959800LM1RW3PKJ4A296-20211231-en

CONSOLIDATED BALANCE SHEET .................................................................................

CONSOLIDATED COMPREHENSIVE PROFIT AND LOSS STATEMENTS .........................

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ...............................................

CONSOLIDATED CASH FLOW STATEMENTS ..................................................................

1. ACTIVITY AND COMPOSITION OF THE PARENT COMPANY ......................................

2.- BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AND

CONSOLIDATION PRINCIPLES .............................................................................................

2.1 BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS .............

2.2 STANDARDS AND INTERPRETATIONS EFFECTIVE IN THIS PERIOD ...................

2.3 ACCOUNTING CORRECTION ...............................................................................

2.4 ACCOUNTING CRITERIA CHANGE .......................................................................

2.5 COMPARISON OF INFORMATION ........................................................................

2.6 FOREIGN CURRENCY TRANSACTIONS AND BALANCES .....................................

2.6.1 FUNCTIONAL CURRENCY AND PRESENTATION CURRENCY ...............................

2.6.2 FOREIGN CURRENCY TRANSACTIONS, BALANCES AND CASH FLOWS ............

2.6.3 CONVERSION OF BUSINESS ABROAD .......................................................................

2.6.4 FOREIGN OPERATIONS IN HYPER-INFLATIONARY ECONOMIES .....................

2.7 RESPONSIBILITY FOR THE INFORMATION, ESTIMATES MADE AND SOURCES

OF UNCERTAINTY .......................................................................................................

2.8 GOING CONCERN ..................................................................................................

2.9 CONSOLIDATION PRINCIPLES APPLIED ...............................................................

2.9.1 SUBSIDIARIES (APPENDIX I) ................................................................................................................

2.9.2 BUSINESS COMBINATIONS ..................................................................................

2.9.3 NON- CONTROLLING INTERESTS ........................................................................

2.9.4 ASSOCIATES (APPENDIX II) ................................................................................

2.9.5 CHANGES IN THE SCOPE OF CONSOLIDATION ...........................................................................

3.- PROPOSED DISTRIBUTION OF PROFITS ...................................................................................

4.- VALUATION STANDARDS ...........................................................................................

4.1 PROPERTY, PLANT AND EQUIPMENT ....................................................................

4.2 GOODWILL .............................................................................................................

4.3 OTHER INTANGIBLE ASSETS .................................................................................

4.4 IMPAIRMENT TO NON-FINANCIAL ASSETS SUBJECT TO AMORTISATION OR

DEPRECIATION ...........................................................................................................

4.5 LEASES ...................................................................................................................

4.6 FINANCIAL INSTRUMENTS ...................................................................................

4.6.1 FINANCIAL ASSETS .............................................................................................

4.6.2 CASH AND CASH EQUIVALENTS ..........................................................................

4.6.3 FINANCIAL LIABILITIES .....................................................................................

4.6.4 . EQUITY INSTRUMENTS ....................................................................................

4.7 CLASSIFICATION OF FINANCIAL ASSETS AND DEBTS INTO CURRENT AND

NON-CURRENT ............................................................................................................

4.8 INCOME AND EXPENSES ........................................................................................

4.9 OFFICIAL SUBSIDIES ..............................................................................................

4.10 CORPORATION TAX .............................................................................................

4.11 OBLIGATIONS TO EMPLOYEES ...........................................................................

4.12 ONEROUS CONTRACTS .........................................................................................

4.13 SHARE-BASED REMUNERATION SCHEMES .........................................................

4.14 TREASURY SHARES ..............................................................................................

4.15 PROVISIONS FOR RISKS AND CHARGES ..............................................................

4.16 ENVIRONMENTAL POLICY .................................................................................

4.17 CONSOLIDATED CASH FLOW STATEMENTS .......................................................

5.- PROFIT/(LOSS) PER SHARE .......................................................................................

6.- BUSINESS COMBINATIONS .......................................................................................

7.- PROPERTY, PLANT AND EQUIPMENT ......................................................................

8.- LEASES ......................................................................................................................

9.- GOODWILL ...............................................................................................................

10.- OTHER INTANGIBLE ASSETS ...................................................................................

11.- IMPAIRMENT ............................................................................................................

12.- INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD ...........................

13.- NON-CURRENT FINANCIAL INVESTMENTS

14.- TRADE RECEIVABLES .............................................................................................

15.- CASH AND CASH EQUIVALENTS ..............................................................................

16.- EQUITY .....................................................................................................................

16.1 CAPITAL .....................................................................................................................................................

16.2 DIVIDENDS ...........................................................................................................

16.3 PARENT COMPANY RESERVES ...........................................................................

16.4 TREASURY SHARES .............................................................................................

16.5 NON CONTROLLING INTERESTS ........................................................................

17.- DEBT IN RESPECT OF BOND ISSUES AND BANK BORROWINGS ............................

18.- TAX NOTE ................................................................................................................

19.- OTHER NON-CURRENT LIABILITIES ......................................................................

20.- PROVISIONS ............................................................................................................

21.- TRADE AND OTHER PAYABLES ..............................................................................

INFORMATION ON DEFERRED PAYMENTS TO SUPPLIERS. THIRD ADDITIONAL

PROVISION. "DUTY TO REPORT" OF ACT 11/2013 OF 26 JULY .......................................

22.- OTHER CURRENT LIABILITIES ..............................................................................

23.- THIRD-PARTY GUARANTEES AND CLAIMS IN PROCESS ......................................

24.- LONG-TERM INCENTIVE PLAN ..............................................................................

25.- INCOME AND EXPENSES .........................................................................................

25.1 INCOME ......................................................................................................................................................

25.2 FINANCIAL INCOME ...............................................................................................................................

25.3 PERSONNEL EXPENSES .........................................................................................................................

25.4 OTHER OPERATING EXPENSES ..........................................................................................................

25.5 FINANCIAL COSTS ..................................................................................................................................

25.6 RESULTS FROM EXPOSURE TO HYPERINFLATION .....................................................................

26.- RELATED PARTY TRANSACTIONS ........................................................................

27.- INFORMATION BY SEGMENTS ..............................................................................

28.- REMUNERATION AND OTHER STATEMENTS MADE BY THE BOARD OF

DIRECTORS AND SENIOR MANAGEMENT ......................................................................

28.1 REMUNERATION OF THE BOARD OF DIRECTORS .......................................................................

28.2 REMUNERATION OF SENIOR MANAGEMENT ...............................................................................

28.3 INFORMATION ON CONFLICTS OF INTEREST ON THE PART OF DIRECTORS ...................

29.- ENVIRONMENTAL, SOCIAL AND GOVERNMENTAL RISKS ...................................

30.- EXPOSURE TO RISK ................................................................................................

31.- EVENTS AFTER THE REPORTING PERIOD ............................................................

APPENDIX I: SUBSIDIARIES .............................................................................................

APPENDIX II: ASSOCIATED COMPANIES ........................................................................

104

CONSOLIDATED MANAGEMENT REPORT ....................................................................................

105

NH Hotel Group, S.A. and Subsidiaries

Consolidated Financial Statements for 2021 drawn up in accordance

with the International Financial Reporting Standards adopted by the

European Union.

NH HOTEL GROUP, S.A. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AT 31 December 2021 AND 31 December 2020

(Thousands of euros)

ASSETS

Note

31/12/2021

31/12/2020

NET ASSETS AND LIABILITIES

Note

31/12/2021

31/12/2020

NON‐CURRENT ASSETS:

EQUITY:

Property, plant and equipment

7 and 11

1,518,859

1,615,924

Share capital

871,491

784,361

Right-of-use assets

8 and 11

1,592,345

1,693,820

Reserves of the parent company

16.1

723,963

933,173

Investment Property

2,905

2,950

Reserves of fully consolidated companies

(555,894)

(349,898)

Goodwill

9 and 11

96,127

101,069

Reserves of companies consolidated using the equity method

(25,644)

(18,176)

Other intangible assets

126,948

128,137

Conversion differences

(147,865)

(162,932)

Deferred tax assets

294,005

273,013

Treasury shares and shareholdings

16.4

(308)

(367)

Investments accounted for using the equity method

40,922

41,773

Consolidated Profit/(Loss) for the period

(133,667)

(437,159)

Financial assets at fair value with change in profit/loss

13.1

2,334

1,985

Equity attributable to the shareholders of the Parent Company

732,076

749,002

Other financial assets at amortised cost

13.2

27,872

35,664

Non-controlling interests

16.5

48,998

49,582

Total non-current assets

3,702,317

3,894,335

Total equity

781,074

798,584

NON-CURRENT LIABILITIES:

Debt instruments and other marketable securities

395,020

349,062

Bank borrowings

389,943

623,011

Leasing liabilities

1,673,018

1,809,120

Deferred tax liabilities

186,359

171,519

Other financial liabilities

504

904

Other non-current liabilities

21,360

10,601

Non-current liabilities

44,061

47,255

Total non-current liabilities

2,710,265

3,011,472

CURRENT LIABILITIES:

Trade and other payables

256,676

188,493

CURRENT ASSETS:

Accounts payable from related entities

824

613

Inventories

9,576

7,957

Tax payables

32,140

22,589

Other current assets

13,228

5,383

Bank borrowings

21,281

25,927

Trade receivables

48,964

29,937

Leasing liabilities

252,335

250,619

Other non-trade debtors

25.1

50,340

19,952

Debt instruments and other marketable securities

6,803

143

Tax receivables

35,772

50,547

Other financial liabilities

105

Accounts receivable from related entities

1,185

955

Other current liabilities

40,376

25,095

Cash and cash equivalents

243,930

320,851

Current liabilities

3,475

6,277

Total current assets

402,995

435,582

Total current liabilities

613,973

519,861

TOTAL ASSETS

4,105,312

4,329,917

NET ASSETS AND LIABILITIES

4,105,312

4,329,917

Notes 1 to 31 set forth in the Consolidated Annual Report and Annexes I/II form an integral part of the consolidated balance sheet at 31/12/2021. The consolidated balance sheet at 31/12/2020 is presented solely for

the purposes of comparison.

NH HOTEL GROUP, S.A. AND SUBSIDIARIES

CONSOLIDATED COMPREHENSIVE PROFIT AND LOSS STATEMENT FOR THE YEARS 2021 AND 2020

(Thousands of euros)

Note

2021

2020

Revenues

25.1

746,484

536,150

Other operating income

25.1

86,940

7,852

Net gains on disposal of non-current assets

7, 8, 10 and 25.1

65,108

(475)

Procurements

(32,073)

(25,378)

Staff costs

25.3

(268,614)

(268,174)

Amortisation of right of use

(172,774)

(186,310)

Depreciation on tangible fixed assets and intangible assets

7 and 10

(107,454)

(116,167)

Net Profits/(Losses) from asset impairment

7, 8, 9, 10 and 11

2,131

(76,258)

Other operating expenses

25.4

(318,597)

(249,481)

Gains on financial assets and liabilities and other

(966)

(222)

Profit (Loss) from entities valued through the equity method

(1,447)

(7,468)

Financial income

25.2

3,411

1,716

Change in fair value of financial instruments

1,815

323

Financial expenses on leases

25.5

(83,048)

(94,106)

Other financial expenses

25.5

(69,324)

(41,439)

Results from exposure to hyperinflation (IAS 29)

25.6

3,151

796

Net exchange differences (Income/(Expense))

703

(3,774)

Impairment on financial investments

12 and 26

(703)

6,926

PROFITS / (LOSSES) BEFORE TAX FROM CONTINUING OPERATIONS

(145,257)

(515,489)

Corporation tax

9,327

75,154

PROFIT/(LOSS) FOR THE PERIOD FROM CONTINUING ACTIVITIES

(135,930)

(440,335)

Profit (loss) for the year from discontinued operations net of tax

—

(66)

PROFIT / (LOSS) FOR THE PERIOD

(135,930)

(440,401)

Conversion differences

(2,857)

(21,799)

Income and expenses recognised directly in equity

(2,857)

(21,799)

TOTAL COMPREHENSIVE PROFIT/(LOSS)

(138,787)

(462,200)

Profit/(Loss) for the year attributable to:

Parent Company Shareholders

(133,667)

(437,159)

Non-controlling interests

(2,263)

(3,242)

Comprehensive Profit / (Loss) attributable to:

Parent Company Shareholders

(136,063)

(456,829)

Non-controlling interests

(2,724)

(5,371)

Profit / (Loss) per share in euros (basic and diluted)

(0.331)

(1.115)

Notes 1 to 31 set forth in the Consolidated Annual Report and Annexes I/II form an integral part of the consolidated comprehensive profit and loss statement

for 2021. The Consolidated Comprehensive Profit and Loss Statement for 2020 is presented solely for the purposes of comparison.

NH HOTEL GROUP, S.A. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR 2021 AND 2020

(Thousands of euros)

Reserves of the parent company

Reserves in companies

consolidated using

Results

Treasury shares

attributable to

Legal

Other

Full

the equity

Conversion

and

Parent

Non-controlling

Total

Capital

Premium

reserve

reserves

consolidation

method

differences

shareholdings

Company

Total

interests

Shareholders

Balance at 1 January 2020

784,361

756,990

74,853

(54,754)

(278,348)

(18,198)

(134,967)

(1,647)

89,964

1,218,254

57,239

1,275,493

Net profit (Loss) for the year

—

(437,159)

(3,242)

(440,401)

Conversion differences

—

(19,670)

—

(19,670)

(2,129)

(21,799)

Recognised income and expenses for the period

—

(19,670)

—

(437,159)

(456,829)

(5,371)

(462,200)

Capital increase

—

Distribution of earnings:

- To Reserves

—

15,894

143,046

(68,998)

—

(89,964)

—

Remuneration Scheme in shares

—

(2,724)

—

1,525

—

(1,199)

—

(1,199)

Adjustment application of IAS 29

—

(8,295)

—

(8,295)

(1,383)

(9,678)

Distribution of dividends

—

(1,179)

Other movements

—

(132)

(2,552)

—

(245)

—

(2,929)

276

(2,653)

Balances at 31 December 2020

784,361

756,990

90,747

85,436

(349,898)

(18,176)

(162,932)

(367)

(437,159)

749,002

49,582

798,584

Initial balance adjusted 01 January 2021

784,361

756,990

90,747

85,436

(349,898)

(18,176)

(162,932)

(367)

(437,159)

749,002

49,582

798,584

Net profit (Loss) for the year

—

(133,667)

(2,263)

(135,930)

Conversion differences

—

(2,396)

—

(2,396)

(461)

(2,857)

Recognised income and expenses for the period

—

(2,396)

—

(133,667)

(136,063)

(2,724)

(138,787)

Capital increase

87,130

19,462

—

(153)

—

106,439

—

106,439

Distribution of earnings:

- To Reserves

—

(226,164)

(203,527)

(7,468)

—

437,159

—

Remuneration Scheme in shares

—

(2,286)

—

759

—

(1,527)

—

(1,527)

Adjustment application of IAS 29

—

17,463

—

17,463

3,280

20,743

Distribution of dividends

—

(166)

Other movements

—

(69)

(2,469)

—

(700)

—

(3,238)

(974)

(4,212)

Balances at 31 December 2021

871,491

776,452

90,747

(143,236)

(555,894)

(25,644)

(147,865)

(308)

(133,667)

732,076

48,998

781,074

Notes 1 to 31 set forth in the Consolidated Annual Report and Appendices I/II form an integral part of the statement of changes in equity for the year 2021. The statement of changes in equity for the year 2020 is

presented for comparison.

NH HOTEL GROUP, S.A. AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENT FOR 2021 AND 2020

(Thousands of euros)

Note

2021

2020

1. OPERATING ACTIVITIES

Consolidated profit (loss) before tax and discontinued operations:

(145,257)

(515,489)

Adjustments:

Amortisation of use rights (+)

172,774

186,310

Depreciation of tangible and intangible fixed assets (+)

7 and 10

107,454

116,167

(Profits)/Losses for impairment (net) (+/-)

7, 8, 9 and 10

(2,131)

76,258

Gains/Losses on the sale of tangible and intangible assets (+/-)

7, 8, 10 and 25.1

(65,108)

475

Gains/Losses on investments valued using the equity method (+/-)

1,447

7,468

Financial income (-)

25.2

(3,411)

(1,716)

Change in fair value of financial instruments

(1,815)

(323)

Financial expenses (+)

25.5

152,372

135,545

Results from exposure to hyperinflation (IAS 29)

25.6

(3,151)

(796)

Net exchange differences (Income/(Expense))

(703)

3,774

Profit (loss) on disposal of financial investments

966

222

Impairment on financial investments (+/-)

703

(6,926)

Other non-monetary items (+/-)

(48,701)

(47,047)

Adjusted profit (loss)

165,439

(46,078)

Net variation in assets / liabilities:

(Increase)/Decrease in inventories

(1,619)

3,410

(Increase)/Decrease in trade debtors and other accounts receivable

(1,538)

70,024

(Increase)/Decrease in other current assets

13,757

(28,015)

Increase/(Decrease) in trade payables

71,328

(68,586)

Increase/(Decrease) in other current liabilities

10,780

(30,875)

Increase/(Decrease) in inventories

(10,031)

(2,579)

(Increase)/Decrease in non-current assets

(312)

254

Increase/(Decrease) in non-current liabilities

436

518

Income tax paid

444

7,834

Total net cash flow from operating activities (I)

248,684

(94,093)

2. INVESTMENT ACTIVITIES

Other interest/dividends received

816

155

Investments (-):

Group companies, joint ventures and associates

—

(64,057)

Tangible and intangible assets and investments in property

7 and 10

(36,837)

(105,464)

Financial investments and other current financial assets

(7,527)

—

(44,364)

(169,521)

Disinvestment (+):

Group companies, joint ventures and associates

2.9.5 and 12

—

26,918

Tangible and intangible assets and investments in property

128,160

4,798

Other assets

7,415

—

135,575

31,716

Total net cash flow from investment activities (II)

92,027

(137,650)

3. FINANCING ACTIVITIES

Dividends paid out (-)

(143)

(1,176)

Interest paid on debts (-)

(55,888)

(34,250)

Interest paid by means of payment

(7,929)

(6,459)

Interest paid by financing and other

(47,959)

(27,791)

Variations in (+/-):

Equity instruments:

- Capital

16.1

5,094

—

- Share premium

16.1

1,224

—

- Treasury shares

16.4

(770)

(298)

Debt instruments:

- Bonds and other tradeable securities (+)

400,000

—

- Bonds and other tradeable securities (-)

(356,850)

—

- Loans from credit institutions (+)

2,484

821,700

- Loans from credit institutions (-)

(241,355)

(278,900)

Borrowings from associate companies (+)

16.1 and 17

100,000

—

- Principal elements on payment for leasing (-)

(271,847)

(244,785)

- Other financial liabilities (+/-)

(102)

(79)

Total net cash flow from financing activities (III)

(418,153)

262,212

4. GROSS INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III)

(77,442)

30,469

5. Effect of exchange rate variations on cash and cash equivalents (IV)

521

(1,726)

6. Effect of variations in the scope of consolidation (V)

6 and 2.9.5

—

2,763

7. NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (I+II+III-IV+VI)

(76,921)

31,506

8. Cash and cash equivalents at the start of the financial year

320,851

289,345

9. Cash and cash equivalents at end of year

243,930

320,851

Notes 1 to 31 set forth in the Consolidated Annual Report and Annexes I/II form an integral part of the consolidated cash flow statement for 2021.

The consolidated cash flow statement for 2020 is presented for the purposes of comparison

NH Hotel Group, S.A. and Subsidiaries

Explanatory notes on the Consolidated Financial Statements for 2021

1.- ACTIVITY AND COMPOSITION OF THE PARENT COMPANY

NH HOTEL GROUP, S.A. (hereinafter the Parent Company) was incorporated as a public limited company in

Spain on 23 December 1881 under the trade name “Material para Ferrocarriles y Construcciones, S.A.”, which

was subsequently changed to “Material y Construcciones, S.A.” (MACOSA) and later to “Corporación Arco,

S.A.”

In 1992, Corporación Arco, S.A. took over Corporación Financiera Reunida, S.A. (COFIR), while at the same

time adopting the trade name of the company taken over and amending its corporate purpose to the new activity

of the Parent Company, which focused on the management of its shareholding portfolio.

During 1998, Corporación Financiera Reunida, S.A. (COFIR) merged with Grupo Catalán, S.L. and its

subsidiaries and Gestión NH, S.A. through the absorption of these companies by the former. Subsequently,

Corporación Financiera Reunida, S.A. (COFIR) took over NH Hoteles, S.A., adopted its trade name and

broadened its corporate purpose to allow for the direct performance of hotel activities, activities in which it had

already been engaged indirectly through its subsidiaries.

Information on these mergers can be found in the financial statements of the years in which said transactions

took place.

The General Shareholders' Meeting of 21 June 2014 agreed to change the company's name from “NH Hoteles,

S.A.” to “NH Hotel Group, S.A.”

The Parent Company heads up a group of subsidiary companies which, together with NH Hotel Group, S,A.,

make up the NH Hotel Group (hereinafter, the “Group” - see Appendices I and II) which is dedicated to running

hotels, on its own, either owning or leasing the hotels, or via third parties, with management, offering a wide

range of functions from its corporate head office and regional offices.

On 11 June 2018, MHG Continental Holding (Singapore) Pte Ltd made a public offer to acquire 100% of the

shares making up NH Hotel Group, S.A.’s company capital, the result of which was that Minor International

Public Company Limited (“MINT”) acquired shares representing 94.13% of the share capital of NH Hotel

Group, S.A., via its wholly owned subsidiary, MHG Continental Holding (Singapore) Pte. Ltd.

At the end of the financial year, the Group was operating hotels in 30 countries, with 353 hotels and 55,063

rooms, of which around 72% are located in Spain, Germany, Italy and the Benelux countries.

NH Hotel Group, S.A. has its registered address at Calle Santa Engracia, 120 - 7th floor, Madrid, Spain.

Furthermore, the name of the Parent Company did not change in this financial year or in the previous one.

Impact of COVID-19

After the start of the COVID-19 pandemic in the middle of March 2020 in Europe, demand for hotels dropped

drastically due to lockdowns, travel restrictions and social distancing, which drastically affected mobility.

The gradual reopening of hotels was made possible by the flexible costing structure and began in the middle of

2020, progressively, depending on recovery of domestic demand and with a focus on optimising profitability.

With the gradual roll out of vaccines since the beginning of 2021, a turning point was beginning to be seen that

– together with the progressive lifting of restrictions in some European countries – allowed a faster reopening of

the portfolio once again. Therefore, at the end of 2021, around 90% of the hotels were open, compared to 60%

at the beginning of the year..

In 2020 NH Hotel Group put “Feel Safe at NH” into place in all its hotels. This is a new plan, with measures

approved by experts, to face up to the health crisis caused by the SARS-CoV-2 coronavirus. The Company has

reviewed all its procedures and made nearly 700 adaptations to its operating standards to preserve the health and

safety of travellers and employees worldwide. Grouped into 10 main lines of action and backed by specialists in

different fields, the measures implemented cover the digitisation of hotel services, adapting sanitation processes,

including social distancing regulations in operations and the application of personal protective equipment,

among others. We also reached a collaboration agreement with SGS, the world leader in inspection, analysis and

certification, which allows us to follow up on the measurement and diagnostics protocol established to verify

that the Group's hotels are clean and safe environments.

In spite of the low level of demand, its flexible operational and financial structure has enabled the Group to

overcome the major challenges in 2020 and 2021. The Group will benefit from brand recognition recovery,

excellent locations and strong market positioning, once recovery accelerates in Europe.

Contingency Plan

As a result of the exceptional circumstances that occurred after the start of the global pandemic (COVID-19),

the Group implemented different measures and plans to adapt the business and ensure its sustainability with the

aim of minimising costs, preserving the Company's liquidity to meet operational needs and ensure that the

recovery of the hotel activity is carried out efficiently and under maximum guarantees in terms of health and

safety.

The following costs discipline and control measures to ensure minimisation of operational costs and preserve

liquidity continue to be implemented:

•Personnel (Note 25.3): The Group carried out adjustments, temporary lay-offs and reductions in hours

and wages in hotels and central offices caused by force majeure or production reasons. Some of these

processes continued during 2021. In addition, a collective redundancy process was carried out in

Central Services in Spain as part of a global plan pursuant to local legislation.

•Operational costs (Note 25.4):

–Negotiations with suppliers to reduce purchase costs, seek alternative, cheaper products and

attain improvements to payment terms.

–Suspension of non-priority third party advisory services.

–Significant reduction in marketing and advertising costs despite the need to boost income.

•Leasing (Note 8): The temporary reduction in fixed leases continued during the first part of 2021 and,

to a lesser extent, during the second half of the year, after recovery began.

•CapEx: Capex decreased by more than 50% during 2020, and during 2021 it has continued to be

limited to a figure of around 36.8 million euros.

•Strengthening liquidity: during 2021 NH Hotel Group proactively carried out a battery of initiatives to

reinforce the Group's capital structure:

◦In May a €100 million capital investment was agreed by Minor International through an

unsecured subordinated loan that was drawn down in May and capitalised in September 2021

through a capital increase process directed towards all shareholders. This agreement provided

immediate liquidity and demonstrated the support of the main shareholder in the recovery.

The capital increase to offset the shareholder loan was approved at the Shareholders’ meeting

held on 30 June. At the same time as the capital increase, the Board started up the cash capital

increase under the same economic conditions and with preferential subscription rights for the

other shareholders to prevent diffusive effects in the shareholdings (Note 16.1).

◦In addition, during April, in order to continue to optimise the debt profile, the expiry of the

ICO syndicated loan of 250 million euros was extended from 2023 to 2026 (Note 17).

Furthermore, the waiver on compliance with financial covenants was extended for the whole

of 2022.

◦In June, NH Hotel Group successfully launched a senior bonds issue on the market,

guaranteed for the amount of 400 million euros and maturing in July 2026. The funds obtained

have been used to repay the senior bond for 357 million euros expiring in 2023. The new

issue, which was significantly oversubscribed, has an annual interest of 4% (Note 17).

