Meliá Hotels International results for 2012 show an increase of +7.9% in revenue per available room (RevPAR), fully explained by improvements in average room rates. Meliá achieved €1,362.4 million in revenues over the year, generating EBITDA of €249.5 million (+1.5%). Net profit reached €37.3 million, 7% less than in the previous year, due to lower capital gains from the disposal or revaluation of assets (2012: €93.4 millions; 2011: €133.0 millions).
Highlights
- The company retains a strong focus on international expansion, especially in Latin America and Asia Pacific, with 12,405 new rooms in the pipeline up to date
- By division, Latin America & the Caribbean once again leads in contribution to results, with growth everywhere except in Spanish cities
- 80% of the operating profit is generated outside Spain, mainly in Latin America and European cities
- Besides globalization, the sales strategy and segmentation have allowed the Company to more than offset the fall in the Spanish market
- The company confirms that it is still meeting all covenants, and reaffirms its commitment to a debt restructuring plan and a gradual reduction of debt in 2013 and 2014
- The company foresees a strong 2013 in its major destinations, with expectations of improvements in the Mediterranean
The results have been achieved mainly thanks to the strength of the hotel business, which due to a strategic focus on improving revenues and customer loyalty generated a growth in RevPAR above market averages and even above expectations. This enabled Meliá to post an Ebitda increase of 8.4% for the hotel division, while the quality of the RevPAR evolution – mostly explained by pricing – led to a hotel EBITDA margin improvement 48 basis points.
The Company believes that the satisfactory business performance also supports the extraordinary evolution in share performance, with an increase of 48.4% in the share price in 2012, well ahead of the Spanish Ibex-35 benchmark index and continuing to date in 2013 with an upward trend in the share price and demand.
Adaptation to the economic environment
The positive evolution of the global economy driven by emerging economies and the United States during the second half of the year, together with improvements in global financial conditions supported 4% growth in international tourist arrivals in 2012 to 1,035 million. The ranking was headed by emerging economies (+4.1%) where Meliá Hotels International is focusing a large part of its growth, along with healthy growth in the more advanced economies of +3.6%.
In terms of source markets, the global trend enabled the Company to generate a dramatic increase of 47% in stays from Latin American source markets such as Brazil, Argentina, Colombia and Chile, while stays by guests from the United States – the leading source market for the Caribbean – grew by 11%.
In Spain the two-track evolution of the market observed in 2011 continues, with the resort hotel segment seeing growth rates in 2012 of 3% in foreign tourist arrivals and spending increases of 5.9%, while demand in the city hotel segment remains weak, with the exception of some major cities that have a better mix of leisure and business travellers. Demand has also been weakened by fewer flights, rising energy costs, increased air taxes and VAT.
Direct sales up 23%
With this in mind, the Company confirms that its expansion strategy and change in segmentation to focus increasingly on the upscale hotel segment and source markets which are less price sensitive have allowed it to adapt to the situation and more than offset the fall in the Spanish market. This has also been enhanced by the growth of melia.com, with sales of 152.5 million euros, 23.2% more than the previous year. In 2013, Meliá expects to increase sales through its direct channels by more than 20%.
International growth and selective development in Spain
The global progression of the group, the result of which is that operations outside Spain generate 80% of results, confirms the success of the commitment of Meliá Hotels International to international growth. The experience of over 27 years in international hotels and a considerable presence in 35 countries allowed the company to benefit in 2012 from growth in destinations in the Caribbean and Latin America, fuelled by the economic boom in source markets such as the United States, Canada and the emerging Latin American countries themselves, as well as increased consumption in traditional source markets such as Europe and Scandinavia, and the significant growth of markets such as Russia or Asia.
The existing pipeline for the Group (hotels signed or in the process of opening) currently includes 41 hotels with 12,405 rooms, 91% of which belong to the upscale segment and 90% of which are located outside Spain. All of them will be added under low capital-intensive formulas (management contracts and variable lease agreements). Meliá continues to intensify its international expansion, supported by the prestige of its brands and its expert management capacity, and aims to keep up in 2013 the rate of adding a new hotel every 3 weeks which it achieved in 2012.
The company also emphasizes the evolution and focus on Latin America and Asia-Pacific. In the former, Meliá saw a 30% increase in RevPAR in its Caribbean resorts, while in Asia-Pacific, the fastest growing region in the world in 2012 and a major priority, Meliá has doubled its portfolio in the region in the past two years, thanks to new hotels in China, Indonesia and Vietnam.
The recent strategic alliance with the Greenland real estate group, one of the leading companies in China, together with the existing agreement with the tourism and hospitality group Jin Jiang, will
strengthen the growth of Company brands in Asia. Growth continues in major European cities such as Vienna or Dusseldorf, where spectacular new hotels are scheduled to open in 2013.
Despite the focus on growth overseas and the strict Contingency Plan in Spain, the Company also maintains a commitment to selective growth in its home market, with hotels which add value to the portfolio, such as the recent opening of the Innside Madrid Genova and the imminent opening of the Innside Madrid Luchana, the first for the brand outside Germany, where it now has 15 hotels and is growing in major cities.
Outlook for 2013
The World Tourism Organization expects growth in 2013 of 3% in the industry, somewhat lower than in 2012, but in line with the outlook of 3.8% annually through to 2030, confirming the fundamental soundness of the industry internationally.
Meliá Hotels International is confident about the performance of hotels and resorts in Latin America and the Caribbean, a trend supported not only by the growth in consumption in their main markets and emerging domestic economies, but also the positive evolution of reservations to date, especially in the groups segment.
In Europe, highlights include the performance of hotels in the prosperous German cities as well as in Paris and London, where the Company is targeting a strong positioning for the newly opened ME London, already exceeding expectations in its first months of operations.
In Spain, Meliá will perform better in Madrid and Barcelona and will benefit from its strong presence in the less affected upscale market, although second tier Spanish cities will not have an easy time, with the Company not expecting progress in domestic corporate demand in Madrid and secondary cities – with exceptions such as Bilbao and San Sebastian – despite the positive impact of deficit control, improvements in the current account balance and labour reforms. As a result, the business strategy will prioritize attracting more international business groups and leisure customers over the weekends.
By contrast, Meliá expects a positive summer season, especially in the Mediterranean resorts. Globally, Meliá expects single-digit growth in RevPAR in 2013, growth which in January remained at +7.9% and is estimated by +6% for the first quarter of the year, mainly attributable to price increases.
The Vice Chairman and CEO of Meliá, Gabriel Escarrer Jaume, stated that “the primary focus will remain on our globalisation as a superior quality hotel management company, strengthening our balance sheet, and optimizing our portfolio and structure within our Contingency Plan in Spain, preparing ourselves to lead the recovery process that, if the improvement in the main macroeconomic indicators holds up, may begin in our industry in 2014.”