Corporate Presentation April 2015
Disclaimer This presentation has been prepared with information about Hotels City Express, S.A.B. de C.V. ("HCITY" or the "Company"). The presentation is not intended to be exhaustive and does not necessarily include all the information the receiver should want to be informed of the Company. The forward-looking statements contained in this presentation are based on the current assumptions and outlook of the Company s management. Actual results, performance and events may differ significantly from those expressed or implied in these forward-looking statements as a result of several factors such as the general and economic conditions in Mexico and abroad, interest and exchange rates, future renegotiations, pre-payments of liabilities or loans denominated in foreign currency, changes in laws and regulations, and general competitive factors (regionally, nationally or internationally). All communications, inquiries and requests for information related to these materials should be directed to the contacts listed below. Abelardo Loscos Corporate Finance and Investor Relations Director Tel: +5255 5249-8056 aloscos@hotelescity.com 2
We are the Leading & Fastest Growing Hospitality Platform in Mexico Business Platform that Provides a Unique Exposure to Hospitality in Mexico The largest limited service hotel chain in Mexico Accelerated Growth in the Economy & Budget Lodging Segments Through New-Hotel Development # of Rooms (1) 13,350 Fully integrated platform spanning the complete hospitality value chain with best-in-class development and distribution capabilities Three distinct lodging formats designed to serve the domestic business traveler and capture middle class expansion in Mexico Diversified geographic footprint geared towards expected GDP growth in Mexico 586 1,061 1,542 2,173 2,850 3,836 4,991 5,562 6,973 8,092 9,326 10,929 Significant embedded growth in recently built inventory Hotels (2) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 5 10 15 20 26 35 45 50 62 71 82 96 118 Organic expansion potential in our target markets due to lower density of hotels per capita, ADRs and occupancy rates State-of-the-art distribution systems at the forefront of industry trends Consistent track record of financial performance Launch of Launch of First international hotel opened in San Jose, Costa Rica IPO Launch of Follow On Opening of first (1) Number of hotels and rooms at the end of the period. 3
Business Model Tailored to Best Serve Our Target Segments Our Portfolio of Three Targeted Limited Service Hotel Brands... Hoteles City Express Brand Portfolio Offers a Differentiated Value Proposition Within our Segment Quality Safety Value Description Average Room Size Average Daily Rate (ADR) (MXN) Flagship brand Essential amenities Economy segment 23 m 2 (248 ft 2 ) $ 600 1,200 City express product located in premium locations 23 m2 (248 ft2) $ 1,000 1,500 Budget segment brand Same quality but smaller rooms 17 m 2 (183 ft 2 ) $ 500 750 Extendedstay brand Apartment -style layout Economy segment 30 m 2 (323 ft 2 ) $ 750 1,700 Geographic Coverage to Primarily Target Value Conscious Domestic Business Travelers Hotel Industry Market Segments Market Segment Consistency Convenience Target ADR (MXN) > $1,500 Rooms per Hotel 100 150 70-150 105 134 26 120 # of Hotels (1) 71 (72%) 7 (7%) 13 (13%) 7 (7%) # of Rooms (1) 8,246 (74%) 941 (9%) 1,484 (13%) 421 (4%) $700 1,500 $500 700 Target Segment (1) As of April 30, 2014. 4
Largest Hotel Chain in our Target Segment Number of Hotels by Chain in Mexico As of April 30, 2015 133 130 Limited Service Hotels Full and Select Service Hotels 93 36 96 41 41 35 35 31 26 24 Number of Hotels by Brand in Mexico As of April 30, 2015 76 62 50 47 36 16 15 12 11 10 7 5 13 11 11 11 6 7 6 5 4 Select Service Limited Service Source: Information prepared by the Company based on publicly available information including, prospectuses, quarterly reports, websites and press releases. 5