◦Furthermore, NH Hotel Group has agreed to extend its revolving syndicated credit facility

(RCF) for 242 million euros, which will now expire in March 2026, instead of March 2023. It

is worth pointing out the support shown by the loan institutions taking part in this financing,

with the extension of the waiver on the financial covenants during all of 2022 (Note 17).

•On 30 June 2021, the sale & leaseback transaction on the NH Collection Barcelona Gran Hotel

Calderón was announced, which was sold for 125.5 million euros with a linked 20 year lease

agreement, with NH having the option to exercise additional extensions. With this transaction, the

Group has generated a net book gain of 46.7 million euros and net cash, after paying the taxes on the

sale, of 113 million euros.

For more information on the Contingency Plan, see the section "Impacts of COVID-19 and the measures

implemented" of the Consolidated Management Report for the financial year ended 31 December 2021.

These consolidated annual accounts include the impact arising from the situation described above, with

particular relevance to the impairment analyses carried out by the group during the financial year and the

resulting recorded results (Note 11), activation of tax credits based on their recovery (Note 18), and the

description and analysis made by directors and their conclusion on business continuity and drawing up the

relevant as a going concern (Note 2.8).

These consolidated annual statements should be read taking into account that assessment and breakdown.

2.- BASIS OF PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS AND

CONSOLIDATION PRINCIPLES

2.1Basis of presentation of the Consolidated Financial Statements

The consolidated annual accounts were prepared using the accounting records of NH Hotel Group, S.A. and the

consolidated entities. The consolidated annual accounts for the 2021 financial year were prepared in accordance

with the International Financial Reporting Standards adopted by the European Union (IFRS-EU), other

provisions within the financial reporting standards framework which are applicable and with the requirements

for format and framework provided for in the Delegated Regulation EU 2018/815 of the European Commission,

Regulation (EC) No. 1606/2002 of the European Parliament and by Law 62/2003, of 30 December on tax,

administrative and social measures, as well as the applicable rules and circulars of the National Securities

Market Commission and the other Spanish accounting regulations that may be applicable, with the purpose of

showing a true image of NH Hotel Group, S.A. and its subsidiaries’ consolidated equity and consolidated

financial position at 31 December 2021, and the consolidated financial performance, consolidated cash flows

and consolidated changes in equity for the financial year ended on that date.

The Group adopted the IFRS-EU on 1 January 2004 and, on that date, applied IFRS 1 “First-time adoption of

International Financial Reporting Standards”.

The Directors of the Parent company consider that the consolidated annual accounts for the 2021 financial year,

which were drawn up on 24 February 2022, will be approved by the General Shareholders Meeting without

amendment. The consolidated financial statements for 2020 were approved by the shareholders at the Annual

General Meeting held on 30 June 2021 and filed with the Companies Registry of Madrid.

Since the accounting standards and valuation criteria applied in the preparation of the Group's consolidated

financial statements may differ from those used by some of its component companies, the necessary adjustments

and reclassifications have been made to standardise them and adapt them to the EU-IFRS.

2.2Standards and interpretations effective in this period

During the year, new accounting standards came into force and were therefore taken into account when

preparing the accompanying consolidated financial statements, but which did not give rise to a change in the

Group’s accounting policies:

(1)New obligatory regulations, amendments and interpretations for the year commencing 01 January 2021:

New standards, amendments and interpretations

Obligatory

application in the

years beginning on

or after:

Approved for use in the European Union

Amendments and/or interpretations

Amendments to IFRS 9, IFRS

7, IFRS 4, IFRS 16 and IAS 39

Reform of the Benchmark

Interest Rate (Phase 2)

Amendments to IFRS 9, IFRS 4, IFRS 16 and IFRS 7 and IAS 39

related to the reform of benchmark indices (Phase 2).

01 January 2021

Amendment to IFRS 4

Deferment of application of

IFRS 9.

Deferment of application of IFRS 9 until 2023.

01 January 2021

Amendment to IFRS 16

Leases - Rent concessions.

Amendment to extend the application period for the practical

solution in IFRS 16 provided for rent concessions related to

COVID-19.

01 April 2021*

* Early application allowed.

These amendments have been applied to these consolidated financial statements with no significant impacts on

either the reported figures or the presentation and breakdown of the information, except for the application of

the amendment to IFRS 16. See breakdown of impacts in the following section.

(2)Amendment to IFRS 16:

An amendment to IFRS 16 was approved by the IASB on 28 May 2020 to help accounting for changes in leases

resulting from the pandemic caused by Covid-19. In March 2021, the IASB approved an amendment that

extends the application period of the aforementioned practical option of IFRS 16 "Leases" by one year.

In this sense, the new wording extends the term that may be affected by the income reductions that could qualify

for the exemption, putting back the deadline from 30 June 2021 to 30 June 2022. The Group has chosen to use

the practical solution, by which rental concessions that comply with that set out above have generated less

expenditure on rent of 28,625 thousand euros (Notes 8 and 25.4).

(3)New regulations, amendments and interpretations which will be obligatory in the years following

the year commencing 01 January 2021

The following standards and interpretations had been published by the IASB on the date the consolidated

financial statements were drawn up but had not yet entered into force, either because the date of their entry into

force was subsequent to the date of these consolidated financial statements or because they had not yet been

adopted by the European Union:

Approved for use in the European Union

Amendments and/or interpretations

Amendment to IFRS 3

Definition of Business.

Clarifications to the definition of business.

01 January 2022

Amendment to IAS 16 Income

obtained prior to the intended

use.

This prohibits deduction of any proceeds from the sale of articles

produced from the cost of a tangible fixed asset while the entity is

preparing the asset for its intended use. Income from the sale of

such samples, along with production costs, is now recognised in

profit and loss.

01 January 2022

IAS 37 Onerous contracts:

costs of performing a contract.

The amendment explains that the direct cost of fulfilling a contract

includes the incremental costs of performing that contract and an

allotment of other costs that are directly related to the performance

of contracts.

01 January 2022

Improvements to IFRS

2018-2020 cycle

Minor amendments to IFRS 1, IFRS 9, IFRS 16, and IAS 41

01 January 2022

Awaiting approval for use in the European Union as of the date of publication of this document (1)

New Standards:

IFRS 17 Insurance contracts

Replaces IFRS 4 and reflects the principles of registration,

valuation, presentation and breakdown of insurance contracts

with the objective that the entity provides relevant and reliable

information which allows users of the information to determine

the effect which contracts have on the financial statements.

01 January 2023

(1) The approval status of the standards can be consulted on the EFRAG website.

Amendments and/or interpretations

Amendment to IAS 1: Classification

of Liabilities as Current or Non-

current.

Clarifications regarding presentation of liabilities as current or

non-current.

01 January 2023

Amendment to IAS 1

Breakdown of accounting policies

IAS 1 has been amended to improve breakdowns of accounting

policies so that they provide more useful information to

investors and other main users of the financial statements.

01 January 2023

Amendment to IAS 8

Definition of accounting estimates

Amendments and clarifications on what should be understood to

be a change in accounting estimates.

01 January 2023

Amendment to IAS 12

Deferred tax relating to assets and

liabilities from a single transaction

Clarifications on how entities should record the deferred tax

generated in transactions such as leases and decommissioning

obligations.

01 January 2023

Amendment to IFRS 17 Insurance

contracts and IFRS 9 Comparative

information

Amendment to the IFRS 17 transition requirements for

insurance companies applying IFRS 17 and IFRS 9 for the first

time, simultaneously.

01 January 2023

Amendment to IFRS 10 and IAS 28

Sale or contribution of assets

between an investor and its

associates or joint ventures

These amendments clarify the accounting treatment of the sales

and contributions of assets between an investor and its

associates and joint ventures that will rest on if the non-

monetary assets sold or contributed to an associate or joint

venture constitute a "business". The investor will recognise the

full gain or loss when the non-monetary assets constitute a

"business". If the assets do not meet said definition, the investor

recognises the gain or loss to the extent of the interests of other

investors. The amendments will only apply when an investor

sells or contributes assets to its associate or joint venture.

Originally, these amendments to IFRS 10 and IAS 28 were

prospective and effective for annual periods beginning on or

after 1 January 2016. However, at the end of 2015, the IASB

made the decision to postpone the effective date (without setting

a new specific date) as it is planning a broader review that could

result in simplifying the accounting of these transactions and

other aspects of the accounting of associates and joint ventures.

Pending approval

2.3Accounting correction

During 2021, there were no corrections of errors.

2.4Accounting criteria change

In 2021 there were no significant changes in accounting criteria.

2.5Comparison of information

As required by IAS 1, the information on 2020 contained in this consolidated annual report is presented for

solely comparative purposes with the information on 2021 and consequently does not in itself constitute the

Group’s consolidated financial statements for 2020.

2.6Foreign currency transactions and balances

2.6.1 Functional currency and presentation currency

The consolidated annual accounts are presented in thousands of euros, rounded to the nearest thousand, which is

the Parent company’s working and presentation currency.

2.6.2 Foreign currency transactions, balances and cash flows

Transactions in foreign currencies are converted to the functional currency using the exchange rates for the

functional currency and the foreign currency on the dates on which the transactions are carried out.

Cash assets and liabilities in foreign currencies have been converted into euros using the rate at the end of the

financial year, while non-cash valued at historic cost are converted using the exchange rates applicable on the

date the transaction took place. The conversion to euros of non-cash assets which are valued at fair value has

been carried out using the exchange rate on the date when they were quantified.

In the presentation of the consolidated cash flow statements, the flows from transactions in foreign currencies

were converted to euros using the exchange rates on the date they occurred. The effect of exchange rate change

on cash and other cash equivalents in foreign currency is presented separately in the cash flow statement as “The

effect of exchange rate differences on cash”.

The differences appearing in settling transactions in foreign currency and the conversion of foreign currency

cash assets and liabilities to euros is recognised in profit and loss. Nevertheless, exchange rate differences

occurring in cash entries forming a part of the net business investment abroad are recorded as conversion

differences in other global profit and loss.

Losses or gains from exchange rate differences relating to foreign currency cash financial assets or liabilities are

also recognised in profit and loss.

The exchange rates for the euro (EUR) for the main Group company currencies at 31 December 2021 and 2020

were as follows:

31/12/2021

31/12/2020

Closing rate

Accumulated

average rate (1)

Closing rate

Accumulated

average rate (1)

US dollar (USD)

1.13

1.18

1.23

1.14

Argentine peso (ARS)

116.82

102.88

Uruguayan peso (UYU)

50.84

51.52

51.98

47.98

Chilean peso (CLP)

970.87

900.90

869.57

900.90

Mexican peso (MXN)

23.14

23.99

24.41

24.52

Colombian peso (COP)

4,545.45

4,347.83

4,166.67

Czech koruna (CZK)

24.86

25.64

26.24

26.45

Hungarian florin (HUF)

369.00

358.42

363.64

350.88

(1) In Argentina the closing exchange rate is used as a result of Argentina being considered to be a hyper-inflationary economy.

2.6.3 Conversion of business abroad

The following criteria have been different applied for converting into euros the different items of the

consolidated balance sheet and the consolidated comprehensive profit and loss statement of foreign companies

included within the scope of consolidation:

•Assets and liabilities have been converted by applying the effective exchange rate prevailing at year-

end.

•Equity has been converted by applying the historical exchange rate. The historical exchange rate

existing at 31 December 2003 of any companies included within the scope of consolidation prior to the

transitional date has been considered as the historical exchange rate.

•The consolidated comprehensive profit and loss statement was translated at the average exchange rate

for the year, except for the companies in Argentina whose economy was declared hyperinflationary and

therefore, in accordance with IAS 29, their consolidated comprehensive profit and loss statement was

translated at the year-end exchange rate.

Any difference resulting from the application these criteria have been included in the “Translation differences”

item under the “Equity” heading.

Any adjustments arising from the application of IFRS at the time of acquisition of a foreign company with

regard to market value and goodwill are considered as assets and liabilities of such company and are therefore

converted using the exchange rate prevailing at year-end.

2.6.4 Foreign operations in hyper-inflationary economies

In 2018, Argentina was declared a hyperinflationary economy due, among other causes, to the fact that the

accumulated inflation rate of its economy exceeded 100% over a continuous period of three years.

As a result, the Group began to apply IAS 29 to the financial statements of Argentine companies with

retroactive effect from 1 January 2018. Applying the standard involves the following exceptions:

•Adjusting the historical cost of non-monetary assets and liabilities and the different equity items from

the acquisition date or inclusion on the consolidated balance sheet until year-end to reflect the changes

in currency’s purchasing power resulting from the inflation.

•Reflecting the loss or gain corresponding to the impact of inflation for the year on the net monetary

position in the profit and loss account.

•Adjusting the various items of the profit and loss account and the cash flow statement for the

inflationary index since its generation, with a counterpart in financial results and in a reconciliation

item on the cash flow statement, respectively.

•Converting all components of the financial statements of Argentine companies at the closing exchange

rate; the exchange rate at 31 December 2021 was 116.82 pesos per euro (102.88 pesos per euro at 31

December 2020).

2.7Responsibility for the information, estimates made and sources of uncertainty

The Directors of the Parent Company are responsible for the information contained in these consolidated

financial statements.

Estimates made by the management of the Group and of the consolidated entities have been used in preparing

the Group’s consolidated financial statements to quantify some of the assets, liabilities, revenue, expenses and

undertakings recognised. These estimates essentially refer to:

–The useful life of the tangible and intangible assets. The Group increases the amount for

depreciation/amortisation when service lives are less than those previously estimated, and will

cancel or reduce the value of obsolete assets which have been abandoned or sold (Note 4.1

and 4.3).

–The assessment of possible impairment losses on certain non-financial assets that require an

estimate of the future evolution of business and the most suitable discount rates. The Group

considers that its estimates in this area are appropriate and coherent with the current economic

climate and reflect its plans for growth based on the sector’s recovery. It considers that its

discount rates reflect the risks relating to each cash generating unit appropriately (Note 4.4).

–The estimates for impairment to accounts receivable are based on the expected losses model in

IFRS 9 (Note 4.6).

–The market value of specific assets.

–The valuation of consolidation goodwill.

–The hypotheses used in the actuarial calculation of liabilities for pensions and other

undertakings made to the workforce; The Group has made certain assumptions to calculate the

liability arising from commitments to employees (Note 4.11 and 4.13).

–Calculation of provisions and evaluation of contingencies. To do so, the Group assesses

certain legal, tax or other types of proceedings that are not closed off at the date the

Consolidated Annual Statements are drawn up (Note 4.15).

–For the calculation of corporation tax, the Group is subject to it in various jurisdictions. To

calculate the provision at worldwide scale, issue of significant judgments is required (Note

4.10).

–The recoverability of capitalised tax credits. The Group only recognises deferred tax assets in

as far as their future realisation or use is sufficiently guaranteed. As future circumstances are

unsure and partially escape the Group's control, assumptions must be made to estimate future

taxable benefits and the period in which deferred tax is recovered (Note 4.10).

The Group's strategy takes into account the targets set in relation to climate change (Note 29), for which reason

they are also taken into account when preparing these consolidated annual statements. Therefore, in the context

of preparing these consolidated annual statements, the effect of the commitments taken on by the Group was

taken into account when calculating the service life of assets, closing costs and analysing impairment to non-

financial assets.

In spite of the fact that these estimates were carried out using the best information available at 31 December

2021 on events analysed, it is possible that events may take place in the future which compel their amendment

(upwards or downwards) in years to come. This will be done in accordance with the provisions of IAS 8,

prospectively.

2.8Going concern

As a result of applying the IFRS 16 accounting standard, the Group has recognised a short-term liability

corresponding to the current value of the lease payment commitments to be made in the next twelve months that,

at 31 December 2021, amounted to 252,335 thousand euros (250,619 thousand euros at December 2020)

meaning that, at 31 December 2021, current liabilities are 210,978 thousand euros higher than current assets

(84,279 thousand euros at December 2020). Given that this effect is caused by a purely accounting (non-

financial) approach, this does not prevent the business's normal development. It is noteworthy that in December

2020 the syndicated credit line for 236 million euros was fully drawn down. This was repaid in 2021, given the

improvement to the Group's liquidity position (Note 17).

As a consequence of the situation caused by Covid-19, government measures taken worldwide to mitigate the

spread of the pandemic have had a significant impact on the Group. These measures resulted in the temporary

closure of establishments in the majority of its locations for a period of time, in both the 2020 and 2021 financial

years, as well as significant falls in the business's operations and the uncertainties associated with how the

situation evolves. These consolidated annual accounts have been prepared in accordance with the going concern

principle as the Group has implemented crisis management organisational and liquidity strengthening measures

to ensure business continuity, both individually (management of contagion or isolation situations), and

collectively (Note 1).

These measures include actions focused on the temporary downsizing of existing resources as well as

renegotiating lease contracts and other actions focused on minimising the impacts of the situation.

Furthermore, in order to strengthen liquidity, during 2021 NH Hotel Group proactively carried out a battery of

initiatives to reinforce the Group's capital structure: Amongst these, a highlight was the receipt from the

majority shareholder, Minor International, of a subordinated loan convertible into shares for 100 million euros,

which was capitalised with a capital increase for all shareholders in September 2021; the extension of the ICO

syndicated loan for 250 million euros from 2023 to 2026; the issue of senior bonds, guaranteed for 400 million

euros and maturing in July 2026 with the relevant amortisation of the senior bond for 357 million euros,

maturing in 2023; and the extension to the revolving credit facility (RCF) for 242 million euros until March

2026, which, at the end of the 2021 financial year, is not totally drawn down (Note 18).

Therefore, assuming a gradual reactivation of the business and scientific progress in relation to COVID-19 that

facilitates a gradual return to normality during 2022 and subsequent years, the Group considers it has sufficient

resources to meet future obligations in the next 12 months.

The Directors have prepared the Consolidated Annual Statements bearing in mind the going concern principle as

they understand that the future perspectives of the Group’s business will allow positive results and positive cash

flows to be obtained in the next financial years.

2.9Consolidation principles applied

2.9.1 Subsidiaries (Appendix I)

Subsidiaries are considered as any company included within the scope of consolidation in which the Parent

Company directly or indirectly controls their management due to holding the majority of voting rights in the

governance and decision-making body, with the ability to exercise control. This ability is shown when the

Parent Company has the power to direct an investee entity’s financial and operating policy in order to obtain

profits from its activities. Subsidiaries are consolidated from the date control is transferred to the group and they

cease to be consolidated from the date on which control ceases.

The purchase method of accounting is used by the group to account for business combinations.

The financial statements of subsidiaries are consolidated with those of the Parent Company by applying the full

consolidation method. Consequently, all significant balances and effects of any transactions taking place

between them have been eliminated in the consolidation process. If necessary, adjustments are made to the

financial statements of the subsidiaries to adapt the accounting policies used to those used by the Group.

Non-controlling interests on the subsidiaries’ profit and loss and equity are shown separately on the consolidated

comprehensive profit and loss statement, the consolidated comprehensive statement of changes in equity and on

the consolidated financial statement, respectively.

The profit or loss of any subsidiaries acquired or disposed of during the financial year are included in the

consolidated comprehensive profit and loss statement from the effective date of acquisition or until to the

effective date of disposal, as appropriate.

2.9.2 Business combinations

The Group applied the exception contemplated in IFRS 1 "First-time adoption of International Financial

Reporting Standards", so that only business combinations carried out from 1 January 2004—the transition date

to IFRS-EU—have been recorded using the acquisition method. Acquisitions of entities prior to that date were

recorded in accordance with the previous Generally Accepted Accounting Principles, taking the necessary

corrections and adjustments on the transition date into account.

The Group has applied IFRS 3 "Business Combinations"—revised in 2008—to transactions carried out from 1

January 2010.

The acquisition date is the date on which the Group gains control of the acquired business.

The purchase method of accounting is used to account for all business combinations, regardless of whether

equity instruments or other assets are acquired. The consideration transferred for the purchase of a subsidiary

includes:

•the fair value of the assets transferred

•the liabilities incurred with the previous owners of the business acquired

•the holdings in the equity issued by the group

•the fair value of any asset or liability arising from a contingent consideration agreement, and

•the fair value of any prior holding in the subsidiary's equity.

The identifiable assets acquired, the liabilities and the contingent liabilities assumed in a business combination

are, with limited exceptions, initially valued at their fair value on the acquisition date. The group recognises any

non-controlling interest in the entity acquired on a basis of acquisition at fair value, or by the proportional part

of the non-controlling interest of the net identifiable assets of the entity acquired.

The costs relating to the acquisition are recognised as expenses when they are incurred.

The excess of:

•the consideration transferred

•the amount of any non-controlling interest in the entity acquired, and

•the fair value of any prior holding in the equity of the entity acquired on the acquisition date

over the fair value of the net identifiable assets acquired is recorded as goodwill. If these amounts are less than

the fair value of the net identifiable assets of the subsidiary acquired, the difference is directly recognised in

profit and loss as a bargain purchase.

When payment of any part of the consideration in cash is deferred, the amounts payable in the future are

discounted at their actual value on the exchange date. The discount rate used is the entity’s incremental

borrowing rate of interest, being the rate at which a similar loan may be obtained from an independent financier

under comparable terms and conditions.

The contingent consideration is classified as equity or a financial liability. The amounts classified as a financial

liability are subsequently revalued at fair value with the changes in fair value being recognised in profit and loss.

If the business combination is carried out in stages, the book value at the date of acquiring the previously held

equity holding is revalued at fair value on the acquisition date, and any gain or loss is recognised in profit and

loss.

2.9.3 Non-controlling interests

Non-controlling interests in subsidiaries acquired after 1 January 2004 are recorded by the percentage holding at

the acquisition date at the fair value of the net identifiable assets. Non-controlling interests in subsidiaries

acquired prior to the transition date are recognised by the percentage holding in their equity on the date of first

consolidation.

Excess losses attributable to non-controlling interests prior to 1 January 2010 but not allotted to them as they

exceeded the total amount of the holding in the equity of the subsidiary, are recorded as a decrease in equity

attributable to the Parent Company shareholders, except in cases where the non-controlling interests have a

binding obligation to assume a part or all of the losses and they have the capacity to make the necessary

additional investment. Profit obtained in subsequent financial years is allotted to the equity attributable to Parent

Company shareholders until the total losses absorbed in previous accounting period relating to non-controlling

interests are recovered.

From 1 January 2010, profit and loss and each item on the other comprehensive results, are allotted to equity

attributable to the Parent Company shareholders and the non-controlling interests in proportion to the holding,

even if this involves a debtor balance for non-controlling interests. Agreements entered into between the Group

and the non-controlling interests are recognised as a separate transaction.

2.9.4 Associates (Appendix II)

Associates are considered as any companies in which the Parent Company has the ability to exercise significant

influence, though it does not exercise either control or joint control. In general terms, it is assumed that

significant influence exists when the percentage stake (direct or indirect) held by the Group exceeds 20% of the

voting rights, as long as it does not exceed 50%.

Associates are valued using the equity method in the consolidated annual accounts.

The profit (loss) net of tax of the associate companies is included in the Group’s consolidated comprehensive

profit and loss statement, in the item "Profit (Loss) from entities valued through the equity method", according

to the percentage of the Group's stake.

If, as a result of the losses incurred by an associate company, its equity was negative, in the Group's

consolidated balance sheet it would be nil; unless there were an obligation on the part of the Group to support it

financially.

At each year-end, the existence of indicators of a potential impairment of the investment in the associate is

assessed in order to recognise the related impairment loss, where appropriate In order to calculate the fair value

of investments in companies whose sole asset is property stock, valuations have been obtained from an

independent expert. For the remaining companies, cash flow discount valuations made in-house have been used,

similar to those described in Note 4.4.

2.9.5 Changes in the scope of consolidation

Additions to the scope of consolidation

During the 2021 financial year the company Grupo Operadores de Hoteles Santa Fe, S.A. de C.V. was

incorporated. This company is not currently trading.

On 7 September 2020, the Group acquired 100% of the shares of the Boscolo Hotels Group, which runs eight

luxury hotels in prime areas of Rome. Florence, Venice, Prague, Nice and Budapest (Note 6, Business

combinations).

Moreover, during 2020 the company NH Strandgade APS was incorporated in Copenhagen, along with two

companies in Italy: NH Italia Real Estate, S.r.l. and NH Holding Srl. These companies’ purpose is to be hotel

operators.

Disposals

During 2021, there were no disposals.

In December 2020 the Group sold 100% of its investment in the company Onroerend Goed Beheer

Maatschappij Bogardeind Geldrop B.V., owner of the NH Geldrop hotel in Holland. The sale involved a cash

entry of 6,359 thousand euros. The sale did not have a significant impact on the profit (loss) for the year.

On 1 July 2020 the Group sold 100% of its investment in the company Onroerend Goed Beheer Maatschappij

Mass Best B.V., owner of the NH Best hotel in Holland. The sale involved a cash entry of 3,262 thousand euros.

The sale did not have a significant impact on the profit (loss) for the year.

Mergers and divisions

During 2021, there were no mergers or divisions.

To simplify the group's corporate structure, in April 2020 the Argentine company Latina de Gestión Hotelera,

S.A. absorbed Inmobiliaria y Financiera Aconcagua, S.A., Edificio Metro, S.A., Polis Corporación, S.A. and

Blacom, S.A. Latina de Gestión Hotelera also spun off its investment in the Chilean company Latina Chile, S.A.

to the new company Latina Holding S.A.U.

In December 2020, on the other hand, the Colombian company Hoteles Royal, S.A. spun off the investments it

had in Chile in the companies Eurotels Chile, S.A., Inmobiliaria Royal, S.A., Royal Santiago Hotel, S.A. and the

investment it had in the United States to the new company Inversiones Chilenas, S.A.

Hoteles Royal, S.A. also absorbed: Hoteles la Boheme LTDA, Hotel Hacienda Royal LTDA, Hotel Andino

Royal, S.A., Hotel Pavillon Royal LTDA, Sociedad operadora Urban Royal Calle 26, S.A.S., Sociedad

Operadora calle 100 Royal S.A.S, Hotel Pacifico Royal LTDA, Hotel Parque Royal S.A.S, Sociedad Hotelera

Calle 74 LTDA, Sociedad operadora Barranquilla Royal S.A.S, Sociedad Operadora Cartagena Royal SAS and

Hotel Medellin Royal LTDA, with the aim of simplifying the Group's company structure in Colombia.

