With a Yes I Can! service attitude, Pur-
part of the Rezidor SAS portfolio of hotels.        three simple questions: when, where and at            chasing Services ensures that hotel needs are
Hotels joining Rezidor SAS enjoy enor-              what price? These questions were related to           met at the right time for the right price.
mous savings of almost 10-15% on pur-               supply and demand and were driven by quanti-
chasing costs and receive a much better             tative considerations. Today, Purchasing Serv-        PIN UP
and broader level of service.                       ices offers well-researched and comprehensive         Rezidor SAS adopted the Purchasing Informa-
                                                    information to value-driven hoteliers on the best     tion Network (PIN) in 1998 and it has been a
In the current increasingly competitive market,     and most cost effective ways to meet the needs        grand success. All information about regional
the success of any enterprise depends on its        of increasingly discerning travellers.                and corporate purchasing agreements is fully
ability to stand apart and above the rest. Rezi-       As guests become more environment con-             integrated in the web-based PIN. In return for
dor SAS strives to set the highest possible         scious, the Purchasing Services department            market exposure on the PIN system, suppliers
standards in a constantly evolving and highly       has been called upon to source products and           offer payback rewards based on the actual pur-
competitive market, and the company’s Pur-          services that strike the right balance between        chase price. These bonus payments average
chasing Service department offers solutions         eco- and economic-friendly.                           around 3% and the money, which was well over
and support to sustain and support the compa-                                                             MEUR 2 in 2005 went straight back to the order
ny’s overall goals and strategies.                  REmARkABLE BUyING POwER                               initiators, which meant more savings for the ho-
    The Purchasing Services department’s goal       The robust size of Rezidor SAS allows Purchas-        tels. In time, PIN will become a complete e-pro-
is to ensure that all selected individual goods     ing Services to take advantage of extensive ex-       curement tool, allowing online end-to-end
and services work together creating a total en-     isting market research and successful                 transactions.
tity that is more than just the sum of its compo-   partnerships with premier suppliers that are
nents. Purchasing Services at Rezidor SAS           market leaders in their respective fields. Inline
works only with suppliers whose products have       with the Rezidor SAS think global, act local strat-
proven to be innovative and represent good          egy, the company is divided into eight dedicated
value for reliable quality.                         Purchasing Regions that cater for every pur-




NUmBER OF PROPERTIES IN OPERATION                   NUmBER OF PROPERTIES IN OPERATION                     NUmBER OF PROPERTIES UNDER
AND UNDER DEvELOPmENT                               AND UNDER DEvELOPmENT                                 DEvELOPmENT
RezIDOR SaS, 2005                                   RezIDOR SaS, 2005                                     RezIDOR SaS, 2005



Radisson SaS ()                                  Managed ()                                         60

Country Inn ()                                                                                           50

Missoni (2)                                                                                               40

                                                    Franchised (80)                                       30
park Inn (8)
                                                                                                          20
Regent ()
                                                                                                          10


Unbranded ()                                       Leased ()                                                 01        02       03        04       05

                                                                                                                                                           5
                                                          Community & environment




Responsible Business Re-emphasised



Rezidor SAS is dedicated to leading the             flexibility to accommodate all regional and local     ACTION AND AID IN A yEAR OF NATURAL
field in the hospitality industry with re-          differences. Hotels receive a list of goals, which    DISASTERS
gards to environmental performance. The             they use to devise an action plan best suited to      A series of large-scale natural catastrophes
company ensures compliance with ethical             their operational criteria. At the end of 2005,       strengthened the partnership between Rezidor
and human rights standards and is con-              94% of all hotels (excl. franchise hotels) had an     SAS and Save the Children in 2005. Early in the
tinuing to increase efficiency per produc-          RB action plan in place.                              year, in the aftermath of the tsunami, an impres-
tion unit at all levels including property,                                                               sive TEUR 20 was collected from guests and
brand and group.                                    mOTIvATING THE TROOPS                                 employees, a sum that was matched by the
                                                    Hotels are encouraged to continuously train           Rezidor SAS corporate office. goldpoints plus
The Rezidor SAS Responsible Business (RB)           their employees in the Responsible Business           members redeemed their points to aid the tsu-
programme is now in its sixth year and is a well-   programme. The training helps employees un-           nami relief and contributed TEUR 40. That figure
established part of the company’s operation.        derstand how a hotel impacts the natural envi-        was also matched by the corporate office.
The cornerstones of RB are:                         ronment and local community and how their                 In October, when the South Asian earthquake
                                                    actions can make a positive difference. The           left thousands dead and millions homeless, a
■ Taking responsibility for the health and          training material is updated regularly and in-        new collection was initiated. Almost TEUR 11
safety of employees and guests                      cludes a CD with guides, manuals and presen-          was collected from employees and guests.
                                                    tations. Every hotel has a skilled RB Coordinator     These funds will be used by Save the Children
■ Respecting social and ethical issues in the
                                                    to guide and advise employees on how to               to provide family packs to the homeless and
company, as well as in the community
                                                    achieve their RB objectives.                          needy in areas hit by the earthquake. Each fam-
■ Reducing the company’s negative impact               All new employees are introduced to the RB         ily pack, costing USD 600, includes a tent, food,
on the environment                                  programme. New hotels that join the Rezidor           sheets and other basic necessities.
                                                    SAS portfolio have been offered rigorous RB
kEEPING UP THE GOOD wORk                            training since 2002. Over 10,000 employees            wORkING wITH, AND FOR,
The RB programme is now deeply embedded             had received RB training by the end of 2005.          THE COmmUNITy
in the company culture. But as with any mature                                                            In September, 133 Radisson SAS, Park Inn,
programme the real challenge now lies in keep-      RECOGNITION FOR RESPONSIBLE                           Country Inn and Regent hotels participated in
ing the troops motivated to advance. In 2005, a     BUSINESS                                              the global Hotel Environment Action Month
new information collection system was launched      External awards and certificates highlight the        (HEAM). HEAM was initiated in 2003 by the ITP
to ensure that lines of communication are kept      pro-active passion that Rezidor SAS exhibits as       (International Tourism Partnership), the tourism
open between the hotels and the head office in      a responsible company that is sensitive about         section of the Prince of Wales International
Brussels. This innovation gives more structure      the environment. In Norway, the company’s ho-         Business Leaders’ Forum. The aim of HEAM is
and transparency to the RB reporting process        tels have made a strong commitment to the             to further educate employees and guests about
and increases accountability.                       Nordic Swan eco-label and five Norwegian              environmental and social issues and to raise
   The performance of all the hotels is measured    Rezidor SAS hotels had received certification by      awareness of the efforts made by individual ho-
against the goals and targets defined in the cor-   the end of 2005. More Norwegian properties will       tels, plus the work of the ITP.
porate RB programme. Rezidor SAS hotels are         gain certificates in the coming year. An addi-           Some form of HEAM activity took place in
spread all over the Europe, the Middle East,        tional 23 hotels received local, external environ-    almost all countries where the company oper-
Africa and Asia. And the RB programme has the       mental certifications.                                ates. Rezidor SAS hotels participated enthusi-




RESPONSIBLE BUSINESS PROFILE

                                                                  RaDISSON SaS                  paRK INN           COUNTRY INN                    ReGeNT
energy kwh/m 2                                                                20                        5                  28                     20
Water litre/guest night                                                       50                        28                  25                     52
Unsorted waste/guest night                                                   .8                    .5                    0.2                    .
Carbon dioxide emissions, ton                                                5.                          0                     0                       0


                                                             Community & environment




                                                                                                           ENERGy CONSUmPTION, 2001– 2005
astically with a wide range of ingenious activities.   ■ Review insurance programme requirements
                                                                                                           RaDISSON SaS, KWH/M2
These included clean-up campaigns, blood do-
                                                       ■ Define and develop crisis management and
nations, collection of toys and clothes for chari-                                                         300
                                                       business continuity processes
ty, car-free days, art competitions for children,
non-smoking days and a renewed focus on                ■ Assist in conducting and reviewing hotel          250

providing employees with training on environ-          audits and pro-actively use them as a tool to       200
mental management.                                     minimise risk and loss throughout the
                                                       company                                             150
ENvIRONmENTAL EFFICIENCy
                                                       ■ Keep the board informed on a regular basis        100
The hotels within the group are becoming in-
                                                       and advise them on recommended policy                50
creasingly resource efficient. When measured in
                                                       changes in the above four areas
terms of production unit, surface area with re-
                                                                                                                 01    02     03     04       05
gard to energy consumption, and guest nights           ■ Keep Regional Directors informed on a
with regard to carbon dioxide emissions, water         quarterly basis and advise them on policy
consumption and waste generation, the overall          changes as they come into effect
trend is positive.
    In total, 86 (80)% of the hotels responded to      Since the terrorist attacks in the US in 2001 and
the 2005 annual RB Status Report, an Internet          in London in 2005, there has been a great shift
                                                                                                           wATER CONSUmPTION, 2001– 2005
based questionnaire asking the hotels about            in how hotel security is perceived. At Rezidor      RaDISSON SaS, LITReS/GUeST NIGHT
their social and environmental performance.            SAS this has resulted in a more structured risk
During the year, the hotels invested TEUR              management agenda, with more pro-active be-         500
2,832 in environmentally related improve-              haviour about gathering and sharing information
ments, including energy efficiency and waste           throughout the company. The lines of commu-         400

management. Over 60% of all hotels have now            nication regarding safety and security issues are
                                                                                                           300
installed low energy light bulbs, room key cards       kept open and the key focus is on prevention.
used to switch on the power in the room, low              In 2005, the Radisson SAS Hotel, Amman
                                                                                                           200
energy mini bars and thermostats to control air        was targeted by terrorists and the banquet hall
conditioning.                                          of the hotel was bombed. The hotel coped ex-        100
    The impact of these investments is that the        tremely well, maintaining operations and sup-
total energy consumption per square meter              porting both victims and local authorities.
                                                                                                                 01    02     03     04       05
was reduced by 6% and the company’s direct             Terrorists increasingly targeted hotels and re-
carbon dioxide emissions were reduced 13%.             sorts in 2005, a move possibly aimed at gaining
The direct CO2 emissions amounted to 5,990             widespread exposure in the media. The current,
(6,897) tons in 2005. The indicators for water         unsettled world situation means that safety and
consumption and unsorted waste generation              security is a key issue for hotel guests and em-
remained more or less constant, 450 (451)              ployees. Rezidor SAS has an open approach to        UNSORTED wASTE, 2001– 2005
litres per guest night and 1.86 (1.84) kg per          safety and security, based on communication,        RaDISSON SaS, KG/GUeST NIGHT
guest night.                                           co-operation and a Yes I Can! attitude.
                                                          Underscoring the company’s commitment to         2,5
PROTECTING OUR PEOPLE AND                              safety and security, Rezidor SAS became one
                                                                                                           2,0
PROPERTy – SAFETy AND SECURITy                         of the founding members of International Hotel
The safety and security of guests, employees           and Restaurant Association’s Global Council on
                                                                                                           1,5
and property is a vital aspect of hotel opera-         Safety Security and Crisis Management. The
tions. At Rezidor SAS, the Risk Management             company was also chosen to host the first face-     1,0
Task Force focuses on six main points:                 to-face meeting of the Global Council in Brus-
                                                       sels in 2005.                                       0,5
■ Review and refine loss prevention standards,
applications, education, practice and auditing                                                                   01    02     03     04       05


                                                                                                                                                   
                                                        Governance & Management




Walking the Talk



In 2005, Carlson Hotels Worldwide ac-              gen Lindegaard (President & CEO, SAS Group)               acts with the Planning Committee to define the
quired a 25% stake in Rezidor SAS to               and Benny Zakrisson (Vice President Corporate             strategic plan for the company. They meet twice
become part owner along with the SAS               Advisory, SAS Group). Jay Witzel (President,              a year to discuss and decide on the business
Group. Carlson is ranked amongst the               Carlson Hotels Worldwide) and Trudy Rautio                plan and strategic issues, including general risk
largest privately held corporations in the         (Executive Vice President and CFO, Carlson                management.
United States and is based in Minneapolis,         Companies) represent Carlson in the board,                   The Sales & Marketing Committee meets
Minnesota, USA. The SAS Group, Europe’s            while Leo M. Renaghan (Associate Dean for Ac-             monthly to follow-up on all revenue related ac-
fourth largest airline, is listed on the stock     ademic Affairs, Cornell University) is an inde-           tivities and issues, including marketing, sales,
exchanges in Stockholm, Copenhagen                 pendent external member.                                  public relations and brand activities and assess-
and Oslo.                                             The Board of Directors assess and approve              ment of new initiatives. The Area Vice Presi-
                                                   the year-end business plan and interim reports.           dents/Regional Directors meet six times a year
Rezidor SAS is organised to achieve its busi-      They then set the overall future business objec-          with the COO to follow-up on the operational
ness and value creation goals. It is governed      tives and strategies by agreeing a budget and             issues including hotel’s financial performance.
against clearly set targets, all relating to the   business plan. The board also decides on in-
overall target of value growth measured in         vestments, new hotel projects and major                   DE-CENTRALISING FOR GROwTH
EBITDA. Annual average EBITDA growth is            changes in the organisation. Five ordinary board          Rezidor SAS has focused on decentralisation to
targeted at 15% over a business cycle and          meetings are held annually, while the Chairman            sustain a high rate of growth, giving more author-
performance towards key stakeholders, such         of the Board and the CEO of Rezidor SAS, Kurt             ity and accountability to individual hotels. To help
as customers, property owners and employees,       Ritter, have monthly meetings.                            General Managers capitalise on their proximity to
is assessed regularly.                                The CEO meets with the Executive Commit-               the market, they are empowered with all the de-
   SAS is represented on the board of Rezidor      tee every week to discuss board matters, busi-            cision-making authority they need to enhance
SAS by the Chairman, Gunnar Reitan (Executive      ness plans, results, main issues, projects in the         revenue, including pricing, revenue management
Vice President & Deputy CEO, SAS Group), Jør-      pipeline and organisational matters. The CEO              and profit generation at the GOP level.
                                                                                                                 Within the framework of brand definitions and
                                                                                                             company policies, the Area Vice Presidents and

The triangle of excellence                                                                                   Regional Directors approve the quarterly busi-
                                                                                                             ness plan. This plan is implemented by the Gen-
                                                                                                             eral Managers, who are fully accountable for
                      eMpLOYeeS                                  The Triangle of Excellence is central to    customer, owner and employee satisfaction at
                                                                 the Rezidor SAS business philosophy.
                                                                 It acknowledges the importance of
                                                                                                             their hotel.
                                                                 owners, customers and employees,                The M-Powerment programme includes equip-
                                                                 and dictates that all three groups must     ping General Managers with state-of-the-art tools
                                                                 be satisfied in order to run a successful   for revenue management, operational efficiency
                                                                 hotel management operation.
                                                                                                             and profit generation.
                         ce

                                 So
                       an




                                                                 As a socially and environmentally               The Area Vice Presidents and Regional Direc-
                                   cia
                     rm




                                                                 responsible company, Rezidor SAS            tors are part of the Corporate Office and sup-
                                     lp
                   rfo




                                                                 acknowledges the role played by other
                                                                                                             port the General Managers, in future openings
                                       er




                                                                 key stakeholders including suppliers,
                 pe




                                         for




                                                                 local communities, government               and franchise operations, in achieving synergies
               nt




                                          ma




                                                                 (legislation) and the environment.          in operation and optimising market penetration.
             me




                                            nc




                                                                                                             They are responsible for following-up on reve-
            on




                                                                 By maintaining an open dialogue
                                               e




                                                                                                             nues and profitability and for improving general
          vir




                                                                 with key stakeholders, Rezidor SAS
        en




                                                                 can keep abreast of stakeholder             brand perception in their regions. The corporate
                                                                 demands and thus swiftly adapt to           office is responsible for developing strategies
                 economic performance                            the continuously changing business
                                                                                                             and goal setting, establishing brand guidelines
                                                                 environment.
                                                                                                             and creating brand awareness, auditing and
                                                                                                             control, as well as ensuring profitable growth.
INVeSTORS &                               COSTUMeRS
pROpeRTY OWNeRS

8
                                                 Governance & Management




                                                           HOTeLS
                                                        General Managers



                                                       Operations

                                                          ReGIONS
                                                      area Vice presidents
                                                       Regional Directors



                                                          Strategy

                                                      CORpORaTe
                                                        OFFICe




Hotels                                        Regions                                     Corporate Office
20 General Managers                           Regional Directors and                    Corporate Office
                                              5 area Vice presidents

Responsibilities                              Responsibilities                            Responsibilities
■ Brand delivery                              ■ Strategy formulation and implementation   ■ Strategy development
■ Quality performance                         ■ Hotel support                             ■ Regional and hotel support
■ Revenue generation                          ■ Optimise operations                       ■ Brand development and implementation
■ Customer, owner and employee satisfaction   ■ Revenue generation                        ■ Succession planning
■ Recruitment and people development          ■ Brand delivery                            ■ Audit and control
■ Promote and sustain Responsible             ■ Owner satisfaction and relationships      ■ Financial performance
  Business objectives                         ■ Leadership development



                                                                                                                               
Leveraging relationships!                    Carlson Hotels Worldwide acquired 25% of Rezidor SaS in 2005 and the companies
renegotiated commercial terms of the current Master Franchise agreement (MFa). This agreement brings additional scale and
profitability to Rezidor SaS and further enhances development opportunities by giving Rezidor SaS a better platform for growth.
It also ensures that the companies align and grow their brands globally, particularly through their loyalty and rewards programs.

