Meliá Moderates Attributable Profit in the First Half of the Year to €43.5 Million Due to the Absence of Capital Gains and Challenges in Some Resort Destinations

Major hotels such as the ME London (+18%), Meliá Milano (+17%) and ME Milano (+11%) perform well in Europe, joined by Paradisus Los Cabos in America (+9%)

The company opened 5 hotels and added 5 hotels up to June, and in July will open the Meliá Shanghai Parkside, a key hotel for the MICE segment in the financial capital of China

MeliáPro (the Meliá B2B and MICE channel) saw sales improve by 26.8% with 45,200 travel agencies signed up

Business performance:

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    • – RevPAR in the 2nd quarter improved by 2.1% and remains positive (0.4%) for the first half of the year
    • – Net Profit (€43.5m) suffers from the impact of €12m in capital gains recorded in the previous year
    • – Priority focus on MeliaPro (B2B platform) that improved sales by 26.8%
    • – Melia.com sales grew by 1.1%, with on-the-books sales 7.6% above the same period in 2018
    • – Spanish and European cities performed well, with Madrid, Barcelona, London and Milan leading the way

Financial management:

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    • – The net financial result improved by 5.9% and the average interest rate remained at 3.2%
    • – Net debt was reduced by €21.8m (before IFRS 16) to €585.7m, confirming the commitment to keep the Net debt/EBITDA ratio below 2x

Growth strategy:

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    • – Meliá has added 5 new hotels to date and opened another 5
    • – The company expects to sign up 15 new hotels before the end of the year and is preparing new openings in Vietnam, China, Milan, Tanzania and Mexico
    • – The growth pipeline currently includes 61 hotels with 14,000 rooms

Outlook 2019:

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    • ​- A positive outlook for the 3rd quarter in city hotels and prudence in the Mediterranean region due to strong pressure on prices
    • – Meliá has so far registered a slight increase in on-the-books sales for the summer season in Spanish resorts, although there is still uncertainty about the last-minute market in several destinations
    • – Meliá reinforces two basic drivers of strategy: financial solvency through a strong balance sheet and digital transformation

Gabriel Escarrer, Executive Vice President and CEO of Meliá Hotels International: “Meliá’s results for the first half of 2019 reflect the impact of the international environment on the tourism industry, particularly in destinations in the Americas such as the Dominican Republic, Cuba and the Cancun-Riviera Maya area in Mexico. Although it is true that these challenges have temporarily affected our performance over the period, it is also true that they demonstrate our resilience and competitiveness, supported by the strengthening of two key strategic areas: our financial strength and our digital capabilities.

In Spain, our results confirm the difference mentioned in the latest Exceltur report between the excellent performance in Spanish city destinations and a slowdown in resort destinations affected by growing competition in emerging destinations. In resort destinations, a better performance has been seen in hotels that have chosen to strengthen their brands, differentiate their product, and increase their distribution capacity, among them the Meliá Hotels International resorts.”

Meliá Hotels International has presented results for the first half of 2019, showing earnings of €43.5m, 25.4% less than in the same period in the previous year, largely caused by the impact of €12m in capital gains in 2018. Although the business environment is more complex than in recent years, the company has generated an improvement in global RevPAR (Revenue Per Available Room) which was stronger in the second quarter (due to the “Easter effect” in the first quarter) through price increases, leading to 0.4% growth overall for the first half of the year. Improvements in recurring revenues (+0.3%) were also maintained, as was EBITDA excluding capital gains (-0.7%).​

Meliá has maintained its robust financial position and reiterated its commitment to keeping the Net Debt/EBITDA ratio below 2X, having reduced net debt by more than €21.8m in the first half of the year (before IFRS 16) to €585m.

International growth

The company has signed to date this year 5 new hotels in Portugal, Dubai, Vietnam and a large hotel under franchise in Bulgaria, and has also opened another 5 to date in Vietnam, Colombia, Prague, Cuba and Paris. In line with its strategic focus on the Asia Pacific region, the company will open three more hotels in Vietnam in 2019: Innside Saigon Central, Hoi An Historic Hotel managed by Meliá and The Reed Hotel managed by Meliá, plus a second hotel in the Pu Dong district of Shanghai, Meliá Shanghai Parkside, an important milestone for the brand in the MICE segment in the financial capital of China.

The company expects to sign approximately 15 new projects before the end of 2019, with an important focus on the United Kingdom, the Eastern Mediterranean, and of course, China and Southeast Asia.

Upcoming openings in 2019 will see the company continue to focus on the most dynamic markets in Europe, including the opening of the Innside Milano Torre Galfa in Milan. This will become its third hotel in a priority city in which almost all of the company brands will soon be present. Another area of growth is in resorts set in the most exotic natural environments such as the Gran Meliá Arusha in Tanzania. This is a growing segment in which Meliá already has outstanding hotels such as the Meliá Serengeti Lodge and Meliá Zanzibar in Africa, Melia Iguazu in America or Meliá Ba Vi Mountain Resort in Asia. As for the Americas, Meliá will soon be opening a major Paradisus resort in Playa Mujeres, one of the most dynamic and successful areas destinations in Mexico, which will boost the company’s performance in the Caribbean.

