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• The global RevPAR growth is explained by pricing in more than 80%, with remarkable evolution in Latin America and the Caribbean;
• Excellent contribution- since their recent openings- of the Paradisus Resorts in Playa del Carmen (México) as well as the ME London and the Gran Meliá Rome hotels;
• The summer season is expected to meet the positive market forecasts, highlighting the Balearic Islands in general and the Calviá Beach hotels (Mallorca) in particular;
• With 7 new hotels signed in the first quarter, the Meliá pipeline now includes 45 hotels with 13,505 rooms;
• Meliá strengthened its balance with a successful convertible bond issue of 200 million euros;
• During the crisis, the hotel company has strengthened its position and reputation.
Revenues reached 292,5 million Euros (-3%) whilst the Company reduced its expenses in 4,7% (excluding rental expenses, increased due to the incorporations of 2 hotels and the impact of a sale & lease back operation) thanks to the contingency plans and the strategic focus on balancing the resources in order to foster the most dynamic markets.
For Meliá, the healthy evolution of the global hotel business with an average RevPAR growth (revenue per available room) of 5,4%, mainly explained by pricing- is behind the Group’s Financial results, because, as its Vice Chairman and CEO explains: “our growing international presence, combined with exposure to alternative feeder markets, offset the drop in demand in Spain, and the healthy development of the hotel business in the first quarter with a RevPAR increase of 5.4% point towards the achievement of our overall objectives for 2013".
In particular, the Group’s strategy has sucesfully prioritized the premium segment in its expansion, as has been shown in large hotels opened in recent months as the two resorts Paradisus in Playa del Carmen (La Perla and La Esmeralda) or the exceptional hotels ME London (designed by Norman Foster) and Gran Meliá Rome - on an old Villa del Gianicolo, in Vatican city. This represents a turning point for the company, which has proven to have the products, and the strategic and operational ability to reach the Pricing levels to which the Company’s luxury brands are aimed: Paradisus Resorts, ME by Meliá and Gran Meliá Hotels and Resorts.
Business performance by market
Americas: RevPAR grew by 15.2% (13.9% in USD) thanks to the improvement in prices, which increased by 11.9% (10.6% in USD). By country, Mexico was a strong performer with a RevPAR increase of 20.4%, underlining the excellent performance of the Paradisus Playa del Carmen (Paradisus La Perla and Paradisus La Esmeralda) where RevPAR improved by 52% and 72% respectively, (and whose Ebitda doubled compared to the same quarter in 2012) and also the good performance of the newly re-branded Paradisus Cancun
In the Dominican Republic RevPAR improved by 10.6%, while the Company also reports a good performance in the Gran Meliá Puerto Rico (+18,1% RevPar) and the Meliá Lima (Peru) (+12.8%) and a 5% improvement in RevPAR in Venezuela due to the impact of the situation and events on the landmark Gran Melia Caracas hotel.
Cuba, with hotels under management contracts, recorded very positive figures above those of last year. As for Brazil, after a sluggish start to the year, the Company maintains a strong forecast for the rest of the year.
EMEA: RevPAR fell by 3.2%, mainly due to a decline in occupancy (-2.9%), with a very different performance in each country, from robust growth in France (+6.1% in RevPAR) attributable to healthy revenue segmentation and strengthening corporate business (which will continue in the second quarter) to a slight decline (-1.9%) in Germany related to the absence of corporate business and congresses, or the abrupt decline in the UK (-5% in RevPAR) affected by comparisons with the months leading up to the London Olympics in 2012.
Premium Europe: RevPAR in this area, which includes the European hotels under the Gran Meliá and ME by Melia brands, increased by 17.2%, based primarily on price increases (+12.3%) in spite of a slowdown in corporate travel in urban luxury hotels, and especially highlighting the recent additions of the Gran Meliá Rome and ME London, which are both achieving excellent positioning.
In the luxury resorts segment, the Company points out the performance of the Gran Melia Don Pepe in Marbella and the better evolution of the Meliá Salinas (Lanzarote, Canary Islands) positively affected by the marketing efforts made in 2012, as well as improvements in the Gran Meliá Palacio de Isora compared to the previous year.
Spanish Resorts (Mediterranean):RevPAR in Spanish resorts increased by 2.2%, consistent with the evolution of occupancy rates (+4.6%), and the fact that Easter fell in April this year, with an excellent pre-Easter season, especially in the Balearic Islands. In the Canary Islands RevPAR declined by 2.3% partly due to a reduced number of flights to some islands. In general, although it is still early to assess markets such as Russia, Spain and Italy, like last year the company is confident that resorts will perform well, especially in the Balearic Islands.
In the latter destination, the company emphasizes the forecasts for the Calvia Beach Resort, which is expected to surpass last year's figures. The Sol Antillas Barbados has beaten 2012 levels of occupancy, and the Sol Katmandu Park & Resort has begun to improve rates by refocusing the resort with the integration of the Katmandu theme park. The Beach House hotel has grown to 253 rooms, and efforts are focused on consolidating the hotel in the "lifestyle" segment with major innovations in food and beverage concepts which continue to attract increasingly affluent customers.
Finally, the trend is also positive for our resorts in Croatia, Bulgaria and Cape Verde, all under management contracts.
Spanish cities: The 2.3% decrease in RevPAR was primarily due to a 1.8% fall in the price of Spanish city hotels, a general trend but particularly harsh in cities such as Sevilla, Valencia and Madrid. In Madrid, the Company identifies factors such as the slowdown in the individual and group business segments, the absence of "lay overs", and the lower contribution of air crews.