2
Board of Directors                                Photograph on previous page.

Trudy Rautio – Born 02/11/52                  Jørgen Lindegaard – Born 07/10/48       Jay S. Witzel – Born 12/06/47
Position: Executive Vice President & CFO,     Position: President & CEO, SAS Group    Position: President, Carlson Hotels Worldwide
Carlson Companies                             Member since: May 2001                  Member since: February 2003
Member since: May 2005
                                              Benny Zakrisson – Born 02/12/59
Kurt Ritter – Born 10/02/47                   Position: Vice President Corporate
President & CEO, Rezidor SAS Hospitality      Advisory, SAS Group
                                              Member since: September 1992
Gunnar Reitan – Chairman, Born 21/09/54
Position: Executive Vice President & Deputy   Leo M. Renaghan – Born 15/07/43
CEO, SAS Group                                Position: Associate Dean for Academic
Member since: April 1994                      Affairs, Cornell University
                                              Member since: September 1992


executive Committee
Standing left to right                        Sitting left to right
Martin Rinck                                  Werner Kuendig
Executive Vice President & CDO                Executive Vice President & COO

Gordon McKinnon                               Kurt Ritter
Sr. Vice President Brands                     President & CEO

Olivier Jacquin                               Knut Kleiven
Sr. Vice President of Sales                   Deputy President & CFO

Jacques Dubois
Sr. Vice President, Marketing,
Distribution & CRM




area Vice presidents
Standing left to right                         Sitting left to right
Jean-Marc Busato,                              Christian Gartmann, UK,
The Middle East                                Ireland & Iceland

Marko Hytonen, Russia,                         Werner Kuendig,
CIS, Baltics & Finland                         Executive Vice President & COO

Thorsten Kirschke, Germany                     Martin Creydt, Norway




Regional Directors & area Vice presidents
Standing left to right                        Roy A. Kappenberger,                    Sitting left to right
Martin Creydt,                                Regional Director, Denmark              Jean-Charles Donat,
Area Vice President                                                                   Regional Director, Park Inn France
                                              Michel Schutzbach,
Michel Stalport,                              Regional Director, Poland               Christian Gartmann,
Regional Director,                                                                    Area Vice President
                                              Martin Holze,
France & Tunisia
                                              Regional Director, Park Inn UK          Werner Kuendig,
Thorsten Kirschke,                                                                    Executive Vice President & COO
                                              Gaston Gellens,
Area Vice President
                                              Regional Director, Sweden               Jean-Marc Busato,
Han Oldenburger,                                                                      Area Vice President
                                              Felix Hauser,
Regional Director, Benelux
                                              Regional Director,                      Marko Hytonen, Area Vice President
Heimo Leitgeb, Regional Director,             Switzerland & Italy
                                                                                      Per Kyd Jacobsen, Regional Director,
Austria, Bulgaria, Hungary,
                                                                                      Turkey & Azerbaijan
Czech Republic & Bratislava

                                                                                                                                
                                       Rezidor SaS General Managers




RADISSON SAS                         Paris, Fabrice Castellorizios       LeBaNON
                                     Paris, Nathalie Seiler              Beirut, Peter Schuler
aUSTRIa                              Paris, Valerie Portheault
Salzburg, Verena Forstinger                                              LITHUaNIa
                                     Paris, Jean-Claude Dumet
Vienna, Alfio Bernardini             Lyon, Yves Grardel                  Klaipeda, Cornelia Erhardt
Vienna, Heimo Leitgeb                Nice, Lionel Servant                Vilnius, Eirik Bergvoll

azeRBaIJaN                           GeRMaNY                             MaLTa
Baku, Per Svendsen                   Berlin, Werner Knechtli             St. Julian’s, Ernest Barry
                                     Cologne, Jürgen Wirtz               Golden Bay, Raphael Cauchi
BaHRaIN
                                     Cottbus, Tobias Brönstrup           NeTHeRLaNDS
Manama, Radek Cais
                                     Dresden, Fernando Gruenberg Stern   Amsterdam, Harriet Koopman
BeLGIUM                              Düsseldorf, Erich Banziger          Amsterdam, Han Oldenburger
Antwerp, Marco Rabbia                Düsseldorf, Thomas Swieca
Brussels, Nicolas Meylan             Erfurt, Florian Meyer-Thoene        NIGeRIa
Brussels, Jesper Henriksen           Fleesensee, Karl Foerster           Lagos, Eivind Dalvang
Hasselt, Pierre Verbeke              Frankfurt, Oliver Staas
                                                                         NORWaY
Spa, Willem van der Zee              Hamburg, TBA
                                     Hannover, Frank Raspe               Ålesund, Vanja Langsaavold Braute
Spa, Willem van der Zee
                                     Karlsruhe, Hagen Müller             Beitostølen, Bjornar Hovi
BULGaRIa
                                     Leipzig, Ralph Goetzmann            Bergen, Lars Listhaug
Sofia, Martin Kolb                   Lübeck, Rik Brust                   Bergen, Per Paulsen
                                     Merseburg, Patrick Hagen            Bodø, Jan-Ove Edvardsen
CHINa
                                     Neubrandenburg, Jürgen Preiss       Haugesund, Knut Henderson
Beijing, Mac Karlsson                                                    Karlstad, Maria Ahgren
                                     Rostock, Holger Herrmann
CzeCH RepUBLIC                       Rügen, Tineke de Wit                Kristiansand, Lars Ola Solstad
                                     Rötz-Wutzschleife, Monika Hauer     Lillehammer, Jorgen Holst
Prague, Pasquale Baiguera
                                     Wiesbaden, Manfred Gabriel          Longyearbyen, Ronny Gjøse
DeNMaRK                                                                  Oslo, Tarje Hellebust
Aalborg, Richard Byrdal              HUNGaRY                             Oslo, Jörg Schiffmann
Aarhus, Henrik Bille Pedersen        Budapest, Gabor Bencze              Oslo, Peter Holst
Copenhagen, Roy Kappenberger         Bükfürdö, Guido Bayley              Olso, Olav Brommeland
Copenhagen, Anders Johannesson                                           Oslo, Jörgen Ljunggren
                                     ICeLaND
Copenhagen, William Palle                                                Stavanger, Ina Eldøy
                                     Reykjavik, Nina Thomassen           Stavanger, Ina Eldøy
Frederikshavn, Camilla Frost
                                     Reykjavik, Hrönn Greipsdóttir       Tromsø, Dag Høybakk
Odense, Jack Nielsen
Ronne, Birte Jensen                  IReLaND                             Trondheim, Rune Nordstokke
Silkeborg, Egon Klitgaard            Athlone, Geir Sikko                 OMaN
eGYpT                                Cavan, Sheila Gray                  Muscat, Christopher Pike
                                     Cork, Ruairi O’Connor
El Quseir, Pascal Gadet
                                     Dublin, Neil Lane                   pOLaND
Sharm El Sheikh, Daniel Twerenbold
                                     Galway, Tom Flanagan                Krakow, Michael Rathgeb
Taba, Johan Aschan
                                     Letterkenny, Ray Hingston           Szczecin, Janet Fitzner
eSTONIa                              Limerick, Stephen Hanley            Warsaw, Michel Schutzbach
Tallinn, Sam Holmberg                Sligo, Eoin Little                  Wroclaw, Maciek Miazek

FINLaND                              ITaLY                               pORTUGaL
Espoo, Kimmo Niittymäki              Rome, Massimo Supino                Lisbon, Virgilio Cordeiro
Helsinki, Marjo Risku
                                     JORDaN                              RUSSIa
Helsinki, Leena Turunen
                                     Amman, Firas Mniemneh               Moscow, Jørgen Rathjen
Helsinki, Leena Turunen
                                     Aqaba, Wahbeh Dahdah                Sochi, Lyudmila Rudneva
Oulu, Jukka Räisänen
                                                                         Sochi, Igor Rekubratskiy
Turku, Satu Järvelä                  KazaKHSTaN
                                                                         Sochi, Ekaterina Goncharenko
Vaasa, Riku Asukas                   Astana, John Grieg                  St. Petersburg, Marko Hytonen
FRaNCe                               KUWaIT
                                                                         SaUDI aRaBIa
Aix-Les-Bains, Marc Augé             Kuwait City, Andreas Flückiger      Jeddah, Muin Sarhan
Les Arcs, Gervais Rousseau
                                     LaTVIa                              Jeddah, Basel Talal
Biarritz, Jacques Aiglon
                                     Riga, Carl Kjellberg                Riyadh, Mohamed Benamar
                                                                         Yanbu Al Bahr, Tahar Chakray

                                             Rezidor SaS General Managers




SLOVaKIa                                   DeNMaRK                                 Stockholm, Meha Patel
Bratislava, Sonja Divé-Dahl                Aalborg, Solveig Byrdal                 Täby, Ulrik Clemens von Döbeln
                                           Copenhagen, Rune Andersen               Uppsala, Cecilia Granath
SOUTH aFRICa
                                           Vejle, Lone Møller                      Vargön, Tomas Lindqvist
Cape Town, Maarten van den Nieuwenhuysen                                           Värnamo, Kåre Johansson
                                           FRaNCe
SWeDeN                                                                             SWITzeRLaND
                                           Arcachon, Dieter Acke
Gothenburg, Malin Franck                   Lyon, Yannick Paturel                   Lully, Jan Tore Halvorsen
Helsingborg, Mikael Wennerström            Macon, Jean-Charles Donnat              Zurich, Andreas Stöckli
Linköping, Tomas Hornstedt                 Nancy, Alexandre Chirat
Malmö, John Monhardt                                                               UNITeD KINGDOM
                                           Nice, Paola Valzoano
Örebro, Patrik Hanberger                                                           Bedford, Mark Barber
                                           Orange, Noël Biset
Östersund, Anders Hallin                                                           Cardiff, Roger Goldsworthy
Stockholm, Lena Andersson                  GeRMaNY                                 Harlow, Anna Frigieri
Stockholm, Peder Backström                 Berlin, Jürgen Gangl                    Hyde Park London, Deborah Haines
Stockholm, Lena Andersson                  Bochum, Jo Dahmen                       London, Martin Holze
Stockholm, Gaston Gellens                  Cologne, Marcus Nölke                   Lakeside, Didier Boehlen
Stockholm, Charlotte Blum                  Cologne, Hidir Özdemir                  Northampton, Phillip Dark
Uppsala, Nils-Goran Zedrén                 Dortmund, Daniel Hoffacker              Nottingham, Sarah Bestwich
                                           Erfurt-Apfelstädt, Klaus Hoesselbarth   Telford, Adrian Pickard
SWITzeRLaND
                                           Hannover, Marcus Schellenberger         Watford, Peter Bartlett
Basel, Felix Hauser                        Hartmansdorf/Chemnitz, Jan Meyer        West Bromwich, Stephen Woodhouse
Lucerne, Markus Conzelmann                 Kaarst, Bertold Reul
St. Gallen, Daniel Werner                  Kamen, Daniel Hoffacker
                                                                                   COUNTRy INN
TUNISIa                                    Munich, Frank Graichen
Djerba, Christiane Antoine                 Munich, Simone Samland                  aUSTRIa

                                           HUNGaRY                                 Vienna, Karim Jalloul
TURKeY
                                                                                   Vienna, Jens Ostergaard
Ankara, Atakan Turhan                      Sarvar, Simone Sander
Istanbul, Philippe Pellaud                                                         FRaNCe
                                           ICeLaND
Istanbul, Per Kyd Jacobsen                                                         Paris, George Balassis
                                           Reykjavik, Ingibjörg Ólafsdóttir
UNITeD aRaB eMIRaTeS                                                               GeRMaNY
                                           IReLaND
Dubai, Siegfried Nierhaus                                                          Timmendorfer Strand, Timm Eckl
                                           Dublin, Sally Ann Hughes
Sharjah, Guy Chidiac
                                           Dundalk, Philip Uzice                   UNITeD KINGDOM
UKRaINe                                    Mulranny, Stephen O’Connor              London, Raj Lallchand
Kiev, Conrad Meier                         NORWaY
                                                                                   London, Malcolm Linforth

UNITeD KINGDOM                             Haugesund, Knut Henderson
Belfast, Carina Williamson                 Geilo, Kjetil Vassdal                   REGENT
Birmingham, Kathrine Ohm-Thomas            Rauland, Kristian Samnoen
                                           Stavanger, Øivind Wigand                CROaTIa
Edinburgh, Malcolm Rann
                                                                                   Zagreb, Torbjörn Bodin
Glasgow, Philip Mahoney                    RUSSIa
Leeds, Peter Laursen                                                               GeRMaNY
                                           Ekaterinburg, Sanjay Deva
Limavady, John O’Carrol                                                            Berlin, Wolfgang Nitschke
Liverpool, Geir Tønnessen                  SOUTH aFRICa
London, Mark Willis                        Cape Town, Debra Sivertsen              KazaKHSTaN
Manchester, Christian Gartmann                                                     Almaty, Alper Can Bulcum
                                           SWeDeN
Stansted, Tim Cordon
                                           Borlänge, Lars Lundh
UzBeKISTaN                                 Falun, Janne Svedin                     UNBRANDED
Tashkent, Necip Fincancioglu               Gävle, Mikael Junger                    eGYpT
                                           Gislaved, Victoria Johansson
                                                                                   Sharm El Sheikh, Hatem Ezzat
                                           Haninge, Lotta Welander
PARk INN
                                           Karlskrona, Marie Baggström             FRaNCe
azeRBaIJaN                                 Kvanum, Tomas Lindqvist                 Aix-Les-Bains, Jean-Christophe Chapuis
Baku, Thomas Stene                         Nyköping, Tell Mellander
                                                                                   IRaN
                                           Sandviken, Goran Cronwall
                                           Solna, Stefan Larsson                   Kish Island, TBA


                                                                                                                            5
The Financials


Statement Of The Board Of Directors And Managing Director   77
Auditors’ Compilation Report                                78
Board Of Directors’ Report                                  79
Group Highlights                                            82
Income Statement – Pro Forma                                83
Balance Sheet – Pro Forma                                   84
Statement Of Changes In Equity – Pro Forma                  86
Cash Flow Statement – Pro Forma                             87
Notes To The Pro Forma Group Accounts                       88




76
                                 Statement of The Board of Directors and Managing Director




Statement of The Board of Directors
and Managing Director

We have today presented the annual report (group accounts) of Rezidor SAS Hospitality Holdings AB for 2005.

The pro forma financial statements in the annual report have been prepared as described in the notes to the group accounts.

Actual financial statements (before pro forma adjustments) have been prepared and presented in accordance with International
Financial Reporting Standards (IFRS) on the presentation of financial statements. We consider the accounting policies appropri­
ate for the annual report (based on the financial statements before pro forma adjustments) to provide a true and fair view of the
Group’s and the Parent Company’s assets, equity and liabilities, financial position, results and cash flows.

We recommend the annual report for adoption by the Annual General Meeting.


Stockholm, March 10th 2006




Board of directors
Gunnar Reitan, Chairman, Jørgen Lindegaard, Jay S. Witzel, Leo M. Renaghan, Benny Zakrisson, Trudy Rautio
and Kurt Ritter.




                                                                                                                                    77
                                                       Auditors’ Compilation Report




Auditors’ Compilation Report



We have read the accompanying unaudited pro forma consolidated balance sheets of Rezidor SAS Hospitality
Holdings AB Group (the “Group”) as at 31 December 2005 and as at 31 December 2004 and the unaudited pro forma
consolidated Income statements, pro forma statements of Changes in Equity, pro forma Cash flow statements for
the years then ended and have performed the following procedures.

1. Compared the numbers appearing in the columns captioned “Actual 2005” in note 27, page 103–106, to the unaudited
   consolidated Balance sheet as at December 31, 2005 and the unaudited consolidated Income statements and the unaudited
   Cash flow statements for the year ended and found them to be in agreement. The Balance sheet, Income statement, and
   Cash flow statement have been subject to review.

2. Compared the numbers appearing in the columns captioned “Actual 2004” in note 27, page 103–106, to the consolidated
   Balance sheet as at 31 December 2004 and the consolidated Income statement and the Cash flow Statement for the year
   ended and found them to be in agreement.

3. Made enquiries of certain officials of the Group who have responsibility for financial and accounting matters about the basis
   of determination of the pro forma adjustments.

The officials described to us the basis for determination of the pro forma adjustments

 4. Read the notes to the pro forma consolidated balance sheets, pro forma consolidated Income Statements and the pro forma
     consolidated Cash flow Statements and found them to be consistent with the basis described to us for determination of the
     pro forma adjustments.
.
  5. Recalculated the application of the pro forma adjustments to the aggregate of the numbers in the columns captioned
   “Pro forma 2005” and “Pro forma 2004” for the pro forma consolidated Balance sheets, pro forma consolidated Income
     statement and the pro forma consolidated Cash flow Statements presented in note 27, page 103–106 and found the amounts
     to be arithmetically correct.

The pro forma consolidated Balance sheets, pro forma consolidated Income statement, pro forma consolidated Statements
of Changes in Equity and pro forma consolidated Cash flow Statements are based on management assumptions. The foregoing
procedures are substantially less than either an audit or a review, the objective of which is the expression of assurance with
respect to management’s assumptions, the pro forma adjustments, and the application of the adjustments to the historical
financial information. Accordingly, we express no such assurance. The foregoing procedures would not necessarily reveal
matters of significance to the pro forma consolidated Balance sheets, pro forma consolidated Income statement, pro forma
consolidated Statements of Changes in Equity and the pro forma consolidated Cash flow Statements and we therefore make
no representation about the sufficiency of the procedures for the purposes of a reader of such statements.




