Meliá Announces Reduced Profits, Mainly Due to the ‘Easter Effect’ in Resort Hotels, With City Hotels in Spain and Europe Showing a Positive Performance

The calendar and current situation in part of the Americas and Canary Islands are behind the fall in EBITDA (-4.5%) and Net Profit (-23.2%) compared to Q1 2018

The company announces two new luxury projects in Port La Mer, the new “golden mile” in Dubai

Melia remains at the forefront of digital transformation with a focus on profitability and the people, with its BeDigital360 project

The 2019 results reflect the impact of the new IFRS16 accounting standard

Business performance

  • Revenue per Available Room (RevPAR) fell by 2.5% due to the decline in occupancy
  • EBITDA fell by 4.5% compared to the same period in 2018
  • The “Easter effect” that affected the first quarter is reversed in April, with Easter week results slightly above the previous year in spite of the unfavourable weather

 

Financial results:

  • The company reiterates its commitment to end the year with a Net Debt/EBITDA ratio of less than 2x (not taking into account IFRS16)
  • Net financial results improved by 9.9% compared to 1Q2018

 

Expansion Strategy:

  • The global pipeline at the quarter’s end is 15,000 rooms and 65 hotels (18% of the total portfolio)
  • 90% of the hotels will be added under management or franchise agreements
  • Over the quarter, Meliá opened 4 hotels and signed up another 4, one in Costa Rica, one in Portugal and two in the United Arab Emirates

 

Digital Transformation

  • Meliá is preparing the second stage of its comprehensive digital transformation through the “BeDigital360º” project

 

Outlook 2019:

  • The company expects the second quarter to reverse the fall in RevPAR up to March thanks to a good Easter and the positive performance expected in our main destinations.
  • On-the-books business for resorts are in line with the figures recorded for summer 2018
  • The extension of a decision on Brexit until October 31 benefits bookings for the summer season and eliminates any effect on them
  • Meliá expects to end 2019 with a slight increase in RevPAR compared to 2018 given the positive performance expected in our main destinations and recently opened hotels such as the Grand Reserve at Paradisus Palma Real in the Dominican Republic and Melia Caribe Beach and Meliá Punta Cana Beach, as soon as their launch is complete.

Gabriel Escarrer Jaume, Executive Vice President and CEO of Meliá Hotels International: “Easter falling in April this year makes comparisons difficult with the first quarter of 2018. This combined with other factors that had a negative effect on some of our markets, such as travel alerts for destinations in Mexico issued by the United States, the complex situation in Cuba or instability in Venezuela. With regard to Spain, we are optimistic about the positive performance in Madrid, Barcelona and Seville in spite of the Easter effect, and can confirm the impact of strong competition from destinations in North Africa and Turkey on the performance in the Canary Islands. To face this complex business environment, our Company relies on our competitive strengths, such as our portfolio of repositioned hotels and our leadership in the resort segment, jointly with our degree of Internationalization – with a special focus on an emerging market like Asia- and the digital leap already achieved. These strengths position Meliá in an advantageous position, which we’ll keep maximizing in the new Strategic Plan we are defining for the coming years”.

​Meliá Hotels International announced earnings of €11.5m for the first quarter of 2019, 23.2% less than in the same period in 2018, with revenues of €393m and EBITDA of €93.1m, 2% and 4.5% less than 2018, respectively.

Regarding the hotel business, the -2.5% decrease in global RevPAR is largely caused by distortion in the comparison with 2018 caused by the Easter holidays falling in April this year rather than March. Results for the period were also affected by the ongoing renovation and repositioning of some important hotels in the Caribbean, combined with the ramp-up or launch of others which are expected to make an important contribution to results in the medium term .

In Spain, the most remarkable evolution was shown by hotels in the main Spanish cities, with a very positive performance, confirming the recovery of the MICE and Group travel segment, especially in Madrid (+4.5% RevPAR), Seville and Barcelona, with a notable increase of 10.2% in RevPAR. Over the Easter period, occupancy in city hotels in Spain was practically unchanged compared to the previous year.

Regarding financials, the company has reiterated its commitment to maintain the Net Debt/EBITDA ratio below 2x. Further consolidating its commitment to sustainability, in April the company signed its first responsible financing credit facilities, linking 50% of its credit facilities to its performance in sustainability. These ESG-linked credit facilities were arranged with BBVA and Santander for a combined amount of €125 million.