3.-PROPOSED DISTRIBUTION OF PROFITS

The proposed distribution of the profit (loss) for the year prepared by the Parent Company's Directors and that

will be submitted for approval by the Shareholders at the General Shareholders' Meeting is as follows (in

thousands of euros):

2021

To legal reserve

16,806

To Prior years' profits (losses)

151,257

Total

168,063

4.-VALUATION STANDARDS

The main principles, accounting policies and valuation standards applied by the Group to draw up these

consolidated financial statements, which comply with IFRS in force on the date of the relevant financial

statements, have been the following:

4.1Property, plant and equipment

Tangible fixed assets are valued at their original cost. They are subsequently valued at their reduced cost

resulting from cumulative depreciation and, as appropriate, from any impairment losses they may have suffered.

Due to the transition to IFRS, the Group reappraised the value of some land to its market value on the basis of

appraisals made by an independent expert for a total amount of 217 million euros. The reappraised cost of such

land was considered as a cost attributed to the transition to the IFRS. The Group followed the criterion of not re-

valuing any of its tangible fixed assets at subsequent year-ends.

Enlargement, modernisation and improvement costs entailing an increase in productivity, capacity or efficiency

or a lengthening of the assets’ useful life are recognised as increases in the cost of such assets. Conservation and

maintenance costs are charged against the consolidated comprehensive profit and loss statement for the year in

which they are incurred.

Withdrawn assets and items, whether arising as a result of a modernisation process or due to any other cause, are

accounted for by derecognising the balances presented in the corresponding cost and accumulated depreciation

accounts.

The Group depreciates its property, plant and equipment following the straight line method, distributing the cost

of the assets over their estimated useful lives, in accordance with the following table:

Estimated years of useful

Buildings

33-50

Plant and machinery

10-30

Other plant, fixtures and furniture

5-10

Other fixed assets

4-5

These items are depreciated based on their estimated useful life or the remaining term of the lease, if this is less

than the useful life.

The profit or loss resulting from the disposal or withdrawal of an asset is calculated as the difference between

the profit from the sale and the asset's book value, and is recognised in the consolidated comprehensive profit

and loss statement.

4.2Goodwill

Goodwill is determined from the criteria set out in the section on business combinations.

Goodwill is not amortised, but its impairment is checked annually or earlier if there are indications of a potential

loss in asset value. For these purposes, the goodwill resulting from the business combination is assigned to each

of the Group's cash-generating units (CGUs) or groups of CGUs that are expected to benefit from the synergies

of the combination and have the criteria referred to in section 4.4 (impairment) applied. After initial recognition,

goodwill is valued at cost less accumulated impairment losses.

At the time of the disposal of a subsidiary or jointly controlled entity, the amount attributable to the goodwill is

included when determining the profits or losses arising from the disposal.

Goodwill arising on the acquisition of companies with a functional currency other than the euro is valued in the

functional currency of the acquired company, with the conversion to euros being made at the exchange rate

prevailing at the balance sheet date.

Internally generated goodwill is not recognised as an asset.

4.3Other intangible assets

Other intangible assets are considered to be any specifically identifiable non-monetary assets which have been

acquired from third parties or developed by the Group. Only those whose cost can be estimated in an objective

way and from which future economic profits are expected are recognised.

Other intangible assets are initially recognised at acquisition or production cost and are subsequently measured

at cost less, as appropriate, their accumulated amortisation and any impairment losses they have suffered.

Any assets deemed to contribute indefinitely to the generation of profits are considered to have an indefinite

useful life. The remaining intangible assets are considered have a “finite useful life”.

Other intangible assets with an indefinite useful life are not amortised and are hence subjected to the

“impairment test” at least once a year (Note 4.4).

Other intangible assets with a finite useful life are amortised according to the straight-line method on the basis

of the estimated years of useful life of the asset in question.

The following are the main items recognised under the “Other intangible assets” heading:

i.Usufruct Rights: As a consequence of entering into the consolidation of Hoteles Royal, S.A., the Group

recognised operating rights of the hotel portfolio for 35 years within this concept. Furthermore, in the

2020 financial year, with the entry of Boscolo Hotels into the scope of consolidation, operating rights

of the hotels where operation has commenced with this business combination were recognised lasting

31 years.

ii.Concessions, patents and trademarks: basically reflect the disbursements made by Gran Círculo de

Madrid, S.A. for the refurbishment and remodelling of the building where the Casino de Madrid is

located. The amortisation of such works is calculated on a straight-line basis by taking into account the

term of the concession for operating and managing the services provided in the building where the

Casino de Madrid is located, which finalises on 1 January 2037. Furthermore, this item includes the

brands of the Grupo Royal with a useful life of 20 years.

iii.Computer applications: include the costs incurred by the Group Companies in the acquisition and

development of various computer software programmes acquired by the different consolidated

companies. The amortisation of software applications is performed using the straight-line method at a

rate of 20-25% per year.

iv.Other rights: include rights relating to lease agreements as a result of business combinations.

4.4Impairment to non-financial assets subject to amortisation or depreciation

The Group evaluates the possible existence of a loss of value each year that would oblige it to reduce the

carrying amounts of its tangible and intangible assets. A loss is deemed to exist when the recoverable value is

less than the carrying amount.

The recoverable value of the assets is the greater of their fair value less the costs of transfer or disposal by

another means and their value in use.

Moreover, and regardless of the existence of any indication of impairment, the Group, at least once a year,

checks potential impairment that may affect goodwill.

The recoverable value should be calculated for an individual assets, unless the asset does not generate cash

entries which are, by and large, independent of those relating to other assets or groups of assets. If this is the

case, the recoverable value is calculated for the Cash-Generating Unit (CGU) it belongs to. As a general rule,

the Group has defined each of the hotels it operates as cash-generating units, according to the real management

of their operations.

If there are signs of impairment in a CGU that goodwill could not be allotted to goodwill, the Group checks, in

the first place, the impairment to the CGU, without including goodwill and recognises, as appropriate, the

impairment loss at the level of the CGU. Subsequently, the Group checks the impairment in the group of CGUs

to which goodwill was allotted and recognises, as appropriate, the impairment loss at the level of the groups of

CGUs.

In the case of Hoteles Royal, S.A., where the whole business of Grupo Royal was acquired and whose purchase

was effective in 2015, the cash-generating unit corresponds to the Group as a whole (Colombian, Chilean and

Ecuadorian market).

In 2020, with the acquisition of the Boscolo Hotels Group, goodwill was generated which was allotted to a

single cash generating unit that relates to the entire Group.

The operating result for each CGU is obtained at the end of the year without taking non-recurring results (if any)

or financial results into account. Once the operating result is obtained for each CGU, the impairment test is

performed for those in which there are indications of impairment. Among others, the Group considers that a

CGU has indications of impairment if it meets the following conditions: it has negative operating results and its

business is stable (it has been open for 3 years).

Losses due to impairment of the CGU initially, if appropriate, reduce the value of the goodwill allotted to it, and

subsequently to the CGU's other assets, pro rata depending on the book value of each one of the assets, with the

limit for each one of them of the greater of their fair value less the costs of disposal and its value in use.

On each closing date the Group assesses whether there are any indications that impairment losses recognised in

previous years no longer exist, or may have decreased. Impairment losses relating to goodwill are not reversible.

Impairment losses on the remaining assets are only reversed if a change has occurred in the calculations used to

determine the asset’s recoverable value. Reversal of the impairment loss is recorded as a credited to profit and

loss.

As an exception, given the current economic situation as a result of the pandemic caused by Covid-19, analyses

have continued to be carried out to determine if there is any impairment to the CGUs as a whole in the 2021

financial year, in the same way as in the 2020 financial year.

In this financial year, the Group carried out a valuation of the greater part of the hotel assets in ownership. They

were valued by a global firm specialising in valuation and consultancy services. The valuation of the assets at 31

December 2021 covered 70 assets. In order to calculate the value of the assets, the most used valuation criteria

was discounted cash flow, due to the fact that the hotel investments are valued depending on their potential

future income.

The value in use is calculated from the estimated future cash flows, discounted at a discount rate after tax that

reflects the current market valuation with respect to the value of money and the specific risks associated with the

asset, covering a five-year period and a perpetual value, except in the case of leased hotels that correspond to the

term of the lease, a perpetual value therefore not being considered in the latter.

4.5Leases

At the beginning of a contract, the Group assesses whether it contains a lease. A contract is, of contains, a lease

if it gives the right to control the use of the asset identified during a period of time in exchange for a

consideration. Leases are recognised as a right-of-use asset and the corresponding liability on the date the leased

asset is available for use by the group.

Assets and liabilities arising from a lease are initially valued based on their present value. Leasing liabilities

include the net present value of the following leasing payments:

•Fixed payments (including fixed payments in essence), less any lease incentive collectable.

•Variable payments for leases that reply on an index or rate, initially valued according to the index or

rate on the start date.

•Amounts expected to be paid by the group for residual value guarantees.

•The price to exercise a purchase option if the group is reasonably certain that it will exercise that

option.

•Penalty payments terminating the lease if the term of the lease reflects the group exercising that option.

In order to determine the term of the lease contracts, the Group has taken as non-cancellable the initial term of

each contract, taking the possible unilateral extensions at the option of the Group only in those cases in which it

has been reasonably considered certain that they will be exercised, and only the cancellation options whose

exercise has been reasonably considered certain have been taken into account.

The general determination of not including unilateral extension of contracts as a part of their term, is based on

the Group´s historical experience. The windows for renewal have historically been used as renegotiation

windows, unless the market situation was clearly favourable for the Group. Therefore, given that hotel rental

agreements are normally signed with a first term that is higher than a macroeconomic cycle (5 years), our

experience shows that is it highly probable that some unknown event may occur on the date the agreement is

signed, and which may significantly affect such judgment. The attacks in Europe, in Brussels or in Nice, serve

as an example, as does the actual pandemic, as they changed the economic paradigm and affected the

frameworks for negotiating rent. Furthermore, to determine the term for lease agreements, the term for

recovering the investments made in it are taken into account.

To determine lease terms, there are no penalties for not exercising the extensions mentioned above, nor have

early terminations with penalties been included.

Contracts may contain leasing and non-leasing components. The Group assigns the consideration in the contract

to the leasing and non-leasing components based on their relative independent prices. For real estate leases in

which the Group cannot separate the leasing and non-leasing components, it accounts for them as a single

leasing component.

Leasing payments are discounted using the implicit interest rate in the lease. If this rate cannot be easily

determined, which is generally the case for the group’s leases, the incremental interest rate is used. The

incremental interest rate is the interest rate that the lessee would incur at the commencement of the lease if it

borrowed, over a period of time, with similar guarantees and in a similar economic environment. The interest

was calculated as a combination of the following elements:

•CDS curve of the economic environment

•Euribor Swap Rate Curve.

•Synthetic NH CDS curve.

These elements were combined to obtain an interest rate curve for each contract based on its geoeconomic

specificities and from which the calculation process consists of bringing each of the discounted flows to the

present value at the interest rate corresponding to each maturity within said curve and calculating which single

equivalent rate would be used to discount said flows.

Potential future increases in variable payments for leases based on an index or rate are not included in leasing

liabilities until they take effect. When the adjustments to the leasing payments based on an index or rate take

effect, the leasing liability is assessed again and set against the asset for right of use.

Leasing payments are allocated between principal and financial cost. The financial cost is charged to profit/

(loss) during the leasing period in a manner that creates a periodic interest rate on the remaining balance of the

liability for each period.

Right-of-use assets are valued at cost that comprises the following:

•The initial valuation amount of the leasing liability.

•Any leasing payment made on or before the state date, less any incentive to lease received.

•Any initial indirect cost.

•Restoration costs.

•Incentives to lease received from the lessor.

•Provision on onerous contracts

In application of IFRS 16, all rent that does not come under the definition of fixed payments in substance and,

therefore, is outside the Group's maximum compulsory commitment, as they are not inevitable, is recorded as an

operational expense for the year.

Therefore, the Group records variable rent that is linked to exploitation of the underlying assets as an expense,

along with those arising from percentages of sales and other similar reference points. Moreover, all rent that, in

application of IFRS 16, are outside the Group's maximum compulsory commitment are recorded as an

operational expense for the year.

Variable rents that are not, in essence, fixed and the way in which they may involve a liability for the Group

would be that the flows arising from exploitation of the CGU are estimated to be negative and, therefore, the

Group would be obliged to record a provision for onerous contracts.

An amendment to IFRS 16 was approved by the IASB on 28 May 2020, extended to 30 August 2021, to help

accounting for changes in leases resulting from the pandemic caused by Covid-19. The amendment establishes

an exemption in which rental concessions caused by Covid-19 may not be recorded as amendments to the lease

(Note 2.2.2).

4.6Financial Instruments

4.6.1Financial assets

Financial assets are recognised in the consolidated balance sheet when they are acquired and initially recognised

at their fair value. The financial assets held by Group companies are classified as follows:

- Financial assets at fair value through profit or loss are those assets acquired by the companies with the

objective of obtaining the contractual flows and selling them; or those assets that do not consist exclusively of

the payment of the principal and interest and the management model is the sale of the same, in general terms,

practically all of the variation in the fair value of the Group's financial assets are recorded with a charge to the

consolidated statement of changes in equity. Interest income, exchange rate differences and impairment losses

are recognised in the income statement and other gains or losses are recognised in "Other comprehensive profit

and loss" in equity. Any cumulative gain or loss recognised in equity is reclassified to profit or loss at the time

of derecognition.

- Financial assets at amortised cost: assets whose contractual cash flows consist exclusively of principal

and interest payments and, if the management model of such assets is to hold them to obtain the contractual

flows. In this case, the Group records any changes in value with a charge to the consolidated comprehensive

profit and loss statement.

Transaction costs at the time of acquisition are recognised as an increase in acquisition cost or as an

expense, depending on whether the financial asset being transacted is considered at fair value through profit or

loss.

Fair value of a financial instrument on a given date is construed as the amount for which it could be bought or

sold on that same date by two knowledgeable parties acting freely and prudently under conditions of mutual

independence.

Interest accrued on financial assets at amortised cost is recognised in the consolidated comprehensive profit and

loss statement on the basis of the effective interest rate. Amortised cost is construed as the initial cost minus any

collections or amortisation of the principal, taking into account any potential reductions based on expected loss.

As regards valuation corrections made to trade and other accounts receivable in particular, the criterion used by

the Group to calculate the corresponding valuation corrections, if any, generally consists of provisioning

according to the expected loss based on the credit risk of the customer portfolio.

The Group derecognises financial assets when the cash flow rights of the corresponding financial asset have

expired or have been transferred and the risks and rewards incidental to its ownership have been substantially all

transferred.

Conversely, the Group does not derecognise financial assets and recognises a financial liability for an amount

equal to the consideration received in the transfers of financial assets in which the risks and rewards inherent in

its ownership are substantially all retained.

Trade debtors and other receivables

Accounts receivable arising from trading operations are initially recorded at their transaction price and,

subsequently, a value correction is made for expected credit losses. Expected credit losses—due to the

fragmentation of the Group's trade debtors—are estimated taking the history of losses due to non-payment with

respect to the Group's sales and open items into account. For the value correction, in the current situation of

uncertainty caused by Covid-19, a detailed analysis is being carried out. To do so, all entries considered to be at

risk are being monitored and plans for collecting their payment are being made, or provisions being made for

those considered to be at risk of recovery.

Furthermore, the group’s credit risk tools are being used, with a default insurance policy for the clients included

in the policy, and for which, in the event of there not being certainty about payment, the requirements of the

policy to claim the amounts as an “incident” are being followed.

4.6.2Cash and cash equivalents

“Cash and Cash Equivalents” in the consolidated balance sheet includes cash, demand deposits and other short-

term, highly liquid investments that can be realised in cash quickly and are not subject to a risk of changes in

value.

4.6.3Financial liabilities

Issues of bonds and other securities

Debt issues are initially recognised at the fair value of the consideration received, less the costs directly

attributable to the transaction. They are subsequently valued at their amortised cost using the effective interest

rate method. Bonds with a maturity date greater than twelve months are classified under non-current liabilities,

while those with a maturity date of less than twelve months are included in current liabilities.

In the case of renegotiations, if they were considered non-substantial and consequently did not require the de-

recognition of the financial liabilities, the carrying amount of the amortised cost of those financial liabilities at

the date of renegotiation is recalculated and a gain or loss due to changes in profit or loss is recognised.

Convertible bond issues are recognised at the time of their issue, distributing the fair value of the consideration

received between their equity and liability components, assigning the residual value obtained after deducting the

amount established separately for the liability component, from the fair value of these instruments as a whole, to

the equity instrument. The value of any derivative embedded in the compound financial instrument other than

the equity component will be included in the liability component.

Bank loans

Loans received from banking institutions are recognised at the amount received, net of costs incurred in the

transaction. They are subsequently valued at amortised cost. These costs incurred in the transaction and the

financial expenses are recognised on an accrual basis in the consolidated comprehensive profit and loss

statement using the effective interest rate method, and their amount is added to liabilities to the extent to which

they are not settled in the period they were produced.

In the case of renegotiations, if they were considered non-substantial and consequently did not require the de-

recognition of the financial liabilities, the carrying amount of the amortised cost of those financial liabilities at

the date of renegotiation is recalculated and a gain or loss due to changes in profit or loss is recognised.

Trade and other payables

Trade accounts payable are initially recognised at fair value and are subsequently valued at amortised cost using

the effective interest rate method.

The Group has contracted confirming operations with various financial entities to manage the payment to

suppliers. Trade payables whose payment is managed by financial entities are shown under the entry for trade

creditors and other accounts payable, in as far as the Group has only assigned payment management to the

financial entities and remains primarily obliged to pay the debt to trade creditors.

Valuation techniques and assumptions applying to the measurement of fair value

The fair values of financial assets and liabilities are determined as follows:

•The fair value of financial assets and liabilities under standard terms and conditions which are traded in

active liquid markets are based on market prices.

•The fair value of other financial assets and liabilities (excluding derivatives) is determined in

accordance with generally accepted valuation models on the basis of discounted cash flow using the

price of observable market transactions and contributor listings of similar instruments.

•In order to determine the fair value of interest rate derivatives, cash flow discounting is used based on

the implicit flow determined by the interest rate curve according to market conditions. In order to

determine the fair value of options, the Group uses the Black-Scholes valuation model and its variants,

using for this purpose market volatilities for the strike and maturity prices of said options.

Any financial instruments valued after their initial recognition at fair value are classified as level 1 to 3 based on

the extent to which fair value can be observed:

•Level 1: includes any instruments indexed to listed prices (without adjustment) of identical assets

or liabilities in active markets.

•Level 2: includes any instruments indexed to other observable inputs (which are not the listed

prices included under Level 1) for assets or liabilities, be it directly (i.e., prices) or indirectly (i.e.,

derived from prices).

•Level 3: includes any instruments indexed to valuation techniques, which include inputs for assets

or liabilities that are not based on observable market data (unobservable inputs).

4.6.4Equity instruments

An equity instrument represents a residual interest in the equity of the Parent Company once all its liabilities are

subtracted.

Equity instruments issued by the Parent Company are recognised in equity for the amount received, net of the

issue expenses.

4.7Classification of financial assets and debts into current and non-current

In the attached consolidated balance sheet, financial assets and debts are classified on the basis of their maturity;

in other words, those with a maturity date equivalent to or less than twelve months are classified as current and

those with a maturity date exceeding this are non-current.

4.8Income and expenses

Income and expenses are recognised on an accrual basis, i.e. when the control of goods and services they

represent has been transferred, irrespective of the moment when the monetary or financial flows deriving from

them arise.

More specifically, income is calculated at the fair value of the consideration to be received and represents the

amounts to be collected for the goods and services delivered within the ordinary framework of operations,

subtracting any discounts and taxes.

Sale of rooms and other related services

Income from the sale of rooms and other related services is recognised daily based on the services provided by

each hotel, including customers who are still staying at the hotel at the close of each day. In this respect, the

Group recognises the income when the service is considered to be provided and, therefore, fulfils the obligation

for performance assumed on check-in. Due to this, for example, in the case of an accommodation service that

covers several nights, the income is recognised on a daily basis for each one of the overnight stays.

The consideration received is distributed among the contracted services. These include direct services such as

room, food, drink and other consumption, and others related to banquets, events and the rental of spaces.

Therefore, the obligations are completely separate and they are recorded at the time they occur.

In the case of the sale of several services together, such as, for example, an accommodation service with one for

breakfast, the Group, when it makes the offer, sets the price for each one of the obligations assumed, for which

reason at the time the services is considered to be provided the income is recorded at the price set beforehand.

Solely in the case of promotions where the service is provided “free-of-charge” with the other one, the Group

applies a methodology where the consideration is divided using a ratio calculated by hotel based on the costs of

the service at that hotel plus an additional margin.

Provision of services

The Group recognizes the income from its hotel management contracts in the year in which the services are

provided, based on the evolution of the variables that determines this income and which are mainly the total

income and the gross operating profit of each hotel managed by the Group.

Loyalty programme

With regarding to the accounting treatment of the “NH Rewards” customer loyalty programme, we consider that

if awarding points gives a significant right to the customer, then it effectively pays the company for future goods

or services in advance, and the company should recognise the income from ordinary activities when the points

are redeemed or when they expire.

Therefore, when the significant right is generated, the Group records a provision for the estimated equivalent

value, partly lowering the income from the sale coupled with the issue of the right. When points are redeemed

the income from the transaction is recorded and the provision is derecognised.

The estimated value of the significant right is calculated, showing the discount the customer would receive when

exercising the option (one Euro for each point the customer has collected) and taking the two following aspects

into account:

•any discount the customer may receive without exercising the option; and

•the probability that the option will be exercised.

The amount of the provision relating to the loyalty programme is recorded in current liabilities on the

consolidated balance sheet.

4.9Official subsidies

Group companies follow the criteria set out below in recognising official subsidies:

–Non-reimbursable capital subsidies (connected with assets) are valued at the amount granted,

recognised as deferred income and taken into profit and loss in proportion to the depreciation of the

assets financed by such subsidies during the financial year.

–Operating subsidies are recorded depending on the grounds for them being granted, either as a

reduction in the expenses they finance, or as other operating income.

4.10Corporation tax

The cost of the year’s corporation tax is calculated through the sum of the current tax resulting from applying

the tax rate to the taxable income for the year and then applying the relevant tax adjustments according to the

law plus any changes in deferred tax assets and liabilities.

Deferred tax assets and liabilities include temporary differences, being any amounts expected to be payable or

recoverable due to differences between the carrying amounts of the assets and liabilities and their tax value, as

well as tax loss carry-forwards and any credits resulting from unapplied tax deductions. Said amounts are

recognised by applying to the relevant temporary difference or credit the tax rate at which they are expected to

be recovered or settled.

In some countries, the tax rate varies depending on whether a transfer of assets is made. In these cases, the

Group’s policy consists of applying the effective tax rate at which they are expected to be recovered or settled.

In the opinion of the Parent’s Directors, the deferred tax thus calculated covers the amount which may

eventually be settled, if any, in the foregoing case.

Deferred tax liabilities for all taxable temporary differences are recognised, except for those in which the

temporary difference arises from the initial recognition of goodwill amortisation of which is not tax-deductible

or the initial recognition of other operating assets and liabilities which do not affect either the tax or accounting

result.

Deferred tax assets identified as temporary differences are recognised only if it is deemed probable that the

consolidated entities will make sufficient tax profits in the future to realise them and they do not come from the

initial recognition of other assets and liabilities in a transaction which does not affect either the tax or

accounting result. Other deferred tax assets (tax loss carry-forwards and tax credits) are recognised only if it is

likely that the consolidated companies will make sufficient tax profits in the future to be able to apply them.

At each year-end, deferred taxes (both assets and liabilities) are reviewed in order to verify that they remain in

force and the relevant corrections are made in accordance with the outcome of the analyses conducted.

4.11Obligations to employees

Spanish hotel companies are obliged to make a specific number of monthly salary payments to those employees

who leave the company due to retirement, permanent disability or upon reaching a certain age and having a

certain number of years of service and fulfilling certain pre-established requirements.

In this regard and in compliance with Royal Decree-Law 16/2005, the Group has outsourced its pension

obligations for its employees' pension plans.

Also, in accordance with Italian law, employees of Italian companies have the right to compensation if they

resign or are dismissed.

Its obligations to personnel also include those arising from contracting pension funds for certain employees,

which in the Group, mainly affects the business units of Italy and the Netherlands.

Therefore, to provide for these obligations to future payments to personnel, the Group has recognised a liability

under “Provisions” (Note 20).

4.12Onerous contracts

The Group considers onerous agreements to be those in which the inevitable costs of fulfilling the obligations

they entail exceed the economic benefits expected from them.

The Group follows the principle of recording a provision at the present value of the aforementioned differences

between the costs and benefits of the contract, or the compensation foreseen for abandonment of the contract, if

such is decided.

4.13Share-based Remuneration Schemes

These schemes, which are settled in shares, are valued at the time of granting, using a financial method based on

a binomial model which takes into consideration the strike price, volatility, the exercise period, the expected

dividends, the risk-free interest rate and the assumptions made concerning the financial year.

In accordance with IFRS 2, the above-mentioned valuation is recognised in profit or loss under personnel

expenses during the period established as a requirement for the employee to remain in the company before

exercising the option. Said value is recognised on a straight-line basis in the consolidated comprehensive profit

and loss statement from the date the option is granted until the date on which it is exercised.

On each subsequent closing date, the Group reviews the estimates regarding the number of options expected to

be exercisable, adjusting the equity figure if necessary.

4.14Treasury shares

Pursuant to IAS 32, treasury shares are presented by reducing the Group’s equity. Treasury shares are

recognised at the value of the consideration paid and are deducted directly from equity. Gains and losses on the

acquisition, sale, issue or retirement of treasury shares are recognised directly in equity and in no case are they

recognised in the consolidated comprehensive profit and loss statement.