Strategically Planned Geographic Footprint and Deployment of Capital Aligned with the Key Drivers of Economic Activity Strategically Planned Footprint Provides Diversified Exposure to Mexico s Main Business, Industrial and Commercial Hubs and Corridors with a Balanced Leverage to the Main Drivers of Economic Activity E NAFTA Agricultural Export Corridor B C NAFTA Industrial, Manufacturing, Logistics and Export Corridors Maquila Export and Logistics Corridor Corredor DMinero Mining Corridor A Energy Petrochemical, and Export Corridor A B C D E Recently enacted Energy Reform Opening of oil and gas sector to private participants Growth of Mexico s manufacturing sector driven by competitive and logistic advantages of the Country Recently announced investments by automotive industry, aviation industry and infrastructure Economic recovery of the United States, Mexico s main business partner Resurgence of maquila industry Decreasing levels of violence in northern Mexico Recently enacted structural reforms in the mining sector Resuming government spending in transportation infrastructure Hotels in Operation 2015 Openings 6
Geographic Coverage and Portfolio Mix by Industry and Sector Geographic Coverage by Country As of April 30, 2015 Presence in Mexico by Economic Activity As of April 30, 2015, % of Total Portfolio based on number of hotels 1% 1% Commercial, Financial and Tourism Services Energy & Petrochemical Activities México Costa Rica 12% - 17% 15% - 20% 20 hotels on the Gulf of Mexico s Energy Corridor Colombia Exporting Activities 10% - 15% 98% Agriculture Activities 5% - 7% 35% - 40% Manufacturing Hotel Portfolio by Brand As of April 30, 2015, # Hotels and % of Total Portfolio Hotel Portfolio by Ownership As of April 30,2015, # Hotels and % of Total Portfolio 13 13% 7 4% 24 22% 37 Owned 7 9% 74% 71 12 11% 26% 40% Co-Owned Leased Franchise and Management Consolidated 78% 25 7
Macroeconomic & Industry Fundamentals Ce Plus Patio Universidad México D.F.
Macroeconomic Fundamentals Pointing to a Gradual Economic Recovery Quarterly GDP Growth Contribution to GDP Growth Gross Fixed Investment Public Construction Expenditure Loans for Machinery & Equipment Private Consumption Source: HSBC Economic Analysis, Santander Economic Analysis, SECTUR and INEGI. 9
Tourism Sector With Growth in Recent Years GDP Contribution by Economic Activity Services Sector GDP Tourism GDP Growth Primary Secondary Tertiary % 10 100% 5 36% 36% 36% 0 2008 2009 2010 2011 2012 2013 2014 62% 61% 61% -5-10 Total GDP Tourism GDP 2011 2012 2013 Domestic Tourism Consumption Growth Airlines Passenger Traffic Growth Room Supply Growth Index 2008 = 100 117 112 107 102 (Million Passengers) CAGR +7% 28 30 33 Rooms +2% 660,546 651,160 672,296 97 24 26 638,494 92 2008 2009 2010 2011 2012 2013 2014 Total GDP Evolution 2010 2011 2012 2013 2014E 2010 2011 2012 2013 Domestic Tourism Private Consumption Source: HSBC Economic Analysis, Santander Economic Analysis, SECTUR and INEGI. 10
Fragmented Industry that Presents Consolidation Opportunities Hotel Supply Fragmented and Dominated by Independent, Non-Standardized Hotels Hotel Demand Driven by our Target Customers Breakdown of Independent and Chained Hotels 2013 (% of Rooms) 100 100 100 28 21 69 Target segment Occupied Room Nights by Nationality of Guests 2013 (% of Occupied Room Nights) 100 100 100 17 60 38 31 72 79 83 40 62 1-4 Stars 5 Stars All Hotels United States Brazil Independent Chained Mexico Domestic International Hotel Rooms in Mexico by Quality Breakdown by Number of Stars Tourism Spending in Mexico Domestic Airline Passengers 2013 179,968 Mainly independent, family operated, non standardized hotels subject to substitution 180,116 2013 International Tourists 10% (Million Passengers) 24.4 25.5 28.1 30.5 135,986 113,961 62,265 50% 55% 57% 60% 5 Stars 4 Stars 3 Stars 2 Stars Others 46% of Total Rooms in Mexico Source: INEGI, Ministry of Tourism, Ministry of Communications and Transportation, JLL, PwC, Euromonitor. 90% Domestic Tourists 2010 2011 2013 2013 Low Cost Carriers Legacy Carriers 11