International expansion

The company continues to make progress in international expansion, with 13 hotel openings planned for 2019 in addition to the 4 already made: Meliá Internacional (Cuba), Innside Paris Charles de Gaulle, Innside Prague and Meliá Ho Tram (Vietnam). In 2020, there are 29 hotels scheduled to open and 14 already planned to date in 2021.

The company announces the addition of two new luxury hotels in Port La Mer, the spectacular new luxury real estate development alongside the sea in Dubai. The ME La Mer and Gran Meliá La Mer, with 231 and 267 rooms respectively, will form a luxury resort complex alongside the sea with views over the iconic skyline of the city. The resort will also provide direct access to the marina, facilities for events for more than 1,000 people, and different shopping and dining facilities to meet the needs and expectations of the most discerning travellers.

As Gabriel Escarrer explains: “Ever since we built our first international hotel in Bali in Indonesia in 1985, internationalisation has always been a driver of our growth and a protective shield against excessive dependence on the Spanish market and its periodic crises. Although we continue to focus on markets in which we have economies of scale and extensive brand recognition, such as Europe and the Latin Caribbean, in quantitative terms our Expansion Plan prioritises emerging markets where we see very high potential for growth and future business such as Asia Pacific and Africa“. Between 2019 and 2020, Meliá will open 16 hotels in Asia Pacific (China, Vietnam, Malaysia, and Indonesia), 5 hotels in Cape Verde and 6 hotels in Africa and the Middle East.

These priorities form part of the new Strategic Plan for the next three years which will extend the company’s digital transformation after the consolidation of its leadership in the field of digital sales and distribution. Efforts will focus on a project named “BeDigital 360º” which aims to implement comprehensive (360 degree) digitalisation.

The project has a multi-stakeholder focus, aiming to benefit from the opportunities created by digitalisation to create more value for shareholders by increasing the company’s efficiency, productivity and competitiveness, while also allowing more agile strategic growth (Plug & Play Hotel project). The project will also provide more personalised experiences for customers and enhance the digital skills and workplace experience for employees.

Vision by market

In addition to the general impact caused by the mentioned “Easter effect”, which was reversed in the second quarter, a complex international situation has generated a series of impacts in some areas in which the company has a significant presence, mainly in America, Cuba and Spanish holiday destinations.

In America, external factors such as security issues in some Mexican destinations and instability in Venezuela, came at the same time as the renovation and repositioning of key hotels in the Dominican Republic such as Meliá Punta Cana Beach and Meliá Caribe Beach, and the launch of a hotel which is expected to make an important contribution in the future: the Grand Reserve at Paradisus Palma Real. On the positive side, hotels in Jamaica and the Bahamas performed excellently.

In Cuba, the Company continues to see weak demand due to purely circumstantial factors such as the strong competition from other destinations in the Caribbean that have added large numbers of hotel rooms and a reduced number of direct flights from important markets such as Canada, Argentina and Mexico. While continuing to improve and diversify its portfolio on the island, and in spite of all the controversy surrounding decisions by the American government such as the recent lifting of the suspension of Titles III and IV of the Helms Burton Act, Meliá continues to believe in a great future for Cuban tourism in the medium and long term.

With a view to the second quarter, the company expects improved revenues and EBITDA in the Americas compared to the same period in 2018, although in Cuba this is expected to be delayed somewhat due to the impact of the renovation and repositioning of certain hotels (Paradisus Varadero, Meliá Las Américas, Hotel Sirenas and Sol Santa María).

EMEA

The division saw an improvement in Global RevPAR of +2.3%, mainly due to increased prices, with varied results depending on the market. The United Kingdom showed a remarkable +9,7% increase thanks to the excellent performance of the ME London and the successful launch of the Melia Kensington, and in spite of the major renovation under way at the Meliá White House. Germany and Austria saw solid growth of +3.5% in RevPAR, while hotels in Paris, France witnessed a fall in demand due to the disturbances and feeling of insecurity generated by the “yellow vest” protest movement, although the positive performance of Meliá Paris la Defense compensated weaker demand in the centre of Paris. Overall, company hotels improved RevPAR by 1%, compared to an average fall of 4.1% in the region (according to the consultancy STR). In Italy RevPAR was slightly below 2018 due to the lower number of trade fairs in the period and the aftermath of the collapse of the Morandi Bridge in Genova.

Moving forward, the Company expects better results in France following the opening of the Innside Paris Charles de Gaulle with better facilities for the MICE (Congresses and Events) and Air Crew segments, a stronger performance in Italy, especially in Milan, and a single-digit increase in RevPAR in Germany along with continued improvements in the United Kingdom.