Deloitte AB




Peter Gustafsson
Authorized Public Accountant




78
                                                            Board of Directors’ Report




Board of Directors’ Report



Primary activity                                       tion, there are 46 (57) under construction and      agreement saw Carlson Hotels Worldwide ac­
Rezidor SAS positions itself as a strong alterna­      development. The hotels are located throug­         quiring a 25% shareholding in Rezidor SAS from
tive in hotel management with a carefully seg­         hout Europe, the Middle East, Africa and Asia.      the SAS Group in return for re­negotiated com­
mented collection of distinctive brands from               All Rezidor SAS brands have distinctive pro­    mercial terms of the parties’ current Master Fran­
mid­market to full luxury, treating hotels as indi­    files and features and operate in specific pro­     chise Agreement (MFA). The terms also reduced
vidual units in order to optimise profitability. The   duct segments. Radisson SAS is a first class full   licensing costs, thereby improving pre­tax profits
company strives to provide business and lei­           service brand and Park Inn is an efficient and      for the company by ca MEUR 6 in 2005 and with
sure travellers with a choice of hospitality pro­      innovative mid­market limited services brand.       a full year effect of MEUR 11. The deal includes
ducts that offer good value for money while            Country Inn focuses on being homey and coun­        extension options of the MFA’s with Carlson until
assuring a good return to owners and inspiring         try­like by adapting to local character, while      2052.
employees.                                             Regent is all about unashamed luxury. Last but         In connection with the above transaction, a
   It is the company’s vision to have its service      not the least; Missoni caters for the style and     new parent company for the Rezidor SAS Hos­
delivery – across all brands – fully animated by       design conscious audience.                          pitality Group was established. The new parent
a Yes I Can! attitude, and the target is to achieve        Growth – with limited financial commitments     company, Rezidor SAS Hospitality Holdings AB
a 100 % guest satisfaction score.                      – is strategically important to Rezidor SAS to      is domiciled in Sweden.
   The company’s business model focuses on             achieve critical mass with regards to brand awa­       Due to the fact that the new structure was
lease, management and franchise contracts. In­         reness, geographical coverage and economies         established in the middle of the year, the conso­
line with this strategy, Rezidor SAS divested the      of scale. The company’s core strategy is to cre­    lidated group accounts and the annual report
last of its real estate interests in 2005 and gained   ate a profitable growth within each brand in the    have been made on a proforma basis. The rea­
MEUR 6.2 from the sales of the shares of Radis­        portfolio. To achieve this, Rezidor SAS offers:     son for this is that such proforma accounts will
son SAS Hotel, London Stansted Airport. The            ■	 Property owners the best possible solution       give the best picture of the financial develop­
hotel continues to be operated by Rezidor SAS          for their individual property                       ment of the group in 2005 and comparables for
under a long­term lease agreement.                                                                         2004. See separate note for description of the
   For leased properties, the company opera­           ■	 Corporate and leisure travellers a collection    preparation of proforma accounts.
tes at own risk (limited to a pre­defined maxi­        of strong brands in different price categories         When Rezidor SAS Hospitality Holdings AB
mum loss as described below) and reward , and                                                              acquired Rezidor SAS Hospitality A/S and its
the trading is included in the group books. Ma­        ■	 Superior value to shareholders by fast and       subsidiaries, the transaction resulted in a resi­
naged and franchised properties give Rezidor           focused growth                                      dual (intangible asset) of MEUR 100.6 between
SAS a fee for services performed. In some ma­                                                              the acquisition price and the net assets in Rezi­
naged properties, Rezidor SAS offers a guaran­         ■	 Increased multi­brand career opportunities       dor SAS Hospitality A/S Group. Business com­
teed result to the owners and thus takes an            combined with continuous personal develop­          binations under common control are not
operating risk and obtain higher upside.               ment for employees                                  covered by IFRS and therefore the company
   Since 1994, under an exclusive master fran­                                                             has chosen to recognize the transaction using
chise contract with US­based Carlson Hotels            ■	 Value, through respect and cooperation, to       the book values and therefore adjust the resi­
Worldwide, Rezidor SAS Hospitality has grown           the communities where the company operates          dual against equity.
Radisson SAS into the second largest up­mar­
ket hospitality brand in Europe, the Middle East       Rezidor SAS added four new home markets in          deveLoPmeNt iN activities aNd
and Africa. In 2002, the parties signed a similar      2005, reflecting increased market coverage in       fiNaNces
deal for three additional Carlson brands: Regent,      the UK, Germany, France and Belgium. In ad­         At the end of the year 2005, there were 217
Country Inn and Park Inn. Park Inn has since           dition, the planned expansion in Russia and         (190) hotels in operation within the Rezidor SAS
grown from 0 to 58 hotels in the region.               other CIS countries will make Rezidor SAS a         Group, with 147 (138) Radisson SAS hotels, 58
   During 2005 Rezidor SAS entered into an             major player in this region.                        (23) Park Inn hotels, 6 (6) Country Inn hotels, 3
agreement with the famous fashion house                                                                    (3) hotels under the Regent brand and 3 (3) un­
Missoni to develop and launch Hotel Missoni.           LeGaL strUctUre                                     branded hotels. The number of rooms available
   At year end 2005, Rezidor SAS had five              In 2005, Rezidor SAS Hospitality and Carlson        for sale on a daily basis increased to from
brands in its portfolio: Radisson SAS, Park Inn,       Hotels Worldwide entered an agreement that          39,900 to 43,900.
Missoni, Country Inn and Regent. The number            enhanced their long­time franchise partnership         The year 2005 was yet another banner year
of hotels in operation were 217 (190), in addi­        into a shareholder agreement. The basis of the      for Rezidor SAS with the opening of 37 (28) new

                                                                                                                                                         79
                                                          Board of Directors’ Report




hotels. Fifteen new Radisson SAS hotels, spre­      marKet deveLoPmeNt                                   oPeratiNG risKs
ad over 12 countries were contracted and 16         Throughout 2005, the hotel industry faced a          Rezidor SAS is subject to the operating risks
Radisson SAS hotels were opened across              number of challenges including natural disas­        common to the Hospitality Industry, including:
EMEA. Of note are the properties in Frankfurt,      ters and the continuing threat of terrorism. De­     ■	 Changes in general economic conditions.
Dubai Media City, Düsseldorf, Paris­Boulogne,       spite this, hotel performance remained resilient
Istanbul, Jeddah and Edinburgh. Park Inn grew       and any adverse effects on trading caused by         ■	 Changes in travel patterns and demand.
by 13 new hotels, nine of which were part of a      these events were short­lived.
portfolio of Queen Moat House hotels that cover         Europe experienced an overall RevPAR growth      ■	 Cyclical over­supply of hotels.
Great Britain from the north to the south and the   of 4–5% during 2005. The Nordic capitals en­
east to the west. For accelerated growth and        joyed the strongest development with Copen­          ■	 The financial condition of third party
faster market penetration, Rezidor SAS will pur­    hagen up 20.1%, Oslo 11.5% and Stockholm             property owners and franchisees.
sue more portfolio deals, such as the recent one    10.2%.
in the UK.                                              Also Eastern Europe continued its positive       ■	 Typical long­term nature of lease and
   With distribution in 48 countries, Rezidor SAS   market development. The market in Southern           management contracts with guarantees.
capitalises on local market upswing and has li­     Europe including France was more challenging.
mited vulnerability with respect to local market        The enlargement of the European Union has        fiNaNciaL eXPosUre
setbacks. In 2005, when the average RevPAR          created new opportunities for the hotel and tra­     As a result of Rezidor SAS’ strategy not to own
increase in Europe was dragged down by south­       vel industry, as there is a high demand for qua­     real estate, the risks from financing activities are
ern and central Europe, RevPAR across Rezidor       lity accommodation in the new member states.         limited.
SAS was buoyed by the strong hotel perfor­          Hotel branding is expected to grow across all           The net position on interest bearing assets
mance in Scandinavia and Eastern Europe.            categories with a strong focus on mid­scale          and liabilities is net assets of MEUR 12.1 (net
   Strong home and core markets stabilities the     brands in Eastern Europe. With Radisson SAS          liability of MEUR 63.5). Rezidor SAS’ main fi­
company and currently, Rezidor SAS regards          and Park Inn, Rezidor SAS is taking advantage        nancing risk is related to the ability to control
Nordic countries, Germany, UK, Ireland, France,     of this opportunity to grow rapidly in the region.   and meet its off­balance sheet commitments
Poland, Switzerland, Austria, the Baltics and the                                                        under fixed leases and management contracts
Benelux as its home markets.                        risK maNaGemeNt oBJectives                           with guarantees. These commitments are nor­
   In 2005, Rezidor SAS generated group wide        The key risk management objectives of Rezidor        mally limited to an agreed maximum financial
revenue of MEUR 1.478 (1.247). This positive de­    SAS may be summarised as follows:                    exposure for Rezidor SAS for the entire term of
velopment is mainly due to comparable units in­     ■	 Ensure that the risks and benefits of new         the contracts (cap). Such cap usually amounts
creasing RevPAR by 11 %. The additional increase    investments and contingent liabilities are in line   to the equivalent of 2–3 years fixed lease or
relates to the increase in number of hotels.        with Rezidor SAS’ financial objectives.              guaranteed result. If the caps are utilised, the
   The increase in revenues and with good cost­                                                          contracts will continue without further commit­
control, EBITDA for 2005 increased to MEUR          ■	 Reduce business cycle risks through brand         ments of guaranteed cash flows to the property
48.8 (27.2 ) on a proforma basis. Gross Opera­      diversity, geographic representation and by          owners. In order to manage and control the off
ting Profit margin for all leased and managed       ensuring there is a business mix of leased,          balance sheet commitments, a financial policy
hotels improved from 34 % to 35 %.                  managed and franchised hotels.                       was implemented some years ago.
   EBT for 2005 (also proforma) was MEUR
35.5 (12.1). The result includes income of MEUR     ■	 Review and assess Rezidor SAS’ insurance          cUrreNcy eXPosUre
6.7 from revaluation of Other shares.               programmes, on an ongoing basis.                     Exposure to foreign currency fluctuations is
   Total investments in intangible and tangible                                                          mainly related to the conversion of the accoun­
fixed assets for 2005 amounted to MEUR 37.8         ■	 Carefully evaluate investments in high­risk       ting for foreign entities into Euro. Activities in
(54.1), and represents mainly major renovations     regions, to match this with premium returns on       foreign entities, which includes owned and
in leased hotels.                                   investments.                                         leased hotels, are typically carried out in local
                                                                                                         currency. Furthermore, there is an exposure to
                                                    ■	 Protect brand values through strategic            foreign currency fluctuation in the Danish enti­
                                                    control and operational policies.                    ties related to management and franchise fees,
                                                                                                         which are typically invoiced in foreign currency.



80
                                                            Board of Directors’ Report




iNterest rate eXPosUre                                The annual Climate Analysis checks employee          eveNts occUrriNG after tHe
Rezidor SAS’ interest bearing position is a net       opinions and perceptions of work conditions,         BaLaNce sHeet date
asset of MEUR 12.1. Based on the net interest         career opportunities and management perfor­          There are no significant events which have oc­
bearing position December 31, 2005, an in­            mance. In 2005, the climate analysis survey          curred after the Balance Sheet date.
crease of 1% point in the interest level would        was revised to place a stronger emphasis on
result in an increase in net interest income of       engagement, loyalty and retention. New ques­         oUtLooK
MEUR 0.1.                                             tions were added and some old ones were re­          In the year 2006, Rezidor SAS intends to conti­
                                                      moved to enhance the quality of the results. In      nue its expansion in a similar manner as in 2005.
credit risKs                                          2005, 13,535 (12,041) employees at 140 (133)         The strengthened relationship between Rezidor
Credit risks related to financial assets equal the    hotels, including managed and franchise pro­         SAS and Carlson Hotels is expected to further
values included in the balance sheet. In some         perties, participated in the Climate Analysis sur­   enhance the company’s possibilities to grow and
cases Rezidor SAS has granted loans to hotel          vey. The result was 84.5 (81) out of a possible      improve the financial situation of the company.
owners in early stages of new projects. Appro­        100. The goal for 2006 is to increase this score        While hotel performance across the Middle
priate interest rates, repayment schedules and        by 2%.                                               East and Asia promises to race ahead, trading
security arrangements have been agreed upon.             Training at Rezidor SAS has a two­pronged         across Europe is expected to remain steady th­
                                                      goal: career development and personal deve­          roughout 2006. As the hotel industry begins to
casH fLoW risKs                                       lopment. The Management School continued to          consolidate and new brands enter the market,
It is the policy of Rezidor SAS that the raising of   attract members from all brands, with 355 (194)      steady but sustainable growth in business per­
capital and placement of excess liquidity is ma­      employees attending in 2005. Rezidor SAS also        formance is expected to help keep the industry
naged centrally. Furthermore the Group has            extended its learning portfolio by introducing       moving in the right direction throughout 2006.
objectives for liquidity reserves, such as excess     customised eLearning resources to support the           Most markets throughout Europe have expe­
cash and irrevocable credit facilities, that the      face­to­face Management School forum.                rienced year­on­year increases in RevPAR in
Group at any time should have available.                                                                   2005, a growth which has primarily been gene­
                                                      resPoNsiBLe BUsiNess PerformaNce                     rated through increase in occupancy levels with
WorK of tHe Board of directors                        The hotels within the group are becoming in­         only modest increase in the Average Daily Rate
The Board of Directors of Rezidor SAS Holdings        creasingly resource efficient.                       (ADR). In 2006, the RevPAR growth is expected
AB consists of 6 members, all elected by the             In total, 86 (80)% of the hotels responded to     to be primarily driven by increase in rate as oc­
Annual General Meeting.                               the 2005 annual RB Status Report, an Internet        cupancy levels are at a high in some of the key
   The Board’s work is governed by the Swedish        based questionnaire asking the hotels about          markets.
Companies Act, the Articles of Association and        their social and environmental performance.             With the traditional feeder markets of the Uni­
the work plan adopted by the Board each year.         During the year, the hotels invested TEUR 2,832      ted States and Japan returning to Europe, and
   During the year, the board held 5 meetings.        in environmentally related improvements, inclu­      the strong influx of travellers from Eastern Eu­
At these meetings, the Board discussed regular        ding energy efficiency and waste management.         rope, India and China, tourist arrival numbers
business items presented at the respective               Over 60% of all hotels have now installed low     are expected to reach pre­2001 levels in most
meetings, such as business plan & budgets,            energy light bulbs, room key cards, low energy       European cities in 2006 and 2007.
business and market conditions, industry              mini bars and thermostats to control air condi­         For the year 2006, revenue is expected to
trends, financial performance, expansion stra­        tioning. The saving resulting from these invest­     increase, mainly due to an increased number of
tegies and specific hotel projects.                   ments was TEUR 270.                                  hotels and continued improvement in market
                                                         The impact of these investments is that the       conditions.
iNteLLectUaL caPitaL resoUrces                        total energy consumption per square meter
The average number of employees in owned              was reduced by 6% and the company’s direct
and leased hotels in 2005 was 4,922 (4,454), of       carbon dioxide emissions were reduced 13%.
which 2,566 were women. The group­wide av­            The direct CO2 emissions amounted to 5,990
erage number of employees (including also ma­         (6,897) tons in 2005. The indicators for water
naged and franchised hotels) was 22,854               consumption and unsorted waste generation
(18,800), of which 19,928 worked under Radis­         remained more or less constant, 450 (451) lit­
son SAS; 2,071 under Park Inn; 139 under              res per guest night and 1.86 (1.84) kg per
Country Inn and 716 under Regent.                     guest night.

                                                                                                                                                         81
                                                         Board of Directors’ Report




Group Highlights
PRO FORMA FOR 2005 AND 2004 – PRIOR yEARS ARE AlSO PREPARED IN ACCORDANCE WITH IFRS




thousand eUr                                                         2005            2004        2003        2002           2001
Key fiGUres
Operating revenue, TEUR                                          587,046          498,728     389,964     389,715        379,474
EBIT, TEUR                                                         34,987          13,722      –24,650     11,068         24,322
Financial items, net, TEUR                                            487           –1,619      –3,078      –1,806         –2,365
Net income, TEUR                                                   26,448           9,562      –32,593      3,876         14,146
EBITDA Margin %                                                           8.3          5.5        –3.0         6.2                 –
EBITDA Growth %                                                     179.4           234.2        –148         –17            –31
Equity, TEUR    1)
                                                                 158,520          128,991      66,526      99,867        104,120
Balance sheet total, TEUR                                        364,433          384,492     291,611     279,309        289,887
Dividends paid, TEUR       2)
                                                                           0        4,173       3,438      13,799         16,474
Total investments, TEUR                                            34,605          53,828      59,280      30,113         18,646
Number of employees         3)
                                                                    4,922           4,454       3,474       3,117          3,103


oPeratioNaL Key fiGUres
Groupwide revenue, TEUR           4)
                                                               1,478,000         1,247,000   1,127,000   1,109,000      1,090,000
RevPAR, EUR      5)
                                                                          67           61          59          69             70
Occupancy %      6)
                                                                     67,3             64,6        62,0        65,0           67,0
Number of Hotels      7)
                                                                      263             247         200         182            160
Available Rooms per night (000)                                           44           39          33          29                  –
Rooms sold (000)      6)
                                                                    6,836           5,964       5,121       4,646          4.964
No of countries operating                                                 49           47          42          40             38
Unsorted waste (Tons)                                              12,326          10,505      10,002               –              –
Energy consumption per m2 (kWh)                                       260             277         276         289            292
Water consumption (liter/guest night)                                 450             451         473         423            436
Employee satisfaction                                                84.5             81.1        81.4        80.5           79.2
Customer satisfaction                                                91.0             90.0        91.0        87.1           86.0


Key ratios
Profit Margin %, (GOP %)         8)
                                                                          35          34          30          33             33
Return on capital employed %                                        12.2              4.3       –14.6         8.4           11.7




1)
     Including minority interest, following IFRS.
2)
     Group Contribution in Norway in 2003, 2004 and 2005.
3)
     Owned and leased properties.
4)
     Revenue in leased, managed and franchised hotels.
5)
     Revenue per available room (RevPAR), including leased and managed hotels.
6)
     Includes owned, leased and Management hotels.
7)
     Of which 217 are in operation in 2005.
8)
     Gross Operating Profit (GOP), including leased and managed hotels.