No assets were sold over the period, although the sale of the Melia Coco Beach in Puerto Rico was finalised. The company remains open to the possibility of some divestments involving non-strategic assets to benefit from opportunities in the market cycle.

360º Digitalisation

Meliá strategy remains focused on comprehensive digital transformation as a key to maintaining excellence and leadership over the coming years and sustaining expected growth. After positioning itself at the forefront of online distribution and sales, Meliá has now launched the BeDigital360 project focused on the comprehensive digital transformation of the company over the next 3 years, boosting the digital skills of employees, process automation, the development of digital solutions and an organisational model more in line with a more digital company.

The company is particularly satisfied with the performance of its B2B channel, which in the first half of the year increased sales to travel agencies, companies and meeting and event organisers by 26.8%, with an outstanding growth of on-line travel Agencies and Tour Operators. For Gabriel Escarrer “The MeliaPro B2B platform has already signed up 45,200 travel agencies and MICE specialists, showing how digitalisation can improve our work with our partners in travel agencies and tour operators, which is essential to the business.”

Finally, as approved at the Annual General Meeting and in compliance with commitments to shareholder compensation, the company paid out a dividend per share of €0.1830 (approximately €42m)

Results by region – First half 2019

AMERICAS: -2.5% RevPAR , +5.1% melia.com

Current problems in DR and Mexico

 (+) Hotels in the English-speaking Caribbean saw significant growth, especially Jamaica (+16% RevPAR), as well as the Los Cabos area in Mexico, including an excellent performance from Paradisus Los Cabos (+9% RevPAR)

(-) The decrease in the US market to the Dominican Republic due to a campaign that questioned food security worsened the situation in the destination and added to problems in some Mexican areas such as Cancun and Riviera Maya, like the sargassum seaweed and the perception of insecurity.

Outlook Q3: the aggressive campaign to be carried out by the Dominican Republic government and companies to restore its positioning in the US market and the priority implementation of the Be Digital 360 project in the country are just two of the actions that should help bring about a recovery in the destination, while Mexico is expected to recover the occupancy levels of previous years through special offers for the US market and a greater focus on the domestic, European and Latin American markets. 

EMEA: +2.6% RevPAR, +5.3% melia.com

Positive overall performance

(+) Germany increased RevPAR compared to the same period in 2018 by 3.1%, thanks in large part to the positive performance in Munich and Berlin, combined with a strong performance in Austria and the Czech Republic after the successful opening of the new Innside Prague Old Town

(+) Good performance in general in UK hotels despite the uncertainty created by Brexit, with highlights including ME London (+18% RevPAR) and an excellent performance from the Meliá White House in spite of the reforms that have been carried out. Strong performance in Italy (+8.5% RevPAR), particularly thanks to Milan, and in France positive trends continued with July reaching the levels the city had prior to the 2015 attacks.

Outlook Q3: expectations in line with the same period in 2018 in Germany and France, and estimated medium single-digit increases in RevPAR for the UK and Italy.

 

SPAIN: -0.1% RevPAR, +4.9% melia.com

Excellent performance in cities and prudence in resorts

(+) Outstanding performance in city hotels (+6.3% RevPAR) especially in cities such as Madrid and Barcelona (with double-digit growth) and Valencia and Seville (near double digit).

(-) The impact of the recovery of competing destinations such as Tunisia and Turkey and a reduction in the number of flights hit RevPAR in resort hotels (-6.5%) despite an above-average performance in these resort destinations thanks to the investments made by Meliá in strengthening brands and distribution.

Outlook Q3: Expectations for city hotels are very positive, especially in Madrid and Barcelona, while bookings are slightly above the previous year for this quarter in resort hotels, with healthy growth on the Spanish mainland coast, stability in Mallorca and a certain decline in the Canary Islands, Menorca and Ibiza, although the season will also be influenced by last-minute sales.

 

CUBA: 10.6% RevPAR, +24% Melia.com

Complex geopolitical environment

(-) The destination suffered from a combination of short-term factors such as relations with the US government and the reduction of flights from Canada or Argentina.

(+) Positive aspects include an increase in sales through melia.com (+24%) and from European countries, Mexico and Latin America.

Outlook Q3: The company expects a slight decline compared to 2018, although this will be partially compensated by a greater contribution from the new Paradisus Los Cayos and Meliá Internacional Varadero hotels, plus an increase in online sales.

 

ASIA PACIFIC: +5.5% RevPAR, +8.2% melia.com

Profitability improves in the face of growing competition

Positive performance in hotel profitability in general, with the exception of some hotels affected by reforms and increasing competition in destinations such as Jinan in China and Yangon in Myanmar. Good overall revenue and profitability performance in Vietnam and Indonesia.

Outlook Q3:  Positive performance expected in Vietnam, Myanmar and Malaysia in the high season in the region, as well as in Indonesia after the presidential election. In China, the company is scheduled to open the new Meliá Shanghai Parkside in the third quarter which, as it coincides with the high season for MICE business, is expected to significantly boost the results in China.