4.15Provisions for risks and charges

The Group follows the policy of provisioning for the estimated amounts arising from ongoing litigation,

indemnities or obligations, as well as for any sureties or guarantees granted by Group companies which could

involve the Group in a payment obligation (either legal or implicit), provided the amount can be reliably

estimated.

Provisions are quantified based on the best information available on the position and evolution of the events that

cause them and are re-estimated at the end of each reporting period, being totally or partially reversed when

these obligations cease to exist or decrease.

Contingent liabilities, except in business combinations, are not recognised in the consolidated financial

statements, but are reported in the notes to the financial statements, in accordance with the requirements of IAS

37.

4.16Environmental policy

Investments arising from environmental activities are valued at their original cost and capitalised as increases in

the cost of fixed assets or inventory in the financial year in which they are incurred.

Any expenses arising from environmental protection and improvement are recognised in the consolidated

comprehensive profit and loss statements for the year in which they are incurred, irrespective of the moment

when the cash or financial flows deriving from them arise.

Provisions for likely or certain liabilities, ongoing litigation and outstanding indemnities or obligations of an

indeterminate amount connected with the environment and not covered by the insurance policies taken out are

established at the time the liability or obligation linked to the indemnities or payment arises.

4.17Consolidated cash flow statements

The following terms with their corresponding explanation are used in the consolidated cash flow statement

prepared using the indirect method:

–Cash flows: inflows and outflows of cash and cash equivalents, which are short-term, highly liquid

investments that are subject to an insignificant risk of changes in value.

–Operational activities: the typical activities of the entities forming the consolidated group, along with

other activities that cannot be classified as investing or financing activities. The group presents

confirming activities for trade payables as an operational activity.

–Investing activities: the acquisition and disposal of long-term assets and other investments not included

in cash and cash equivalents.

–Financing activities: activities that result in changes in the size and composition of the equity and

liabilities that are not operating activities.

5.-PROFIT/(LOSS) PER SHARE

Profit (Loss) per share is calculated by dividing the net profit or loss attributable to the Group in a period by the

weighted average number of shares in circulation during the period, excluding the average number of treasury

shares held during the same period.

In accordance with this:

31.12.2021

31.12.2020

Net Profit/(Loss) for the year (thousands of euros)

(133.667)

(437.159)

Weighted average number of shares in circulation (in thousands)

403.288

391.965

Basic and diluted Earnings/(Losses) per share in euros

(0,331)

(1,115)

6. BUSINESS COMBINATIONS

On 7 September 2020, the Group acquired 100% of the shares of the Boscolo Hotels Group, which runs eight

luxury hotels in prime areas of Rome. Florence, Venice, Prague, Nice and Budapest. The Group operates

through the following companies:

•Hungarian Opco New York Palace K.F.T.

•Italian OpCo Roco Hospitality Group, S.R.L.

•Czech Opco AGAGA, s.r.o.

The hotels are run under the variable rent with a guaranteed minimum system.

The amount of the initial consideration for the acquisition of the Boscolo Group was 50,491 thousand euros, to

which 2,147 thousand euros was added relating to the net working capital position at the integration date. Both

amounts were wholly paid up at the time of acquisition. After a subsequent review of the net working capital

position and the additional agreement with the vendor, the Group recorded an account receivable with the

vendor of 6,008 thousand euros, recorded under the "Other trade receivables" heading.

The consideration, the final fair values of the assets and liabilities identified at the time of acquisition and the

final goodwill, whose valuation was finalised in the 2021 financial year, are set out below:

Item

Thousands

of euros

Other intangible assets (Note 10)

51,187

Property, plant and equipment (Note 7)

850

Right-of-use assets (Note 8)

52,629

Deferred tax assets (Note 18)

5,610

Other non-current assets

150

Cash and cash equivalents

2,722

Other current assets

3,535

Leasing liabilities (Note 8)

(52,629)

Provisions for contingencies and costs (Note 20)

(4,562)

Deferred tax liabilities (Note 18)

(11,458)

Other current liabilities

(12,854)

Fair value of the acquired entity's net assets

35,180

Net Consideration

46,630

Goodwill (Note 9)

(11,450)

The fair values of the assets and liabilities acquired were estimated internally based on the Group's past

experience.

7.-PROPERTY, PLANT AND EQUIPMENT

The breakdown and movements in the year were as follows (in thousands of euros):

Thousands of euros

Land and

buildings

Plant and

machinery

Other fixtures,

tools, furniture

and others

Property, plant

and equipment

in progress

Total

Cost, allotted cost, revalued cost

1,608,309

850,825

447,447

85,586

2,992,167

Accumulated depreciation

(394,347)

(555,660)

(331,215)

—

(1,281,222)

Impairment losses

(73,568)

(14,451)

(7,002)

—

(95,021)

Net Book Value at 01 January 2021

1,140,394

280,714

109,230

85,586

1,615,924

Cost, allotted cost, revalued cost

Inclusions

699

11,361

5,930

10,019

28,009

Retirements

(54,696)

(28,068)

(13,597)

(2,132)

(98,493)

Transfers

41,594

23,201

12,310

(80,946)

(3,841)

Exchange differences and IAS 29 impact

23,490

12,570

4,180

5,231

45,471

Accumulated depreciation

Inclusions

(19,372)

(43,461)

(29,664)

—

(92,497)

Retirements

7,093

17,281

12,771

—

37,145

Transfers

—

(30)

(36)

—

(66)

Exchange differences and IAS 29 impact

(5,744)

(7,532)

(3,455)

—

(16,731)

Impairment losses

Reversal/(Allotment) of impairment losses recognised in

profit and loss (Note 11)

138

2,892

854

—

3,884

Transfers

(4,609)

2,476

2,133

—

Exchange differences and IAS 29 impact

—

(8)

—

Balance at 31 December 2021

1,129,049

271,404

100,648

17,758

1,518,859

Cost, allotted cost, revalued cost

1,619,396

869,889

456,270

17,758

2,963,313

Accumulated depreciation

(412,370)

(589,402)

(351,599)

—

(1,353,371)

Impairment losses

(77,977)

(9,083)

(4,023)

—

(91,083)

Net Book Value at 31 December 2021

1,129,049

271,404

100,648

17,758

1,518,859

Thousands of euros

Land and

buildings

Plant and

machinery

Other fixtures,

tools, furniture

and others

Property, plant

and equipment

in progress

Total

Cost, allotted cost, revalued cost

1,647,261

838,501

452,211

74,286

3,012,259

Accumulated depreciation

(381,829)

(540,355)

(336,278)

—

(1,258,462)

Impairment losses

(27,472)

(8,570)

(4,632)

—

(40,674)

Net Book Value at 01 January 2020

1,237,960

289,576

111,301

74,286

1,713,123

Cost, allotted cost, revalued cost

Inclusions

1,740

39,076

23,276

31,953

96,045

Retirements

(8,869)

(28,224)

(37,013)

(1,601)

(75,707)

Business combinations (Note 6)

—

171

472

207

850

Changes in the scope of consolidation

(13,618)

(649)

(222)

154

(14,335)

Transfers

(5,975)

6,803

12,418

(13,149)

Transfers of assets held for sale and disposable groups of

items

10,495

—

10,495

Exchange differences and IAS 29 impact

(22,725)

(4,853)

(3,695)

(6,264)

(37,537)

Accumulated depreciation

Inclusions

(23,297)

(45,652)

(31,119)

—

(100,068)

Retirements

3,607

23,719

35,785

—

63,111

Changes in the scope of consolidation

2,344

306

657

—

3,307

Transfers

—

2,427

(2,443)

—

(16)

Exchange differences and IAS 29 impact

4,828

3,895

2,183

—

10,906

Impairment losses

Impairment losses recognised in profit and loss

(48,252)

(6,105)

(2,370)

—

(56,727)

Transfers

2,156

—

2,240

Exchange differences and IAS 29 impact

—

140

—

140

Balance at 31 December 2020

1,140,394

280,714

109,230

85,586

1,615,924

Cost, allotted cost, revalued cost

1,608,309

850,825

447,447

85,586

2,992,167

Accumulated depreciation

(394,347)

(555,660)

(331,215)

—

(1,281,222)

Impairment losses

(73,568)

(14,451)

(7,002)

—

(95,021)

Net Book Value at 31 December 2020

1,140,394

280,714

109,230

85,586

1,615,924

The main additions occurring during the financial year relate to hotel refurbishment and opening new hotels.

The highlights in Spain are the works at the NH Collection Madrid Abascal, in France the refurbishment of the

NH Lyon Airport, in Italy the refurbishment of the NH Trieste and NH Collection Roma Centro, in Central

Europe the opening of the NH Hannover, in Benelux the works at the NHOW Brussels Bloom hotel, in Latin

America the works at the NH Mexico City Reforma (Mexico) and the NH Ciudad de Santiago (Chile). Finally,

it should be noted that the works on the NH Collection New York Madison Avenue have concluded and the

hotel opened during the financial year.

The main derecognition in the period relates to the sale of the NH Collection Barcelona Gran Hotel Calderón in

Spain with a sale and leaseback transaction. The hotel was sold for 125.5 million euros with a linked 20 year

lease agreement, with NH having the option of additional extensions (Note 1).

The effect on the profit and loss account of assets de-recognised, replaced or disposed of to third parties outside

the Group was a profit of 66,402 thousand euros (a loss of 1,668 thousand euros in 2020), recognised under

"Profit/(loss) on the disposal of non-current assets" in the 2021 consolidated comprehensive profit and loss

statement.

The net entries for the 2020 financial year included in the “Changes in the scope of consolidation” and

“Business combinations” rows come, on the one hand, from the sales of the companies Onroerend Goed Beheer

Maatschappij Maas Best, B.V., owner of the NH Best hotel, and Onroerend Goed Beheer Maatschappij

Bogardeind Geldrop, B.V., owner of the NH Geldrop hotel, both in Holland (Note 2.9.5), and the acquisition of

the Boscolo Hotels Group comes under business combinations (Note 6).

At 31 December 2021, there were mortgages on tangible fixed asset elements with a net book value of 158

million euros (208 million euros in 2020) (Note 17).

The Group has taken out insurance policies to cover any possible risks to which the different elements of its

tangible fixed assets are subject, and to cover any possible claims that may be filed against it in the course of its

activities. These policies sufficiently cover the risks to which the Group is exposed.

At 31 December 2021, firm investment undertakings amounted to 26.8 million euros. These investments will be

made between 2022 and 2023 (17.3 million euros in 2020).

8.-LEASES

The breakdown and movements under this heading were as follows (in thousands of euros):

Thousands of euros

Real estate

Premiums for

contracts and

other rights

Total

Cost

4,132,468

73,267

4,205,735

Accumulated amortisation

(2,460,615)

(46,969)

(2,507,584)

Impairment losses

(4,331)

—

(4,331)

Net Book Value at 01 January 2021

1,667,522

26,298

1,693,820

Cost

Inclusions

91,743

—

91,743

Retirements

(98,521)

—

(98,521)

Reclassifications

3,631

—

3,631

Currency translation difference

6,548

—

6,548

Accumulated Amortisation

Inclusions

(169,825)

(2,949)

(172,774)

Retirements

72,998

—

72,998

Currency translation difference

(5,505)

—

(5,505)

Impairment

Reversal/(Allotment) of impairment losses recognised in profit and loss (Note 11)

424

—

424

Currency translation difference

(19)

—

(19)

Balance at 31 December 2021

1,568,996

23,349

1,592,345

Cost

4,135,869

73,267

4,209,136

Accumulated amortisation

(2,562,947)

(49,918)

(2,612,865)

Impairment losses

(3,926)

—

(3,926)

Net Book Value at 31 December 2021

1,568,996

23,349

1,592,345

Thousands of euros

Real estate

Premiums for

contracts and

other rights

Total

Cost

4,032,889

73,267

4,106,156

Accumulated amortisation

(2,361,264)

(43,393)

(2,404,657)

Impairment losses

—

Net Book Value at 01 January 2020

1,671,625

29,874

1,701,499

Cost

Inclusions and Retirements

61,673

—

61,673

Business combinations (Note 6)

52,629

—

52,629

Transfers

(3,629)

—

(3,629)

Conversion differences

(11,094)

—

(11,094)

Accumulated Amortisation

Inclusions

(182,734)

(3,576)

(186,310)

Retirements

71,720

—

71,720

Transfers

4,037

—

4,037

Currency translation difference

7,626

—

7,626

Impairment

Reversal/(Allotment) of impairment losses recognised in profit and loss (Note 11)

(4,333)

—

(4,333)

Conversion differences

—

Balance at 31 December 2020

1,667,522

26,298

1,693,820

Cost

4,132,468

73,267

4,205,735

Accumulated amortisation

(2,460,615)

(46,969)

(2,507,584)

Impairment losses

(4,331)

—

(4,331)

Net Book Value at 31 December 2020

1,667,522

26,298

1,693,820

Balance at

01/01/2021

Expenses

for interest

Business

combination

s (Note 6)

Changes

Rent

payments

Exchange

rate

differences

Balance at

31/12/2021

Leasing liabilities

2,059,739

83,048

—

53,832

(271,847)

581

1,925,353

Balance at

01/01/2020

Expenses

for interest

Business

combination

s (Note 6)

Changes

Rent

payments

Exchange

rate

differences

Balance at

31/12/2020

Leasing liabilities

2,067,369

94,106

52,629

94,215

(244,785)

(3,795)

2,059,739

The main movements mainly correspond to the closure of four hotels under leases, as well as the amendment to

the term of some contracts and the change to the essentially fixed component in various contracts with a variable

structure. During the financial year, NH Collection Venezia Palazzo Barocci and NH Firenze Anglo American

in Italy, NH Cornellá and NH Ciudad de Almería and NH Sant Boi in Spain were closed, NH Hannover in

Germany and NH Collection Copenhagen in Denmark were opened and NH Collection Barcelona Gran Hotel

Calderón in Spain was sold and subsequently leased.

Likewise, the business combination includes the acquisition of the Boscolo Hotels Group in 2020 through the

companies Roco Hospitality Group S.R.L., New York Palace, Kft. and Agaga, S.R.O.; hotel leasing operators in

Italy, Hungary and the Czech Republic (Note 6).

The main impacts on the statement on the consolidated comprehensive profit and loss statement related to the

application of IFRS 16 are a higher financial expense of 83,048 thousand euros (94,106 thousand euros in

2020), a net loss on the disposal of non-current assets of 1,294 thousand euros (a gain of 624 thousand euros in

2020), due mainly to cancellations of contracts that had no cash impact and a reversal for asset impairment of

424 thousand euros (allotment for impairment of 4,333 thousand euros in 2020).

The amounts recorded as right-of-use assets correspond to properties where the NH Group is a lessee for its

operation as a hotel.

Short-term leases and low-value leases are recognised as an expense in the consolidated comprehensive profit

and loss account on a straight line basis. A short-term lease contract is one where the period is less than or equal

to 12 months. A “low value contract” is one whose underlying asset assigned in use would have a new value of

under 5 thousand euros. The impact recorded on the attached consolidated comprehensive profit and loss

statements for the leases totals an income of 16,692 thousand euros (31,374 thousand euros income in 2020)

(Note 25.4). This income is a result of applying the exemption introduced in IFRS 16 on 28 May 2020, and

extended until 30 August 2021, which meant the Group recorded savings of 28,625 thousand euros (46,195

thousand euros in 2020) (Note 2.2).

Furthermore, in the lease agreements, there are no restrictions or imposed clauses and no sales transactions with

subsequent leasing were carried out during the financial year.

Future cash output that the lessee is potentially exposed to, and which are not shown in the valuation of leasing

liabilities, exclusively relate to payments for variable leasing.

Therefore, future gross payments estimated for the next 5 years total 664 million euros. Nevertheless, these

expenses will result in higher income and produce higher profits.

The Group has not granted any options to extend and terminate, or guarantees of residual value. There do exist

leases that have not commenced, for which the Group has undertaken gross lease payments of 39,276 thousand

euros in a period of 1 to 5 years, and 198,715 thousand euros in a period of over 5 years.

9.-GOODWILL

The balance included under this item corresponds to the net goodwill arising from the acquisition of businesses

of certain companies, and breaks down as follows (thousands of euros):

2021

2020

NH Hoteles Deustchland, GmbH y

NH Hoteles Austria, GmbH

58,888

61,114

Grupo Royal

22,494

24,539

Boscolo Hotels (Note 6)

11,571

11,554

Others

3,174

3,862

96,127

101,069

The movements in this heading of the consolidated balance sheet in the financial year were as follows (in

thousands of euros):

Business

Goodwill at

Conversion

combinations

Impairment

Goodwill at

Company

01/01/2021

differences

(Note 6)

(Note 11)

31/12/2021

NH Hoteles Deutschland, GmbH y

NH Hoteles Austria, GmbH

61,114

—

(2,226)

58,888

Grupo Royal

24,539

(2,045)

—

22,494

Boscolo Hotels

11,554

(8)

—

11,571

Others

3,862

—

(690)

3,174

Total

101,069

(2,018)

(8)

(2,916)

96,127

Business

Goodwill at

Conversion

combinations

Impairment

Goodwill at

Company

01/01/2020

differences

(Note 6)

(Note 11)

31/12/2020

NH Hoteles Deutschland, GmbH y

NH Hoteles Austria, GmbH

75,212

—

(14,098)

61,114

Grupo Royal

27,607

(3,068)

—

24,539

Boscolo Hotels

—

11,458

—

11,554

Others

3,758

104

—

3,862

Total

106,577

(2,868)

11,458

(14,098)

101,069

Thousands of euros

2021

2020

Grupo Royal CGUs

22,494

24,539

Group CGUs (Boscolo Hotels)

11,571

11,554

CGU 6

13,587

CGU 21

9,929

CGU 12

6,272

CGU 5

2,996

4,325

CGU 13

5,624

CGU 2

5,023

CGUs with goodwill allocated individually <

€4 M

18,631

20,216

96,127

101,069

10.-OTHER INTANGIBLE ASSETS

The breakdown and movements under this heading were as follows (in thousands of euros):

Thousands of euros

Usufruct

Rights

Concessions,

patents and

trademarks

Software

applications

Other

rights

Total

Cost, allotted cost, revalued cost

84,215

37,489

101,118

17,039

239,861

Accumulated amortisation

(6,458)

(26,527)

(67,627)

—

(100,612)

Impairment losses

—

(8,316)

—

(2,796)

(11,112)

Net Book Value at 01 January 2021

77,757

2,646

33,491

14,243

128,137

Cost, allotted cost, revalued cost

Inclusions

9,848

155

4,397

—

14,400

Retirements

(20)

(460)

(309)

—

(789)

Transfers

—

275

—

275

Exchange differences and IAS 29 impact

(1,751)

(370)

—

(2,118)

Accumulated amortisation

Inclusions

(2,468)

(502)

(11,939)

—

(14,909)

Retirements

—

299

223

—

522

Transfers

—

(120)

120

—

Exchange differences and IAS 29 impact

442

249

—

691

Impairment losses

Reversal/(Allotment) of impairment losses recognised in profit

and loss (Note 11)

—

739

Balance at 31 December 2021

83,808

1,897

26,261

14,982

126,948

Cost, allotted cost, revalued cost

92,292

36,814

105,484

17,039

251,629

Accumulated amortisation

(8,484)

(26,601)

(79,223)

—

(114,308)

Impairment losses

—

(8,316)

—

(2,057)

(10,373)

Net Book Value at 31 December 2021

83,808

1,897

26,261

14,982

126,948

Thousands of euros

Usufruct

Rights

Concessions,

patents and

trademarks

Software

applications

Other

rights

Total

Cost, allotted cost, revalued cost

33,976

38,322

90,212

17,039

179,549

Accumulated amortisation

(5,483)

(26,392)

(53,920)

—

(85,795)

Impairment losses

—

(7,171)

—

(2,776)

(9,947)

Net Book Value at 01 January 2020

28,493

4,759

36,292

14,263

83,807

Cost, allotted cost, revalued cost

Inclusions

2,574

108

11,019

—

13,701

Retirements

(34)

(394)

(131)

—

(559)

Business combinations (Note 6)

50,815

—

372

—

51,187

Transfers

—

(36)

(60)

—

(96)

Exchange differences and IAS 29 impact

(3,116)

(511)

(294)

—

(3,921)

Accumulated amortisation

Inclusions

(1,515)

(974)

(13,511)

—

(16,000)

Retirements

366

—

433

Transfers

—

331

(316)

—

Exchange differences and IAS 29 impact

537

142

—

735

Impairment losses

Reversal/(Allotment) of impairment losses recognised in profit

and loss (Note 11)

—

(1,140)

—

(20)

(1,160)

Transfers

—

(5)

—

(5)

Balance at 31 December 2020

77,757

2,646

33,491

14,243

128,137

Cost, allotted cost, revalued cost

84,215

37,489

101,118

17,039

239,861

Accumulated amortisation

(6,458)

(26,527)

(67,627)

—

(100,612)

Impairment losses

—

(8,316)

—

(2,796)

(11,112)

Net Book Value at 31 December 2020

77,757

2,646

33,491

14,243

128,137

10.1 Usufruct Rights

The main additions in this financial year occurred in the Netherlands (9.8 million euros), as a result of the

improvements investment within the framework of the NH Collection Amsterdam Grand Hotel Krasnapolsky

management contract .

The net additions in the 2020 financial year in the row "Business combinations" come from the purchase of

Boscolo Hotels (Note 6).

10.2 Software applications

The most significant additions in this financial year were a result of investments made in digitisation and

improvement to the customer journey experience, and digitisation and optimisation of operating processes to

gain sustainability, mobility and include customer care.

10.3 Other rights

Other rights, include rights relating to lease agreements as a result of business combinations in Italy.

11.-IMPAIRMENT

The Group evaluates the possible existence of a loss of value each year that would oblige it to reduce the

carrying amounts of its tangible and intangible assets or reverse them, if appropriate. A loss is deemed to exist

when the recoverable value is less than the carrying amount. The recoverable value of the assets is the greater of

their fair value less the costs of transfer or disposal by another means (mainly used for hotel assets in ownership)

and their value in use.

As an exception, given the current economic situation as a result of the pandemic caused by Covid-19, analyses

have continued to be carried out to determine if there is any impairment to the CGUs as a whole in the 2021

financial year, in the same way as in the 2020 financial year.

The value in use is calculated from the estimated future cash flows, discounted at a discount rate after tax that

reflects the current market valuation with respect to the value of money and the specific risks associated with the

asset, covering a five-year period and a perpetual value, except in the case of leased hotels that correspond to the

term of the lease, a perpetual value therefore not being considered in the latter. Value in use has been calculated

for all the CGUs.

For the purposes of determining fair value for the owned hotels in this financial year, the Group made a

valuation of the greater part of the hotel assets in ownership. The valuation was made by a global firm

specialising in valuation and consultancy services. The valuation of the assets at 31 December 2021 covered 70

assets. In order to calculate the value of the assets, the most used valuation criteria was discounted cash flow,

due to the fact that the hotel investments are valued depending on their potential future income.

11.1 Key assumptions used

The evolution of the key assumptions in the analysed hotels has taking the business knowledge of Group

Management into account as well as the expected recovery of the sector after the COVID-19 pandemic. In this

regard, the assumed projections are based on the use of the Management’s budget for 2022, which assumes a

dramatic recovery in revenues compared to 2021, but still lower than those in 2019 due to the negative effect

that the COVID-19 pandemic has had on tourism over the past two years. Recovery to pre-COVID-19 levels is

calculated in the comparable hotels over the next few years, once mobility restrictions decrease and, therefore,

consumer confidence is recovered. The Group's strong positioning in the countries where it operates, the good

locations of the portfolio and the high recognition of its brands are key factors in the assumed recovery period.

This recovery scenario calculates reaching pre-pandemic figures in the comparable hotels, which are those for

2019, between 2023 and 2024.

There are a number of factors that are considered by the Group's Management to make the projections, which

are:

•Estimate of external sources specialising in the hotel sector, along with investment banks with

reference to the recovery of the hotel sector.

•Estimate of GDP (Gross Domestic Product) growth issued by the International Monetary Fund (IMF)

in its report published in October of each year for the next five years.

•Knowledge of the business/asset/local situation of the local Management of each Business Unit to

which each CGU belongs.

•Historical results obtained by the CGUs.

•Investments in repositioning the CGUs.

These factors are reflected in the cash flows through the following working hypotheses used to obtain the

projections:

•Income from accommodation is projected as the product of percentage occupation, and average rate per

room (“ADR” Average Daily Rate: is the ratio of the total income from rooms in a specific period

divided by the rooms sold in that specific period) and the total rooms available per year.

•The other revenues are projected based on the average of the relationship between the revenue from

accommodation and those revenues.

•Personnel expenses are calculated on the basis of the average cost for personnel plus the relevant

increase in each country referenced to the collective employment agreement for each year.

•Direct expenses are directly associated with each of the revenues and are projected on the basis of an

average ratio, while undistributed expenses are projected based on the average ratio between these and

direct expenses.

•For its part, tax is calculated from the tax rates applicable in each country.

The discount rates were calculated by a third party using the Weighted Average Cost of Capital (WACC)

methodology: Weighted Average Cost of Capital (WACC), as follows:

WACC=Ke*E/(E+D) + Kd*(1-T)*D/(E+D)

Where:

Ke: Cost of Equity

Kd: Cost of Financial Debt

E: Own Funds

D: Financial Debt

T: Tax Rate

The Capital Asset Pricing Model (CAPM) is used to estimate the cost of equity (ke).

The main variables used by a third party to calculate the discount rate are as follows:

•Risk-free rate: the WACC calculation is based on an increased risk-free rate. The risk-free rate is

standardised to show the average sustainable performance of the long-term bonds issued by

governments and considered to be “safe” (usually those classified as AAA by the main ratings

agencies).

◦For European countries, a rate of 0% was taken into account as the performance of German

government bonds at 20 years, on the valuation date, showed negative performance from

December 2021 and a 1.5% standardisation was extended.