82
                                                  Income Statement – Pro Forma




Income Statement – Pro Forma
FROM ACTUAl TO PRO FORMA, SEE NOTE 27



thousand eUr                                                  Notes              Pro forma 2005   Pro forma 2004
Operating revenue                                              8,9                     587,046          498,728
Cost of goods sold                                                                     –43,737          –41,255
Personnel cost                                                 10                     –207,295         –182,340
Other operating expenses                                                              –135,403         –113,336
Gross operating income                                                                 200,611          161,797


Rental expense, insurance of properties & property tax         11                     –158,044         –137,677
Share of income in associated companies                                                  6,213            3,071
operating income before depreciation                                                    48,780           27,191


Depreciation and amortization                                                          –20,469          –19,284
Income from sale of shares and tangible fixed assets                                     6,676            5,815
operating income before financial items                                                 34,987           13,722


Financial income                                               12                        7,732            2,044
Financial expenses                                             12                       –7,245           –3,663
operating income before tax                                                             35,474           12,103


Tax on ordinary result                                         13                       –9,026            –2,541
Net income after tax                                                                    26,448            9,562


Minority interest
Net income                                                                              26,448            9,562




                                                                                                             83
                                          Balance Sheet – Pro Forma




Balance Sheet – Pro Forma
FROM ACTUAl TO PRO FORMA, SEE NOTE 27



assets


thousand eUr                                        Notes             Pro forma 2005   Pro forma 2004
NON-CURRENT ASSETS
intangible non-current assets
Goodwill                                             14                      12,597           12,729
Other intangible assets                              14                      61,054           54,527
                                                                             73,651           67,256


tangible non- current assets
land, buildings and fixed installations              14                      21,695           77,878
Machinery and equipment                              14                      48,894           52,216
Construction in progress                             14                       8,314            4,439
                                                                             78,903          134,533


financial non-current assets
Share of equity in associated companies              15                       5,766           11,335
Other shares and participations                      15                      17,076            7,982
Pension funds, net                                   19                      14,472           11,003
Deferred tax asset                                   13                      13,084           11,535
Other long-term receivables                           17                     15,612           14,287
                                                                             66,010           56,142


total non-current assets                                                    218,564          257,931


CURRENT ASSETS
inventory                                                                     5,195            4,533
receivables
Accounts receivable                                  16                      48,312           35,321
Other receivables                                                            54,604           53,289
                                                                            102,916           88,610


Bank deposits, cash in hand, etc.                    18                      37,758           33,418
total current assets                                                        145,869          126,561

total assets                                                                364,433          384,492




84
                                                      Balance Sheet – Pro Forma




Balance Sheet – Pro Forma
FROM ACTUAl TO PRO FORMA, SEE NOTE 27



eQUity aNd LiaBiLities


thousand eUr                                                    Notes             Pro forma 2005   Pro forma 2004
EQUITy
Share capital                                                                               107           80,000
Translation differences                                                                  19,393           19,312
Reserves                                                                                143,545           61,514
Retained earnings                                                                       –31,187          –41,712
Net profit for the year                                                                  26,448            9,562
equity attributable to equity holders of the parent                                     158,306          128,676


minority interest                                                                           214              215
total equity                                                                            158,520          128,891


lIABIlITIES
Non-current provisions
Pension commitments                                              19                       1,034            2,640
Deferred tax                                                     13                      14,303            9,143
                                                                                         15,337           11,783


Non-current interest bearing liabilities
Other long-term liabilities                                                                 430                0
                                                                                            430                0


current liabilities
liabilities to financial institutions                                                    37,683           36,095
Accounts payable                                                                         34,732           30,943
Current tax                                                                               7,222            1,117
Other current liabilities                                         20                    110,509          175,663
                                                                                        190,146          243,818


total liabilities and provisions                                                        205,913          255,601

total equity and liabilities                                                            364,433          384,492


Mortgages and contingent liabilities                            21, 24
leasing commitments                                               22
Management contract commitments                                   23
Segment information                                               25




                                                                                                              85
                                         Statement of Changes in Equit y – Pro Forma




Statement of Changes in Equity – Pro Forma
FROM ACTUAl TO PRO FORMA, SEE NOTE 27



                                                                                           equity attributable
eQUity                                        share    translation              retained    to equity holders    minority      total
thousand eUr                                 capital   differences   reserves   earnings        of the parent    interest     equity

equity as of 01.01.2004                      77,200       21,342      59,978    –37,208             121,312          214    121,526
Increase of Share Capital                     2,800                                                    2,800                  2,800
Net profit for the year                                                           9,562                9,562                  9,562
Group contribution                                                               –4,173               –4,173                 –4,173
Tax reductions from group contribution                                            1,205                1,205                  1,205
Transfer                                                               1,536     –1,536
Change in translation difference                          –2,030                                      –2,030           1     –2,029
equity as of 31.12.2004                      80,000       19,312      61,514    –32,150             128,676          215    128,891
equity as of 01.01.2005                      80,000       19,312      61,514    –32,150             128,676          215    128,891
Increase of Share Capital                     3,000                                                    3,000                  3,000
Net profit for the year                                                          26,448               26,448                 26,448
Transfer                                                                –963        963                     0                     0
Change in translation differences                              81                                          81                    81
Creation of the Swedish Parent Company      –82.893                   82,993                             100                   100
equity as of 31.12.2005                        107        19,393     143,544     –4,739             158,305          215    158,520




86
                                                   Cash Flow Statement – Pro Forma




Cash Flow Statement – Pro Forma
FROM ACTUAl TO PRO FORMA, SEE NOTE 27


thousand eUr                                                    Notes                Pro forma 2005   Pro forma 2004
oPeratioNs
Earnings Before Interest and Taxes (EBIT)                                                   35,410           11,533
Interest paid to external financial institutions                                               –34             –268
Depreciation and amortization                                     14                        20,469           19,284
Income from sale of shares and tangible fixed assets
                                                                14, 15                      –8,818           –5,815
and disposals
Write down/up of investments                                                                –6,660
Change in tax position                                                                         917            –4,934
Share of income in associated companies                          15                         –6,213            –3,071
Dividend from associated companies                               15                          3,087            2,689

funds provided by the year’s operations                                                     38,158           19,418
Change in:
Inventories                                                                                   –662            –1,161
Current receivables                                                                         –1,990          –11,409
Current liabilities                                                                          1,964            4,905

change in working capital                                                                     –688           –7,665
cash flow from operating activities                                                         37,470           11,753

iNvestmeNts
Shares and participations                                        15                         –2,629            –1,071
Interest received from external financial institutions                                          98              838
Other intangible assets                                           14                        –2,504
Construction in progress                                          14                       –13,806          –14,630
Machinery and equipment                                           14                       –15,723          –19,234
land, Buildings and other fixed installations                     14                        –3,203          –19,964
total investments                                                                          –37,767          –54,061

Sale of fixed assets and shares                                                             85,042           17,641
cash flow from investing activities                                                         47,275          –36,420

fiNaNciNG
Net on external loans                                                                          373           –2,156
long term interest bearing receivables                                                      –1,385            1,477
long term interest bearing liabilities                                                      –1,592             –281
Current interest bearing receivables                                                        –8,985            9,741
Current interest bearing liabilities                                                       –65,902           39,718
Other changes financial items                                                               –7,610           –5,422
total external financing                                                                   –85,101           43,077

Increase share capital                                                                       3,107            2,800
Group contribution, Norway                                                                                   –4,173
cash flow from financing activities                                                        –81,994           41,704

effects of exchange rate changes on cash
                                                                                               –72              –91
and cash equivalents
change in liquid funds in the balance sheet                                                  2,679           16,946
Liquid funds at the beginning of the year                                                   –2,604          –19,622
Liquid funds at year -end                                        18                             75           –2,676

liquid funds consist of:
Bank deposits, cash in hand etc.                                                            37,758           33,419
liabilities to financial institutions                                                      –37,683          –36,095
Liquid funds                                                                                    75           –2,676

                                                                                                                 87
Notes to the Pro Forma Group Accounts


Note i        GeNeraL iNformatioN:                                                   After initial recognition, IFRS requires goodwill acquired in a business combina-
                                                                                     tion to be carried at cost less any accumulated impairment losses. Under IAS
Rezidor SAS Hospitality Holdings AB is a limited company incorporated in             36 Impairment of Assets (as revised in 2004), impairment reviews are required
Sweden. Its registered office and principal place of business are in Sweden          annually, or more frequently if there are indications that goodwill might be im-
(Stockholm). The principal activities of the Company and its subsidiaries are        paired. IFRS 3 prohibits the amortization of goodwill. Previously, under IAS 22,
described in the board of directors’ report.                                         the Group carried goodwill in its balance sheet at cost less accumulated am-
                                                                                     ortization and accumulated impairment losses. Amortization was charged over
                                                                                     the estimated useful life of the goodwill, subject to the rebuttable presumption
Note 2        Basis of PreParatioN of Pro forma                                      that the maximum useful life of goodwill was 20 years. In accordance with the
              fiNaNciaL statemeNts:                                                  transitional rules of IFRS 3, the Group has applied the revised accounting policy
                                                                                     for goodwill prospectively from the beginning of its first annual period beginning
During the first quarter of 2005, the SAS Group concluded an agreement with          on or after 31 March 2004, i.e. 1 January 2005 to goodwill acquired in busi-
the U.S.-based Carlson Hotels Worldwide. Under this agreement Carlson                ness combinations for which the agreement date was before 31 March 2004.
Hotels acquired 25% in Rezidor SAS in exchange for improved commercial               Therefore, from 1 January 2005, the Group has discontinued amortizing such
terms in the parties’ Master Franchise Agreement. The agreement was com-             goodwill and has tested the goodwill for impairment in accordance with IAS
pleted end of June 2005.                                                             36. Because the revised accounting policy has been applied prospectively, the
                                                                                     change has had no impact on amounts reported for 2004 and prior periods.
In order to present comparable figures, the financial statements are presented
using a pro forma method as if this agreement with Carlson Hotels Worldwide
took place the 1/1/2004 (instead of July 1st 2005) with all the consequences in      Note 4        accoUNtiNG PoLicies
the Income Statement regarding the reduction of fees paid to Carslon and its
related tax effect (see note 27).                                                    The financial statements before pro forma adjustments have been prepared in
                                                                                     accordance with International Financial Reporting Standards.
In order to prepare the pro forma financial statements, we considered as start-
ing points:                                                                          IFRS are implemented in order for the annual report also to comply with the
                                                                                     requirements of the accounting standards approved by the European Union.
For 2004, the actual financial statements of 2004 reported in last year annual
                                                                                     REPORTING CURRENCy
report. For 2005, the actual financial statements of 2005 taking into considera-
                                                                                     As EUR is the functional currency for the Group, the financial statements are
tion that the New Franchise Agreement took place as of its real date of comple-
                                                                                     presented with EUR as the reporting currency.
tion which is 1st July 2005.
                                                                                     GENERAl PROvISION ON RECOGNITION AND MEASUREMENT
Applying the pro forma method as if the New Franchise Agreement with Carlson         Assets are recognised in the balance sheet if it is likely that future economic
took place as of 1st January 2004, the above mentioned fees would have de-           benefits will flow to the Group as a result of past events and the value of the
creased by an amount of 5,064 TEUR for 2005 and 9,097 TEUR for 2004 having           assets can be measured reliably.
both of them a direct impact on the pro forma cash flow statement.
                                                                                     Liabilities are recognised in the balance sheet if the Group has a legal or actual
Moreover, 55,000 TEUR have been considered as other intangible assets in the         obligation as a result of a past event, and it is likely that future economic benefits
Parent Company financial statements due to the excess price for the valuation        will flow out of the Group, and the value of the liabilities can be measured reliably.
considered for the whole Group.
                                                                                     In the initial recognition assets and liabilities are measured at cost. Measure-
Therefore and still assuming that the New Agreement took place as of 1st             ment after the initial recognition is effected as described below for each item.
January 2004, this amount of 55,000 have been depreciated over the length of
                                                                                     In connection with recognition and measurement, all affairs and conditions are
this New Agreement (47 years) starting 1/1/2004. The related pro forma adjust-
                                                                                     taken into consideration that arise before the time at which the Annual Report
ments in the Income Statement are an increase of depreciation of 585 TEUR for
                                                                                     is prepared and that confirm or invalidate affairs and conditions existing on the
2005 and 1,170 TEUR for 2004. Finally, the related tax effects (28%) of these
                                                                                     balance sheet date.
adjustments have also been showed in the Income Statement as a pro forma
net tax charge (–1,254 TEUR for 2005 and –2,220 for 2004). These related tax         Income is recognised in the income statement as and when earned, whereas
adjustments have been considered as cash outflows for 2004 and as a change           costs are recognised at the amounts attributable to the financial period under
in the tax liability for 2005.                                                       review. Revaluations of financial assets and liabilities are included in the income
                                                                                     statement as financial income or financial expenses.

Note 3        adoPtioN of NeW aNd revised iNterNatioNaL                              CONSOlIDATED FINANCIAl STATEMENTS
              fiNaNciaL rePortiNG staNdards                                          The consolidated financial statements include Rezidor SAS Hospitality Holdings
                                                                                     AB (Parent Company) and the group enterprises (subsidiaries) that are control-
In the current year, the Group has adopted all of the new and revised Standards      led by the Parent Company, see group chart in note 7. Control is achieved by
and Interpretations issued by the International Accounting Standards Board           the Parent Company, either directly or indirectly, holding more than (50%) of
(the IASB) and the International Financial Reporting Interpretations Committee       the voting rights or in any other way possibly or actually exercising controlling
(IFRIC) of the IASB that are relevant to its operations and effective for account-   influence. Enterprises in which the Group, directly or indirectly, holds (between
ing periods beginning on 1 January 2005.                                             20% and 50%) of the voting rights and exercises significant, but not controlling
                                                                                     influence are regarded as associates.
The adoption of these new and revised Standards and Interpretations has
resulted in changes to the Group’s accounting policies in the following area that    BASIS OF CONSOlIDATION
have affected the amounts reported for the current or prior years:                   The consolidated financial statements incorporate the financial statements of
                                                                                     the Company and entities (including special purpose entities) controlled by the
GOODWIll (IFRS 3)                                                                    Company (its subsidiaries). Control is achieved where the Company has the
IFRS 3 should be applied for business combinations for which the agreement           power to govern the financial and operating policies of an entity so as to obtain
date is on or after 31March 2004.                                                    benefits from its activities.



