Meliá First Half 2012 Net Profits Up by 24%
RevPAR maintains a positive trend, increasing by 8.5% -practically explained by price increases- and with further margin for improvement
Meli Hotels International presented results for the first half of 2012 within a framework in which the International Monetary Fund has revised downwards its economic forecasts. In the Travel & Tourism Industry, institutions such as the World Travel and Tourism Council have also posted a moderate downgrade, even though leisure trends remain comparatively robust, with Spain in particular showing an increase of 2.9% in international visitors and of 5,6% in their expending, along with significant increases in the main feeder markets such as Germany or France and also in alternative feeder markets such as the United States or Russia.
Within this context, the Company highlights the positive performance in the first half of the year, showing a consolidated EBITDA of 105 million Euros, an increase of 0.2% over the same period in the previous year. This performance was offset by the lower contribution from the Real Estate division (38.0 million in 2012 vs. 43.2 million in 2011) and the non securitization of the customer portfolio in Club Meli, which in the same period in 2011 generated revenues of 3.5 million. Excluding the latter two effects, EBITDA and EBITDA margin improved by 15.5% and 121 base points, respectively. Net profit reached 10.6 million euros.
The results are explained by the positive performance of the hotel business, which has seen RevPAR (revenue per available room) increase by 8.5% after an acceleration during the second quarter attributable to the 11.1% increase in prices. The expected mid-single digit growth in the Mediterranean Division in the third quarter, together with a robust performance in Latin America, may maintain the trend in RevPARs evolution for the third quarter.
The trend in the second quarter reflects the duality of the situation inside and outside Spain, with the business evolving at two different speeds. Positive signs in the Caribbean thanks to the strong business performance in both leisure and business travel, particularly in groups, and In European cities, Meli notes positive developments taking into account the strong demand for Trade Fairs and Congresses, especially in Germany, the Olympic Games in London, and changes in the segmentation of some key hotels with a greater weight in corporate accounts.
Regarding Spain, the company expects positive growth, especially in the Balearic Islands and on the mainland coast, already seen in June and July, and attributable to the behaviour of European feeder markets which offset the weak demand in domestic demand, where roomnights fell around 9% to June. Meli anticipated this situation way in advance, with higher sales from the most dynamic markets such as the German, Russian and the Scandinavian, and Latin American countries like Mxico, Brazil and Argentina, thanks to its globalisation process, which is not only based on the opening of hotels in key markets, but also on an effort by sales teams to boost sales in alternative feeder markets.
The Company also notes satisfactory data coming from sales through meli.com, which show a 34,3 % increase in on-the-books business, comparing to 2011, and from the increasing level of loyalty of our customers throughout 2012, when the number of regular customers in the Mas Loyalty Program reached the figure of 2,7 millions, versus 2,5 millions by year end 2011. Currently a 25% of roomnights are explained by Melis loyalty program.
By Division, in America RevPAR grew by 25.5 with the improvements in results during the semester mainly attributable to the progressive recovery in consumption in the US, the improved performance of the MICE segment, growing arrivals from Latin American markets, and higher arrivals from Europe to the Caribbean. The best figures are coming out of the Dominican Republic and Mexico, with the latter led by the evolution of the hotels in Cancun and also by the new Paradisus La Perla and La Esmeralda resorts in Playa del Carmen.
In EMEA, RevPAR went up by 4.7%, thanks to a 5.1% improvement in prices. By country, France registered the best performance followed by Germany which benefited from strong MICE activity. In the U.K, the Meli White House reported a RevPAR increase of +6.0% assisted by favourable exchange rates, while in Italy the Company is implementing an action plan to adapt to the economic environment and minimize the impact on overall performance.
Average room rates in Premium Europe saw an improvement +3.9%, although RevPAR fell by 1.2%. The best performance was seen in hotels with a higher exposure to the international business segment and also in hybrid hotels with a mix of business and leisure segments such as the Gran Meli Fnix (Madrid) and Gran Meli Victoria (Palma de Mallorca). There was also a positive contribution from the new Gran Meli Rome. Regarding resorts, the hotels biased towards international feeder markets reported better results, such as the Gran Meli Don Pepe (Marbella) and the Meli de Mar (Palma de Mallorca) with its successful Adults Only concept.
RevPAR in the other Spanish resorts (Mediterranean Division) in the second quarter increased by +1.4% coinciding with the opening of most hotels in the Balearic Islands and mainland Spain. For the whole first semester the Division has seen a 6.8% decrease in occupancy accompanied by price increases which have resulted in an average decrease of 1.2% in RevPAR. The Canary Islands performed below last year, with the comparables with 2011 strongly affected by the impact of the Arab Spring.
Spanish cities (Urban Spain Division) continued to be affected by weak demand for business travel, seeing a RevPAR fall of – 2,4%. Within the framework of the Strategic Plan 2012-2014, the Company has introduced a Contingency Plan in Spain including actions in hotels such as the disaffiliation of underperforming hotels and hotels that do not create value for the brand, the renegotiation of lease agreements with minimum guarantees, amongst others.
International growth and hotel pipeline
As noted in June by the Chairman of Meli Hotels International during the Annual General Meeting, the business strategy of the company founded over 56 years ago now revolves around globalisation, in parallel with a progressive orientation of its business model towards becoming more of a management company as expansion prioritises formulas which are low in capital such as variable leases or management or franchise contracts.