◦For Latin American countries, American sovereign debt was taken into account, which

oscillates between 1.8% (performance at the Valuation Date) and 2.5% (standardised value).

In these countries, the differential of inflation to the USA is also applied.

◦For the United Kingdom, the performance of British government bonds at 20 years was taken

into account, which oscillates between 1.2% (performance at the Valuation Date) and 2.5%

(standardised value).

•Market risks premium: defined at 5.5% for rates in EUR and USD and 5.0% for GBP, based on a wide

range of financial information, multiple methodologies and economic and financial market conditions

at December 2021.

•Beta or systematic risk: Using a sample of listed companies whose businesses are comparable, the

sector’s risk differential is estimated in relation to the average risk on the global market. To calculate

the WACC for hotels being leased, a comparative of a sample of traditional hotel companies is taken

into account. Furthermore, to this group, and to calculate the WACC for owned hotels, a sample of

property investment funds (REITs) is also included in order to show the real estate contribution to the

business. Bloomberg’s historic betas were taken as a reference (monthly data at 5 years). Given that

these betas are leveraged, they have been de-leveraged taking into account the average historical debt/

capital structure for each company over 5 years.

•The capital structure applied was estimated on the basis of the capital structure of the comparable

companies, taking the proportion of debt with interest, preferential capital and ordinary capital of these

companies that are listed on the stock exchange into consideration. The average capital structure

applied is 59.5% Own Funds and 40.5% Debt for the group of comparables for owned hotels, and

58.1% Own Funds and 41.9% Debt for the group of comparables for leased hotels.

•In addition, the local rate for corporation tax on the valuation date in each country was considered.

•To calculate the Cost of the debt, a 2.9% debt differential is applied, based on the spot rate of German

bonds at 20 years and applying the credit rating differential for the comparable companies of reference.

Below are the pre-tax discount rates of the major countries:

Discount rate before taxes:

Germany

Netherlands

Italy

Spain

Colombia

2021

6,36% - 8,73%

6,17% - 8,35%

8,24% - 10,47%

7,61% - 9,86%

15,02% - 15,98%

2020

11,2%

9,6%

12,12%

10,6%

13,6%

The evolution of the key assumptions in hotels with indications of impairment at 31 December in the major

countries in euros was as follows:

2021

2020

2021

2020

2021

2020

2021

2020

2021

2020

Germany

Netherlands

Italy

Spain

Colombia

Post-tax WACC

4,5% -

6,0%

7,54%

4,5% -

6,25%

7,79%

6,25% -

8,0%

8,12%

5,75% -

7,5%

8,14%

10,8% -

11,3%

10,57%

Growth rate (g)

2,03%

1,97%

1,90%

1,70%

1,39%

1,35%

1,70%

1,69%

2,91%

Average ADR (years of

projection)

104,2

100,8

65,6

59,5

136,7

133,5

97,2

92,5

58,9

62,1

Average Occupancy Rate

(years of projection)

72,1%

65,0%

64,4%

54,3%

70,7%

65,1%

73,9%

66,2%

67,2%

61,5%

The after-tax discount rates used by the Group for these purposes range in Europe from 4.5% to 10.25% (7.5%

and 8.1% in 2020) and in Latin America from 9.00% to 14.5% (10.6% and 16.2% in 2020) without taking into

account Argentina, whose after-tax discount rate has been calculated taking into account its hyperinflationary

economic situation and varies between 52.50% in 2022 and 33.25% in 2026, and standardised to 18.5% for the

perpetuity calculation based on the estimate of inflation. In this regard, the cash flows resulting from the

impairment tests were also calculated after tax. In addition, the book value to which the value-in-use is

compared does not include any deferred tax liabilities which could be associated with the assets.

Using a post-tax discount rate and post-tax cash flows is consistent with paragraph 51 of IAS 36, which states

that "estimated future cash flows will reflect assumptions that are consistent with the manner of determining the

discount rate". In addition, the result of the post-tax flows updated at a post-tax discount rate would obtain

uniform results with respect to the impairment test if a pre-tax rate were used and, therefore, the impairment and

reversion accounting records would be uniform.

11.2 Sensitivity analysis

Furthermore, the Group has carried out a sensitivity analysis for each of the CGUs, and for the groups of CGUs

where goodwill is allotted.

For each scenario, each hypothesis has been considered individually, recording the impact on impairment for

each of them. Scenario 1 is a negative one where the discount rate is raised 100 b.p. above the rate used in the

test and a growth rate lower by 100 b.p., i.e. with minimum growth, and falls in occupancy of 100 b.p. and ADR

of 1% which would lead to additional impairment to that registered in 2020.

In the case of Scenario 2, this is a positive one where the discount rate is 100 b.p. below the rate used in the test,

a growth rate or 100 b.p., with increases in occupancy of 100 b.p. and ADR of 1% which would lead to lower

impairment to that registered in 2020.

A sensitivity analysis of the results of the impairment analysis given variations in the following scenarios,

including the impacts that the amendment of each scenario would have without affecting the rest, for the main

goodwill, is set out below:

NH Hoteles Deutschland, GmbH and NH Hoteles Austria, GmbH

Average values

Impairment test

Assumption

Scenario 1

Results

Scenario 1

Assumption

Scenario 2

Results

Scenario 2

After‐tax discount rate:

4,20%-6,50%

5,20% - 7,50%

(960)

3,20% - 5,50%

815

Growth rate

1%-3%

0% - 2%

(789)

3% - 4%

620

Occupancy rate

77.5%

76.5%

(552)

78.5%

552

ADR (euros)

125.50

124.3

(690)

126.8

690

Royal Group

Average values

Impairment

test

Assumption

Scenario 1

Results

Scenario 1

Assumption

Scenario 2

Results

Scenario 2

After‐tax discount rate:

11,25%-14,5%

12,25% - 15,5%

—

Growth rate

1,00% - 3,00%

0,00% - 2,00%

—

Occupancy rate

67.0%

66.0%

—

ADR (euros)

85.52

84.7

—

Boscolo Hotels

Average values

Impairment

test

Assumption

Scenario 1

Results

Scenario 1

Assumption

Scenario 2

Results

Scenario 2

After‐tax discount rate:

7,76%

6,76%

—

Growth rate

1,39%

0,39%

—

Occupancy rate

72.3%

71.3%

—

ADR (euros)

199.82

197.8

—

In addition, a sensitivity analysis of the results of the impairment analysis of the most significant CGUs that

have associated property, plant and equipment, intangible assets and rights of use is set out below:

Sensitivity analysis of tangible and intangible assets and rights of use

Average values

Impairment

test

Assumption

Scenario 1

Results

Scenario 1

Assumption

Scenario 2

Results

Scenario 2

After‐tax discount rate:

4,4% - 52,5%

5,4% - 53,5%

(30,406)

3,5% - 51,5%

25,865

Growth rate

1,0% - 5,5%

0,0% - 4,5%

(11,920)

2,0% - 6,5%

13,708

Occupancy rate

72.3%

71.3%

(6,993)

73.3%

4,293

ADR (euros)

135,1

134.1

(6,779)

136.1

6,350

11.3 Impairment losses

If the recoverable amount of an asset is estimated to be lower than its carrying amount, the latter is reduced to

the recoverable amount by recognising the corresponding reduction through the consolidated comprehensive

profit and loss statement.

If an impairment loss is subsequently reversed, the carrying amount of the asset is increased to the limit of the

original value at which such asset was recognised before the loss of value was recognised.

The Group recognised a net reversal of impairment losses of 2,131 thousand euros (76,758 thousand euros

allotment for impairment in 2020) as summarised below:

•Property, plant and equipment: impairment amounting to 26,998 thousand euros was recognised in

2021 for certain tangible assets; this impairment mainly corresponds to real estate and is a result of the

worsening of future expectations of cash flows for different reasons, including the opening of

competitors' hotels or the loss of an important customer and the worsening of the outlook due to the

Covid-19 situation. (61,250 thousand euros in 2020). On the other hand, there was a reversal of 30,882

thousand euros resulting from the improvement in expectations, recorded under the heading "Gains/

(Net losses) from asset impairment" on the consolidated comprehensive income statement for 2020

(4,523 thousand euros in 2020).

•Right-of-use assets: an impairment reversal was recorded for Rights of use of 1,834 thousand euros and

an allotment to impairment of 1,410 thousand euros (allotment of 4,333 thousand euros in 2020) (Note

8).

•Goodwill: the Group recognised an impairment loss of 2,916 thousand euros on goodwill for NH

Hoteles Deutschland, GmbH, NH Hoteles Austria, GmbH and others (14,098 thousand euros in 2020).

This impairment arises from their worsening expectations of future cash flows mainly due to the

opening of competitor hotels and the worsening of the outlook due to the Covid-19 situation.

•Other intangible assets: reversals of impairment losses of 739 thousand euros (impairment losses of

1,497 thousand euros and reversals of 337 thousand euros in 2020) were recognised under "Net Gains/

(Losses) on asset impairment" of the consolidated comprehensive income statement

The balance of impairment to property, plant and equipment at 31 December is as follows (in thousands of

euros):

2021

2020

Spain

5,129

6,600

Italy

45,831

68,639

Germany

15,759

7,199

Benelux

17,860

10,057

Latin America

6,438

2,526

Others

—

Total impairment

91,083

95,021

The recoverable amount of the CGUs subject to impairment or reversal (not the entire portfolio of the Group) is

as follows

Million euros

2021

Recoverable amount

TOP 10

CGU 35

73.4

CGU 25

54.4

CGU 26

36.6

CGU 4

28.5

CGU 29

26.6

CGU 31

24.9

CGU 30

23.0

CGU 32

18.5

CGU 33

16.9

CGU 34

16.1

Subtotal

318.9

Other CGUs by country

Spain

12.3

Italy

62.5

Benelux

16.5

Germany

47.1

LatAm

40.6

Other Countries

7.2

Subtotal

186.2

Total

505.1

12.-INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD

The associated companies in the year and the amount recognised on the books (in thousands of euros) are listed

below:

Relationship

Book value

Company

Activity centre

percentage

nature

2021

2020

Mil Novecientos Doce, S.A. de C.V.

CDMX, México

25%

Associate

2,000

1,900

Consorcio Grupo Hotelero T2, S.A. de

C.V.

CDMX, México

10%

Associate

1,567

1,413

Inmobiliaria 3 Poniente, S.A. de C.V.

Puebla, México

17%

Associate

—

1,100

Hotelera del Mar, S.A.

Mar de Plata, Argentina

20%

Associate

645

702

Borokay Beach, S.L.

Madrid, Spain

50%

Associate

929

Kensington Hotel Value Added I, Ltd

London, UK

30%

Associate

—

Sotocaribe, S.L.

Madrid, Spain

36%

Associate

35,781

35,729

Total

40,922

41,773

The impact recorded on the consolidated comprehensive profit and loss statement for the financial year due to

consolidation of these holdings was losses of 1,447 thousand euros (7,468 thousand euros loss in 2020),

recorded under the heading "Gain/(Loss) from entities valued using the equity method". In addition, these

holdings increased in 2021 by 596 thousand euros due to the effect of the exchange differences (they decreased

by 2,575 thousand euros in 2020).

The Group's policy on holdings in associated companies consists of ceasing to book losses in these companies if

the associated company's consolidated losses attributable to the Group are equivalent to or exceed the cost of its

holding in them, provided there are no additional contingencies or guarantees connected with existing losses.

The balance sheet of these key companies accounted for using the equity method at year-end is as follows (in

thousands of euros):

Current

Assets

Non-

Current

Assets

Current

Liabilities

Non-

Current

Liabilities

Equity

Net Profit

(Loss)

Company

Mil Novecientos Doce, S.A. de C.V.

7,884

—

7,884

(11)

Consorcio Grupo Hotelero T2, S.A. de C.V.

15,661

—

15,661

738

Inmobiliaria 3 Poniente, S.A. de C.V.

801

10,808

782

4,468

6,359

(561)

Hotelera del Mar, S.A.

694

3,462

480

750

2,926

—

Borokay Beach, S.L.

963

1,104

115

1,857

—

Sotocaribe, S.L.

9,162

245,639

29,301

50,036

175,463

(371)

13.-NON-CURRENT FINANCIAL INVESTMENTS

13.1Financial assets at fair value with change in profit/loss

The breakdown of this heading is as follows:

Thousands of euros

2021

2020

NH Panamá, S.A.

3,767

Other investments

757

408

Provisions

(2,190)

Total

2,334

1,985

In regard to the fair value of financial assets, it does not differ significantly from its cost.

13.2Other financial assets at amortised cost

The breakdown of this heading is as follows

Thousands of euros

2021

2020

Subordinated loans to companies owning hotels

operated by the Group through leases

13,038

20,793

Loans to associates (Note 26)

148

140

Long-term deposits and sureties

12,843

12,835

Others

1,843

1,896

Total

27,872

35,664

The “Subordinated loans to companies owning hotels operated by the Group through leases” item includes a

series of loans granted by the Group to companies which own hotels in countries such as Germany, Austria, the

Netherlands, Italy and Spain, and which are operated by the Group under a leasing agreement.

The main features of these agreements are as follows:

–Hotel rentals are not subject to evolution of the inflation rate or to that of any other index.

–The aforementioned subordinated loans accrue interest at a fixed rate of 3% per annum.

–Lease agreements establish a purchase right on properties subject to agreements that, as a general rule,

may be executed in the fifth, tenth and fifteenth year from the entry into force of the agreement.

–The model used for these lease agreements has been analysed and independent experts consider them to

be operating leases. These hotels are covered by the scope of IFRS 16 and, therefore, from the

transition date involve recording a right of use asset and a leasing liability.

14.-TRADE RECEIVABLES

This item reflects different accounts receivable from the Group’s operations. Its detail is as follows:

Thousands of euros

2021

2020

Trade receivables for services provided

56,283

38,962

Provision for bad debts

(7,319)

(9,025)

Total

48,964

29,937

As a general rule, these receivables do not accrue interest and are due at less than 90 days with no restrictions on

how they may be availed.

Movements in the provision for insolvencies during the year were as follows::

Thousands of euros

2021

2020

Balance at 1 January

9,025

7,100

Conversion differences

(74)

Additions

1,390

5,889

Applications

(3,166)

(3,890)

Balance at 31 December

7,319

9,025

The analysis of the ageing of financial assets in arrears but not considered impaired in the financial year is as

follows

Thousands of euros

2021

2020

Less than 30 days

2,618

4,646

From 31 to 60 days

3,002

3,008

More than 60 days

3,217

3,630

Total

8,837

11,284

In this regard, the provisions recorded take into account all the expected losses on the balances of trade

receivables on the balance sheet.

15.-CASH AND CASH EQUIVALENTS

"Cash and Cash Equivalents" largely includes the Company’s cash position and bank deposits maturing in three

months or less. These assets are recognised at their fair value.

The Group's liquidity position at 31 December 2021 is based on the following points:

•The group had cash and cash equivalents amounting to 243,930 thousand euros.

•Available undrawn credit facilities of 267,000 thousand euros (Note 17).

There are no restrictions on how cash may be used. There are 2,424 thousand euros reserved in accordance with

a firm commitment with the co-owners of Hoteles Royal (2,057 thousand euros in 2020) for future investments

in the hotels.

As a result of the enactment of Royal Decree 1558/2012 of 15 November, of Article 42 bis of Royal Decree

1065/2007 of 27 July, approving the General Regulations on tax management, inspection and procedures, and

implementing the common rules of the procedures for applying taxes, which establishes certain reporting

obligations with regard to overseas assets and rights, among others, it is disclosed that some members of the NH

Hotel Group S.A. Board of Directors have the right, as representatives or authorised officials, to dispose of bank

accounts located abroad, which are in the name of Group companies. The reason certain Board members have

the right to dispose of overseas bank accounts is that they are directors or board members of said subsidiaries.

NH Hotel Group S.A. holds other accounting documents, namely the consolidated annual accounts, from which

sufficient data can be extracted in relation to the aforementioned accounts.

16.-EQUITY

16.1Capital

At 31 December 2021, the share capital of NH Hotel Group, S.A. was represented by 435,745,670 fully

subscribed and paid up bearer shares each with a par value of €2 (392,180,243 shares at 31 December 2020). All

these shares carry identical voting and economic rights and are traded on the Continuous Market of the Spanish

Stock Exchanges.

The Company increased its share capital and premium by 106.6 million euros in the 2021 financial year with the

offset of loans from the main shareholder and preferential subscription rights for the other shareholders, by

virtue of the resolutions of the General Shareholders’ Meeting held on 30 June 2021.

According to the most recent notifications received by the Parent Company and the communications submitted

to the Spanish National Securities Market Commission (CNMV) prior to the end of each reporting period, the

main shareholdings at 31 December were as follows:

31/12/2021

31/12/2020

Minor International Public Company Limited (“MINT”)

94.13%

The aforementioned (indirect) shareholding of MINT in NH Hotel Group, S.A. is the result of the IPO made by

MHG Continental Holding (Singapore) Pte Ltd. on 11 June 2018 for 100% of the shares that were part of the

share capital of NH Hotel Group, S.A., the result of which was that MINT acquired, through its wholly owned

subsidiary MHG Continental Holding (Singapore) Pte. Ltd, shares representing 94.13% of the share capital of

NH Hotel Group, S.A.

16.2Dividends

In 2021, as mentioned in note 3, and in 2020 the Parent Company did not distribute dividends.

16.3Parent Company Reserves

Legal reserve

i) The legal reserve is allotted in accordance with article 274 of the Consolidated Text of the Capital Companies

Act, which provides that, in all cases, a figure equal to 10% of the profit for the financial year must go into it

until it reaches at least 20% of the share capital.

It may not be distributed and, if it is used to offset losses, in the event that there are no other reserves that are

sufficient for that purpose, it must be replenished with future profits.

At 31 December 2021 and 2020 the Parent Company had not allotted the minimum limit provided for in the

Consolidated Text of the Capital Companies Act to this reserve.

ii) Share premium

This reserve is freely distributable.

16.4Treasury shares

At 31 December 2021, the Group had 96,246 own shares, compared to 103,947 own shares at 31 December

2020. The reduction in treasury shares over the period can be explained by the following movement:

•On 10 April 2019, the Group signed a liquidity contract to manage its treasury shares with Banco

Santander, which entered into force on 11 April 2019. The total number of shares allocated to the

securities account associated with the new Liquidity Contract at 31 December 2021 is 96,246 shares

and the current amount allocated to the cash account is 333,543 euros. At 31 December 2020, the

number of shares assigned to the liquidity contract was 103,947 shares. The negative effect recorded in

reserves for operations carried out in 2021 was 700 thousand euros.

•In the 2021 financial year, the second cycle of the second long-term incentive plan was settled (Note

24). Settlement of the second cycle was made with a purchase of 189,962 treasury shares, with this

amount matching the total number of shares handed over. The total recorded positive impact of these

movements on equity was 759 thousand euros.

16.5 Non controlling interests

The movements under this heading during the financial year are summarised below:

Thousands of euros

2021

2020

Opening balance

49,582

57.239

Application of IAS 29

3,280

(1.383)

Comprehensive profit (loss) attributable to non-controlling interests

(2,724)

(5.371)

Dividends paid to non-controlling interests

(166)

(1.179)

Other movements

(974)

276

Closing balance

48,998

49,582

The 2021 "Dividends paid to non-controlling interests" item reflects the dividends of 166 thousand euros paid

out by the company NH Lagasca, S.A. Dividends paid out by the following companies were recorded in 2020:

NH Marín, S.A. amounting to 1,150 thousand euros and NH Las Palmas, S.A. amounting to 29 thousand euros.

17.-DEBT IN RESPECT OF BOND ISSUES AND BANK BORROWINGS

The balances of the “Bonds and other negotiable securities” and “Debts with credit institutions” items for the

financial year were as follows:

Thousands of euros

2021

2020

Long-term

Short-term

Long-term

Short-term

Guaranteed senior notes

400,000

—

356,850

—

Borrowing costs

—

8,089

—

3,308

Arrangement expenses

(4,980)

(1,286)

(4,885)

(1,751)

Effect of renegotiation of debt IFRS 9

—

(2,903)

(1,414)

Debt instruments and other marketable securities

395,020

6,803

349,062

143

Guaranteed syndicated credit line

—

236,000

—

Unsecured loans

326,119

5,089

320,742

9,177

Subordinated loans

40,000

—

40,000

—

Mortgages

20,363

3,071

23,854

2,398

Credit lines

5,000

12,000

5,000

12,000

Arrangement expenses

(5,108)

(1,356)

(2,585)

(1,696)

Effect of renegotiation of debt IFRS 9

3,569

1,047

—

Borrowing costs

—

1,430

—

4,048

Bank borrowings

389,943

21,281

623,011

25,927

Total

784,963

28,084

972,073

26,070

The effect of debt movement on the Group's cash flows as reflected in the cash flow statement is affected by

non-cash movements generated by exchange rate differences as the group has debts in currencies other than the

euro.

For the purpose of strengthening the Group’s capital structure and liquidity, the following financing measures

were entered into during 2021:

–In April 2021 the extension for an additional period of 3 years was formalised for the syndicated loan

of 250,000 thousand euros with a partial guarantee from the Instituto de Crédito Oficial (ICO), taking

its original expiry date of 2023 to 2026. Furthermore, the waiver on compliance with financial

covenants was extended for the whole of 2022.

–In May 2021, the Parent Company received a loan convertible into shares of 100,000 thousand euros

from its majority shareholder, Minor International, which was capitalised with a capital increase for all

the shareholders in September 2021 (Note 16).

–In June 2021, the renegotiation of the syndicated credit facility (RCF) was formalised, increasing its

total from 236,000 thousand euros to 242,000 thousand euros and extending its expiry from 2023 to

2026. Furthermore, the waiver on compliance with financial covenants was extended for the whole of

2022.

–In June 2021, the Parent Company placed a senior bonds issue on the market, guaranteed for a total of

400,000 thousand euros maturing in 2026, the funds from which were mainly used to repay senior

bonds guaranteed for a total of 356,850 thousand euros maturing in 2023.

These transactions have strengthened capital structure and liquidity, giving the company a stable financial

position, without significant maturities until 2026, to address the recovery of its activity.

Secured senior bonds maturing in 2026

On 14 June 2021 the Parent Company offered guaranteed senior bonds, which mature in 2026, at the nominal

value of 400,000 thousand euros. The nominal annual interest rate for the issue is 4% and the cost of arranging

the issue of the bond was 6,896 thousand euros.

After the issue was paid up and closed on 28 June, using the funds received from the issue, the Parent Company

paid off the total guaranteed senior notes (the “Bonds”) in the amount of 356,850 thousand euros maturing in

2023 early, with a payment of 100.938% of the nominal value of the Bonds subject to repayment.

The outstanding nominal amount at 31 December 2021 was 400,000 thousand euros.

Secured credit line

On 22 September 2016, the Parent Company and NH Finance, S.A. entered into a revolving business credit with

credit institutions amounting to 250,000 thousand euros ("syndicated credit line") with a maturity of three years,

extendable to five years at the time of the refinancing of the guaranteed senior notes maturing in 2019. As a

consequence of the refinancing of the guaranteed senior notes maturing in 2019, which took place in 2017, the

maturity date of said financing was extended to 29 September 2021.

On 16 October 2020, the Parent Company and NH Finance, S.A. agreed the extension of the maturity of the

finance to 29 March 2023, with a limit of 236,000 thousand euros.

On 29 June 2021, the Parent Company and NH Finance, S.A. agreed an additional extension of the maturity of

the finance to 31 March 2026, with a limit of 242,000 thousand euros.

On 8 July 2021 the amount drawn down from this syndicated credit facility was reduced from 236,000 thousand

euros to 36,000 thousand euros. On 8 December 2021, the amount of 36,000 thousand euros drawn down was

completely cut.

At 31 December 2021, the entire 242,000 thousand euros of this financing were available.

Subordinate loan convertible into shares

On 24 May 2021, the Parent Company received a loan convertible into shares of 100,000 thousand euros from

its majority shareholder, Minor International, which was capitalised with a capital increase for all the

shareholders in September 2021 (Note 16.1).

Unsecured loans

–Syndicated ICO backed loan maturing in 2026

On 29 April 2020, the Group entered into a loan for 250,000 thousand euros over 3 years, with no repayments

until maturity.

The contract, within the legal framework established by the Spanish government to mitigate the economic

impact of COVID-19, received a guarantee granted by the Spanish state.

On 29 April 2021, on the basis of Royal Decree Law 34/2020 approved in November 2020, the Parent Company

agreed the extension of this financing with the loan institutions until 2026, with no partial repayments until

maturity.

At 31 December 2021, this financing was available in full.

–Other non-guaranteed loans

In addition to the ICO backed syndicated loan for 250,000 thousand euros, as a result of the crisis caused by

COVID-19, throughout 2020 the Parent Company and its subsidiaries took advantage of government aid in the

various countries to take out several loans. Throughout 2021 extensions to their terms were agreed, with the

grant of a guarantee from the Spanish State:

•In May 2020, the Parent Company signed a bilateral loan for 10,000 thousand euros over two years,

within the legal framework established by the Spanish state to mitigate the economic impact of

COVID-19 and thus receiving the ICO guarantee. In May 2021, on the basis of Royal Decree Law

34/2020, the Parent Company agreed the extension of the maturity of this loan for a further 3 years,

with a new maturity date of May 2025.

•In July 2020, the Parent Company signed a bilateral loan for 7,500 thousand euros over three years,

within the legal framework established by the Spanish state to mitigate the economic impact of

COVID-19 and thus receiving the ICO guarantee. In April 2021, on the basis of Royal Decree Law

34/2020, the Parent Company agreed the extension of the maturity of this loan for a further 3 years,

with a new maturity date of July 2026.

•In October 2020 the Italian subsidiary NH Italia Spa signed a bilateral loan for 15,000 thousand euros

over 6 years, within the legal framework provided by the Italian state to mitigate the economic impact

of COVID-19 and, in this way, receiving the State guarantee (SEPE).

•Furthermore, various bilateral loans were signed between June and September 2020 in different regions

(Portugal, Argentina and Chile) to mitigate the economic impact of the pandemic. At 31 December

2021 the total amount drawn down from these loans was 3,199 thousand euros.