88
                                                                                   Notes




The consolidated financial statements are prepared on the basis of the financial       Goodwill arising on acquisition is recognised as an asset and initially measured
statements of Rezidor SAS Hospitality Holdings AB and its subsidiaries. The            at cost, being the excess of the cost of the business combination over the
financial statements used for consolidation have been prepared applying the            Group’s interest in net fair value of the identifiable assets, liabilities and contin-
Group’s accounting policies.                                                           gent liabilities recognised. If, after reassessment, the Group’s interest in the net
                                                                                       fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities
The results of subsidiaries acquired or disposed of during the year are included       exceeds the cost of the business combination, the excess is recognised imme-
in the consolidated income statement from the effective date of acquisition or         diately in profit or loss. The interest of minority shareholders in the acquiree is
up to the effective date of disposal, as appropriate.                                  initially measured at the minority’s proportion of the net fair value of the assets,
                                                                                       liabilities and contingent liabilities recognized.
Where necessary, adjustments are made to the financial statements of subsidi-
aries to bring their accounting policies into line those by other members of the       PROFITS OR lOSSES FROM DIvESTMENT OF SHARES
Group.                                                                                 Profits or losses from divestment of subsidiaries and associates are calculated
                                                                                       as the difference between the selling price and the carrying amount of the net
All intra-group transactions, balances, income and expenses are eliminated on          assets at the time of divestment, inclusive of non-amortised goodwill and es-
consolidation.                                                                         timated divestment expenses. Profits and losses are recognised in the income
                                                                                       statement under ”Income from sale of shares and tangible fixed assets”.
Minority interests in the net assets of consolidated subsidiaries are identified
separately from the Group’s equity therein. Minority interests consist of the          TRANSlATION OF ACCOUNTS IN FOREIGN CURRENCy
amount of those interests at the date of the original business combination             Foreign currency transactions are at the initial recognition translated into the
and the minority’s share of changes in equity since the date of the combina-           reporting currency using average monthly rates, which essentially reflect the
tion. Losses applicable to the minority in excess of the minority’s interest in        rate of exchange at the date of transaction. Receivables, liabilities and other
the subsidiary’s equity are allocated against the interest of the Group except         monetary items denominated in foreign currencies that have not been settled
to the extent that the minority has a binding obligation and is able to make an        at the balance sheet date are translated using the rate of exchange at the bal-
additional investment to cover the losses.                                             ance sheet date. Exchange differences that arise between the rate at the date
                                                                                       of transaction and the one in effect at the date of payment, or the rate at the
BUSINESS COMBINATIONS                                                                  balance sheet date, are recognised in the income statement as financial items.
For intra-group acquisitions, any difference between the acquisition costs and         Fixed assets purchased in foreign currencies are translated using historical
the equity of the acquired companies are adjusted against equity according to          exchange rates.
the pooling of interest method.
                                                                                       All foreign subsidiaries and associates are considered independent entities.
All assets and liabilities assumed in the business combination are recorded in         In recognising these entities the income statements are translated into the
the acquirer’s group financial statements at their book value immediately before       reporting currency at average monthly rates, which essentially reflect the rate of
the acquisition, without any adjustments to fair value. Comparative figures are        exchange at the date of transaction. Balance sheet items are translated using
presented as if the business combination had occurred at the first day pre-            the exchange rates at the balance sheet date. Goodwill is considered to belong
sented in the group financial statement – even if they relate to a period before       to the independent foreign entity, and it is translated using the exchange rate
the actual incorporation of the new parent company.                                    at the balance sheet date. Exchange differences arising on the translation of
                                                                                       foreign entities’ equity at the beginning of the period using the exchange rates
The acquisition of subsidiaries is accounted for using the purchase method.            at the balance sheet date as well as those arising on the translation of income
The cost of the acquisition is measured at the aggregate of the fair values, at        statements from using average rates to using the exchange rates at the balance
the date of exchange, of assets given, liabilities incurred or assumed , and           sheet date are taken directly to shareholders’ equity.
equity instruments issued by the Group in exchange for control of the acquiree,
plus any costs directly attributable to the business combination. The acquiree’s       Exchange adjustments of long-term intercompany accounts with independent
identifiable assets, liabilities and contingent liabilities that meet the conditions   foreign subsidiaries, which in substance forms part of the aggregate investment
for recognition under IFRS 3 are recognised at their fair values at the acquisition    in the relevant subsidiary, are recorded directly in shareholders’ equity.
date, except for non-current assets (or disposal groups) that are classified as
held for sale in accordance with IFRS 5 Non-Current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair value less
costs to sell.




ExCHANGE RATES
                                                                                                       year-end rate                                    average rate
one eur equals:                                                        currency                   2005                  2004                      2005                  2004
Denmark                                                                      DKK                   7.46                  7.43                      7.45                  7.44
Sweden                                                                       SEK                   9.43                  9.01                      9.28                  9.13
Norway                                                                       NOK                   8.02                  8.28                      8.01                  8.37
UK                                                                           GBP                   0.69                  0.71                      0.68                  0.68



                                                                                                                                                                            89
                                                                                    Notes




iNcome statemeNt                                                                         Deferred tax liabilities are recognized for taxable temporary differences arising
                                                                                         on investments in subsidiaries and associates, and interest in joint ventures,
REvENUE                                                                                  except where the Group is able to control the reversal of the temporary dif-
Operating revenue consists mainly of fees from the hotel activities, including           ference and it is probable that the temporary difference will not reverse in the
management and franchise fees, and sales done in owned and leased hotels.                foreseeable future.
Fee revenue is included in the income statement for the period it relates to,
while revenue from sales in the hotels are included in the income statement              The carrying amount of deferred tax assets is reviewed at each balance sheet
when the services have been rendered.                                                    date and reduced to the extent that it is no longer probable that sufficient tax-
                                                                                         able profits will be available to allow all or part of the assets to be recovered.
Revenue is measured at the fair value of the consideration received or receiv-
able and represents amounts receivable for goods and services provided in the            Deferred tax is calculated at the tax rates that are expected to apply in the
normal course of business, net of discounts and sales related taxes.                     period when the liability is settled or the asset realized. Deferred tax is charged
                                                                                         or credited to profit or loss, except when it relates to items charged or credited
Interest income is accrued on a time basis, by reference to the principal out-           directly to equity, in which case the deferred tax is also dealt within equity.
standing and at the effective interest rate applicable.
                                                                                         Deferred tax assets and liabilities are offset when there is a legally enforceable
Dividend income from investments is recognised when the shareholders rights              right to set off current tax assets against current liabilities and when they relate
to receive payment have been established.                                                to income taxes levied by the same taxation authority and the Groups intends
                                                                                         to settle its current tax assets and liabilities on a net basis.
COST OF GOODS SOlD
Cost of goods sold relates mainly to cost of goods in restaurants (Food &                A policy has been adopted for writing down deferred tax assets relating to tax
Beverage) incurred to generate revenue.                                                  losses carried forward based on the expected utilization periods for the losses
                                                                                         in accordance with forecasted, future results. Losses carried forward that are
lEASING                                                                                  expected to be utilized within the 1 to 5 years are valued at 75%, 6 to 10 years
As a lessee, Rezidor SAS has entered into operating lease contracts. The lease           at 50%, 11 to 15 years at 25% and after 15 years at zero.
cost for operating lease contracts is recognised on a straight-line basis unless
another systematic basis is a better representative of the time pattern of the           BaLaNce sHeet
benefits to the group.
                                                                                         GOODWIll
PERSONNEl COST                                                                           Goodwill arising on the acquisition of a subsidiary or a jointly controlled entity
Personnel costs comprise salaries and wages as well as social security costs,            represents the excess of the cost of the acquisition over the Group’s interest
pension contributions, etc. for the companies staff.                                     in the net fair value of the identifiable assets, liabilities and contingent liabilities
                                                                                         of the subsidiary or jointly controlled entity recognized at the date of acquisi-
OTHER OPERATING ExPENSES                                                                 tion. Goodwill is initially recognized as an asset at cost and is subsequently
Other operating expenses include expenses related to operating the hotels                measured at cost less any accumulated impairment losses.
such as heat, light, power, IT and telecommunication, as well as expenses
related to sale, marketing and administration such as fee expenses and com-              For the purpose of impairment testing, goodwill is allocated to each of the
missions.                                                                                Group’s cash-generating units expected to benefit from the synergies of the
                                                                                         combination. Cash-generating units to which goodwill has been allocated are
FINANCIAl INCOME AND ExPENSES                                                            tested for impairment annually or more frequently when there is an indication
These items include interest income and expenses, realised and unrealised ex-            that the unit may be impaired. If the recoverable amount of the cash-generating
change gains and losses on securities and shares, debts and foreign currency             unit is less than the carrying amount of the unit, the impairment loss is al-
transactions, value adjustments of financial assets, addition or deduction of            located first to reduce the carrying amount of any goodwill allocated to the unit
amortisation relating to mortgage debt, as well as cash discounts etc.                   and then to the other assets of the unit pro-rate on the basis of the carrying
                                                                                         amount of each asset in the unit. An impairment loss recognized for goodwill is
TAxATION                                                                                 not reversed in a subsequent period.
Income tax expense represents the sum of the tax currently payable and
deferred tax.                                                                            On disposal of a subsidiary or a jointly controlled entity, the attributable amount
                                                                                         of goodwill is included in the determination of the profit or loss on disposal.
The tax payable is based on taxable profit for the year. Taxable profit differs
from profit as reported in the income statement because it excludes items of             OTHER INTANGIBlE ASSETS
income or expense that are taxable or deductible in other years and it further           Acquired intangible assets in the form of rights are measured at cost less
excludes items that are never taxable or deductible. The Group’s liability for           accumulated amortisation. These rights are amortised over the term of the
current tax is calculated using tax rates that have been enacted or substan-             agreement.
tively enacted by the balance sheet date.
                                                                                         Intangible assets are written down to the lower of recoverable amount and
Deferred tax is recognized on difference between the carrying amount of assets           carrying amount.
and liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit, and is accounted for using the balance             PROPERTy, PlANT AND EQUIPMENT
sheet liability method. Deferred tax liabilities are generally recognized for all tax-   Land, buildings, and fixed installations as well as machinery and equipment are
able temporary differences and deferred tax assets are recognized to the extent          measured at cost less accumulated depreciation and write-downs. No depre-
that is probable that taxable profits will be available against which deduct-            ciation is effected for land.
ible temporary differences can be utilized. Such assets and liabilities are not
recognized if the temporary difference arises from goodwill or from the initial          Cost includes the acquisition price, costs directly related to the acquisition, and
recognition (other than in a business combination) of other assets and liabilities       expenses of making ready the asset until the time when it is ready to be put
in a transaction that affects neither the taxable profit nor the accounting profit.      into operation.




90
                                                                                      Notes




Interest and other finance costs relating to tangible assets during the manufac-          are made if a contract is considered onerous. Other provisions are recognised
turing period are recognised in the income statement, except for interest and             and measured as the best estimate of the expenses required for settling the
other finance cost related to construction of new hotel buildings, where these            liabilities at the balance sheet date. Provisions that are estimated to mature
costs are capitalised and depreciated.                                                    in more than one year after the balance sheet date are measured at their
                                                                                          discounted value.
The basis of depreciation is cost less estimated residual value after ended
useful life. Depreciation is provided straight-line with the following percentages        MORTGAGE DEBT
based on an assessment of the assets’ estimated useful lives:                             Mortgage debt is at the time of borrowing recognised at cost, equalling the
Buildings                                                                     2,5 %       proceeds received less transaction costs incurred, and it is subsequently meas-
                                                                                          ured at amortised cost, which is equal to the capitalised value generating from
Fixed installations and technical improvements                              10,0 %        applying the effective-interest method.
Guest room furniture, fixture and equipment                                 15,0 %
Other FF&E and machinery                                                    20,0 %        OTHER FINANCIAl lIABIlITIES
                                                                                          Other financial liabilities are recognised at amortised cost, usually equalling
Tangible assets are written down to the lower of recoverable amount and                   nominal value.
carrying amount.
                                                                                          RETIREMENT BENEFIT OBlIGATIONS
Profits and losses from the sale of tangible assets are calculated as the differ-         Several companies within the Group have established pension plans for its
ence between the selling price less selling expenses and the carrying amount              employees. These pension commitments are mainly secured through various
at the time of sale. Profits or losses are recognised in the income statement             pension plans. These vary considerably due to different legislation and agree-
together with depreciation and write-downs.                                               ments on occupational pension systems in the individual countries.

INvESTMENTS IN ASSOCIATES AND INTEREST IN jOINT vENTURES                                  For pension plans where the employer has accepted responsibility for defined
An associate is an entity over which the Group has significant influence and              contribution solutions, the obligation to employees ceases when contractual
that is neither a subsidiary nor an interest in a joint venture. Significant influ-       premiums have been paid. For other pensions plans where defined benefit pen-
ence is the power to participate in the financial and operating policy decisions          sions have been agreed, the commitments do not cease until the contractual
of the investee but is not control or joint control over those policies.                  pensions have been paid. The Group calculates its pension commitments for
                                                                                          the defined benefit pension plans. Calculations of commitments are based on
A joint venture is a contractual arrangement whereby the Group and other par-             estimated future final salary. An estimate of funded assets is made at the same
ties undertake an economic activity that is subject to joint control, that is when        time.
the strategic financial and operating policy decisions relating to the activities
requires the unanimous consent of the parties sharing control.                            Pension costs for the year comprise the present value of pension earnings for
                                                                                          the year, plus interest on the obligation at the beginning of the year, less return
The results, assets and liabilities of associates and joint ventures are incor-           on funded assets. Amortization of deviations from estimates and plan amend-
porated in these financial statements using the equity method of accounting,              ments is added to this total for certain pension plans. Plan amendments and
except when the investment is classified as held for sale, in which case it is            deviations between anticipated and actual results for estimated pension com-
accounted for under IFRS 5 Non-Current Assets Held for Sale and Discontin-                mitments and funded assets are amortized over the average remaining working
ued Operations. Under the equity method, investments in associates and joint              lives of the employees participating in the pension plan.
ventures are carried in the consolidated balance sheet at cost as adjusted for
post-acquisition changes in the Group’s share of the net assets of the associ-            Cumulative actuarial deviations from estimates of up to 10% of the greater of
ate, less any impairment in the value of individual investments. Losses of an             pension obligations and pension assets are included in the so-called corridor
associate in excess of the Groups interest in that associate (which includes any          and are not amortized. When the cumulated actuarial deviations from estimates
long-term interests that, in substance, form part of the Group’s net investment           exceeds this 10% limit, the excess amount is amortized over a 15-year period,
in the associate) are not recognized.                                                     which corresponds to the average remaining employment period.

Any goodwill arising on the acquisition of the Group’s interest in a jointly con-         FINANCIAl RISK MANAGEMENT
trolled entity is accounted for in accordance with the Group’s accounting policy          Rezidor SAS is exposed to interest rate- currency- credit- and liquidity risks.
for goodwill arising on the acquisition of a subsidiary (see below).                      According to the policy, Rezidor SAS should not use derivative financial instru-
                                                                                          ments to hedge the financial risks. As a result of Rezidor SAS’ strategy not to
OTHER SHARES AND PARTICIPATIONS                                                           own real estate, the risks from financing activities are limited.
Other shares and participations are measured at fair value at the balance sheet date.
                                                                                          INTEREST RATE RISK
INvENTORIES                                                                               Rezidor SAS’ main financing risk is related to the ability to control and meet its
Inventories are measured at the lower of cost (using the FIFO principle) and              off-balance sheet commitments under fixed leases and management contracts
net realisable value. Cost of goods for resale, raw materials and consumables             with guarantees. These commitments are normally limited to an agreed maxi-
consist of purchase price plus handling cost.                                             mum financial exposure for Rezidor SAS for the entire term of the contracts
                                                                                          (cap). Such cap usually amounts to the equivalent of 2–3 years fixed lease or
RECEIvABlES                                                                               guaranteed result. If the caps are utilised, the contracts will continue without
Receivables are measured at amortised cost, usually equalling nominal value,              further commitments of guaranteed cash flows to the property owners. In order
less provisions for bad debts.                                                            to manage and control the off balance sheet commitments, a financial policy
                                                                                          was implemented some years ago.
SHAREHOlDERS’ EQUITy
Dividends are recognised as a liability at the time of resolution to this effect at       All liabilities to financial institutions are variable rate loans.
the general meeting. The recommended dividends for the financial period are
disclosed under a separate caption under “Shareholders’ equity”.                          CURRENCy RISK
                                                                                          Exposure to foreign currency fluctuations is mainly related to the conversion of
PROvISIONS                                                                                the accounting for foreign entities into Euro. Activities in foreign entities, which
Provisions for obligations related to lease contracts and management contracts            includes owned and leased hotels, are typically carried out in local currency.

                                                                                                                                                                            91
                                                                                   Notes




Furthermore, there is an exposure to foreign currency fluctuation in the Danish        Note 5        criticaL JUdGemeNts iN aPPLyiNG tHe eNtit y’s
entities related to management and franchise fees, which are typically invoiced                      accoUNtiNG PoLicies
in foreign currency.
                                                                                       In the process of applying the entity’s accounting policies, which are described
CREDIT RISKS                                                                           here above in note 4, management has made following judgments that have the
Credit risks related to financial assets equal the values included in the balance      most significant effect on the amounts recognized in the financial statements.
sheet. In some cases Rezidor SAS has granted loans to hotel owners in early
                                                                                       FOR BUSINESS COMBINATION :
stages of new projects. Appropriate interest rates, repayment schedules and
                                                                                       IFRS 3 has been adopted for business combinations for which the agreement
security arrangements have been agreed upon. As of 31st December 2005,
                                                                                       date is or after 31 March 2004.
there were no concentrations of credit risks.
                                                                                       Therefore the Group has applied the revised accounting policy for goodwill
lIQUIDITy RISKS                                                                        prospectively from the beginning of its first annual period beginning on or after
It is the policy of Rezidor SAS that the raising of capital and placement of           31 March 2004. Nevertheless, the Group had no acquisitions during 2004
excess liquidity is managed centrally. Furthermore the Group has objectives for        accounting period. The Group carried goodwill in its balance sheet at cost less
liquidity reserves, such as excess cash and irrevocable credit facilities, that the    accumulated depreciation and accumulated impairment losses. Following IFRS
Group at any time should have available.                                               3, Goodwill is not subject to depreciation but to impairment testing (see here
                                                                                       below in note 6)
FAIR vAlUE
The fair value of Rezidor SAS financial assets and financial liabilities correspond    As accounting election, the Group used the books values instead of the fair
to their book values.                                                                  values when the costs of the business combination were allocated.

                                                                                       FOR AMORTIzING THE INTANGIBlE ASSETS:
THE CASH FlOW STATEMENT
                                                                                       Following the New Franchise Agreement, the brands of the Group have been
The cash flow statement is presented using the indirect method. It shows cash
                                                                                       valued and thus classified as intangible asset. This intangible asset has been
flows from operating activities, investing activities and financing activities as
                                                                                       depreciated on a linear basis throughout its useful life which is the lifetime of
well as the cash and cash equivalents at the beginning and the end of the
                                                                                       the New Franchise Agreement.
financial period.