The data supporting this strategic direction is clear: of the 31 hotels with a total of 10,491 rooms currently in the pipeline, 92% of them are in the upscale and Premium segment, and all of them have been added under lease, management or franchise agreements. 90% of the new rooms will be added outside Spain, 54% of them in emerging countries. The company continues to maintain a balance between city and resort hotels.
This orientation is possible thanks to the high level of maturity in the Meli hotel management model, embodied in the added value the company offers hotel properties as a manager through global sales leadership, loyalty programmes and brand standardization, all supported by financial stability.
To date in 2012, Meli has opened 5 new hotels (702 rooms) including two successful new resorts in Mallorca (Balearic Islands), the Meli Dubai, the Marina Palace in Bulgaria, and the much-awaited opening of the Gran Meli Rome. In September, the spectacular ME London will be inaugurated and is expected to make an important contribution in the medium and long term not only as the flagship of the ME by Meli brand, but also for the entire company. Designed by Foster & Partners and accompanied by leading food service brands such as the New York-based ” ONE Group”, the hotel is a sign of the commitment of the Company to excellence in lifestyle hospitality.
With regard to finance, Meli Hotels International highlights compliance with its financial covenants related primarily to syndicated loans, and maintains confidence in compliance regarding obligations at year end. Within a conservative framework of debt management, Meli has reported that it has liquidity levels of 405 million euros, which provides the Company with a relatively calm environment in which to continue to work in advance on refinancing its most important obligations.
During the first half of the year, Meli renewed all of its amount credit facilities maturing in 2012, a sign of the confidence that major financial institutions retain in the hotel company. With regard to the diversification of funding sources in which the company has been working, Meli highlights the growing importance of capital markets as a key factor in contributing to the lengthening of the maturities and the exposure to international markets e.g., exposure to financing in USD.
The Company also mentioned that while the recent Jones Lang LaSalle valuation estimated total asset value at 3,243 million euros, only 13 of its 63 majority owned hotels are mortgaged so that Meli has still scope for asset-backed financing, and the asset rotation ( as witnessed by the recent income of .5 million generated by the sale of the ME Cancun hotel) will certainly contribute to the progressive financial de-leverage of the Company, in search of an asset-lighter business model.
Meli maintains its target of reducing its net debt below 900 million euros in the year, and expects to maintain the same average cost of debt at current levels of around 5%. Regarding preferred shares, the refinancing decission is expected before year end. Net debt was reduced by 68,5 millions versus Q1, principally on the back of asset sales.
Sustainability and a commitment to responsible tourism
Melli is also proud to inform that, within the frame of its energy-efficiency program, SAVE it has been able to reduce the CO2 Emissions and Water Consumption per stay by 8,5 % and 10,1 % respectively within the 2007-2012 period. Meli holds a strategic approach towards this matter, and therefore, the Company released in June its Sustainability Report 2011 including the design of the company’s Code of Ethics, compliance with the commitments to UNICEF, the set up of an alliance with the ONCE Foundation with the signature of the Convenio Inserta with the aim of improve accessibility in our hotels. For the first time ever the report includes the measurement of the Companys carbon footprint, linked to the recent announcement of the adoption of a new standard measurement system promoted by the WTTC for the international hotel industry.
The hotel company took part in two global initiatives with the involvement of more than 100 hotels: the World Environment Day, sponsored by the United Nations, and Earth Hour, sponsored by the WWF, both very well received by customers.
With regard to corporate reputation, Meli Hotels International highlights the renewal of its Biosphere Hotel Company certification from the Responsible Tourism Institute, and an award received in Brazil, where the official Spanish Chamber of Commerce in Brazil hosted the third edition of its Sustainability Awards for Spanish companies operating in Brazil, delivering the award in the Contributions to Improvement in Corporate Development category to Meli Hotels International.
Meli remains confident about a positive summer season especially in destinations such as the Balearic Islands and mainland Spain. The booking position, considering the main UK and Central European Tour Operators and company owned channels, point towards mid-single digit growth versus the previous year. In the Spanish feeder market, the Company remains confident about achieving results above last year thanks to the better performance of Online Travel Agencies and company owned channels.
Particularly positive is the contribution of the recently opened resorts in the Balearic Islands, the Sol Wave House and Beach House. These two resorts are part of the “Calvi Beach Resort project to reposition a mature tourism destination on the southwest coast of Mallorca- in which Meli has 3.500 rooms- which has now completed its first stage. Meli is proud of the project as a sign of its commitment to innovation, corporate social responsibility and a sustainable tourism model, and also thanks to the magnificent response of the market which will guarantee results far above expectations.
The company highlighted the VAT increase for tourism in Spain from 8 to 10% in September as a factor which may affect results in a scenario in which the hotel company assumes 100% of the impact. According to estimates the impact may be around a 2 5 million Euro decrease in EBITDA levels for the full year 2012. In view of current price negotiations, the Company believes that this increase will have limited impact on average rate levels. With respect to other markets, we expect a continued positive trend in Latin America and the Caribbean, partly explained by the strength of the groups segment, and also in the US and Canada, according to the results of negotiations with the main tour operators. European Cities will continue to see strong gains in business performance in Trade Fairs and Congresses while London is also expected to receive a positive boost from the Olympics.
In overall terms, to conclude, Meli forecasts a scenario of growth and maximization of profit and margins in the international arena, while in Spain, (that represents only a 20% of the operating profit) more rigorous cost control will be applied in headquarters, hotels and the vacation club business.