Subsidiaries of the Parent Company have other unsecured bilateral loans, including a loan from the American

subsidiary of 50,000 thousand dollars (44,146 thousand euros at December 2021) signed in 2018, fully drawn

down at 31 December 2021 and maturing in July 2023. These funds were used to finance the New York hotel's

capex. The remaining bilateral loans are distributed amongst the companies in Colombia and, at 31 December

2021, the amount drawn down was 1,363 thousand euros.

Subordinated loan

A loan amounting to 40,000 thousand euros fully drawn at 31 December 2021 and with a single maturity and

repayment in 2037, are included in this item. The interest rate on this loan is the 3-month Euribor plus a spread.

Mortgages

The detail of the mortgage loans and credits is as follows (in thousands of euros):

Fixed rate

Variable

interest

Net book value of

the mortgaged

asset

Mortgaged asset

Total

Spain

Wilan Ander

3,714

—

3,714

4,668

Wilan Huel

2,661

—

2,661

4,985

NH Palacio de la Merced

—

2,620

15,243

Total Spain

6,375

2,620

8,995

24,896

Chile

NH Plaza de Santiago

14,439

—

14,439

14,346

Total Other

14,439

—

14,439

14,346

Total

20,814

2,620

23,434

39,242

Bilateral credit lines

At 31 December 2021, the balances under this item include the amount drawn down from credit facilities. The

joint limit of these loan agreements and credit facilities at 31 December 2021 amounted to 42,000 thousand

euros, of which 17,000 thousand euros had been drawn down at that date.

Obligations required in the senior notes contracts maturing in 2026, the syndicated credit line and the

syndicated loan with ICO guarantee maturing in 2026

The senior notes maturing in 2026, the syndicated credit line maturing in 2026 and the syndicated loan

guaranteed by ICO maturing in 2026 require the fulfilment of a series of obligations and limitations of

essentially homogeneous content as regards the assumption of additional borrowing or provision of guarantees

in favour of third parties, the granting of real guarantees on assets, the sale of assets, investments that are

permitted, restricted payments (including the distribution of dividends to shareholders), transactions between

related parties, corporate transactions and disclosure obligations. These obligations are detailed in the issue

prospectus for the aforementioned notes, as well as in the credit agreement of the syndicated credit line.

The syndicated credit line and the syndicated loan with the ICO guarantee require compliance with financial

ratios (financial covenants); in particular, (i) an interest coverage ratio of > 2.00x, (ii) a net indebtedness ratio of

< 5.50x.

Furthermore, the senior notes maturing in 2026 and the syndicated credit line require fulfilment of a Loan to

Value (“LTV”) ratio that depends on NH’s net debt level at any time as shown below:

- Net debt-to-income ratio ˃ 4.00x: LTV ratio = 70%

- Net debt-to-income ratios ≤ 4.00x: LTV ratio = 85%

- Net debt-to-income ratio ≤ 3.50x: LTV ratio = 100%

The maximum permitted LTV at 31 December 2021 is 70%.

At 31 December 2021, the Parent Company has a waiver on compliance with the financial covenants for the

syndicated credit line and the syndicated loan with the ICO guarantee for the whole of 2022.

Package of guaranteed senior bonds maturing in 2026 and syndicated credit line maturing in 2026

The guaranteed senior notes maturing in 2026 and syndicated credit line maturing in 2026 share the following

guarantees: (i) pledge of shares: 100% of the share capital of (A) Diegem, (B) Immo Hotel Brugge NV, (C)

Immo Hotel Diegem NV, (D) Immo Hotel Mechelen NV, (E) Immo Hotel Stephanie NV,(F) Onroerend Goed

Beheer Maatschappij Van Alphenstraat Zandvoort, B.V. and (G) NH Italia, S.p.A.; (ii) first-tier mortgage

guarantee on the following hotels located in the Netherlands: NH Conference Centre Koningshof owned by

Koningshof, B.V.; NH Conference Centre Leeuwenhorst owned by Leeuwenhorst Congres Center, B.V.; NH

Zoetermeer owned by Onroerend Goed Beheer Maatschappij Danny Kayelaan Zoetermeer, B.V.; NH

Conference Centre SparreNHorst owned by SparreNHorst, B.V.; NH Capelle owed by Onroerend Goed Beheer

Maatschappij Capelle aan den IJssel, B.V.; y NH Naarden owned by Onroerend Goed Beheer Maatschappij

IJsselmeerweg Naarden, B.V. and the joint guarantee on first demand of the main operating companies in the

group wholly owned by the Parent Company.

The net book value of the assets granted as mortgage security against the syndicated credit line (242,000

thousand euros fully drawn down at 31 December 2021) and guaranteed senior notes in the amount of 400,000

thousand euros, maturing in 2026, can be broken down as follows (in thousands of euros):

Net book value

of mortgaged

Mortgaged asset

assets

NH Conference Centre Leeuwenhorst

55,871

NH Conference Centre Koningshof

39,473

NH Conference Centre Sparrenhorst

6,286

NH Zoetermeer

7,189

NH Naarden

3,854

NH Capelle

6,082

Total

118,755

Net value of assets assigned as mortgage collateral

118,755

Value of guaranteed debt

400,000

Fixed interest

400,000

Variable interest

—

Limitation on the distribution of Dividends

The guaranteed "senior" bonds maturing in 2026, the syndicated revolving credit line maturing in 2026 and the

ICO backed syndicated loan and bilateral loan maturing in 2026 described above contain clauses limiting the

distribution of dividends.

In the case of the senior bonds maturing in 2026, in general, distribution of dividends is allowed as long as (a)

there is no current non-compliance and one is not produced as a result of the distribution; (b) the interest

coverage ratio pro forma taking into account the planned distribution would be > 2,0x; and (c) the total restricted

payments (including, amongst others, certain restricted investments, early repayments of subordinated debt,

share buy-backs, payments in cash for subordinated debt to controlling shareholders, or persons associated with

them, and other forms of remuneration to shareholders in their position as such) made from the offer date (14

June 2021) must be lower than the total of, amongst other entries, (i) 50% of NH Group's consolidated net

income from the first day of the full quarter immediately prior to the offer date up to the date of the full quarter

nearest to the distribution date for which the quarterly accounts are available, although when calculating the net

income, 100% of the consolidated net losses for that period must be deducted, with the exception of losses prior

to 31 March 2022 (this is what is known as the “CNI builder basket”), and (ii) 100% of the net contributions to

NH Group's capital since the offer date.

Additionally, as an alternative and without having to be in compliance with the previous condition, NH Group

may distribute dividends and make other restricted payments without any limit on the amount as long as the

leverage ratio (gross debt/EBITDA) pro forma taking into account the intended restricted payment should not be

higher than 4.5x.

Finally, and also alternatively and without having to be concurrent with the previous ones, the notes maturing in

2026 establish a franchise to be able to make restricted payments (including dividends) without needing to

comply with any specific requirement, for a total aggregate amount of 25,000,000 euros from the issue date.

In the case of the syndicated credit line, the distribution of dividends or other forms of remuneration to

shareholders are not allowed while the waiver on complying with financial ratios (financial covenants) is in still

in force. Once the waiver ceases to be in force, according to the syndicated credit line, the distribution of a

percentage of the NH Group’s consolidated net profit from the previous year is allowed, provided that there has

been no breach of the relevant financing agreement and the net financial debt (through the dividend payment or

other type of distribution)/EBITDA ratio is less than 4.0x. The amount that may be distributed depends on the

net financial debt/EBITDA ratio (pro forma taking into account the dividend payment or other type of

distribution) in accordance with the following breakdown:

- Net Financial Debt /EBITDA ≤ 4.0x: Percentage of consolidated net profit: 75%

- Net Financial Debt /EBITDA ≤ 3.5x: Percentage of consolidated net profit: 100%

- Net Financial Debt /EBITDA ≤ 3.0x: Percentage of consolidated net profit: unlimited

All these metrics are calculated using consolidated data.

At 31 December 2021, the requirements for the distribution of dividends that year were not met.

Detail of current and non-current payables

The detail, by maturity, of the items included under “Non-Current and Current Payables” is as follows (in

thousands of euros):

A 31/12/2021

Maturity schedule

Figures in thousands of euros

Límit

Available

Disposed

Year 1

Year 2

Year 3

Year 4

Year 5

Remainde

Mortgages

23,434

—

23,434

3,070

2,007

5,919

1,237

767

10,434

Fixed rate

20,814

—

20,814

2,469

1,396

5,299

608

10,434

Variable interest

2,620

—

2,620

601

611

620

629

159

—

Subordinated loans

40,000

—

40,000

—

40,000

Variable interest

40,000

—

40,000

—

40,000

Guaranteed senior notes

400,000

—

400,000

—

400,000

—

Fixed rate

400,000

—

400,000

—

400,000

—

Unsecured loans

331,208

—

331,208

5,090

54,391

9,712

7,855

254,160

—

Fixed rate

8,112

—

8,112

1,057

2,151

1,872

1,905

1,127

—

Variable interest

323,096

—

323,096

4,033

52,240

7,840

5,950

253,033

—

Secured credit line

242,000

—

Variable interest

242,000

—

Credit lines

42,000

25,000

17,000

12,000

3,000

—

2,000

—

Variable interest

42,000

25,000

17,000

12,000

3,000

—

2,000

—

Borrowing at

1,078,642

267,000

811,642

20,160

59,398

15,631

11,092

654,927

50,434

Arrangement expenses

(12,730)

—

(12,730)

(2,642)

(2,744)

(2,861)

(2,974)

(1,212)

(297)

IFRS 9

4,616

—

4,616

1,047

1,059

1,071

1,080

359

—

Borrowing costs

9,519

—

9,519

—

Adjusted total debt at 31/12/2021

1,080,047

267,000

813,047

28,084

57,713

13,841

9,198

654,074

50,137

Adjusted total debt at 31/12/2020

1,023,143

25,000

998,143

26,070

7,860

891,306

10,239

7,472

55,196

At 31 December 2021, the average cost of the gross drawdown amount of the Group was 3.5%.

The detail for maturities of the debt for operating leases without discounting is as follows (in thousands of

euros):

Total

liabilities

Maturities

2021

2022

2023

2024

2025

2026

Resto

Gross lease payments

31/12/2021

2,728,005

—

250,149

236,321

222,303

206,872

191,944

1,620,416

Gross lease payments

31/12/2020

3,001,150

261,034

248,745

237,466

225,081

209,655

196,174

1,622,995

Net Debt

The detail of net debt at 31 December is as follows (in thousands of euros):

Net Debt

2021

2020

Cash and cash equivalents

243,930

320,851

Financial debt (Long and short term)

(813,047)

(998,143)

Leasing liabilities (Note 8)

(1,925,353)

(2,059,739)

Net Debt

(2,494,470)

(2,737,031)

Cash and liquid investments

243,930

320,851

Gross debt – fixed interest rates

(2,355,153)

(2,448,192)

Gross debt – variable interest rates

(383,247)

(609,690)

18.-TAX NOTE

Tax consolidation scheme

The Group operates in many countries and is therefore subject to the regulations of different tax jurisdictions

regarding taxation and corporate income tax.

NH Hotel Group, S.A. and the companies with tax domicile in Spain in which it held a direct or indirect stake of

at least 75% during the 2021 tax period are subject to the tax consolidation scheme governed by Title VII,

Chapter VI of Law 27/2014 on Corporate Income Tax.

The companies belonging to the tax group have signed an agreement to share the tax burden. Hence, the Parent

Company settles any credits and debts which arise with subsidiary companies due to the negative and positive

tax bases these contribute to the tax group.

The companies that make up the tax consolidation group are the following:

NH Hotel Group, S.A.

NH Europa, S.L.

Latinoamericana de Gestión Hotelera, S.L.

NH Atardecer Caribeño, SA.

NH Central Reservation Office, S.A.

Gestora Hotelera del Siglo XXI, S.A.

NH Hoteles España, S.A.

Nuevos Espacios Hoteleros, S.A.

NH Hotel Ciutat De Reus, S.A.

Coperama Holding, S.L.

Gran Círculo de Madrid, S.A.

Coperama Spain, S.L.

Iberinterbrokers, S.L.

NH Las Palmas, S.A.

Wilan Ander, S.L.

NH Lagasca, S.A.

Palacio de la Merced, S.A.

Wilan Huel S.L.

NH Cash Link, S.L.U.

Corporation tax is calculated on the financial or accounting profit or loss resulting from the application of

generally accepted accounted standards in each country, and does not necessarily coincide with the tax result,

this being construed as the tax base.

In 2021, Spanish companies pay taxes at the general tax rate of 25% irrespective of whether they apply the

consolidated or separate taxation schemes. The foreign companies are subject to the prevailing tax rate in the

countries where they are domiciled. In addition, taxes are recognised in some countries at the estimated

minimum profit on a complementary basis to Corporation Tax.

The prevailing corporation tax rates applicable to Group companies in the different jurisdictions where the

Group has significant operations are as follows:

Country

Nominal Rate

Country

Nominal Rate

Argentina

25%-35%

Italy

24%

Austria

25%

Luxembourg

26%

Belgium

25%

Mexico

30%

Brazil

34%

Netherlands

26%

Chile

27%

Poland

19%

Colombia

31%

Portugal

21%

Czech Rep

19%

Romania

16%

Dominican Rep.

27%

South Africa

28%

Ecuador

25%

Spain

25%

France

26.5%

Switzerland

Germany

30%

United Kingdom

19%

Hungary

Uruguay

25%

Ireland

12.5%

USA

21%

Financial years subject to tax inspection

In accordance with Spanish tax legislation, the years open for review to the Consolidated Tax Group are:

Tax loss

Tax

Carryforwards

Corporation

2017 a 2020

VAT

2018 a 2021

IRPF (personal income tax)

2018 a 2021

Non-resident Income Tax

2018 a 2021

In Germany, an inspection procedure has been opened which is reviewing the amount of negative tax bases still

to be offset by the companies. Furthermore, a verification file is open for all the taxes in some of the German

companies which covers the 2015 to 2018 financial years.

In Switzerland, during 2021, a Corporation Tax verification file was opened for the 2016 to 2020 financial

years.

Finally, an inspection procedure has been opened in Colombia focused on the deductions of certain Corporation

Tax expenses.

The Group’s Directors do not expect any significant contingencies to arise from the conclusions of the

inspections.

Regarding the financial years open to inspection in the rest of the group, contingent liabilities not susceptible to

objective quantification may exist, which are not significant in the opinion of the Group’s Directors. Moreover,

the Company considers that there are no significant uncertain tax positions.

Balances with Public Administrations

The composition of the debit balances with Public Administrations at 31 December is as follows:

Thousands of euros

2021

2020

Deferred tax assets

Tax credits

162,789

132,377

Tax assets due to asset impairment

46,205

41,854

Tax withholdings of workforce

2,647

2,778

Other prepaid taxes

1,346

1,584

IFRS16

81,018

94,420

294,005

273,013

Thousands of euros

2021

2020

Short‐term taxes receivable

Corporation tax

4,740

13,026

Value Added Tax

27,504

30,977

Other tax receivables

3,528

6,544

Total

35,772

50,547

The movements of the "Deferred tax assets" heading in the year were as follows:

Thousands of euros

2021

2020

Opening balance

273,013

220,040

Asset impairment

4,350

10,012

Generation of assets due to tax losses

27,006

48,998

Settlements of assets due to tax losses

(1,897)

(605)

Activation of deductions

—

103

Business combinations (Note 6)

—

5,610

IFRS 16 (Note 8)

(13,402)

(1,366)

Others

4,935

(9,779)

Total

294,005

273,013

All these impacts have had an effect on the Consolidated Profit and Loss Statement except for some non-

significant impacts that have resulted in changes to the consolidated statement of changes in equity.

The increase in deferred tax assets is mainly due to the generation of assets due to tax losses. Furthermore, in

2020, under the business combinations heading, a balance of 5,303 thousand euros was reported for tax loss

assets of the companies within the NH Group as a result of the Boscolo Hotels business combination. In 2021,

this balance was reported as a tax credits asset.

At 31 December 2021, the Group had assets resulting from tax losses and deductions amounting to 162,789

thousand euros (132,377 thousand euros in 2020). Out of the total tax credits, 77,170 thousand euros (79,067

thousand euros in 2020) relate to credits activated in Spain.

In the 2021 financial year, the movement of tax credit assets impacting the consolidated comprehensive profit

and loss statement was 25,109 thousand euros. The increase in tax credits was due to the activation of the loss

for the financial year, mainly in Holland (12,568 thousand euros), Italy (8,134 thousand euros), Portugal (2,358

thousand euros) and Latin America (2,153 thousand euros). To record these credits, the relevant plans for tax

credit recovery were prepared to support their activation. Furthermore, in Spain tax credits of 1,897 thousand

euros were derecognised.

At 31 December 2021, the Group had tax loss and non-deductible financial expenses carryforwards worth

204,723 thousand euros (168,533 thousand euros at 31 December 2020) and deductions amounting to 2,823

thousand euros (29,136 thousand euros in 2020) that had not been entered in the accompanying consolidated

balance sheet because the Directors considered they did not meet accounting standard requirements. These

assets are grouped as follows (rate amount):

Thousands of euros

2021

2020

Non-deductible financial expenses in Spain

58,558

51,334

Negative tax bases generated by the Spanish entities before their inclusion in the

Spanish consolidation group

25,703

Spanish consolidation group tax loss carryforwards

33,845

33,582

Negative tax bases generated in Belgium

6,242

2,646

Negative tax bases generated in Luxembourg

10,664

10,746

Negative tax bases generated in Germany

34,697

19,986

Negative tax bases generated in Austria

10,204

8,037

Negative tax bases generated in Switzerland

1,886

—

Negative tax bases generated in Latin America

4,545

3,288

Negative tax bases USA

8,817

Negative tax bases France

5,058

3,814

Other negative tax bases

4,504

580

Total Credit for negative tax bases and financial expenses

204,723

168,533

Deductions generated in Spain

2,823

29,136

Total deductions

2,823

29,136

Total non-activated tax credits

207,546

197,669

The amount of credit for finance costs, which are not considered deductible in the Spanish corporate income tax

when exceeding 30% of the operating revenue of the tax group calculated in accordance with Article 16 of Law

27/2014 of 27 December, on Corporate Income Tax, amounted to 58,558 thousand euros at 31 December 2021

(51,334 thousand euros in 2020). There is no deadline for offsetting non-deductible finance costs.

The change to the credits that were not recorded in the 2021 financial year is mainly due to the increase in

credits for non-deductible financial expenses in Spain (7,224 thousand euros) and negative tax bases in

Germany, Austria, Switzerland, the Czech Republic and Hungary (20,132 thousand euros), Benelux (3,514

thousand euros), Italy (2,239 thousand euros) and Latin America (1,257 thousand euros) which are, in part,

offset by the reduction in deductions in Spain (26,313 thousand euros), mainly produced by the expiry of the

term for their application.

The composition of the creditor balances with Public Administrations at 31 December is as follows:

Thousands of euros

2021

2020

Deferred tax liabilities

Revaluation of assets and other valuation differences

186,359

171,519

Total

186,359

171,519

Thousands of euros

2021

2020

Short‐term taxes payable

Corporation tax

1,361

3,517

Value Added Tax

1,538

441

Personal Income Tax

4,544

3,813

Tax on Income from Capital

1,129

1,025

Social Security

7,783

3,756

Others

15,785

10,037

Total

32,140

22,589

The movements in deferred tax liabilities during the year were as follows:

Thousands of euros

2021

2020

Opening balance

171,519

180,082

IAS 29 Hyperinflationary economies

5,435

(651)

Update rate change in Argentina

9,915

—

Business combinations (Note 6)

—

11,458

Others

(510)

(19,370)

Closing balance

186,359

171,519

The increase in deferred tax liabilities is mainly due to the update of deferred tax liabilities in Argentina as a

result of the tax rate increase (from 25% to 35%) with effect for the 2021 financial year. The total effect for this

item was 9.915 thousand euros.

The impacts have had an effect on the Consolidated Profit and Loss Statement except for an amount of 5,354

thousand euros that has resulted in changes to the consolidated statement of changes in equity.

The detail, by country and item, of these deferred taxes is as follows:

2021

Thousands of euros

Tax credits

Prepaid Taxes

Total Assets

Liabilities

Spain

77,170

32,670

109,840

20,041

Benelux

21,703

27,521

49,224

18,768

Italy

27,337

15,139

42,476

91,855

Germany

22,729

44,027

66,756

3,023

Others

13,850

11,859

25,709

52,672

TOTAL

162,789

131,216

294,005

186,359

2020

Thousands of euros

Tax credits

Prepaid Taxes

Total

Assets

Liabilities

Spain

79,067

33,245

112,312

25,509

Benelux

7,343

27,363

34,706

18,253

Italy

14,659

26,374

41,033

85,353

Germany

22,729

42,959

65,688

2,904

Others

8,579

10,695

19,274

39,500

TOTAL

132,377

140,636

273,013

171,519

Reconciliation of the accounting result to the tax result

The reconciliation between the consolidated comprehensive profit or loss statements, the corporation tax base,

current and deferred tax for the year, is as follows:

2021

2020

Thousands of euros

Central Services/

Southern Europe

and USA

Italy

Benelux

Central

Europe

Latin

America

TOTAL

Spanish

Companies

Other

Companies

TOTAL

Consolidated comprehensive

profit and loss statements

before taxes

(34,586)

7,051

(67,426)

(29,235)

(21,061)

(145,258)

(120,933)

(394,622)

(515,555)

Adjustments to consolidated

comprehensive profit and loss:

—

Accounting consolidation

adjustments

—

Due to permanent differences

64,374

13,236

60,243

26,473

12,640

176,966

121,151

283,121

404,272

Due to temporary differences

(4,070)

(20,499)

8,503

5,950

10,161

(225)

72,988

72,763

Tax base (Taxable profit or loss)

25,718

(212)

1,320

3,188

1,739

31,753

(7)

(38,513)

(38,520)

Current taxes to be refunded / (to

pay)

859

271

(845)

(261)

3,355

3,379

7,708

1,801

9,509

Total current tax income /

(expense)

(6,376)

(340)

(620)

(486)

(7,771)

9,352

9,354

Total deferred tax income /

(expense)

6,750

(6,186)

14,202

459

2,034

17,259

591

65,722

66,313

Total other income / (expense)

(89)

—

(104)

(55)

(161)

(357)

(156)

(513)

Total Corporation Tax income /

(expense)

285

(6,135)

13,949

(265)

1,493

9,327

236

74,918

75,154

Deductions generated by the consolidated tax group of the Parent Company

At 31 December 2021, the Tax Group held the following tax credits carryforward (thousand euros):

Year

Of origin

Deduction pending application

Amount

2007 to 2011

Deduction to encourage certain activities

867

2014 to 2020

IT Deduction

1.585

2019 and 2020

Investment deduction in the Canary Islands

631

2013 to 2014

Other

925

4.008

19.-OTHER NON-CURRENT LIABILITIES

The breakdown of the “Other non-current liabilities” item in the accompanying consolidated balance sheets is as

follows:

Thousands of euros

2021

2020

At amortised cost:

Capital subsidies

1,689

2,151

Investment acquisition liability

3,150

Other liabilities

16,521

5,300

21,360

10,601

“Other liabilities” includes the deferral of various long-term commitments to public authorities for 10,915

thousand euros.

20.-PROVISIONS

The breakdown of “Provisions” for the financial year, together with the main movements recognised were as

follows:

Thousands of euros

Additions

Applications/

Reversals

Business

combinations

(Note 6)

Transfers and

other changes

Balance at

01/01/2021

Balance at

31/12/2021

Provision for risk and

non-current expenses:

Provision for pensions and

similar obligations

29,224

2,907

(4,327)

—

228

28,032

Other claims

18,031

1,374

(3,376)

—

16,029

47,255

4,281

(7,703)

—

228

44,061

Provision for risk and

current expenses:

Other claims

6,277

3,781

(6,207)

(148)

(228)

3,475

6,277

3,781

(6,207)

(148)

(228)

3,475

Total

53,532

8,062

(13,910)

(148)

—

47,536

Thousands of euros

Additions

Applications/

Reversals

Business

combinations

(Note 6)

Balance at

01/01/2020

Balance at

31/12/2020

Provision for risk and

non-current expenses:

Provision for pensions and

similar obligations

28,919

1,014

(709)

—

29,224

Other claims

19,322

1,623

(2,914)

—

18,031

48,241

2,637

(3,623)

—

47,255

Provision for risk and

current expenses:

Other claims

5,021

1,395

(4,849)

4,710

6,277

5,021

1,395

(4,849)

4,710

6,277

Total

53,262

4,032

(8,472)

4,710

53,532

Provision for pensions and similar obligations

The “Provisions for pensions and similar obligations” account mainly includes the pension fund of a certain

number of employees of the Netherlands business unit, and the T.F.R. “Trattamento di fine rapporto” in Italy, an

amount paid to all workers in Italy at the moment they leave the company for any reason. This is another

remuneration element, whose payment is deferred and annually allocated in proportion to fixed and variable

remuneration both in kind and in cash, which is valued on a regular basis. The annual amount to be reserved is

equivalent to the remuneration amount divided by 13.5. The annual cumulative fund is reviewed at a fixed

interest rate of 1.5% plus 75% of the increase in the consumer price index (CPI).

This section also includes various retirement, performance related and/or long-stay awards considered in the

Collective Bargaining Agreements that are applicable in Spain.

At the end of 2021, the liabilities entered against this item were of 28,032 thousand euros (29,224 thousand

euros at 31 December 2020).

The breakdown of the main assumptions used to calculate actuarial liabilities is as follows:

2021

2020

Netherlands

Italy

Netherlands

Italy

Discount rates

1.0%

0.0%

-0.2471%

0.60%

0.0%-0.0736

Expected annual rate of salary rise

0.50%

2.0%

0.50%

1.90%

Expected return from assets allocated to the plan

0.18%

1.6%

0.23%

1.6%

2021

2020

Spain

Discount rates

0.39%-

0.76%

0.32%-

0.57%

Expected annual rate of salary rise

1.2%

Other claims

The "Other claims" item includes provisions for disputes and risks that the Group considers likely to occur.