Cash flows from the acquisition and divestment of enterprises are shown sepa-          Note 6        Key soUrces of estimatioN UNcertaiNt y
rately under “Cash flow from investing activities”. Cash flows from acquired
enterprises are recognised in the cash flow statement from the time of their           The key assumptions concerning the future, and other key sources of estima-
acquisition, and cash flows from divested enterprises are recognised up to the         tion uncertainty at the balance sheet date, that could have a significant risk of
time of sale.                                                                          causing a material adjustment to the carrying amounts of assets and liabilities
                                                                                       within the next financial year are discussed here below.
“Cash flow from operating activities” is calculated as operating income before
                                                                                       FOR GENERAl IMPAIRMENT TESTING:
 tax adjusted for non-cash operating items, increase or decrease in the working
                                                                                       At least once a year, tests are performed to look for the existence of impair-
 capital and change in tax position.
                                                                                       ment. At each year end (closing date), a review is conducted to look for any
                                                                                       indication that the company’s tangible, intangible assets and contracts are im-
“Cash flow from investing activities” includes payments in connection with the
                                                                                       paired and if this is the case, an assessment is done of the recoverable amount
 acquisition and divestment of enterprises and activities as well as the purchase
                                                                                       of the individual assets and contracts (or the cash-generating unit to which they
 and sale of intangible and tangible assets as well as investments.
                                                                                       belong) to determine whether impairment exists. The method used for testing is
                                                                                       the net present value (NPV) technique using the internal discount rate (WACC:
“Cash flow from financing activities” includes changes in the size or composition
                                                                                       see table hereunder) which is recalculated regularly and per region. The cash
 of the Group’s issued capital and related costs as well as the raising of loans,
                                                                                       flows discounted are based on long range plans. If the net present value of
 instalments on interest-bearing debt, and payment of dividends.
                                                                                       these long range plans shows a negative NPV, then impairment is considered
                                                                                       on the related tangible and intangible assets or contracts.
“Liquid funds” includes bank deposits, cash in hand and liabilities to financial
 institutions.                                                                         FOR IMPAIRMENT ON GOODWIll:
                                                                                       The Group tests goodwill annually for impairment, or more frequently if there
Cash flows denominated in foreign currencies, including cash flows in foreign          are indications that goodwill might be impaired. The recoverable amounts are
subsidiaries, are translated at average monthly rates, which essentially reflect       determined from value in use calculations. The key assumptions for the value
the rates at the date of payment. Cash at year end is translated at the rates at       in use calculations are those regarding the discount rates, growth rates and
the balance sheet date.                                                                expected changes to selling prices and direct costs during the period. Manage-
                                                                                       ment estimates discount rates using the WACC that reflect current market
 DEFINITION OF RATIOS                                                                  assessments for the time value of money and the risks specific to the related
                                                                                       entity. The growth rates are based on internal and industry growth forecasts.
 Profit margin % =                             Profit margin x 100                     Changes in selling prices and direct costs are based on past practices and
                                                     Revenue                           expectations of future changes in the market. The Group prepares cash flow
                                                                                       forecasts derived from the most recent financial budgets approved by manage-
Return on capital =              Operating income plus financial income x 100          ment over the length of the lease contracts. The rate of growth utilized does not
employed                       Balance sheet total less non–interest bearing debt      exceed the average long-term growth rate for the relevant markets. The rates
                                                                                       used to discount forecasted cash flows is described in the table here below.

                                                                                       FOR IMPAIRMENT ON MANAGEMENT CONTRACTS AND lEASE
                                                                                       AGREEMENTS
                                                                                       The same method of impairment is applied to test if management contracts or
                                                                                       lease agreements are onerous and should then be impaired.




92
                                                         Notes




DISCOUNT RATES USED
(WEIGHTED AvERAGE COST OF CAPITAl: WACC)
region                                              Wacc %
Europe                                                8.51
Denmark                                               8.49
Norway                                                8.89
Russia                                               12.45
South Africa                                         12.25
Sweden                                                8.54
Switzerland                                           6.87
UK                                                    9.43
US                                                    9.80
Africa                                               19.00


Note 7        GroUP comPaNies aNd LeGaL strUctUre

REzIDOR SAS HOSPITAlITy HOlDINGS AB HAS THE FOllOWING SUBSIDIARIES:
Bahrain                                                      registered in   ownership %   share capital
Rezidor SAS Hotels & Resorts, Mdl East W.l.l                 Manama Town             51      MUSD 1.0
Belgium
SAS Hotel Personnel S.A.                                     Brussels               100       MEUR 0.1
Rezidor SAS Hospitality S.A.                                 Brussels               100       MEUR 0.1
SAS Hotel Brussels leopold SA                                Brussels               100       MEUR 0.1
GH Holding SA                                                Brussels               100       MEUR 0.1
SAS Hotel Brussels S.A.                                      Brussels               100     MEUR 10.3
Rezidor SAS Park Belgium Nv/SA                               Brussels               100       MEUR 0.1
cyprus
Doriscus Enterprise limited                                  limassol                16     MEUR 23.7
china
SAS Royal Hotel, Beijing, Co., ltd                           Beijing                 50      MUSD 9.0
denmark
SAS Hotels A/S Danmark                                       Copenhagen             100    MDKK 210.0
SAS Falconer Center A/S                                      Frederiksberg          100       MDKK 1.2
SAS International Hotels Management A/S                      Copenhagen             100      MDKK 2.0
SIHSKA A/S                                                   Copenhagen             100      MDKK 3.0
SAS Scandinavia Hotel Aarhus A/S                             Aarhus                 100       MDKK 0.5
SAS International Hotels Selection A/S                       Copenhagen             100      MDKK 5.0
SAS Riga Hotel A/S                                           Copenhagen             100       MDKK 0.5
Hotel Development South Africa A/S                           Copenhagen             100      MDKK 1.0
SAS Hotel Kiev A/S                                           Copenhagen             100      MDKK 1.0
SAS Hotel Investment Egypt A/S                               Copenhagen             100      MDKK 1.0
SAS Hotel Investment France A/S                              Copenhagen             100      MDKK 1.0
Hotel Investment Turkey A/S                                  Copenhagen              51      MDKK 1.0
Nordrus joint venture A/S                                    Copenhagen             100       MDKK 0.5
SAS Hotel Investment A/S                                     Copenhagen             100      MDKK 1.0
Hotel Invest UK A/S                                          Copenhagen             100      MDKK 5.0
Rezidor SAS Country A/S                                      Copenhagen             100       MDKK 1.5
Rezidor SAS Park A/S                                         Copenhagen             100      MDKK 1.0
Rezidor SAS Regent A/S                                       Copenhagen             100      MDKK 2.0
Rezidor SAS lifestyle A/S                                    Copenhagen             100      MDKK 1.0
Rezidor SAS loyalty Management A/S                           Copenhagen             100      MDKK 1.0
Rezidor SAS Cornerstone A/S                                  Copenhagen             100       MDKK 2.4
Rezidor SAS Management & Development A/S                     Copenhagen             100       MDKK 0.5


                                                                                                     93
                                                      Notes




Rezidor SAS Hospitality A/S                            Copenhagen                   100     MDKK 83.0
Casino Denmark A/S                                     Copenhagen                    50      MDKK 1.0
Casino Copenhagen A/S                                  Copenhagen                    50      MDKK 0.0
Nordrus Hotels Holdings A/S                            Copenhagen                 26.08       MDKK 1.2
Africa joint venture Holding A/S                       Copenhagen                   100       MDKK 0.5
egypt
Al Quseir Hotell Company S.A.E                        Al Quseir City                 20        MEGP 30
estonia
RDS Hotelli AS                                        Tallin                      14.10       MEEK 4.1
Astlanda Hotelli AS                                   Tallin                        100       MEEK 0.4
france                                                 registered in         ownership %   share capital
Rezidor SAS Resort France                              Nice                         100       MEUR 0.0
Rezidor SAS Hospitality France S.A.S.                  Paris                        100       MEUR 2.4
SAS Hotels France S.A.S.                               Paris                        100       MEUR 2.5
Royal Scandinavia Hotel Bordeaux S.A.S.                Paris                        100       MEUR 0.0
Royal Scandinavia Hotel Nice S.A.S.                    Nice                         100       MEUR 2.4
Royal Scandinavia Hotel Marseille S.A.S.               Paris                        100       MEUR 0.0
Rezidor SAS Park France S.A.S.                         Paris                        100       MEUR 0.0
Rezidor SAS lyon S.A.S.                                lyon                         100       MEUR 0.0
Rezidor SAS Aix les Bains S.A.S.                      Aix les Bains                 100       MEUR 0.0
Rezidor Park Nancy S.A.S.                              Nancy                        100       MEUR 0.0
Rezidor Park Mâcon S.A.S.                              Mâcon                        100       MEUR 0.0
Rezidor Park lyon–Ouest S.A.S.                         la Tour de Salvagny          100       MEUR 0.0
Rezidor Park Arcachon S.A.S.                          Arcachon                      100       MEUR 0.0
Rezidor Park Orange S.A.S.                             Orange                       100       MEUR 0.0
Rezidor les loges S.A.S.                              Aix les Bains                 100       MEUR 0.0
Germany
zweite Rezidor SAS Regent Berlin GmbH                  Munich                       100       MEUR 0.0
SAS Hotels Deutschland GmbH                            Hamburg                      100       MEUR 0.2
SAS Hotels Management GmbH                             Hamburg                      100       MEUR 0.0
Marliane Betriebs GmbH                                 Hamburg                      100       MEUR 0.0
SAS Hotel Dresden GmbH                                 Hamburg                      100       MEUR 0.0
SAS Hotel Rügen GmbH                                   Hamburg                      100       MEUR 0.0
SAS Hotel Investitions GmbH                            Hamburg                      100       MEUR 0.0
SAS Hotel Hannover GmbH                                Hamburg                      100       MEUR 0.0
SAS Hotel Köln GmbH                                    Hamburg                      100       MEUR 0.0
SAS Hotel Wiesbaden GmbH                               Hamburg                      100       MEUR 0.0
SAS Hotel Berlin GmbH                                  Hamburg                      100       MEUR 0.0
Rezidor SAS Regent Berlin GmbH                         Hamburg                      100       MEUR 0.0
SAS Hotel Karlsruhe GmbH                               Hamburg                      100       MEUR 0.0
SAS Hotel Frankfurt GmbH                               Hamburg                      100       MEUR 0.0
Country Inns and Suites FRG Hotel Management GmbH      Munich                       100       MEUR 0.8
Country Inn München Frankfurter Ring GmbH              Munich                       100       MEUR 0.0
Country Inn München Ost GmbH                           Munich                       100       MEUR 0.0
Rezidor SAS lifestyle Hotels Deutschland GmbH I. G.    Munich                       100       MEUR 0.0
Rezidor SAS Park Deutschland GmbH                      Munich                       100       MEUR 0.0




94
                                                Notes




Netherlands
SAS Hotel Amsterdam B.v.                        Amsterdam                100       MEUR 0.0
Norway
Rezidor SAS Hospitality Norway AS                Oslo                    100    MNOK 102.0
SAS Royal Hotel AS                               Oslo                    100     MNOK 11.3
SAS Hotel Norge AS                               Bergen                  100      MNOK 0.5
SAS Globetrotter Hotel AS                        Stavanger               100      MNOK 0.5
SAS Atlantic Hotel AS                            Stavanger               100      MNOK 0.5
SAS Hotels Service Centre AS                     Oslo                    100       MNOK 0.1
Rezidor SAS Park Norway AS                       Oslo                    100       MNOK 0.1
russian federation
zAO Hotel Corporation                            St. Petersburg        36.37     MRUR 40.9
south africa
RHW joint venture Southern Africa (prop) ltd.    Waterfront               50     MRAND 6.5
RHW Management Southern Africa (prop) ltd.       Cape Town
sweden                                           registered in    ownership %   share capital
Rezidor SAS Hotel AB (dormant since 01.01.05)    Solna                   100       MSEK 5.2
Rezidor SAS Sweden AB                            Sundbyberg              100       MSEK 0.1
Rezidor SAS Hospitality Sweden AB                Sundbyberg              100      MSEK 18.0
Rezidor SAS Services Sweden AB                   Sundbyberg              100       MSEK 0.5
AB Strand Hotel                                  Stockholm               100       MSEK 0.3
Royal viking Hotel AB                            Stockholm               100       MSEK 8.0
Hotel AB Bastionen                               Gothenburg              100       MSEK 1.0
SAS Arlandia Hotel AB                            Stockholm               100       MSEK 1.0
SAS SkyCity Hotel AB                             Stockholm               100       MSEK 1.0
SAS Royal Hotel AB                               Malmö                   100       MSEK 1.0
Rezidor SAS Park AB                              Sundbyberg              100       MSEK 0.1
switzerland
Rezidor SAS Switzerland AG                      zug                       99       MCHF 0.1
SAS Hotels Switzerland AG                        Basel                    97       MCHF 0.1
turkey
Feri Otelcilik ve Turizm A.S                     Istanbul                 10        BTl 135
Macka Otelcilik Anonim Sirketi                   Istanbul              99.30          BTl 50
United Kingdom
SAS Hotels UK ltd.                               Manchester              100       MGBP 0.0
SAS Portman (Holdings) ltd                       Manchester              100       MGBP 0.0
SAS Hotel Manchester ltd                         Manchester              100       MGBP 0.0
SAS Hotel leeds ltd                              Manchester              100       MGBP 0.0
SAS Hotel Edinburgh ltd                          Manchester              100       MGBP 0.0
SAS Hotel Stansted Airport ltd                   Manchester              100       MGBP 0.0
SAS Hotel Stansted ltd                           Manchester              100       MGBP 0.0
Rezidor lifestyle Glasgow ltd                    Manchester              100       MGBP 0.0
Rezidor SAS Hotel Management ltd                 Manchester              100       MGBP 0.0
Rezidor SAS Park UK ltd                          Manchester              100       MGBP 0.0
Park Hotel Heathrow ltd                          Manchester              100       MGBP 0.0
Park Hotels Management limited                   Manchester              100      MDBP 0.0
Rezidor lifestyle Edingburgh limited             Manchester              100       MGBP 0.0




                                                                                          95
                                                                               Notes




                                   SAS AB                    75%                                     25%                   Carlsson Hotels
                                    (Publ)
                                                                                                                                (USA)
                                  (Sweden)


                    Preferred shares
                                                                        Rezidor SAS Hospitality
                    75% – 30% votes                                                                                         Carlsson Sub
                                                                              Group AB
                                                                                                                               (USA)
                                                                               (Sweden)
                                                                                     Ordinary shares 100% – 60% votes
                                                                                                                                    Preferred shares
                                                                        Rezidor SAS Hospitality                                     25% – 10% votes
                                                                             Holdings AB
                                                                               (Sweden)
                                                                                     100% shares and votes

                                                                             Rezidor SAS
                                                                            Hospitality A/S
                                                                              (Denmark)




                                                                                                   – Rezidor SAS
                                                                                                     Hospitality
                                                                                                     Norway A/S                Rezidor SAS
  Rezidor SAS              Rezidor SAS              Rezidor SAS              Rezidor SAS                                                                 Rezidor SAS
                                                                                                   – Rezidor SAS                  loyalty
  Country A/S                Park A/S               Regent A/S               lifestyle A/S           Sweden AB                                         Cornerstone A/S
                                                                                                                              Management A/S
   (Denmark)                (Denmark)                (Denmark)                 (Denmark)           – Hotel Invest UK A/S                                  (Denmark)
                                                                                                                                (Denmark)
                                                                                                   – SAS Hotels A/S
                                                                                                     Denmark




                                                                                                        Radisson
     Country Inn             Park Inn                 Regent                   lifestyle
                                                                                                          SAS
     Operations             Operations               Operations               Operations
                                                                                                       Operations




Rezidor SAS Hospitality Group AB is owned by Carlson Hotels Worldwide – USA           Rezidor SAS Hospitality Holdings AB is consolidated as a subsidiary in the
(for 25%) and by SAS – Sweden (for 75%). Rezidor SAS Hospitality Holdings AB          consolidated financial statements of SAS AB, Stockholm. The financial state-
is owned by Rezidor SAS Hospitality Group AB for 100%. The financial statements       ments are available at www.scandinavian.net.
are consolidated at the level of Rezidor SAS Hospitality Holdings AB.




Note 8        reL ated Parties

Related parties with controlling influence: SAS AB, the ultimate parent com-          The business relationship with Carlson mainly consisted in a flow of operating
pany and Carlson owning 25% of the shares. Other related parties with whom            costs related to the use of the brands and for the use of the reservation system
Rezidor SAS has had transactions: The SAS AB Group and the management of              of Carlson.
Rezidor SAS.
                                                                                      As at year-end, Rezidor SAS had ordinary current liabilities of TEUR 2,199
The business relationship with SAS (apart from the ownership-related transac-         (2,538). The total amount of pro forma operating costs paid is 6,087 (4,412) and
tions, see Board of Directors’ report and Statement of changes in equity) mainly      the actual being 11,151 (13,509).
involved services for the crew and staff of SAS throughout the world, and
administration of parts of SAS’ frequent flyer program, Eurobonus. Rezidor SAS
also buys services from SAS Finance. All transactions with SAS are based on           Note 9        oPeratiNG reveNUe
commercial terms and professional attitude.

Rezidor SAS has established a financial grouping of liquid funds, which utilizes      operating revenue per
the services from SAS Finance.                                                        area of operation                                         2005            2004

                                                                                      Rooms revenue                                          321,424         266,317
As at year-end, Rezidor SAS had ordinary current receivable claims towards
                                                                                      Food & Beverage Revenue                                183,707        156,739
SAS of TEUR 18,422(10,248) and ordinary current liabilities of TEUR 21,865
(91,304)                                                                              Fee revenue                                             45,904          36,272
                                                                                      Other revenue                                           36,011          39,400
1.6 % (2.2 % in 2004) of Rezidor SAS operating revenue represents sales to            total                                                  587,046        498,728
other companies within the SAS Group.