Capex Positive Growth Dynamics in a Capitalized Industry Capitalization Events for Lodging / Real Estate Investment Vehicles Growth of Hotel Chains in Mexico # of Hotels in Operation 2012 IPO Fibra Hotel 96 71 2013 IPO Fibra Inn FO Fibra Hotel IPO Hoteles City Express Hoteles City Express 35 18 12 7 11 11 11 8 One Hoteles Real Inn Ibis Comfort Inn 2014 FO Hoteles City Express Rights Offering Fibra Inn As of December 2014 As of December 2012 Source Information prepared by the Company based on publicly available information including, prospectuses, quarterly reports, websites and press releases Cash Deployment of Main Players Special Focus in the Limited Service Segment Capex and Cash Balance as of 4Q14, number of hotels as of December 2014 2,500 2,000 1,500 Fibra Hotel Cash Balance as of 4Q14 Increase in # of Limited Service Hotels (2) from December 2012 to December 2014 25 17 1,000 500 0 Hoteles City Express Fibra Inn Posadas 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Hoteles City Express Posadas 5 Grupo Real Turismo 3 Choice Hotels Growth in Number of Hotels (4Q14 vs 4Q13) 12
Business Model that Boosts Value Creation with Each New Hotel Ce Chetumal, Quintana Roo
Our Fully Integrated Business Model Provides Broad Exposure to Hospitality in Mexico Fully integrated platform provides flexibility and control over investment cost, growth, marketing and customer experience Development Hotel Ownership Hotel Management & Franchising Marketing and Distribution 20,000+ rooms developed by the Hoteles City Express team Systematic and streamlined design and development Low, predictable costs Benefit from scale in development Strong ROIC track record Control over going in cap rates 37 owned hotels (1) 25 co-owned hotels (1) 12 leased hotels (1) Primary focus on ownership and coownership of hotels 50%+ ownership in coowned hotels Business partners contribute land and/or equity and local market insight Best-in-class operating margins Standardized room layouts, furnishings and processes Brand licensing to thirdparty hotel owners under management contracts Strong brand recognition Own distribution channels account for vast majority of reservations City Premios guest loyalty program Corporate and local agreements Targeted and cost-efficient marketing At the forefront of digital and social media distribution FIBRAS International Chains Independent Hotels (1) As of December 31, 2014; excludes managed and franchised hotels. 14
Leading Hotel Development Capabilities at the Core of Our Strengths Streamlined and Replicable Development Processes Difficult to Replicate Hotel Development Capabilities Out of the ground new hotel development in as little as 6 months Construction Begins Month 2 4 Proven In- House Hotel Development Expertise More hotel and room openings since 2003 than any other hotel chain in Mexico One new hotel opened every 6.8 weeks on average since our first opening in 2003 Capacity to develop up to 18-20 hotels per year On-budget international development experience Month 3 5 Month 4 6 Predictable Costs and Time of Delivery Economies of scale in construction contracting and purchasing furnishings and fixtures Competitive and highly transparent bidding process with high-quality contractors Track record of meeting budgeted times and costs Maintenance, Renovations and Improvements Based on strict guidelines that enable cost control and consistent quality Terms in contracts of managed hotels ensure periodic renovations based on our guidelines Month 5 7 Month 6 9: Opening Scalable Infrastructure Standardized and streamlined processes allow us to scale hotel development capacity Processes scalable to new markets / geographies International Standards All properties built to comply with highest safety, fire and environmental standards Key differentiating factor from independent, nonbranded hotels predominant in our target segment 15