Among the most significant are the provisions created on the basis of the action brought in the proceedings

claiming breach of contract in a property development, as well as other claims received in relation to the

termination of certain leases where certain amounts are claimed (Note 23).

21.-TRADE AND OTHER PAYABLES

The breakdown of this item in the consolidated balance sheet at 31 December is as follows (thousands of euros):

Thousands of euros

2021

2020

Trade and other payables

230,640

164,564

Advance payments from customers

26,036

23,929

256,676

188,493

The heading "Commercial Creditors and Other Accounts Payable" covers the accounts payable derived from

commercial activity typical of the Group. This heading includes 37,460 thousand euros (27,989 thousand euros

at 31 December 2020) coming from creditors for confirming transactions.

The "Advance payments from customers" item mainly includes customer deposits arising from the Group's hotel

businesses.

INFORMATION ON DEFERRED PAYMENTS TO SUPPLIERS. THIRD ADDITIONAL PROVISION.

"DUTY TO REPORT" OF ACT 11/2013 OF 26 JULY

Below is the information required by Additional Provision Three of Law 15/2010 of 5 July and modified

according to the Resolution of 29 January 2016, of the Institute of Accounting and Auditing, on the information

to be incorporated in the record of annual financial statements relating to the average period for payment to

suppliers in commercial transactions of Spanish companies.

2021

2020

Days

Average period for payment to suppliers

Ratio of paid transactions

Ratio of transactions pending payment

Amount (thousands of euros)

Total payments made

271,179

194,915

Total payments pending

20,018

10,226

The above information on payments to suppliers of Spanish companies refer to those which by their nature are

trade creditors due to debts with suppliers of goods and services. The table includes, therefore, the "Commercial

Creditors and Other Accounts Payable" item in current liabilities of the consolidated balance sheet.

The average period for payment to suppliers has been calculated using the weighted average of the two ratios

explained below:

–Ratio of paid transactions: average payment period of transactions paid in each year weighted by the

amount of each transaction.

–Ratio of transactions pending payment: average period between the invoice date and the end of the year

weighted by the amount of each transaction.

The maximum period for payment to suppliers of the Company has been higher than the legal period stablished

of 60 days due to the impact of COVID-19 pandemic on hotel demand. This situation is remediable as long as

several measures are taken focused on temporary resizing of existing resources, such as renegotiation of rent

contracts and other different actions focused on minimizing COVID-19 impacts, which jointly with the

progressive recovery of hotel activity will contribute to meet the stablished legal ratio.

22.-OTHER CURRENT LIABILITIES

At 31 December, this item is broken down as follows:

Thousands of euros

2021

2020

Outstanding remuneration

28,695

19,175

Other creditors

11,681

5,920

40,376

25,095

Outstanding remuneration mainly includes the accrual of fixed and variable salaries which are unpaid, as well as

provisions for holidays not taken.

23.-THIRD-PARTY GUARANTEES AND CLAIMS IN PROCESS

At 31 December 2021, the Group had a total of 44,715 thousand euros in economic or financial bank guarantees

issued by various banks (34,052 thousand euros in 2020).

The increase in balance for bank bonds at 31 December 2021, compared to the balance at 31 December 2020, is

mainly due to the issue of a bond as a rent guarantee for a new hotel in Denmark and those issued in favour of

Social Security for the deferral of social security payments by several group companies applied for at the

beginning of 2021.

Of the 44,715 thousand euros in bank guarantees, 38,300 thousand euros guarantee leasing contract obligations

and others related to the Group's usual operations in various countries, and 6,415 thousand euros issued in

relation to public bodies.

At 31 December 2021, the Group had taken out insurance policies to cover risks arising from damage to

material goods, loss of profits and third‐party liability. The capital insured sufficiently covers the assets and

risks mentioned above.

Commitments to third parties

–On 10 March 2006, the partnership agreement of the company which owns a hotel in the United

Kingdom was signed, of which a group company is a shareholder, under which, if the company

were to receive a purchase offer for 100% of its shares at market price, the Group company could

be required to transfer the shares. However, the group company will have preferential acquisition

rights over the shares. At the close of the financial year, the group company had granted its

shareholder an option to purchase shares representing up to 8.36 % of the company capital of the

company owning the hotel.

–Within the framework of new development projects in the normal course of business, in which

Grupo NH subsidiaries act as lessees or operators, the Group's parent company gives personal

guarantees in favour of third parties to secure its contractual obligations, often issue promissory

notes in payment of said obligations and agrees penalty clauses in case of breach of contract.

–Likewise, within the framework of the group's financing, personal and real guarantees have been

granted to fulfil the obligations guaranteed under the financing agreements (Note 17).

Claims in process

The Group's main contingent assets and liabilities on the date these consolidated financial statements were

drawn up, are set out below:

–The owner of four properties in the Netherlands has claimed in court the payment of compensation

to a Dutch subsidiary because there was allegedly a change of the control situation in the year 2014,

which supposedly entitles him to claim a fine, according to the lease. The claim filed by the owner,

both in the first instance and on appeal, was dismissed in full. The same owner has instituted fresh

court proceedings alleging a change of control situation in 2018, with an agreement being reached

between the parties to put an end to the claim.

–A claim has been filed against a Group company in Germany due to the termination of two lease

agreements and claiming specific amounts, including damages.

–A claim has been filed against a Group company in Italy due to the early termination of a lease

agreement; the ruling was favourable to the company's interests in the appeal, although it is in

judicial review currently in progress.

–A Group company in Italy has been sued for damages under a service provision contract, with the

claim being dismissed in the first instance. It is currently at the appeal stage.

–A Group company in South Africa has been sued for damages as a result of the termination of a

lease agreement.

–A claim has been filed against two of the Group's companies seeking payment fees to rights

management from 1 January 2008 to 31 May 2013, in addition to an unspecified amount

corresponding to the period thereafter until a judgment is issued, plus interest and costs. The

procedure from both first instance and appeal has been resolved by setting an amount lower than the

one claimed, however, a judicial review has been filed, which is pending a hearing.

–A claim has been filed against a Group company claiming payment in relation to the payment of a

management entity’s fees for the years 2018, 2019, et seq, which is currently being processed.

–A claim has been filed against a Group company for damages within the framework of a corporate

relationship, which has been partially admitted. It is currently at the appeal stage.

–Claims have been submitted in claim for payment, within the framework of the various rent

renegotiation processes the Company is in. These are currently being processed.

–On the occasion of the agreements reached in 2014 for the sale of the shares held by NH Hotel

Group, S.A in the company Sotogrande, S.A., the Group agreed to subrogate to the position of

Sotogrande, S.A. for certain claims assuming all rights and obligations relating thereto, and are

summarised as follows:

•Plaintiff in the proceedings against construction agents for construction defects in

twenty-five homes and contractual liability.

•Respondent in the process of claiming amounts from a real estate development due to

construction defects.

–A former shareholder of the Group has requested the annulment of certain resolutions adopted by

the Board of Directors, and the proceedings are currently in progress.

–As part of the contractual liability assumed by the Group in a hotel purchase contract in Holland,

the buyers informed the Group of the requirement to pay the Dutch Capital Transfer Tax. At 31

December 2021, the total amount of this tax, plus the corresponding default interest, was 12,654

thousand euros. The purchasers submitted an appeal to the Dutch Treasury that was rejected and an

appeal has been filed with the Courts that is still pending resolution. The Group and the purchasers

reached an agreement whereby NH assumed control of the judicial procedure. In March 2021, a

judgment issued by the Court of First Instance was received rejecting the Group’s claim, with

which the Group does not agree, so a new appeal will be filed before the second judicial instance on

14 June 2021.

The Directors of the Parent Company consider that the hypothetical loss incurred by the Group as a result of

such actions would not significantly affect the equity of the Group.

24.-LONG TERM INCENTIVE PLAN

On 29 June 2017, the Company's General Shareholders Meeting approved a long-term share-based incentive

plan (“the plan”) for the Group's executives and employees. The Plan was approved retroactively from 1

January 2017, it will have a total duration of five years, divided into three – independent of each other – three-

year cycles.

The plan consisted of the grant of ordinary shares of NH Hotel Group, S.A. to the beneficiaries calculated as a

percentage of the fixed salary, according to their level of responsibility. The number of shares to be granted was

subject to the degree of fulfilment of the following objectives:

•TSR (total shareholder return) at the end of each of the Plan's cycles, comparing the performance of

NH Hotel Group, S.A. shares with the STOXX® Europe 600 Travel & Leisure share index

•Revaluation of the Share

•Recurring Net Profit

•Recurring EBITDA

The beneficiaries must remain in the Group at the end of each cycle, notwithstanding the exceptions deemed

appropriate, as well as achieving the minimum thresholds for each of the objectives.

The Plan targeted approximately 100 beneficiaries.

The current cycles at 31 December 2021 are:

No. of Shares

Assigned at

the start of

each cycle

(Thousands)

No. of live

shares at

31.12.2021

(Thousands)

Value of the

allocation

(Euros)

The first cycle began on 1/1/2017 (delivery in 2020 (concluded))

720.87

—

3.80

The second cycle began on 01/01/2018 (delivery in 2021

(concluded))

517.96

—

5.96

The third cycle began on 01/01/2019 (delivery in 2022 (in force))

879.25

711.35

3.96

The difference between the total shares assigned at the beginning of each cycle and the live shares at 31

December 2021 correspond to beneficiaries who left between the launch up to the final third cycle (31

December 2021).

The second cycle (2018-2020) of the second long-term incentive plan was settled in the first half of 2021 with

the delivery of 189,962 net shares at a fair value per unit of 4.28 euros. The settlement of this Plan was made net

of taxes.

At the date of publication of this report, all the cycles – in force or ended – had been approved by the Board of

Directors.

The maximum amount approved by the General Shareholders' Meeting for the three cycles of the second Plan is

16,200,000 euros.

The effect of these items on the consolidated comprehensive profit and loss statement for 2021 was 958

thousand euros (no impact was recorded in 2020).

25.-INCOME AND EXPENSES

25.1INCOME

The breakdown of these headings in the consolidated comprehensive income statements is as follows:

Thousands of euros

2021

2020

Hotel occupancy

522,778

348,180

Catering

146,680

111,175

Meeting rooms and others

52,169

47,088

Rentals and other services

24,857

29,707

Revenues

746,484

536,150

Operating subsidies

82,690

Other operating income

4,250

7,816

Other operating income

86,940

7,852

Net gain (loss) on disposal of assets

65,108

(475)

Aid received of 82.7 million euros has been recorded under the Operating subsidies line, which mainly relates to

subsidies received from the German government to offset the drop in sales caused by COVID-19. Out these

subsidies, 39,020 thousand euros recorded under the “Other non-trade debtors” are currently pending receipt.

“Rentals and Other Services” includes the income from fees invoiced to hotels operated on a management basis

and the services provided by the NH Group to third parties.

The breakdown of net turnover by geographical markets is as follows:

Thousands of euros

2021

2020

Italy

159,542

83,111

Southern Europe and USA

263,988

158,320

Central Europe

148,584

142,184

Benelux

128,777

122,458

Latin America

45,532

29,927

Central Services

150

746,484

536,150

25.2 Financial Income

The breakdown of the amount of financial income is:

Thousands of euros

2021

2020

Interest income

854

951

Other financial income

2,557

765

3,411

1,716

Interest income corresponds to loans valued at amortised cost.

25.3 Personal expenses

This item in the consolidated comprehensive profit and loss statement is broken down as follows:

Thousands of euros

2021

2020

Wages, salaries and similar

191,794

188,430

Social security contributions

48,802

54,986

Severance payments

9,941

7,521

Contributions to pension plans and similar

10,188

10,342

Other social expenses

7,889

6,895

268,614

268,174

The saving recorded in 2021, as a result of the subsidies or allowances received from Governments to offset the

restrictive measures taken, was 42,302 thousand euros in wages and salaries and 26,849 thousand euros in social

security contributions (36,932 and 15,795 thousand euros in 2020, respectively)..

The average number of people employed by the Parent Company and the companies consolidated through full

consolidation in the year broken down by professional category was as follows:

2021

2020

Group's general management

Managers and heads of department

1,433

1,483

Technical staff

880

988

Sales representatives

631

816

Administrative staff

144

180

Rest of workforce

6,976

7,637

10,072

11,112

In calculating the average number of employees, the Group has not taken into account employees whose

contracts have a duration of less than two days. The decrease in the average number of people employed can be

explained by the contingency plans that the Group put in place to alleviate the fall in business due to Covid-19.

Mainly these consisted of temporary layoffs, due to force majeure or productive reasons, and voluntary

reductions in working days and wages. The collective redundancy process announced in February has been

carried out in central services and the business unit in Spain as part of a global plan in compliance with local

legislation.

The breakdown of the personnel at 31 December, by sex and professional category, is as follows:

31/12/2021

31/12/2020

Males

Females

Males

Females

Group's general management

Managers and heads of department

807

612

801

609

Technical staff

456

410

482

466

Sales representatives

169

438

202

526

Administrative staff

104

Rest of workforce

3,552

3,630

3,374

3,498

5,039

5,170

4,928

5,204

The average number of people with disabilities equivalent to or greater than 33%, directly employed by the

Parent Company and fully consolidated companies in Spain in the year, broken down by professional category,

is as follows:

2021

2020

Managers and heads of department

—

Technical staff

Sales representatives

Administrative staff

Rest of workforce

The average age of the Group's workforce was approximately 41.1 and average seniority in the Group was 10.5

years (39.7 years and 9.4 years respectively in 2020).

25.4 Other operating expenses

The composition of this consolidated comprehensive income heading is as follows:

Thousands of euros

2021

2020

Leasing (Note 8)

(16,692)

(31,374)

Outsourcing of services

57,063

42,234

Commissions and bonuses for customers

46,013

27,260

Supplies

48,182

42,856

Maintenance and cleaning

32,586

28,111

Laundry and related costs

19,152

14,840

Costs associated with information technologies

32,410

33,085

Marketing and merchandising

11,055

9,692

Taxes, insurance and levies

27,867

24,439

Advisory services

13,779

11,667

Other external services

47,182

46,671

318,597

249,481

In 2021, the Group experienced an improvement to the level of activity in its hotel business, which led to an

increase in some operational expenses directly related to the level of activity, such as the supplies and laundry

service, among others. Also, the increase recorded in revenue per available room explains the increase in

associated agency commission expenses. Nevertheless, and in spite of the improvement to business, the Group

has, since the start of the pandemic, a contingency plan in place to reduce fixed and variable costs directly

related to the level of activity.

On the other hand, during 2021, the Group managed to reach agreements with the vast majority of landlords,

which has made it possible to obtain rent concessions to significantly mitigate the impact of the pandemic. In

this sense, as a result of applying the IFRS 16 amendment published on 30 August 2021, the Group recorded

savings of 28,625 thousand euros relating to rent concessions achieved in the aforementioned negotiations

carried out as a result of Covid-19 (Note 2.2). In addition, as a result of the drop in business and renegotiations

and write-offs, expenses for variable rents, as well as those which are not subject to IFRS 16, were reduced.

Likewise, as a result of the subsidies or bonuses received by the Governments to offset the losses produced by

the fixed income, a saving of 13 million euros was recorded in leases.

During 2021 and 2020, the fees for account auditing and other services provided by the auditor of the Group's

consolidated annual accounts and the fees for services invoiced by the entities related to it by control, shared

ownership or management, were as follows:

Thousands of euros

2021

2020

Auditing services

548

553

Other verification services

435

214

Total auditing and related services

983

767

Tax consulting services

—

Other services

243

Total other services

243

Total professional services

1,044

1,010

Additionally, entities associated with the international network of the consolidated annual accounts auditor have

invoiced the Group for the following services:

Thousands of euros

2021

2020

Auditing services

1,244

1,170

Other verification services

209

215

Total auditing and related services

1,453

1,385

Tax consulting services

254

289

Other services

312

Total other services

566

342

Total

2,019

1,727

During 2021, other auditing firms apart from the auditor of the consolidated annual accounts or entities

associated with this company by control, shared ownership or management, have provided account auditing

services to the companies making up the Group, for fees totalling 99 thousand euros (46 thousand euros in

2020). The fees accrued in 2021 by these firms for tax advice services were 468 thousand euros (366 thousand

euros in 2020) and for other services, 242 thousand euros (54 thousand euros in 2020).

25.5 Financial cost

The breakdown of this chapter in the consolidated comprehensive income statement is as follows:

Thousands of euros

2021

2020

Expenses for interest

39,530

28,021

Financial expenses for means of payment

7,928

6,459

Financial effect relating to restatement

of provisions and other financial liabilities

9,633

1,271

Amortisation of debt arrangement expenses

12,233

5,688

Other Financial expenses

69,324

41,439

Interest on leases (Note 8)

83,048

94,106

Financial Expenses

152,372

135,545

The increase in the “Financial effect relating to restatement of provisions and other financial liabilities” line is

explained by recognition at fair value of the extension, for an additional three-years period, of the syndicated

loan for 250,000 thousand euros with a partial guarantee from the Official Credit Institution (ICO) and the

settlement of the senior bonds guaranteed for a total of 356,850 thousand euros maturing in 2023.

Furthermore, the increase in the "Amortisation of debt arrangement expenses" line is due to early amortisation

of the debt arrangement expenses associated with the financial liabilities cancelled during the 2021 financial

year (Note 17).

The expenses for interest correspond to debts valued at amortised cost.

25.6 Results from exposure to hyperinflation

This heading includes the net effect recognised in the consolidated comprehensive profit and loss statement

arising from the application of accounting standards to the financial statements of Argentine subsidiaries from

the date of first application since 2018 (Note 2.6.4).

26.-RELATED PARTY TRANSACTIONS

In addition to its subsidiaries, associates and joint ventures, the Group's “related parties” are considered to be the

“key management personnel” of the Parent Company (Board Members and Directors, along with their

immediate relatives), as well as organisations over which key management personnel may exert significant

influence or control.

Transactions carried out by the Group with its related parties during the year are stated below, distinguishing

between major shareholders, members of the Board of Directors and Directors of the Parent Company and other

parties that were related during the year even though there are no longer a shareholder at year-end. The

conditions of the related-party transactions are equivalent to those of transactions carried out under market

conditions:

Thousands of euros

2021

Income and Expenses

Significant

shareholders

Associates or

companies of

the Group

Total

Expenses:

Financial Expenses

1,838

—

1,838

Reception of services

959

—

959

Other expenses

1,225

—

1,225

4,022

—

4,022

Income:

Financial income

—

351

Management or cooperation agreements

1,480

877

2,357

Other income

744

—

744

2,224

1,228

3,452

Thousands of euros

2020

Income and Expenses

Significant

shareholders

Associates or

companies of

the Group

Total

Expenses:

Reception of services

832

—

832

Other expenses

1,528

—

1,528

2,360

—

2,360

Income:

Financial income

—

346

Management or cooperation agreements

666

516

1,182

Other income

578

600

1,244

884

2,128

The heading “Management or cooperation agreements” referring to major shareholders includes the amounts

that have accrued in the form of management fees payable to Grupo NH in the financial year by virtue of the

hotel management agreement signed with Grupo Minor.

Related party balances

Thousands of euros

31/12/2021

31/12/2020

Accounts receivable from related entities

1,185

955

Accounts receivable from associated companies (long term)

(Note 13)

148

140

Accounts receivable from associated companies (short term)

418

841

Loans to associates

10,543

10,114

Provision for impairment

(9,502)

Total Assets

2,792

2,548

Thousands of euros

31/12/2021

31/12/2020

Accounts payable from related entities

(824)

(613)

Accounts payable from associated companies

(9)

—

Total Liabilities

(833)

(613)

At 31 December 2021, the NH Hotel Group has a net balance pending collection of 361 thousand euros with the

Minor Group (1,185 thousand euros recorded as an account receivable and 824 thousand euros as accounts

payable).

27.-INFORMATION BY SEGMENTS

In order to improve and simplify business processes during 2021, the Group revised its organisational structure,

causing a change in the organisation of segments and, therefore, eliminating the Property segment as it was not

significant., In this way, operational segments are not aggregated as reporting segments.

The Management Committee is the body responsible for making decisions on the Group’s segments. The

Management Committee monitors operational results on the basis of three geographical regions in order to make

decisions on the allotment of resources and performance assessments. Each one of the geographical regions is

led by its own Managing Director, who reports to the Management Committee.

The way of managing the three geographical regions coming under corporate services, defines the Group’s

geographical segments:

–BUSE (Southern Europe): includes Italy, Spain, Portugal, France, Andorra, Tunisia and the USA. Within

the segment, the information used for Management to manage it is presented separating Italy form the

other countries.

–BUNE: within the segment, management information is grouped between Central Europe (which

includes: Germany, Austria, Czech Republic, Hungary, Poland, Romania, Slovakia and Switzerland) and

Benelux (which includes: Holland, Belgium, Luxembourg, Ireland and the United Kingdom).

–BUAM (Latin America, which includes: Argentina, Brazil, Chile, Colombia, Cuba, Ecuador, Haiti,

Mexico and Uruguay).

The following table shows the breakdown of certain balances on the Group’s consolidated income statement.

Italy

Southern

Europe

Central

Europe

Benelux

Latin America

Corporate

Services

TOTAL

Revenues

159,542

263,988

148,584

128,777

45,532

746,484

Other operating income

532

1,282

79,402

4,069

122

1,533

86,940

Depreciation

(48,142)

(79,230)

(79,697)

(44,700)

(10,719)

(17,739)

(280,227)

Net profit (loss) for asset deterioration

23,367

2,070

(11,730)

(7,603)

(3,973)

—

2,131

Financial Income

335

134

308

2,537

3,411

Financial Expenses

(19,097)

(27,659)

(39,279)

(23,462)

(6,100)

(36,774)

(152,371)

Results from exposure to hyperinflation (IAS 29)

—

3,151

—

3,151

Profit (Loss) from entities valued through the

equity method

—

(1,025)

(422)

(1,447)

Corporation tax

(6,135)

9,963

(265)

13,949

1,493

(9,678)

9,327

Thousands of euros (2021)

Thousands of euros (2020)

Italy

Southern

Europe

Central

Europe

Benelux

Latin America

Corporate

Services

TOTAL

Revenues

83,111

158,320

142,184

122,458

29,927

150

536,150

Other operating income

673

1,999

429

2,795

132

1,824

7,852

Depreciation

(53,111)

(83,879)

(84,746)

(50,434)

(10,317)

(19,990)

(302,477)

Net profit (loss) for asset deterioration

(47,370)

(4,257)

(20,531)

(3,180)

(972)

(76,258)

Financial Income

273

429

893

1,715

Financial Expenses

(19,737)

(27,702)

(37,452)

(31,476)

(5,137)

(14,040)

(135,544)

Results from exposure to hyperinflation (IAS 29)

—

796

—

796

Profit (Loss) from entities valued through the equity

method

—

(542)

(6,926)

(7,468)

Corporation tax

29,115

4,016

22,647

17,461

3,402

(1,487)

75,154

Profit (loss) for the year from discontinued

operations net of tax

—

(66)

—

(66)

2021

Thousands of euros

31/12/2021

Total

Italy

Southern

Europe

Central Europe

Benelux

Latin America

Corporate

Services

OTHER INFORMATION

Inclusions of tangible fixed

assets and other intangibles

42,409

5,806

2,010

8,209

18,132

2,226

6,026

Depreciation

(280,227)

(48,142)

(79,230)

(79,697)

(44,700)

(10,719)

(17,739)

Net profit (loss) for asset

deterioration

2,131

23,367

2,070

(11,730)

(7,603)

(3,973)

—

BALANCE SHEET

ASSETS

Assets by segments

4,064,391

710,942

793,029

1,038,647

1,002,412

309,521

209,840

Shareholdings in associated

companies

40,922

—

929

—

4,212

35,781

Total consolidated assets

4,105,313

710,942

793,958

1,038,647

1,002,412

313,733

245,621

LIABILITIES

Liabilities and equity by

segments

4,105,313

710,942

793,958

1,038,647

1,002,412

313,733

245,621

Total Consolidated Liabilities

and Equity

4,105,313

710,942

793,958

1,038,647

1,002,412

313,733

245,621

2020

Thousands of euros

31/12/2020

Total

Italy

Southern

Europe

Central

Europe

Benelux

Latin America

Corporate

Services

OTHER INFORMATION

Inclusions of tangible fixed assets and

other intangibles

109,746

29,088

12,500

20,387

29,757

6,701

11,313

Depreciation

(302,477)

(53,111)

(83,879)

(84,746)

(50,434)

(10,317)

(19,990)

Net profit (loss) for asset deterioration

(76,258)

(47,370)

(4,257)

(20,531)

(3,180)

(972)

BALANCE SHEET

ASSETS

Assets by segments

4,288,145

747,933

819,574

1,004,569

1,154,305

288,575

273,189

Shareholdings in associated companies

41,773

—

929

—

5,116

35,728

Total consolidated assets

4,329,918

747,933

820,503

1,004,569

1,154,305

293,691

308,917

LIABILITIES

Liabilities and equity by segments

4,329,918

747,933

820,503

1,004,569

1,154,305

293,691

308,917

Total Consolidated Liabilities and

Equity

4,329,918

747,933

820,503

1,004,569

1,154,305

293,691

308,917

28.-REMUNERATION AND OTHER STATEMENTS MADE BY THE BOARD OF DIRECTORS

AND SENIOR MANAGEMENT

The Management Bodies of the Parent Company have the following composition at 31 December:

–Board of Directors: 9 members (9 members at 31 December 2020),

–Audit and Control Committee: 3 members (3 members at 31 December 2020),

–Appointments and Remuneration Committee: 3 members (3 members at 31 December 2020).