Remuneration to the Board of Directors and the Board of Management is
disclosed in note 10 below.


96
                                                                               Notes




Note 10      PayroLL cost, NUmBer of emPLoyees, etc                                Note 12        fiNaNciaL items iN teUr


Payroll cost                                 2005                       2004       reZsas Group                                                  2005                2004
Salaries                                 153,327                    136,967        Interest income received from SAS                              173                  113
Pension costs                                5,737                     2,503       Other Financial Income 1)                                     7,559              1,776
Social security                            26,701                     21,953       Exchange differences                                                                155
total                                    185,765                   161,423         financial income                                              7,732              2,044

The average number of employees in Rezidor SAS during 2005 was 4,922
(4,454).                                                                           Interest expense paid to SAS                               –3,320               –3,280

                                   2005                        2004                Other Financial expense                                     –2,847                 –383

                              men        Women             men        Women        Exchange differences                                       –1,078                       0
                                                                                   financial expense                                          –7,245               –3,663
Denmark                       132            115           115            141
                                                                                   Net                                                             487            –1,619
Norway                        513            765           496           822
Sweden                        202            323           278           383       1)
                                                                                        Includes the following value adjustments on shares (at fair value)
UK                            634            544           335           323            held by the following companies:

Germany                       475            519           396           415       SAS Hotel Investment AS: 3,000 TEUR                           for RBS Hotelli AS
France                        163            160           146           146       SAS Hotel Kiev A/S:                3,000 TEUR                 for Doriscus
Belgium                       180             92           150             80                                                                    Enterprise ltd
Other                           57            48           133             95      SAS Hotels A/S Denmark: 368 TEUR                              for SAS Royal Hotel
                                                                                                                                                 Beijing Co ltd
totals                       2356          2566          2049           2405
                                                                                   CI&S FRG GmbH:                     307 TEUR                   for Timmerdorfer
                             4922                        4454                                                                                    Strand
                                                                                   total                              6,675 teUr

                                      2005                     2004
                                                                                   Note 13        Pro forma ta X oN ordiNary resULt
                             total    of which men total       of which men
Board members                     6             83%        5           100%
                                                                                   income tax:                                         2005                          2004
Presidents and
                                  5           100%         5           100%
Other senior executives                                                            Denmark                                              –285                          –349
                                                                                   Norway                                            –1,646                        –1,155
Remuneration to the external Members of the Board of Directors amounted to
TEUR 30 (26). Salaries and other remuneration to the management team was           Sweden                                            –1,112                        –2,223
TEUR 2,035 (2,184). Rezidor SAS also covered housing and company cars for          United Kingdom                                    –1,347                        –1,014
the management team in total TEUR 286 (313). Part of the remuneration to           Belgium                                              –798                          –822
Rezidor SAS management team is paid as bonus.
                                                                                   Netherlands                                          –372                         –200
In the event that Rezidor SAS decides to terminate the Managing Director for       France                                                 –31                         –275
reasons other than breach of contract or gross negligence, severance pay           Switzerland                                           –55                               0
would amount to three years annual remuneration. For the other nine execu-         Germany                                                   2                         139
tives in the management team severance pay would amount to between one
and three year’s annual remuneration.                                                                                               –5,644                        –5,899
                                                                                   deferred tax:
                                                                                   Current year                                      –3,382                         3,358
Note 11      reNtaL eXPeNse, iNsUraNce of ProPerties
                                                                                                                                    –3,382                          3,358
             & ProPert y ta X
                                                                                   total Pro forma tax                              –9,026                         –2,541

                                                      2005              2004       Pro forma tax is calculated at the below mentioned tax rates. Pro forma taxation for
                                                                                   other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
Minimum lease payments                             121,729            99,934
Contingent lease payments                           18,450            19,514
                                                                                   country                               tax rate (2005)               tax rate (2004)
Other                                               17,865            18,229
                                                                                   Denmark                                              28%                           30%
total rent, insurance and tax                      158,044          137,677
                                                                                   Norway                                               28%                           28%
                                                                                   Sweden                                               28%                           28%
                                                                                   United Kingdom                                       30%                           30%
                                                                                   Belgium                                              34%                           34%
                                                                                   Netherlands                                          31%                           34%
                                                                                   France                                               34%                           35%
                                                                                   Switzerland                                          31%                                 –
                                                                                   Germany                                              40%                           40%


                                                                                                                                                                         97
                                                                                Notes




The pro forma tax charge for the year can be reconciled to the pro forma profit per the pro forma income statement as follows:
                                                                                                        2005                     %             2004                    %
Pro forma operating income before tax                                                                35,474                                  12,103
Tax at the domestic income tax rate of 28%                                                            –9,933                 28.0            –3,389                28.0
Tax effect of expenses that are not deductible in determining taxable income                           1,884                  –5.3             –704                  5.8
Tax effect of income that is not taxable                                                               8,159                –22.9              4,675              –38.6
Effect of different tax rates of subsidiaries operating in other jurisdictions                           –942                  2.6             –702                  5.8
Change in loss carry forward not capitalized                                                          –7,055                 19.9            –5,539                45.8
Withholding taxes                                                                                        –199                  0.6             –326                  2.7
Adjustment of prior years taxes                                                                        2,442                  –6.9                86               –0.7
Deferred tax                                                                                          –3,382                   9.5             3,358              –27.7
Pro forma tax expense and effective tax rate for the year                                             –9,026                 25.4            –2,541                20.9
Pro forma net income after tax (before minority share)                                               26,448                                    9,562


As soon as the mother company is now located in Sweden, the applicable                 the same level as the Swedish one (28%). Therefore, there is no pro forma dif-
domestic tax rate is the Swedish one (28%). In the last annual report (2004),          ference in applying this rate in 2005. but there is one for 2004 (and represents a
the domestic tax rate considered was the Danish one (30%) which is now at              domestic tax difference of 242 TEUR – see hereafter).



                                                                                                        2004                     tax rate                 income tax
Pro forma operating income before tax                                                                 12,103                          28%                       3,389
Pro forma operating income before tax                                                                 12,103                          30%                      –3,631
Pro forma tax difference                                                                              12,103                          –2%                        –242

deferred tax in the balance sheet                                                                       2005                         2004
Deferred tax asset                                                                                    13,084                      11,535
Deferred tax liability                                                                               –14,303                      –9,143
Net position 31-12-2005                                                                               –1,219                         2,392

The movements for the year in Rezidor SAS’ net deferred tax position was as follows:
                                                                                                          2005                        2004
Net deferred tax asset/liability, opening balance                                                        2,392                        –522
Charged to income for the year                                                                          –3,382                       3,358
Deferred tax in acquired companies                                                                             0                           0
Translation differences                                                                                   –229                        –444
Net deferred tax asset/liability, closing balance                                                      –1,219                        2,392


The above-mentioned tax losses can be carried forward without time limit.
The total tax value of net operating losses not included in the deferred tax
asset is TEUR 27,426 (19,124).




98
                                                           Notes




Note 14    iNtaNGiBLe aNd taNGiBLe fiXed assets (Pro forma)


                                                other
                                            intangible construction in   machinery and    Buildings       Land and
                                 Goodwill      assets        progress       equipment    and install. improvements       total
Acquisition value 01-01-2004      15,139      55,971          44,485          111,681      90,524           3,260    321,060
Investments                                                   14,630           19,234      19,838             126     53,828
Sales/Disposals                                                    –30         –1,414     –17,739          –3,523     –22,706
Reclassifications                                             –54,211          11,567      42,335             309           0
Translation adjustment               428          14             –435            –675         –816             77      –1,407
Net BooK vaLUe 31-12-2004         15,567      55,985           4,439         140,393      134,142             249    350,775


Acc.depreciation 01-01-04         –1,523          –34                         –78,106     –62,419              –1    –142,083
Depreciation accord. to plan      –1,280      –1,225                          –12,015       –4,774                    –19,294
Sales/Disposals                                                                 1,065        9,809              6     10,880
Translation adjustment               –35        –199                              879          871             –5       1,511
Acc.depreciation 31-12-04         –2,838      –1,458                          –88,177     –56,513               0    –148,986
Net BooK vaLUe 31-12-2004        12,729       54,527           4,439           52,216      77,629             249    201,789


                                                other
                                            intangible construction in   machinery and    Buildings       Land and
                                 Goodwill      assets        progress       equipment    and install. improvements       total
Acquisition value 01-01-2005      15,567      55,985           4,439          140,393     134,142             249    350,775
Investments                            0       2,504          13,806           15,723        2,570              2     34,605
Sales/Disposals                        0            0               0         –12,323     –56,868            –131     –69,322
Reclassifications                      0        5,861          –9,171           2,278        1,020             12           0
Other adjustments                    221            8           –779              180          124              5        –241
Translation adjustment               130         103               19             603        3,078              9       3,942
Net BooK vaLUe 31-12-2005        15,918       64,461           8,314         146,854       84,066             146    319,759


Acc.depreciation 01-01-05         –2,838      –1,458                          –88,177     –56,513               0    –148,986
Depreciation accord. to plan         –35       –1,821                         –12,559       –6,051             –3     –20,469
Sales/Disposals                        0          10                            1,743          651              0       2,404
Other Adjustments                   –460        –131                            1,245         –237              0        417
Translation adjustment                12           –7                            –212         –363              0       –570
Acc.depreciation 31-12-05         –3,321       –3,407               0         –97,960     –62,513              –3    –167,204
Net BooK vaLUe 31-12-2005         12,597      61,054           8,314           48,894      21,553             143    152,555
Net BooK vaLUe 31-12-2004        12,729       54,527           4,439           52,216      77,629             249    201,789




                                                                                                                           99
                                                                            Notes




GOODWIll                                                                          impairment
cost                                                                              Impairment loss recognised in the year ended
                                                                                                                                                                 –
At 1 january 2004                                                   15,139        31 December 2005 and balance at 31 December 2005
Exchange difference                                                       558     Net carrying amount
At 1 january 2005                                                   15,697        At 31 December 2005                                                    12,597
Elimination of amortization accumulated                                           At 31 December 2004                                                    12,729
                                                                            –
prior to the adoption of IFRS 3
                                                                                  Goodwill acquired in a business combination is allocated, at acquisition, to the
Arising on acquisition of a subsidiary                                      –
                                                                                  cash generating units that are expected to benefit from that business combina-
Eliminated on disposal of a subsidiary                                      –     tion. The net carrying amount of goodwill had been allocated as follows:
Reclassified as held for sale                                               –     cash Generating units                                     2005           2004
Other adjustments                                                         221     Radisson SAS Hotel, Amsterdam                            1,867           1,867
at 31 december 2005                                                15,918         Rezidor SAS Country A/S – for Country
                                                                                                                                           3,813           3,621
                                                                                  Inns & Suites FRG Hotelmgt Gmbh
                                                                                  SAS Hotels A/S Denmark –
amortisation                                                                                                                               6,320           6,342
                                                                                  for Radisson SAS Hotel Nice
At 1 january 2004                                                   –1,523        Others                                                      597            899
Exchange differences                                                      –23     total net carrying amount                              12,597          12,729
Amortisation for the year                                           –1,315        Regarding annual impairment testing on Goodwill, refer to note 6.
At 1 january 2005                                                   –2,861
Other adjustments                                                        –460     Net gain on sale of assets                             2005              2004

Elimination of amortisation accumulated                                           Sales price                                              799           18,065
                                                                            –
prior to the adoption of IFRS 3                                                   Book value                                              –279          –11,826
at 31 december 2005                                                 –3,321        Transaction cost                                                          –424
                                                                                  Net gain                                                 520            5,815




Note 15       oWNersHiP iN associated comPaNies aNd otHer sHares


                                                            Book value          share of                                                              Book value
associated companies                 ownership (%)           01.01.05            income          dividend      investments               other         31.12.05
Casino Denmark A/S                            50.0%                 94                 2                 0                  0                –1                95
Casino Copenhagen K/S                         50.0%             4,075             2,094           –3,087                    0              –10             3,072
RHW jv Southern Africa (P) ltd                50.0%             1,429              –689                  0                  0             –352               388
zAO St-Petersburg (*)                         35.0%             5,638             3,320                  0                  0          –8,958                   0
Nordrus Hotel Holding A/S                     26.1%                 99             –113                  0                  0              175               161
Rezidor SAS Hotels & resorts
Middle East Wll                               50.0%                  0              438                  0                  0              452               890
SAS Royal Hotel Beijing Co ltd                50.0%                  0            1,161                  0                  0               –1             1,160
total                                                         11,335             6,213            –3,087                    0          –8,695             5,766
(*) The shares of ZAO St-Petersburg have been disposed of during 2005.

                                                            Book value          share of                                                              Book value
other shares and participation ownership (%)                 01.01.05            income          dividend      investments               other         31.12.05
Feri Otelcilik ve Turizm A.S                  10.0%             2,164                  0                 0                  0              119             2,283
RBS Hotelli AS                                14.1%             1,901                  0                 0                  0           2,994              4,895
Al Quesir Hotel Company S.A.E.                20.0%             1,469                  0                 0                  0              217             1,686
Doriscus Enterprise ltd                       16.0%             2,325                  0                 0              384             2,994              5,703
First Hotels Co K.S.C.C                         1.8%                 0                 0                 0            2,042                 66             2,108
Timmerdorfer Strand                           20.0%                  0                 0                 0                  0              307               307
Others                                                            123                  0                 0                33               –62                 94
total                                                           7,982                  0                 0            2,459             6,635            17,076



Net gain on sale of shares                          2005                 2004
Sales price                                         6,787                   0
Book value                                           –631                   0
Gain on sale of shares                             6,156                    0


100
                                                                                   Notes




Note 16       accoUNts receivaBLe                                                      secured through insurance companies. The collective pension plans for sala-
                                                                                       ried employees in Sweden and for employees in Norway are secured through
Current receivables are stated net of an allowance for doubtful accounts of            defined benefit pension plans with insurance companies. For employees in
TEUR 6,852 (5,194).                                                                    Denmark Rezidor SAS mainly has defined contribution plans.


Note 17        LoNG–term receivaBLes
                                                                                       defined benefit pension plans                             2005                2004
                                                                                       Pensions earned during the year                         –1,541              –1,274
                                                         2005               2004       Interest cost                                           –2,050              –1,696

loans to parties relating to                                                           Expected return on pension assets for
                                                                                                                                                2,763               2,403
operation of hotels                                    12,153             11,475       the year

Other                                                   3,459               2,812      The year’s amortization of deviations
                                                                                                                                                    –53              –121
                                                                                       from estimates and plan amendments
total                                                  15,612             14,287
                                                                                       impact on income for the year,
In some cases Rezidor SAS grants loans to operators of our hotels, or to our           net, pertaining to defined benefit                          882                 688
joint venture partners in early stages of new projects. The terms for such loans       pension plans
vary, but in general there is agreed on interest on the loans and the repayment
schedule is based on the project opening and project progress.
                                                                                       defined benefit pension plans, assets                     2005                2004
                                                                                       Status December 31
Note 18       casH aNd BaNK                                                            Plan assets                                             43,436             36,324
                                                                                       Pension commitments                                   –41,923             –30,419
TEUR 2,432 (2,275) of the total cash at bank is restricted to meet the liability
arising from payroll taxes withheld.                                                   Difference between plan assets and
                                                                                                                                                1,513               5,905
                                                                                       commitments
                                                                                       Unrecognized plan amendments, and
Note 19       PeNsioN fUNds, Net                                                       deviations from estimates including                     11,925               5,098
                                                                                       actual return
                                                         2005               2004       Book assets                                            13,438              11,003
Pension funds, net,                                                                    In some pension plans the actual return has been lower than Rezidor SAS’
over funded plans                                      14,472             11,616
                                                                                       estimated long-term return, which is reflected in the item unrecognized
Pension funds, net,                                                                    deviations from estimates. Information on actual return is not yet available.
under funded plans                                     –1,034                –612
                                                                                       Pension assets, net, including pension commitments, assets under manage-
total                                                  13,438             11,003
                                                                                       ment and unrecognized plan amendments and deviations from estimates for
                                                                                       the defined benefit pension plans developed as follows:
Per country                                              2005               2004
Norway                                                 12,244               9,935      Pension assets, net                                       2005                2004
Sweden                                                   1,724                961      Opening balance                                         11,003             10,035
Belgium                                                   –530                107      Earnings impact for the year                               –882               –688
total                                                  13,438             11,003       Paid-in premium                                          3,985               1,812

When calculating Rezidor SAS’ pension commitments, the year’s pension earn-            Utilization/payment of client
                                                                                                                                                  –167                 –81
                                                                                       company funds in Alecta
ings and returns, the following long-term economic assumptions apply to the
Rezidor SAS Group which represent a weighted average:                                  Change in deviations from estimates
                                                                                                                                                  –759               –245
                                                                                       and pension plans
                                                         2005               2004
                                                                                       Currency effects                                            258                 170
Discount rate                                             5.1%               6.4%
                                                                                       closing balance                                        13,438              11,003
long-term rate of return                                  5.6%               7.7%
Inflation rate                                            2.3%               3.0%
Future salary adjustments                                 3.3%               3.0%      Note 20       otHer cUrreNt LiaBiLities
Future adjustments of current pension                     2.0%               2.0%
                                                                                                                                                 2005                2004
In the financial statements, the commitments in the Rezidor SAS Group are
included as specified in the table below. The items “unrecognized amounts”             Financing from SAS Group companies                      21,865             91,304
include deviations from estimates, actuarial gains and losses and plan amend-          Other current liabilities                               88,644             84,359
ments. These are allocated according to two methods. Plan amendments are               closing balance                                       110,509            175,663
spread over the average remaining working lives of employees participating
in the plan. Deviations from estimates are amortized over fifteen years when           Liability for VAT, social security and payroll taxes is included in other current
they exceed 10% of the greater of pension obligations of pension assets. Most          liabilities with TEUR 16,760 (14,707).
pension plans in Scandinavia are defined benefit plans. Most pension plans are