Proven Development Capacity Delivering on our Business Plan We Have Fulfilled our Hotel Opening Schedule as Planned and Within Budget Hotel Development Pipeline at IPO (Scheduled Openings for 2013) While Continuing to Build a Highly Visible Development Pipeline 2014 Hotel Development Pipeline 72 73/74 75 85 86 87 88 Ce Chetumal Opened: March 2013 Ce Santa Fe / CS Santa Fe Opened: June / August 2013 Ce Oaxaca Opened: October 2013 Ce Tehuacan (Puebla) Opened: March 2014 Ce Paraíso (Dos Bocas) Opened: May 2014 Ce Monterrey Norte Opened: August 2014 Ce DF Central de Abastos Opened: September 2014 76 77 78 89 90 91 92 Ce Salina Cruz Opened: October 2013 Ce Patio Universidad Opened: December 2013 Ce La Paz Opened: December 2013 CS Puebla Autopista Opened: September2014 Ce Apizaco Opened: September 2014 Ce Cd. Victoria Opened: October 2014 Ce Plus D.F. Satélite Opened: October 2014 79 80 81 93 94 95 96 82 Cj Puebla Autopista Opened: December 2013 83 Ce Cali (Colombia) Opened: December 2013 84 Ce Cananea Opened: December 2013 Ce Monterrey Nuevo Sur Opened: December 2014 97 98 Ce Matamoros Opened: December 2014 Ce Salamanca Opened: December 2014 99 Cj Villahermosa Opened: December 2014 Ce Irapuato Norte Opened: December 2013 Cj Cd. del Carmen Opened: February 2014 Cj Cd. del Carmen (Aeropuerto) Opened: February 2014 Ce Cabo San Lucas Opened: April 2015 CS Cabo San Lucas Opened: April 2015 Ce Tuxpan Estimated Opening: 2Q15 - Opened Hotel - Scheduled Openings 16
Development Pipeline for 2015 Footprint Provides Diversified Exposure to Mexico s Main Business, Industrial and Commercial Hubs and Corridors Maquila Export and Logistics Corridor Hotel, Room and City Count 2014 2015E Change Hotels 96 118 22.9% Rooms 10,929 13,350 22.2% Cities 58 63 8.6% NAFTA Agricultural Export Corridor Corredor Minero Mining Corridor Energy Petrochemical, and Export Corridor 9 Hotel Portfolio by Brand Pro-forma as of December 2015, % of total rooms 10 18 5% 15% 9% 71% 81 Hotel Portfolio by Investment Scheme Pro-forma as of December 2015, % of total rooms Ce Ce Plus Cj CS NAFTA Industrial, Manufacturing, Logistics and Export Corridors 12 3133 9% 27% 40% 45 Owned Co-owned Leased Managed & Franchised Hotels in Operation 2015 Openings 28 24% Consolidated 73% 17
Proprietary Marketing and Distribution Platforms at the Forefront of Evolving Consumer Behavior and Industry Trends Leading Marketing and Distribution Platforms in Mexico Sales and Marketing Levers Multi-channel Proprietary CRS Multi-channel reservation platform: Market Intelligence Marketing Programs Central Reservation System ( CRS ) 150+ regional, national and international inhouse hotel market studies City Premio loyalty program, accounting for ~20% of our reservations during 2014 Active marketing on social media: Own system that manages room night sales, corporate agreements, third-party vendors and e-commerce Efficient inventory, ADR and yield management GDSs OTAs 2.4% City @ccess online system 2.6% 14.9% Internet website CRS 4.6% 1Q15 Room Nights Sold by Channel 19.6% Call Center 55.8% Walk-ins and direct bookings 82% of reservations made through own channels (1) 44% through our CRS 23% through electronic channels Corporate Sales Corporate Alliances 26 sales executives across Mexico and an office in Miami for international sales 7,500+ corporate and local agreements, accounting for ~60% of our occupied room nights during 2014 Airlines: State-of-the-art digital media platform: PR and Publicity Diversified media advertising Internet, pay TV, in-flight magazines, radio (1) Includes walk-ins and reservations made directly at the hotel. 18
Operation and Financial Perfomance Ce Plus Patio Universidad, México D.F.
