The Chairman of the hotel company highlights that the chain restructured in good time to deal with the crisis and benefit from the opportunities it creates
* Sol Meliá paid out a dividend of 0.0343 € per share in a context of prudence and moderate optimism
* Escarrer congratulated the Sol Meliá management team for their excellent crisis management
Palma de Mallorca – Sol Meliá held its Annual General Meeting 2010 today, during which the company Chairman and founder, Gabriel Escarrer Juliá, summarised the management of the company in 2009, “one of the most critical years in the history of travel and tourism”, as well as explaining the vision that the leading Spanish hotel company has of the current situation in travel and tourism and the outlook for 2010.
With regard to the assessment of the business environment, the Chairman explained the major differences by region and also the dynamism of emerging markets, highlighting the huge potential of China, where Sol Meliá recently inaugurated its first hotel, the Gran Meliá Shanghai.
In a context of what he described as “generalised losses amongst our main competitors”, Gabriel Escarrer mentioned the ”moderately positive” growth of the hotel group, which managed to stay in profit throughout 2009 thanks to its healthy balance sheet and the efficiency of the anti-crisis contingency plan. Escarrer also highlighted the enhanced value of the company’s hotel brands, intense diversification, and the rejuvenation of the hotel portfolio as driving factors for growth, and also pointed out that share value actually increased by 38.5% in 2009.
The Sol Meliá Chairman also praised the decision-making and flexibility of the company management team in “a period of uncertainty”, focusing company activities around four major Action Areas: enhancing revenues, rationalising costs, controlling risks, and safeguarding the health of the balance sheet and cash-flow. Escarrer particularly emphasised the financial management of the company which has allowed it highly comfortable margins for meeting its financial obligations over the next two years after a reduction in net debt, the optimisation of the debt structure, and the diversification of its sources of finance.
He also stressed his pride in the successful cost rationalisation programme which achieved savings of more than 80 million euros without having any detrimental effect on service quality, with customer satisfaction ratings remaining at a level of around 80%.
With regard to the business model, the Sol Meliá Chairman stressed the hotel company’s desire to diversify (geographically, by feeder market, by product and by brand), particularly in the area of hotel operational formulas, reminding the audience that 30% of the total number of rooms are currently owned by the company, 48% are operated under management agreements, 5% are franchises and the remaining 17% are operated under lease agreements.
The trend towards the greater use of low capital-intensive growth formulas will allow the company to focus on what its Chairmen referred to as “that which we do best: manage hotels”, while also reducing company leverage.
Importance of CSR and Sustainability
In a climate such as the current one it is more and more important for companies to show corporate responsibility and cultural, social and environmental commitment, all growing factors in the creation of a more sustainable economy.
Gabriel Escarrer confirmed the strategic commitment of Sol Meliá to Sustainability and Corporate Social Responsibility, a commitment which led to Sol Meliá achieving in 2009 a number of milestones which were well received by the markets and which “make Sol Meliá one of the most responsible companies in travel and tourism”; while also reminding the audience that Sol Meliá has seen its membership of the Spanish stock exchange FTSE4Good-Íbex responsible investment index renewed, and has also made progress in defining areas for improvement and other commitments derived from its membership of the United Nations Global Compact.
Another milestone referred to by Escarrer was company certification as the first “Biosphere Hotel Company” after compliance with the commitments and criteria defined by the Responsible Tourism Institute and supported by UNESCO to bring about constant improvement in the social, environmental and cultural arenas. Specifically, Escarrer spoke about the progress in energy saving and the reduction in emissions, the improvements in waste management and recycling, and activities focused on the preservation of biodiversity, the subject of a recent campaign by the hotel chain which coincided with World Biodiversity Day and Biodiversity Year.
The founder of Sol Meliá also mentioned the awards which the company received in such a difficult year as 2009 as a reward for its corporate reputation. Together with the Prince Felipe Award for Tourism Excellence , Escarrer also mentioned the improvements in rating systems such as MERCO (where Sol Meliá is now ranked number 55 amongst all Spanish companies for corporate reputation) or the results of prestigious surveys such as the TNS survey and the Hotel Barometer in which respondents rated Sol Meliá the most well-known hotel company in Spain.
With regard to the hotels themselves, the Chairman spoke about the selection by German consumers of Sol Meliá’s INNSIDE brand hotels as the best international hotel brand, and the numerous awards received by the Sol Meliá Vacation Club for its innovation, quality, and sales.
Growth, brands and diversification
In 2008, Spain provided 43% of the company’s earnings. In 2009, this figure fell to 24% accompanied by parallel growth in alternative destinations such as Latin America and the Caribbean. Guests from outside Spain now represent two thirds of the entire customer base at Sol Meliá. In the words of Gabriel Escarrer, “this geographical diversification focused on more dynamic markets multiplies our growth opportunities and makes our brands stronger and more widely known”.
In 2009 Sol Meliá added 20 new hotels, and expects to add a new hotel around every four weeks to its hotel portfolio. This trend includes growing emphasis on the superior category hotel brands (Meliá, Innside, Gran Meliá, ME and Paradisus) and the addition of newly-built hotels leading to a rejuvenation of the hotel portfolio.
With regard to growth, Sol Meliá strategy continues to focus on the enhancement of its brand equity, reinforcing its presence in markets where it has competitive advantages and opening up new markets, such as the recent additions in Austria, Colombia, Crete, Luxemburg, Andorra, Cabo Verde or China, where Sol Meliá faces an extraordinary opportunity with the Gran Meliá Shanghai, which Escarrer referred to as one of the most emblematic hotels in China.
With regard to the outlook for the future, the Chairmen of Sol Meliá offered his view from the perspective of the first five months of the year and the contracting under way. Escarrer reminded the audience of the better industry outlook on an international level and forecast a gradual recovery in bookings and an incipient stabilisation in price levels.
In his conclusions for shareholders, Gabriel Escarrer emphasised his confidence that Sol Meliá will emerge from the crisis even stronger than before, a confidence based on the greater solvency and financial strength of the company, internal efficiencies, diversification, and particularly on enhanced levels of teamwork, an achievement which has built a more united front amongst its employees, to whom Gabriel Escarrer has always referred as the “company’s most important asset”.
To end his intervention, Escarrer summarised the nature of the last two financial years as a period in which “Sol Meliá was able to restructure in time to resist the worst effects of the global crisis, and be in optimum conditions to benefit from the opportunities which are likely to arise in the future”.