                                                                                                                                                                       101
                                                                                 Notes




Note 21       assets PLedGed aNd coNtiNGeNt LiaBiLities
                                                                                     year                        Number of management contracts expiring
                                                                                     2006 – 2009                                                                    2
assets pledged                                         2005              2004
                                                                                     2010 – 2014                                                                    4
Securities on deposit                                 2,432              2,275
                                                                                     2015 – 2019                                                                  14
Book value of secured loans                                 0                    0
                                                                                     2020 – 2024                                                                  15
contingent liabilities
                                                                                     2025 – 2029                                                                  16
Miscellaneous guarantees                              1,529              1,715
                                                                                     The total guaranteed annual cash flow according to these management con-
In certain agreements entered into by the members of the group, there are            tracts is the following:
clauses leading to possible changes in business relations and financial struc-
ture, if the ownership of Rezidor SAS should become subject to a change.
                                                                                     year                                   total guaranteed annual cash flow
                                                                                     2006                                                                   80,000
Note 22       LeasiNG commitmeNts
                                                                                     2007                                                                   79,000
At year-end Rezidor SAS has 62 leasing contracts for hotel buildings, of which       2008                                                                   42,000
some also include other fixed assets than buildings.                                 2009                                                                   21,000
                                                                                     2010                                                                   15,000
The leasing agreements expire in the following years:
year                             Number of leasing agreements expiring
                                                                                     Note 24      LitiGatioN
2006 – 2009                                                                      4
2010 – 2014                                                                      7   Rezidor SAS operates in a number of countries around the world and is always
2015 – 2019                                                                  10      involved in several complex projects and business relationships where there
                                                                                     can be professional disputes on various issues. Most often these situations
2020 – 2024                                                                  22
                                                                                     finds its solution through negotiations and discussions. In some rare situations
2025 – 2029                                                                      6   these disputes can lead to major disagreements or claims of violation of law.
2030 – 2034                                                                  12      Proper accounting for possible financial implications has been done.
2035 – 2040                                                                      1

Future leasing expenses for leasing agreements effective on 31st of December         Note 25      seGmeNtaL discLosUres
are estimated to:
                                                                                     The Group is only engaged in the business segment ”Hotel Operations”.
                                total estimated future leasing expenses
                                                                                     Revenue, segment assets and additions to tangible and intangible assets
                                                2005                     2004        are disclosed within the secondary geographical segments. The segment
Within 1 year                               156,000                  132,000         information complies with the Group’s accounting policies and internal financial
1 – 5 years                                 644,000                  715,000         management.

After 5 years                            2,146,000                 2,143,000
                                                                                     Fixed assets in the geographical segments include those used directly in the
total                                    2,946,000                2,990,000          operation of each segment, including intangible assets, property, plant and
                                                                                     equipment, and investments in associates. The assets are distributed accord-
Amounts listed above are a mix of minimum and contingent lease payments,             ing to their physical location.
summarizing the actual amounts.
                                                                                     GEOGRAPHICAl – SECONDARy SEGMENT (PRO–FORMA)
In contracts containing a minimum lease payment, the financial exposure
related to the minimum lease payments is usually limited (capped) to a maxi-         2005                         revenue      segment assets          investments
mum amount for the entire lease period that the minimum lease payments can           Norway                      175,283                 83,525             10,982
exceed a contractually defined variable lease. The maximum excess payments
                                                                                     Sweden                        79,269               116,625               6,198
are usually limited to 2–3 years minimum lease.
                                                                                     Denmark                       64,863                 51,461                230
                                                                                     Germany                       81,763                30,940               3,988
Note 23       maNaGemeNt coNtract commitmeNts                                        United Kingdom              100,585                 36,778               7,986
                                                                                     Other countries               85,283                45,104               5,221
The management agreements can have commitments by Rezidor SAS with
respect to financial liabilities. Rezidor SAS has in some cases guaranteed to        total                       587,046               364,433              34,605
the hotel owners a minimum annual cash flow. In most of the agreements the
guarantee is limited to a maximum amount over the term of the agreement as
                                                                                     2004                         revenue      segment assets          investments
well as a maximum annual amount. The maximum amount over the term of the
agreement is usually equal to 2–3 times the annual guaranteed amount.                Norway                      160,227                 45,072               4,813
                                                                                     Sweden                        87,001               152,457               1,851
As at the end of 2005, Rezidor SAS had granted some kind of financial commit-
                                                                                     Denmark                       56,613                46,015                 105
ment in 51 Management contracts.
                                                                                     Germany                       66,286                 34,537              5,365
The management contracts containing such financial risk for the group will           United Kingdom                70,806                73,819             30,657
expire as presented in the table below:                                              Other countries               57,795                32,592             11,037
                                                                                     total                       498,728               384,492              53,828


102
                                                                  Notes




Note 26     aUditors’ fees


                                                      Group
                                               2005           2004
deloitte
Audit assignments                               659             407
Other assignments                               131             353
total deloitte                                  790             760


other audit firms
Audit assignments                                 5              21
Other assignments                               344               2
total other audit firms                         349              23
total                                          1139             783




Note 27     recoNciLiatioN from actUaL to Pro forma



INCOME STATEMENT – FROM ACTUAl TO PRO FORMA

                                                  actual       from actual    Pro forma     actual    from actual   Pro forma
thousand eUr                        subnotes       2005       to Pro forma         2005      2004    to Pro forma        2004

Operating revenue                               587,046                        587,046    498,728                    498,728
Cost of goods sold                               –43,737                       –43,737     –41,255                   –41,255
Personnel cost                                  –207,295                      –207,295    –182,340                  –182,340
Other operating expenses               1        –140,467              5,064   –135,403    –122,433         9,097    –113,336
Gross operating income                          195,547               5,064    200,611    152,700          9,097     161,797
Rental expense, insurance of
                                                –158,044                      –158,044    –137,677                  –137,677
properties & property tax

Share of income in associated
                                                   6,213                         6,213       3,071                     3,071
companies

operating income before deprecia-
                                                 43,716               5,064     48,780     18,094          9,097      27,191
tion
Depreciation and amortization          2         –19,884               –585    –20,469     –18,114        –1,170     –19,284
Income from sale of shares and
                                                   6,676                         6,676       5,815                     5,815
tangible fixed assets

operating income before financial
                                                 30,508               4,479     34,987       5,795         7,927      13,722
items
Financial income                                   7,732                         7,732       2,044                     2,044
Financial expenses                                –7,245                        –7,245      –3,663                    –3,663
operating income before tax                      30,995               4,479     35,474       4,176         7,927      12,103
Tax on ordinary result                 3          –7,772           –1,254       –9,026        –321        –2,220      –2,541
Net income after tax                             23,223               3,225     26,448       3,855         5,707       9,562
Minority interest
Net income                                       23,223               3,225     26,448       3,855         5,707       9,562




                                                                                                                         103
                                                              Notes




BAlANCE SHEET – FROM ACTUAl TO PRO FORMA


assets

                                                 actual    from actual   Pro forma     actual    from actual   Pro forma
thousand eUr                        subnotes      2005    to Pro forma        2005      2004    to Pro forma        2004

NON-CURRENT ASSETS
intangible non-current assets
Goodwill                                        12,597                     12,597     12,729                     12,729
Other intangible assets               4, 5      62,809         –1,755      61,054        697         53,830      54,527
                                                75,406         –1,755      73,651     13,426         53,830      67,256


tangible non-current assets
land, buildings and fixed
                                                21,695                     21,695     77,878                     77,878
installations
Machinery and equipment                         48,894                     48,894     52,216                     52,216
Construction in progress                         8,314                      8,314      4,439                      4,439
                                                78,903                     78,903    134,533                    134,533


financial non-current assets
Share of equity in associated
                                                 5,766                      5,766     11,335                     11,335
companies
Other shares and participations                 17,076                     17,076      7,982                      7,982
Pension funds, net                              14,472                     14,472     11,003                     11,003
Deferred tax asset                              13,084                     13,084     11,535                     11,535
Other long-term receivables                     15,612                     15,612     14,287                     14,287
                                                66,010                     66,010     56,142                     56,142


total non-current assets                       220,319         –1,755     218,564    204,101         53,830     257,931


CURRENT ASSETS
inventory                                        5,195                      5,195      4,533                      4,533


receivables
Accounts receivable                             48,312                     48,312     35,321                     35,321
Other receivables                               54,604                     54,604     53,289                     53,289
                                               102,916                    102,916     88,610                     88,610


Bank deposits, cash in hand, etc.     6, 7      25,816         11,942      37,758     26,541          6,877      33,418
total current assets                           133,927         11,942     145,869    119,684          6,877     126,561

total assets                                   354,246         10,187     364,433    323,785         60,707     384,492




104
                                                                  Notes




BAlANCE SHEET – FROM ACTUAl TO PRO FORMA


eQUity aNd LiaBiLities

                                                     actual    from actual   Pro forma     actual    from actual   Pro forma
thousand eUr                            subnotes      2005    to Pro forma        2005      2004    to Pro forma        2004

EQUITy
Share capital                                          107                        107     80,000                     80,000
Translation differences                             19,393                     19,393     19,312                     19,312
Reserves                                   8       143,545                    143,545      6,514         55,000      61,514
Retained earnings                          9       –36,895          5,708     –31,187    –41,712                    –41,712
Net profit for the year                    9        23,223          3,225      26,448      3,855          5,707       9,562
equity attributable to equity
holders of the parent                              149,373          8,933     158,306     67,969         60,707     128,676


minority interest                                      214                        214        215                        215
total equity                                       149,587          8,933     158,520     68,184         60,707     128,891


lIABIlITIES
Non-current provisions
Pension commitments                                  1,034                      1,034      2,640                      2,640
Deferred tax                                        14,303                     14,303      9,143                      9,143
                                                    15,337                     15,337     11,783                     11,783


Non-current interest bearing liabilities
Other long-term liabilities                            430                        430          0                          0
                                                       430                        430          0                          0


current liabilities
liabilities to financial institutions               37,683                     37,683     36,095                     36,095
Accounts payable                                    34,732                     34,732     30,943                     30,943
Current tax                                10        5,968          1,254       7,222      1,117                      1,117
Other current liabilities                          110,509                    110,509    175,663                    175,663
                                                   188,892          1,254     190,146    243,818                    243,818
total liabilities and provisions                   204,659          1,254     205,913    255,601                    255,601

total equity and liabilities                       354,246         10,187     364,433    323,785         60,707     384,492




                                                                                                                        105
                                                                         Notes




CASH FlOW STATEMENT – FROM ACTUAl TO PRO FORMA


                                                                actual from actual     Pro forma    actual from actual   Pro forma
                                                   Sub-notes
thousand eUr                                                     2005 to Pro forma          2005     2004 to Pro forma        2004

oPeratioNs
Earnings Before Interest and Taxes (EBIT)            1, 2       30,931       4,479       35,410      3,606      7,927      11,533
Interest paid to external financial institutions                   –34                      –34      –268                    –268
Depreciation and amortization                         2        19,884            585     20,469    18,114       1,170      19,284
Income from sale of shares and tangible
                                                                –8,818                   –8,818     –5,815                 –5,815
fixed assets and disposals
Write down/up of investments                                    –6,660                   –6,660
Change in tax position                                3           917                       917     –2,715     –2,219      –4,934
Share of income in associated companies                         –6,213                   –6,213     –3,071                 –3,071
Dividend from associated companies                               3,087                    3,087      2,689                  2,689
funds provided by the year’s operations                        33,094        5,064       38,158    12,540       6,878      19,418
Change in:
Inventories                                                      –662                      –662     –1,161                 –1,161
Current receivables                                             –1,990                   –1,990    –11,409                –11,409
Current liabilities                                              1,964                    1,964      4,905                  4,905
change in working capital                                        –688                      –688     –7,665                 –7,665
cash flow from operating activities                            32,406        5,064       37,470     4,875       6,878      11,753

iNvestmeNts
Shares and participations                                       –2,629                   –2,629     –1,071                 –1,071
Interest received from external financial
institutions                                                       98                        98       838                     838
Other intangible assets                                         –2,504                   –2,504
Construction in progress                                       –13,806                  –13,806    –14,630                –14,630
Machinery and equipment                                        –15,723                  –15,723    –19,234                –19,234
land, Buildings and other fixed installations                   –3.203                   –3,203    –19,964                –19,964
total investments                                              –37,767                  –37,767    –54,061                –54,061
Sale of fixed assets and shares                                85,042                    85,042     17,641                 17,641
cash flow from investing activities                            47,275                    47,275    –36,420                –36,420

fiNaNciNG
Net on external loans                                             373                       373     –2,156                 –2,156
long term interest bearing receivables                          –1,385                   –1,385      1,477                  1,477
long term interest bearing liabilities                          –1,592                   –1,592       –281                   –281
Current interest bearing receivables                            –8,985                   –8,985      9,741                  9,741
Current interest bearing liabilities                           –65,902                  –65,902    39,718                  39,718
Other changes financial items                                   –7,610                   –7,610     –5,422                 –5,422
total external financing                                       –85,101                  –85,101    43,077                  43,077
Increase share capital                                           3,107                    3,107      2,800                  2,800
Group contribution, Norway                                                                          –4,173                 –4,173
cash flow from financing activities                            –81,994                  –81,994    41,704                  41,704

effects of exchange rate changes on
cash and cash equivalents                                         –72                       –72        –91                    –91
change in liquid funds in the balance sheet                     –2,385       5,064        2,679    10,068       6,878      16,946
Liquid funds at the beginning of the year             7         –9,482       6,878       –2,604    –19,622                –19,622
Liquid funds at year -end                                      –11,867      11,942           75     –9,554      6,878      –2,676

liquid funds consist of:
Bank deposits, cash in hand etc.                               25,816       11,942       37,758     26,541      6,878      33,419
liabilities to financial institutions                          –37,683                  –37,683    –36,095                –36,095
Liquid funds                                                   –11,867      11,942           75     –9,554      6,878      –2,676


106
                                                                            Sub-notes




sUB-Notes to Note 27


The purpose of these sub-notes is to explain the pro forma adjustments made         7   Payment of net income tax related to tax impacts attributable to the fee
between the actual financial statements of 2004 and 2005 in order to achieve            reduction and to the depreciation on intangible asset.
the pro forma financial statements. They are all related to the assumption that
the New Franchise Agreement (or assignment agreement) with Carlson took                 The adjustments in the cash flow statement for 2005 consist also of the net
place as of 1/1/2004.                                                                   taxes paid related to pro forma adjustments made in 2004 (2,219). Indeed
                                                                                        and for the same reason mentioned in sub-note 6, as soon as actual finan-
1   Pro forma fees adjustments based on the assignment agreement                        cial statements are the starting points to achieve the pro forma financial
                                                                                        statements for both years, all pro forma amounts considered to be paid in
2   Pro forma depreciation adjustments on intangible asset.                             2004 have also to be considered as paid in 2005.

3   Pro forma tax effect related to adjustments made on fees and on depreci-            In the cash flow statement for 2005 and for the same reasons described
    ation of intangible asset (see sub-notes 1 & 2).                                    in sub-notes 6 & 7, the liquid funds at the beginning of the year have been
                                                                                        adjusted with the pro forma adjustments of 2004 which represent the net
4   Intangible asset related to the assignment agreement adjusted as of the             cash collection of the reduction of fees adjusted in 2004 (9,097) minus the
    opening balance January 1, 2004. This is a non cash issue.                          net taxes related to pro forma adjustments made in 2004 (2,219).

5   Pro forma depreciation adjustments on intangible asset (see sub-note            8   Same as sub-note 4. It is a non cash issue related to the assignment
    2). The adjustments for 2005 consist of the depreciation amount of 2004             agreement.
    (1,170) and the depreciation amount of 2005 (585).
                                                                                    9   Net impact on retained earnings related to pro-forma adjustments in the
6   Cash collection related to fees adjustments.                                        Income statement (see sub-notes 1, 2, 3). Year 2005 contains also the net
                                                                                        impact of the adjustments made in the Income statement in 2004.
    The adjustments in the cash flow statement for 2005 consist of the reduc-
    tion of fees collected in 2004 (9,097) and the reduction of fees collected      10 Adjustment on tax liability.
    in 2005 (5,064). Indeed, as soon as actual financial statements are the
    starting points to achieve the pro forma financial statements for both years,
    all pro forma amounts considered to be collected in 2004 have also to be
    considered as collected in 2005.




                                                                                                                                                               107
                  PareNt comPaNy
           Rezidor SAS Hospitality Holdings AB
      Central Business Registration No.: 556674-0972
                 Registered in: Stockholm



               Board of directors
                   Gunnar Reitan
                 Jørgen Lindegaard
                    Jay S. Witzel
                  Leo M. Renaghan
                  Benny Zakrisson
                    Trudy Rautio
                     Kurt Ritter



                       aUditor
                       Deloitte AB
                   Peter Gustafsson
              Authorized Public Accountant




108

								
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