Growth has Been Accompanied by Consistent Improvement Across All Key Operating and Financial Metrics Portafolio Mix by Investment Scheme Installed and Occupied Rooms Nights Occupancy % of Hotels Owned Co-owned Leased Managed and Franchised Thousand Rooms Installed Occupied 847 +19.9% +16.0% 983 468 561 % 185 bps 55.2% 57.1% 62 26% 34% 16% 24% 71 34% 28% 14% 24% 15.7% 82 37% 28% 13% 22% 96 36% 26% 13% 25% 1Q14 1Q15 +17.2% 3,586 3,040 2,693 2,230 2,120 1,531 1,675 1,223 54.8% 56.8% 1Q14 55.1% 1Q15 59.1% 2011 2012 2013 2014 Average Daily Rate and Revenue per Available Room MXN 714 +7% 395 +10% 762 435 2011 2012 2013 2014 Total Revenues and Adjusted EBITDA (1) MXN Millions +21.3% +21.0% 311 376 100 121 2011 2012 2013 2014 Consolidated Net Income MXN Millions +171.4% 45 17 668 366 1Q14 +3.3% 683 722 388 398 1Q15 737 436 1Q14 1Q15 32.0% 32.1% +25.5% 190 1,104 1,412 715 932 280 358 471 10 1Q14 1Q15 5.3% 12.0% +142.7% 143 84 26 2011 2012 2013 2014 2011 2012 2013 2014 2011 2012 2013 2014 26.5% 30.0% 32.4% 33.3% 1.4% 2.7% 7.6% 10.1% ADR RevPar Revenue Adj. EBITDA Margin Net Income Margin (1) Adjusted EBITDA calculated as operating income + depreciation + amortization + expenses associated with the opening of new hotels. 20
Significant Embedded Growth In Recently Built Inventory Number of Hotels in Operation # of Hotels in Operation at the End of Each Period Average Daily Rate ( ADR ) MXN 44% 37% 39% 35% 34% 775 762 96 96 +2.6% 82 750 737 71 722 62 34 33 32 725 743 26 27 700 691 35 45 50 62 63 682 714 720 675 683 2011 2012 2013 2014 1Q15 668 650 2011 2012 2013 2014 1Q15 (1) Non-Established Hotels Established Hotels (1) Total Chain Established Hotels % of Non-Established Occupancy Revenue per Available Room ( RevPAR ) % MXN 66 62 58 54 50 62.6 63.5 59.4 59.8 58.0 +640 pbs 59.1 56.8 57.1 54.8 55.1 2011 2012 2013 2014 1Q15 Total Chain Established Hotels (1) 500 475 450 425 400 375 350 472 451 +8.5% 405 413 414 436 435 366 388 398 2011 2012 2013 2014 1Q15 Total Chain Established Hotels (1) (1) Defined as hotels with at least 36 months in operation at a defined period. 21
Solid Capital Structure Geared to Support Growth Balance Sheet Structure As of March 31, 2015 Financial Debt Maturity Schedule As of March 31, 2015 MXN 9,846.6 Million MXN 9,846.6 Million Total Debt Outstanding: MXN 1,831.8 Million 1 36 100% 100% Cash and Equivalents Recoverable Taxes and Other Current Assets 29% 4% 19% 4% Financial Debt Other Liabilities 10 9 10 6 8 6 7 5 2015 2016 2017 2018 2019 2020 2021 2022 2023 Access to Diversified Financing Sources Bank Debt by Counterparty as of March 31, 2015 11% Hotel Assets 67% 77% Shareholders Equity 5% 8% 9% 36% HSBC Bancomext IFC Banamex IFC/DEG 8% 23% Corpbanca Otros Assets Liabilities + Shareholders' Equity 1. Does not include MXN $7.2 million of interest to be paid 22
Corporate Governance to Support and Lead Growth Ce Plus & CS Santa Fe México D.F.
Long Standing Commitment to Maintaining Corporate Governance Best Practices and Social Responsibility Solid Institutional Sponsorship with a Broadly Diversified Investor Base 7% Institutionalized Governance Aligned with Best Practices Board Committees 27% IFC Affiliates Audit (100% Independent) Corporate Practices (100% Independent) Planning & Finance Free float 66% Commitment to the Environment Other investors with holdings of less than 5% individually Mainly independent Board of Directors (8 out of 9 Board members are independent) Procurement & Construction Board of Directors Compensation Nominations Social Responsibility and Sustainability It is in our DNA. Why? 1. Because we care 2. Because our guests and partners care We collaborate with different organizations focused on promoting social awareness and nature preservation 3. Because we strictly comply with regulations 4. Because it makes business sense 30% and 40% reductions in energy and water use, respectively, at our EDGE-certified hotels LEED Certification (USGBC) First hotel in Latin America 6 certified hotels + 8 in process of certification EDGE Certification (IFC) First certified building worldwide 9 hotels certified + 9 in process of certification Biosphere Responsible Tourism (UNESCO) First hotel chain worldwide in process of certification 39 certified hotels + all hotels expected to be certified by 2016 We support initiatives aimed at creating long-term value within our communities through education and entrepreneurship 24