Performance continued to be more positive in those cities with a high leisure component, benefiting from the Easter holidays which in 2013 fell in the first quarter. The favourable snowfall also benefited cities near ski resorts.
Some macroeconomic factors such as rising airport charges or VAT, coupled with circumstances such as the strike by staff at Iberia, also contributed to a fall in demand and the number of travellers. For Spain, the Company maintains a negative outlook for secondary cities and Madrid, with a better outlook for cities with a greater exposure to leisure travellers such as Barcelona and Palma de Mallorca.
Financial Management
The Company announced in its results for 2012 a twin objective of refinancing part of its debt to extend maturities, while simultaneously enhancing its asset rotation policy.
As part of our goal of restructuring our debt, in March the company made a convertible bonds issue of €200 million The operation was a success, with an over-subscription of 2.1 times and with better conditions than the issue made in 2009. This will help to control the financial cost as the fixed annual interest rate for the issue was set at 4.5%.
Meliá remains analysing other options to make further progress in its lengthening the repayment schedule, and also expects to continue with its strategy of assets rotation to generate additional capital gains.
International growth
Meliá announced today the addition of a new hotel in Lima (Peru), confirming its vocation to grow in countries with growing economies and an emerging domestic and outbound travel industry.
Within its vocation to grow through low-capital intensive formulas, the Company reports that 100% of the current pipeline hotels are signed either under management or lease contracts. To date, this year Meliá has signed the addition of a new hotel every three weeks, with a total of 7 hotels signed with 1,776 rooms, forming part of a current pipeline of 45 hotels with 13,505 rooms. 94% of these rooms are located outside Spain and 91% are in the upscale segment, 57% in the so-called "emerging markets".
The Company maintains a balance in its portfolio between resort hotels (51%) and urban hotels (49%). In the latter there were recent openings of the first two Innside branded hotels in Spain: Innside Madrid Genoa and Innside Madrid Luchana.
Sales strategy
The strong focus on customers’ relationship and their loyalty, explains Meliá.com channel evolution, which not only recorded increases of 20% over the previous year, but a 50% of melia.com sales belonged to loyal customers, members of the “Meliá Rewards” Program.
On the other hand, globalization and the rise of emerging feeder markets, coupled with the crisis in some traditional markets like Spain, has driven a profound transformation of the structure and business strategy of Meliá Hotels International, now much more focused on the most dynamic and high potential markets, with noteworthy developments in emerging countries such as Brazil, Mexico and China, as tourist feeder markets, replacing other traditional sources. In Brazil, for example, the new focus on outbound business aims to strengthen sales of our international hotels in destinations to which Brazilian tourists increasingly travel, such as Punta Cana, Cancun, and major European cities, and is expected to significantly increase revenues.
Similarly, sales efforts have shifted towards In traditional markets like Germany, the strategy is also aimed at strengthening the demand to hotels within Germany and the rest of Europe (inbound & outbound). Given trends in different markets, the Global E-Commerce department also develops creative strategies with different OTAs (Online Travel Agencies) through preferential agreements and actions.
Spain: contingency plans and competitive strength
Meliá strategy during the crisis years in Spain has been to combine a policy of maximizing growth and margins internationally with a contingency plan in the Spanish city hotel segment (affected by its reliance on domestic demand) which has been reviewed and adjusted depending on needs. These plans include operational and managerial synergies, cost control, adapting corporate structures to the needs of each market, and the timely disaffiliation of hotels that do not contribute positively, among other actions that ought to be maintained until the recovery phase.
This strategy, made possible by the balance between urban & resort hotels within Melia, and by the growing importance of the international hotel portfolio, has allowed the Company to maintain the size and growth of the business, while also increasing international recognition and market confidence. Despite the strict contingency plans, the Group has maintained its leadership in Spain, and highlights other qualitative indicators such as the Quality Índex towards client, which rose to 86,8%, and the Global satisfaction Índex, with 81,3%, . These must be added to the excellent reputational position reached by Melia, both externally Meliá is the leading Tourism Company by Corporate Reputation in Spain in 2012- and internally, as the Company reached more than 8 points out of 10 in attributes like “staff commitment” or internal image and pride of belonging.
As noted by Gabriel Escarrer "We are proud of the successes achieved by our Company in our internal and external reputation, without our quality ratings or the motivation of our employees being affected by the difficulties of recent years, and also having managed to maintain and strengthen our leadership and competitive position in Spain, with a view to the start of a future recovery."
Outlook 2013
Bookings from the UK, Central Europe and melia.com in our Mediterranean resorts point towards a positive 2013 summer season versus the previous year, especially in the Balearic Islands, where bookings of the Calviá Beach’ hotels have been increased even considering the overall increase in rooms and facilities, like the Sol Katmandu Park & Resort.
Thanks to its positioning as a lifestyle product, highly oriented to the new on-line & social-network consumer, CalviáBeach aims to keep fostering the Internet business, where the Beach house hotel got the Company’s record in on-line reservations, over 80%.
Meliá (melia.com) still maintains a cautious outlook given that it is still too early to forecast feeder markets such as Russia, Italy and Spain. In the Spanish Cities segment, the Company continues to focus on cost control in light of the lack of any sign of recovery in domestic demand.
Regarding the outlook for the full year, Meliá maintains its guidance of mid-single digit RevPAR growth, mainly explained by price improvements and supported by the evolution of Latin America and the Caribbean and the strong positioning of the newly opened resorts in Playa del Carmen (Mexico): Paradisus La Perla and Paradisus La Esmeralda.
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