SPAIN

Overall RevPAR for Spain as a whole (-6.7%) was mainly influenced by the Easter effect in resorts, and in spite of the positive results in city hotels, especially the significant recovery of Barcelona and Madrid, with +10% and +4.5% growth respectively compared to the first quarter of 2018. The southern region also suffered from the Easter effect, but with a strong performance in the Seville and Sierra Nevada hotels. The weaker performance in the Balearic Islands was caused by the Easter effect and reduced activity in the MICE segment, while the Canary Islands suffered from a reduction in the number of flights, the impact of certain closures due to renovation and repositioning, and decreased demand due to strong competition from other holiday destinations such as Egypt. The hotels in Morocco, on the other hand, improved their contribution.

Forecasts for the second quarter in Spanish hotels are positive, especially in Madrid, bearing in mind the positive impact of the Easter effect in April and the hosting of events such as the Champions League final, among others. The company remains cautious about the evolution of Menorca and Ibiza in the second quarter, despite the positive Easter effect in April, and is looking at a negative forecast in the Canary Islands due to the growing competition from alternative destinations and continuing renovations in certain hotels.

ASIA

RevPAR in USD terms fell slightly (-1.1%) over the quarter, mainly due to the depreciation of local currencies against the dollar. Overall, the results for the division were positive, with +1% increase in revenue and +4% in GOP.

The Company expects a positive evolution in the second quarter in all the countries in Asia in which it operates thanks to growing foreign demand for Asia and the growing penetration of company hotels, with new additions in high-potential countries such as China, Thailand and Vietnam.

 

NON-FINANCIAL INFORMATION

Fight against Climate Change and Sustainable Investments

Within the framework of its environmental strategy, the Company has activated the “CO2PERATE” project to help reduce CO2 emissions in 110 hotels as well as their energy costs. The investment, of over 2.5 million euros, will bring 66,000 tons. reduction in emissions (equivalent to planting 3,300,000 trees), as well as savings of more than 14 million euros in the next 5 years. The project focuses on two lines of work:

1.- Monitoring of 80% of electricity consumption and continuous measurement of fuels and water consumption with the purpose of detecting points of improvement through Energy Saving Measures without investment, and implementation of best practices related to the use of energy.

2.- Provision of artificial intelligence in air conditioning system through the installation of control devices and other elements such as temperature probes in chiller machines, so that optimum performance is achieved through algorithms and variables such as occupancy and temperature. Therefore, in addition to helping with the environmental commitments acquired and to reducing the Company’s energy costs, the project will also represent an advance in the Meliá digitalization process.

On the other hand, during the first quarter of 2019, the process of disposing of single-use plastics has continued, in line with the company’s commitment in this matter. Among other actions, the elimination of the disposable amenities (cosmetic products and body hygiene) of the rooms has brought a reduction of 23% of plastics of these containers, compared to the 1st Quarter of year 2018, which is equivalent to approximately 2,700 kg. Although the implementation has not yet been completed in the total of hotels, and in spite of the initial investment required, the implementation of dosers for the different products in the rooms has already led to a saving of 83,239 euros.

Corporate Responsibility and Philanthropy

In Spain, during the first quarter, Meliá signed a pioneering agreement with the Accenture Foundation in March to provide digital skills that increase the employability of its basic personnel. Within the framework of the broad process of digital transformation of the Company, this Agreement confirms the important focus that Meliá wants to place on people, within this transformation.

Meliá is acknowledged in 2019 as the “Most Attractive Company to Work For” by Spanish university students, according to the ranking developed by Universum, which gathers the opinions of more than 30,000 students. The ranking indicates that Meliá is the ninth most attractive service & business company for future recruits, and the first among tourism companies, and places the Group at the “top” of the professional aspirations of young Spanish people attracted by the hostelry.

Meliá Hotels International also renewed in 2019 the 1st position of the tourism industry in Spain in the prestigious Monitor Merco Responsibility & Corporate Governance.

At the international level, Meliá renewed in February two important responsible commitments acquired by the Group: the ethical commitments of the UNWTO International Tourism Code, and its position as the 2019 TOP World Member in the fight against child exploitation and trafficking (The Code, ECPAT).

Likewise, in 2019, the Company has launched 80 sustainable hotel certification processes worldwide (renewals and new certificates) with the most prestigious sustainability seal in the sector, Eartcheck.