28.1 Remuneration of the Board of Directors

The amount accrued during the year by the members of the Parent Company's Board of Directors in relation to

the remuneration of the Executive Directors, by law stipulated directors' fees and attendance fees and other

items, is as follows:

Thousands of

Remuneration item

2021

2020

Fixed remuneration

1,003

807

Variable remuneration

—

Parent Company: allowances

Parent Company: attendance allowances

291

221

Transactions in shares and other financial instruments

190

257

Life insurance premiums

Others

Total

1,556

1,341

At 31 December 2021, the Board of Directors had 9 members, all male (the same data as in 2020).

Due to the situation caused by COVID-19, the members of the Board voluntarily waived 20% of their

remuneration from January to April 2021 and 100% of it in May and June 2021(in 2020 the board members

voluntarily waived 50% of their retribution since 1 March).

Furthermore, the Executive Directors saw their fixed remuneration decrease by 20% from January to June and

their variable remuneration accrued and received for 2021 was 0.

In relation to the heading, "Transactions on shares and/or other financial instruments", consideration has been

given to the objective long-term remuneration accrued. Remuneration in kind (vehicles and health insurance) is

included under "Others".

Further information in the directors’ Annual Remuneration Report.

28.2 Remuneration of senior management

The remuneration of members of the Management Committee during the year, excluding those who

simultaneously held office as members of the Board of Directors (whose remuneration has been set out above),

is detailed below:

Thousands of

2021

2020

Pecuniary remuneration

1,504

1,277

Remuneration in kind

120

Others

230

462

Total

1,854

1,837

There were six members of Senior Management at 31 December 2021 (six members at 31 December 2020)

excluding the CEO and the Chief Operations Officer due to their status as executive directors.

During 2021, as a result of the crisis arising from COVID-19, the members of the Management Committee saw

their fixed remuneration crease by 20% from January to June 2021. Furthermore, the variable remuneration

accrued in 2021 was 0. This gives rise to a total decrease in their remuneration in 2021 vs their target

remuneration of 38%. During 2020 the members of the Management Committee saw their annual remuneration

for 2020 decrease by more than 50%.

Remuneration in kind includes the vehicle and the cost of insurance.

The heading "Other" takes the long-term objective remuneration accrued in 2021 into consideration.

28.3 Information on conflicts of interest on the part of Directors

During 2021, Minor International Public Company Limited (“Minor”), an indirect majority shareholder of the

Group (94.132%) and represented on the Board by four proprietary Directors, and the Group signed a series of

Related Party Transactions, which are broken down in the Audit and Control Committee's Annual Report, as

well as in Note 26 of this Report. These Related Party Transactions have always been executed in strict

compliance with the rules established in the applicable regulations and the Procedure for Conflicts of Interest

and Related Party Transactions with Significant Shareholders, Directors and Senior Management of NH Hotel

Group, S.A. approved by the Board of Directors on 11 November 2021. All transactions signed with Minor

(and/or its group of companies) have counted on a report from the Audit and Control Committee, have been

signed under market conditions and with the participation of external advisors, and in compliance with the

provisions in the Framework Agreement signed between the parties on 7 February 2019, which regulates,

among others, the scope of action of the respective hotel groups headed by the Group and Minor through the

identification of preferred geographic areas or zones, the mechanisms necessary to prevent and deal with

possible conflicts of interest, as well as to carry out operations with related parties and develop business

opportunities. The aforementioned Framework Agreement was duly communicated to the Market via a Relevant

Fact and is published in full on the Company's website.

During all Board Meetings dealing with issues related to Minor, the Proprietary Directors were absent when

dealing with said matters and therefore did not participate in the adoption of the corresponding agreement.

29.- ENVIRONMENTAL, SOCIAL AND GOVERNMENTAL RISKS

The Parent Company’s Board of Directors is the body responsible for supervision of the risk management

system, and the Audit and Control Committee supports the Board in supervising the effectiveness of the internal

control, internal audit and the risk management systems.

The governing bodies receive information about the main risks the Group is exposed to and the capital resources

available to face up to them at least every quarter, along with information about compliance with the limits set

in the risk appetite.

Therefore, as in previous years, in 2021 the Audit and Control Committee supervised and validated the Risk

Map update and the correct implementation of the action plans that fully or partially contribute to mitigating the

main risks.

An analysis was carried out on the 78 risks appearing in the Group’s risk catalogue for 2021 to identify those

relating to ESG (Environmental, Social and Governance) criteria. The result was that 35% of all the risks

identified were classified as such.

More information about the Group's risk management model in the Risk Management section of the 2021

Consolidated Non-Financial Information Statement.

The Group is a company that is committed to the well-being of its guests and to efficient management of the

resources available in the environment its hotels are in. The Group is aware of the effects of its activity on the

environment and works to prevent and anticipate possible environmental contingencies, as well as to integrate

sustainability into all its processes. It is constantly working on reducing their impact.

The Group's environmental management is based on identification and annual review of the main environmental

impacts that it may cause using the environmental and climate risk map. Although there is a specific process for

assessing environmental risks, the methodology followed is consistent with the corporate risk management

model and, in addition, it is those that are most critical, included in the Group’s risk catalogue, that become a

part of the corporate risk map update.

More information about the Group’s environmental and climate management in the NH Room4 Planet -

Commitment to the fight against Climate Change and progress towards decarbonisation section in the 2021

Consolidated Non-financial Information Statement.

NH ROOM4 Sustainable Business

The Group performs its hotel activity with the ambition of leading responsible behaviours, and creating shared

value at an economic, social and environmental level wherever it operates. The strategic vision of NH ROOM4

Sustainable Business is based on three fundamental management levers: NH ROOM4 People, NH ROOM4

Planet and NH ROOM4 Responsible Shared Success, all of which are framed under the same premise of

sustainable and ethical principles, responsible culture and spirit of citizenship.

Convinced it is moving in the right direction to achieve the next sustainability challenges, the Group is aligned

with the Sustainable Development Goals (SDGs) to which it can contribute and undertakes to continue creating

long-term and global value within the framework of the 2030 Agenda.

Furthermore, the Group carries out a process to determine material matters annually, with the aim of:

•Complying with the requirements of the non-financial information directive.

•Determining relevant aspects to guide the Sustainability strategy.

•Giving a response to the Global Reporting Initiative (GRI) requirements for reporting sustainability and

those of the United Nations 2030 Agenda.

Their relevance is determined by the impact that each one may have, whether on the Group’s business itself, or

on its main stakeholders, as well as the possible evolution of the impact in the medium and long term.

More information about this Model and its performance in 2021 is available in the NH ROOM4 Sustainable

Business section in the 2021 Consolidated Non-financial Information Statement.

30.-EXPOSURE TO RISK

Group financial risk management is centralized in the Corporate Finance Division in accordance with the

policies approved by the Board of Directors. This Division has put the necessary measures in place to control

exposure to changes in interest and exchange rates on the basis of the Group’s structure and financial position,

as well as credit and liquidity risks. If necessary, hedges are made on a case-by-case basis. The main financial

risks faced by the Group’s policies are described below:

Credit risk

The Group main financial assets include cash and cash equivalents (Note 15), as well as trade and other

accounts receivable (Note 14). In general terms, the Group holds its cash and cash equivalents in entities with a

high credit rating and part of its trade and other accounts receivable are guaranteed by deposits, bank guarantees

and advance payments by tour operators.

The Group has no significant concentration of third-party credit risk due to the diversification of its financial

investments as well as to the distribution of trade risks with short collection periods among a large number of

customers.

The Group has formal procedures for detecting objective evidence of impairment in trade receivables for the

provision of services. As a result of these, significant delays in payment terms and the methods to be followed in

estimating the impairment loss based on individual analyses are identified. Impairment of trade receivables from

customers for the provision of services at 31 December 2021 amounted to 7,319 thousand euros (9,025 thousand

euros at 31 December 2020) (Note 14) and customer balances not included in this provision have sufficient

credit quality and, therefore, with this provision, the credit risk of these trade receivable is considered covered.

Interest rate risk

The Group’s financial assets and liabilities are exposed to fluctuations in interest rates, which may have an

adverse effect on its results and cash flows. In order to mitigate this risk, the Group has established policies and

has part of its debt at fixed interest rates through the issue of guaranteed convertible senior bonds. At 31

December 2021, approximately 53% of the gross borrowings drawn down was tied to fixed interest rates

(excluding leasing liabilities).

In accordance with reporting requirements set forth in IFRS 7, the Group has conducted a sensitivity analysis on

possible interest-rate fluctuations in the markets in which it operates, based on these requirements.

Through the sensitivity analysis, taking as a reference the outstanding amount of that financing that has variable

interest, we estimated the increase in the interest that would arise in the event of a rise in the reference interest

rates.

•In the event that the increase in interest rates were 25 b.p., the financial expense would

increase by 0.957 thousand euros plus interest.

•In the event that the increase in interest rates were 50 b.p., the financial expense would

increase by 1,914 thousand euros plus interest.

•In the event that the increase in interest rates were 100 b.p., the financial expense would

increase by 3,828 thousand euros plus interest.

The results in equity would be similar to those recorded in the income statement but taking into account their tax

effect, if any.

Lastly, the long-term financial assets set out in Note 13 of this annual report are also subject to interest-rate

risks.

Exchange rate risk

The Group is exposed to exchange-rate fluctuations that may affect its sales, results, equity and cash flows.

These mainly arise from:

–Investments in foreign countries (essentially Mexico, Argentina, Uruguay, Colombia, Chile,

Ecuador, the Dominican Republic, Brazil, Panama and the United States).

–Transactions made by Group companies operating in countries whose currency is other than

the euro (essentially Mexico, Argentina, Uruguay, Colombia, Chile, Ecuador, the Dominican Republic,

Venezuela, Brazil, the United States and the United Kingdom).

In this respect, the detail of the effect on the currency translation difference of the main currencies in 2020 was

as follows:

Thousands of euros

Currency

translation

difference

Changes with

respect to 2020

Uruguayan peso

(4,655)

(8)

Mexican peso

(20,052)

2,155

Colombian peso

(37,533)

(4,543)

The changes in the currency translation difference of the above currencies was mainly due to the movements in

exchange rates between 31 December 2021 and 31 December 2020:

Year-end euro reference

exchange rate

2021

2020

Change

Uruguayan peso

50.84

51.98

2.19%

Mexican peso

23.14

24.41

5.21%

Colombian peso

4,545.45

4,166.67

(9.09)%

As can be observed in the table, the movements in the exchange rate of the currencies with respect to the end of

the previous year is in line with the changes in equity associated with these currencies.

Below is a detail of the movements in the average exchange rate of the aforementioned currencies:

Average euro reference

exchange rate in the year

2021

2020

Change

Uruguayan peso

51,52

47,98

(7.37)%

Mexican peso

23,99

24,52

2.16%

Colombian peso

4.347,83

4.166,67

(4.35)%

For these currencies an analysis was carried out to determine if it would be better to apply a monthly average or

cumulative average exchange rate, and no significant difference resulted from this analysis.

Liquidity risk

Exposure to adverse situations in debt or capital markets could hinder or prevent the Group from meeting the

financial needs required for its operations and for implementing its Strategic Plan.

Furthermore, the continuous concentration in the banking system may make access to financial instruments,

bank guarantees and financing working capital more difficult.

Management of this risk is focused on thoroughly monitoring the maturity schedule of the Group’s financial

debt, as well as on proactive management and maintaining credit lines that allow forecast cash needs to be met.

The Group's liquidity position at 31 December 2021 is based on the following points:

–The group had cash and cash equivalents amounting to 243,930 thousand euros.

–Available undrawn credit facilities of 267,000 thousand euros (Note 17).

The Group also has 45,400 thousand euros in confirming lines that it uses to manage part of its payments to

trade creditors. These lines are spread amongst various banks and give coverage to trade suppliers in various

countries in Europe (Spain, Germany, Holland, Italy, Belgium, Austria and Luxembourg).

The capacity of the business units to generate positive cash flows from operations.

Lastly, the Group makes cash flow forecasts on a systematic basis for each business unit and geographical area

in order to assess their needs. This Group liquidity policy ensures payment undertakings are fulfilled without

having to request funds at onerous conditions and allows its liquidity position to be monitored on a continuous

basis.

31.-EVENTS AFTER THE REPORTING PERIOD

The Company is planning to put the 2022-2027 Long-Term Incentive Plan (“Performance Cash Plan”) in place

in 2022. This grants a cash amount payable in the event of fulfilling the targets set for that purpose. The Plan is

explained in an annual report on listed public company directors’ remuneration, prepared by the Board of

Directors on 24 February 2022, which is presented as a separate report, forming part of the Management Report

attached to these consolidated annual statements.

APPENDIX I: SUBSIDIARIES

The data on the Parent company's subsidiaries at 31 December 2021 are presented below:

(*) The companies belonging to the German consolidated group made use of the exemption provided in Section 264, Paragraph 3 of the Commercial Code (HGB) in 2021.

(**) The companies belonging to the German consolidated group made use of the exemption provided in Section 264, Paragraph 3 of the Commercial Code (HGB) and Section 291, paragraph 1, of the Commercial code (HGB) in 2021.

(*) The companies belonging to the German consolidated group made use of the exemption provided in Section 264, Paragraph 3 of the Commercial Code (HGB) in 2021.

100

(*) The companies belonging to the German consolidated group made use of the exemption provided in Section 264, Paragraph 3 of the Commercial Code (HGB) in 2021.

101

(*) The companies belonging to the German consolidated group made use of the exemption provided in Section 264, Paragraph 3 of the Commercial Code (HGB) in 2021.

103

APPENDIX II: ASSOCIATED COMPANIES

104

CONSOLIDATED MANAGEMENT REPORT

FOR THE YEAR ENDED

31 December 2021

EVOLUTION OF BUSINESS AND GROUP'S SITUATION

NH Hotel Group is an international hotel operator and one of the leading urban hotel companies worldwide in

terms of number of rooms. The Group operates 353 hotels and 55,063 rooms in 30 countries, and has a

significant presence in Europe.

The centralised business model allows it to offer a consistent level of service to its customers in different hotels

in different regions. The corporate headquarters and regional offices offer hotels a wide range of functions such

as sales, revenue management, reservations, marketing, human resources, financial management and systems

development.

This flexible operational and financial structure has enabled the Group to overcome the huge challenges of the

past two years. Although the challenges will continue in the first months of 2022, the Group will benefit from

brand recognition, excellent locations and strong market positioning in Europe in the medium and long term.

During 2021, as a result of the start of recovery after the economic crisis caused by the COVID-19 pandemic,

the global economy increased by +5.9%, compared to a decrease of -3.1% in the previous year (Data and

estimates from IMF “World Economic Outlook”, January 2022). GDP growth in 2021 was in line with

expectations, showing continuous adaptation of economic activity to the pandemic and its associated

restrictions, as well as continuous support from institutions in many countries. However, the continuous

recovery was weakened during the year, hindered by the increase of infections from new strains and

interruptions to the supply chains. At the end of the year, as a result of the omicron strain, many countries went

back into partial lockdown which had an impact on global economic recovery.

The four countries that bring the greatest proportion of the Group's sales and profits show rates of decline in

2021: Spain (+4.9% in 2021 vs. -10.8% in 2020), Holland (+4.5% in 2021 vs. -3.8% in 2020), Germany (+2.7%

in 2021 vs. -4.6% in 2020), and Italy (+6.2% in 2021 vs. -8.9% in 2020). On the other hand, growth in Latin

America is expected to be +6.8% in 2021 (vs. -6.9% in 2020) as all the economies as a whole have continued to

suffer the consequences created by COVID-19.

For the global economy, 2022 began with some uncertainty in the short term. As the new omicron variant of the

COVID-19 virus advances, countries have once again imposed restrictions on mobility. Due to the rising price

of energy and disruptions to supplies, inflation is higher and more generalised than forecast. The unforeseen

sluggishness of private consumption recovery has limited the prospects for growth.

Therefore, the estimate is for +4.4% growth of world economic activity in 2022 (+5.9% in 2021 vs. -3.1% in

2020). More specifically, in the Euro zone growth of +3.9% is forecast in 2022 (+5.2% in 2021 vs. -6.4% in

2020).

Global tourism experienced an increase of 4% in 2021 compared to 2020 (415 million against 400 million).

Nevertheless, international tourist arrivals (visitors who stay overnight) remained 72% lower than in 2019, the

year prior to the pandemic, according to the OMT’s preliminary estimates. These figures follow those in 2020,

the worst year in the history of tourism, when a 73% decrease in international arrivals was recorded.

The speed of recovery continues to be slow and inconsistent in the various regions of the world, due to the

different levels of mobility restrictions, the vaccination rates and traveller confidence. Europe and the Americas

recorded a significant improvement in 2021 compared to 2020 (+19% and +17%, respectively), but both are still

105

at 63% below pre-pandemic levels. By sub-regions, Mediterranean Southern Europe (+57%) and Central and

Eastern Europe (+18%), Central America (+54%) and North America (+17%) also surpassed 2020 levels.

The first publication of the OMT World Tourism Barometer indicates that, in 2022, the increase in the

vaccination rate, combined with the decrease in travel restrictions due to better cross border coordination and

new protocols, have helped to liberate the suppressed demand. International tourism moderately upturned in the

second half of 2021, with arrivals in the third and fourth quarters being 62% lower than those before the

pandemic. According to limited data, international tourist arrivals in December were 65% lower than in 2019.

The true impact of the omicron strain and the wave of infections with COVID-19 remains to be seen.

The recent increase in cases of COVID-19 and the omicron strain are going to disrupt recovery and affect

confidence until the beginning of 2022, as some countries have reintroduced travel prohibitions and restrictions

for certain markets. At the same time, vaccination roll outs continue to be inconsistent. A difficult economic

environment may place additional pressure on the effective recovery of international tourism, with the rises in

petrol prices, increased inflation, the possible rise in interest rates, high volumes of debt and continuous

interruption to the supply chains. However, the recovery of tourism that is occurring in many markets, above all

in Europe and the Americas, along with the general roll out of vaccinations and a significant coordinated lifting

of travel restrictions, could contribute to reinstating consumer confidence and accelerating the recovery of

international tourism in 2022.

While international tourism recovers, domestic tourism continues to drive sector recovery in an increasing

number of destinations, particularly those with a large domestic market. According to the experts, domestic

tourism and travel closer to home will continue to make up tourism in 2022.

Business traveller behaviour habits could be affected in the short and medium term. This involves less trips on

business, given the gradual adoption of digital solutions and hybrid formulas, which are affecting the evolution

of some specific segments of business tourism.

It is worth noting the Company's solid position with which to deal with the current situation after its operational

and financial transformation in previous years. The excellent performance of the group in the years prior to the

pandemic is the result of a complete transformation within the group, particularly brand segmentation, portfolio

optimisation, significant investment in repositioning and systems, the focus on efficiency and cost control, and

the reduction of financial indebtedness.

Continuous improvement to the customer experience was boosted in 2019 with the launch of various initiatives:

"Fastpass", a combination of three innovative services (Check-in Online, Choose Your Room and Check-out

Online), which gives customers full control over their stay. Also a new service, “City Connection”, where you

can enjoy the city without limits. Under the slogan “Stay in one hotel, enjoy them all”, the NH Hotel Group

offered a range of services that allow customers to enjoy them in any hotel in the city they are in, regardless of

the hotel they are staying in for the duration of their stay.

The embodiment of an NH Hotel Group value proposition based on the improvement of quality, experience and

brand architecture with the NH Collection, NH Hotel and nhow brands are a reality today in the Group. With the

integration of the Minor Hotels commercial brands, NH Hotel Group is currently operating hotels in Europe

under the Tivoli, Anatara and Avani flags.

During the first part of 2021, and in order to adapt to the new trends in business travellers, the Group launched a

series of initiatives:

•Extended Stay, with up to 35% discount on stays of more than 7 days for working away from home for

an extended period.

•Smart Spaces, a new B2B offer, with exclusive spaces for working and organising small business

meetings making the most of all the advantages of our hotels.

106

•Hybrid Meetings, to boost the value of events reaching a bigger audience from various destinations

with a combination of in-person and virtual attendance.

•NH+, a new corporate segment focus on SMEs, which are the first to restart their activity.

Digitisation will be key to the sector’s evolution. The customer experience is improved and efficiency increased

using technology and digitisation. The digital component will be key in responding to travellers’ security needs

and experience. Technology should be a facilitator that complements our employees’ work, freeing them up

from administrative tasks so they can give more personal attention to customers.

It is worth highlighting that the NH Hotel Group continues to be at the forefront of innovation. The Group's

Digital Transformation has allowed processes and systems to be made more efficient, increasing the capacity to

be different from the competition, and continue improving the Company's basic processes. One of the greatest

achievements therefore has been to centralise all its properties and functions into a single integrated system.

This allows the NH Hotel Group to have a fully-integrated digital platform: NH Digital Core Platform. A

pioneering technological solution in the sector that has allowed all the Group's hotel’s systems to be integrated

which has become the basis for the NH Hotel Group to expand its customer knowledge, maximise its efficiency

and innovate on a large scale in all its value areas.

For the first time, hotel businesses are experiencing difficulties finding staff, which suggests that the sector must

go back to attracting talent with attractive professional career plans that boost training and job flexibility.

In its use of quality indicators, the NH Hotel Group focuses on measuring quality using new sources of

information and surveys with a significant increase in the volume of reviews and number of assessments

received. Its average score on TripAdvisor in 2021 was 8.4, compared to 8.5 in December 2020. Additionally,

its average Google Reviews score was 8.7, compared with 8.7 in December 2020. These average scores

demonstrate the high levels of quality perceived by customers and the positive growth trend that the NH Hotel

Group has had throughout the year.

The NH Rewards loyalty programme had more than 10 million members in 2021 and is one of the most

comprehensive rewards schemes worldwide. With four categories (Blue, Silver, Gold and Platinum), the

Company’s programme recognised and rewards its habitual customers’ loyalty for each stay, with benefits from

earning points - equivalent to euros - which are redeemable, with no date restrictions, for free nights or extra

services at the hotel. NH Rewards also always gives flexibility in paying with points and cash, special pricing,

exclusive privileges when booking on the web site, etc, as well as a series of differential services enriching the

experience in all brands of the NH Hotel Group’s hotels.

NH Rewards is an important commercial lever, as members contribute 32% of the total nights at the Company,

and have been the loyal, repeat customers who, during the pandemic, contributed most to the recover of booking

numbers. The incentive of earning extra points stimulates bookings on direct channels, up to the point that more

than 69.4% of the bookings on the NH web site are made by NH Rewards members, who also spend and visit

more than guests who are not members.

During 2021, NH Hotel Group announced it was jointing the Global Hotel Alliance (GHA), which runs the

award winning Discovery loyalty programme for multi-brand hotels. As a part of the agreement, NH Rewards

will take part in GHA’s GHA Discovery programme in 2022, with it becoming one of the ten largest loyalty

programmes in the hotel sector, with more than 900 hotels taking part and accessing new source markets.

Minor's hotels are already members of this alliance.

On the other hand, in 2021, the Group started operating 3 new hotels in Hannover, Murano and Copenhagen

with 589 rooms. The Group, therefore, reached a total of 353 hotels with 55,063 rooms at 31 December 2021.

The Group also signed-up 2 new hotels with 145 bedrooms in 2021. These sign ups were on an under

management basis in Santiago del Estero and in Cali. Both sign ups were under the NH brand.

107

Revenues in 2021 totalled 746.5 million euros, an increase of 39.2% (+210.3 million euros). The Profit for the

year attributable to the Parent was -133.7 million euros compared with -437.2 million euros in 2020. This

increase is explained by the increase in activity after the impact of COVID-19 during 2021.

In this year gross borrowing decreased from 998.1 million euros in December 2020 to 813.0 million euros in

December 2021. At 31 December 2021, cash and cash equivalents amounted to 243.9 million euros (320.9

million euros at 31 December 2020). Furthermore, this liquidity is complemented by the syndicated credit line

for 242.0 million euros (fully drawn down at the close of the 2020 financial year) and some credit lines at the

close of the 2021 financial year of 25.0 million euros, against 25.0 million euros at 31 December 2020.

In June 2021, the rating agencies confirmed NH Hotel Group’s rating within the issue of the new bond for 400

million euros maturing in 2026 which occurred in June. On 14 June 2021, Fitch confirmed NH Hotel Group's

rating at 'B-' with a negative outlook. On 15 June 2021, Moody's confirmed NH Hotel Group's corporate rating

at 'B3’ with a negative outlook. It should be noted that both agencies have stated that NH is managing the

recovery with satisfactory financial flexibility and deleveraging capacity, with a significant portfolio of owned

assets. In turn, Moody’s reconfirmed NH Hotel Group’s corporate rating at “B3”, with a negative outlook, in its

last publication on 29 December 2021.

As a result of the public offering on 31 October 2018, along with the capital increase in September 2021, Minor

currently owns 410,183,997 shares in NH Hotel Group, S.A. representing 94.13% of its share capital. Since

2018, both companies have begun to explore joint value creation opportunities for the coming years.

Minor Hotels and NH Hotel Group have integrated their brands under a single corporate umbrella present in

more than 50 countries around the world. In this way, a portfolio of more than 500 hotels under eight brands is

organised: NH Hotels, NH Collection, nhow, Tivoli, Anantara, Avani, Elewana and Oaks, which completes a

wide and diverse spectrum of hotel proposals connected to the needs and desires of global travellers.

Both groups currently share their knowledge base and experience in the sector in order to materialise short-term

opportunities, taking advantage of the complementarity of their hotel portfolios to define a global sales strategy,

the implementation of economies of scale with a broader customer base, explore development pathways for all

their brands in different geographical areas and access to shared talent.

COVID-19 impact and the measures implemented

After the start of the COVID-19 pandemic in the middle of March 2020 in Europe, demand for hotels dropped

drastically due to lockdowns, travel restrictions and social distancing, which drastically affected mobility.

The gradual reopening of hotels was made possible by the flexible costing structure and began in the middle of

2020, progressively, depending on recovery of domestic demand and with a focus on optimising profitability.

With the gradual roll out of vaccines since the beginning of 2021, a turning point was beginning to be seen that

– together with the progressive lifting of restrictions in some European countries – allowed a faster reopening of

the portfolio once again. Therefore, at the end of 2021, around 90% of the hotels were open, compared to 60%

at the beginning of the year.