Meliá Hotels International has released its financial results for the first quarter of 2014. They are overwhelmingly positive, despite the late Easter in April, with a 99% increase in net profits on 2013 and a 10% increase in RevPAR. These positive results for the company are consistent with latest reports from the Spanish Government and the Central European Bank that Spanish demand is on the rise.
Overall revenue growth (+12%) jointly with RevPAR growth (+10.1%), indicate an improvement in all corporate and business areas. There has also been significant growth in EBITDA excluding capital gains (+22%) and EBITDA margins in the hotel business (+136 basis points).
Meliá Hotels International opened 5 new international hotels over the quarter and signed another 5 management contracts, confirming its vocation as a global “management” company, with the goal of signing 30 new hotels in 2014.
Meliá remains a travel industry leader in corporate reputation according to the 2013 Merco index, and 31st Spanish Company overall. There has been an exceptional performance by Spanish resorts (+24.3% RevPAR), especially in the Canary Islands and the Gran Meliá Palacio de Isora.
Meliá Hotels International attributes a large part of the results to the growth of sales on melia.com, where reservations are 40% ahead of the same period last year
On a financial level, Meliá increases its debt by 7.25% and confirms it will keep focusing on deleveraging its balance sheet in 2014. Factors contributing to this are: the consolidation in accounts at Colon Verona, owners of Gran Melia Colon, meant an additional €29 Million debt; the continued de-valuation of the Venezuelan Bolivar and also that the first quarter is always the weakest.
Gabriel Escarrer, Vice Chairman and CEO of Meliá Hotels International, said of the announcement: “The results validate our strategy in recent years and our successful transition to a more internationally business model focused on the management of hotels for third parties. For our company, it is an enormous satisfaction to record progress in all business divisions and regions, and to be able to face the recovery from the crisis in a strong position and ready to make the most of all opportunities.”
BUSINESS PERFORMANCE BY REGION:
EMEA: RevPAR for hotels in this region increased by 11.6%. This is largely due to improvements at the hotels in Paris (+9.7%), Germany (+6.1%) with a focus on the new INNSIDE Dusseldorf Hafen, as well as the hosting of important trade fairs in Dusseldorf and the UK.
ME Europe: ME London, the group’s flagship, saw the second highest RevPAR increase in the whole company with a 110% rise. ME Madrid also achieved positive figures thanks to the innovation in its F&B offering. The ME Brand overall reports a dramatic RevPAR rise in 48.8%.
Mediterranean: RevPAR in the Spanish resorts (mostly Canary Islands and Balearic Islands) increased between January and March by 24.3% thanks to the positive performance in both price (+11.3%) and occupancy (+11.7%). Results in the Canary Islands, in particular, exceeded expectations, and while the company attributes this partly to the conflicts in Egypt, it is also confident that the situation will stabilise and that they will continue to progress on their merits.
Americas: This region saw an excellent 17.3% growth in RevPAR, primarily due to performances in Mexico (+25.3 % in RevPAR), with Paradisus La Esmeralda and Paradisus La Perla Resorts in Playa del Carmen expecting a profit in the region of $28 million by year end. Paradisus Cancun also performed well, as did Dominican Republic Paradusis properties (+7.4% RevPAR).
The latest addition to the hotel portfolio in America, the Meliá Nassau Beach (to be re-named Melia at Baha Mar in July), the company’s first hotel in the English-speaking Caribbean, has also achieved very positive figures and is strengthening its position in the market month after month.
Spanish cities: up to the end of April, thus eliminating the impact of Easter falling in April, the RevPAR of Spanish city hotels increased by 1.6%. Equally important is that Meliá has seen a gradual improvement in all Spanish urban Hotels’ results month after month, with RevPAR growing by 4% in March.
EXPANSION STRATEGY:
The Meliá Hotels International Strategic Plan is based on two fundamental objectives: globalisation and new markets, and the reorientation of the business model to become a company with more managed hotels than owned hotels, the latter currently representing 23 % of the total.
The Meliá pipeline (60 hotels signed and in the process of incorporation along the next 2 years) shows intense growth of the company, with 99% outside Spain and 84% on management and franchise agreements, in addition to variable lease agreements.
In 2013, the Company added 28 hotels, with a new hotel signed every two weeks, and in the first quarter 2014 five more new hotels with 1,600 rooms were signed, in both mature markets such as the United States (INNSIDE New York) and Italy (ME Milan Il Duca) or in emerging countries such as Indonesia (INNSIDE Makassar and INNSIDE Legian) and Mongolia (Gran Meliá Ulaanbaatar).
OUTLOOK:
Regarding the outlook for the second quarter, Meliá expects April to generate a significant improvement, not only attributable to the later celebration of Easter, but also the healthy growth in Spanish domestic demand, which is expected to continue to solidify.
With regards to the summer season, current trends point towards slightly better results than 2013, with a strong performance in the Canary Islands, Balearic Islands and Spanish mainland coast.
Doubts remain about the Russian market, where bookings may be lower than the previous year, however any potential fall is expected to be absorbed by an estimated improvement of 15% in Spanish domestic demand.
Outside Spain, positive numbers are expected from European cities. Germany will host a greater number of trade fairs, Italy will see the consolidation of the Gran Meliá Rome in its third year of operation, and results in Paris are expected to remain healthy. ME London faces its second year in operation as a benchmark of hospitality in London. Meanwhile, Meliá Vienna, created by renowned architect Dominique Perrault in the highest tower of Austria, has successfully opened in Q1.
Overall, the company maintains the outlook of a medium-high single digit RevPAR growth, more than 50% of which based on price increases.
