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Mélia looks to resort recovery

Mélia Hotels International said that it expected resorts and leisure-led hotels to lead the recovery, as it launched a strategic review.

The company said that direct bookings had enabled it to “defend” its room rates, with 60% of total sales coming through its website.

Gabriel Escarrer Jaume, CEO, said: “The first nine months of 2020 confirm the terrible impact of the Covid-19 pandemic on the travel industry and highlight the correctness of our response to the crisis, with a focus on activating the drivers of our resilience and improving our competitiveness and efficiency.

“At the same time, an agile management of hotel openings combined with flexibility, safety and our sales capacity, have allowed us to maximise the number of hotels open (157 at the end of September) and their results, with 100% of the opened hotels meeting the criteria of recovering jobs and business activity without negatively affecting the viability of the company.

“In the long term, the company has begun a strategy review, reinforcing its basic strengths in terms of solvency, talent, digitalisation, brand diversification and a renewed hotel portfolio, which will place it in an unbeatable position to take advantage of the growth opportunities that will emerge due to the foreseeable consolidation of the industry after the pandemic."

The group said that trends showed a preference for domestic travel, greater “dynamism” in second-tier cities and the predominance of individual travellers over other segments. With 51.5% of rooms available compared to the third quarter last year,  the company reported Ebitda at - €27.6m. The 44.7% decrease in revpar was attributed to lower room occupancy. The group had a monthly cash burn of €34m, with debt increasing by €102.3m during the quarter. Mélia had liquidity of €442.5m at the end of the period.

By region, only China had recovered a level of activity similar to that before the crisis, followed by Vietnam.

The group said: “The lack of visibility regarding Q4 is accentuated by new lockdowns in place or predicted in some markets, especially in Spain, Germany and the UK, whilst practically all the Group's hotels in Mexico and the Dominican Republic will be open by 1 December.

“Resilience and flexibility continue to define group strategy, which is committed to liquidity, cost containment, and a new, more digital and efficient operating model.”

The company said that it expected the turning point in the recovery in Easter next year.

Meliá Hotels International used its AGM earlier this year to announce its revised strategy for 2020 to 2022, named “The Day After”.

The group has increased its focus on digital and said that it expected to see great consolidation in the industry as well as the “reconversion of obsolete hotels and destinations”.

Gabriel Escarrer Juliá, the group’s non-executive chairman, said: “Never, in more than six decades in the industry, have we had to face a crisis of such catastrophic dimensions”, adding that he expected to see more digitalisation, and major changes in distribution channels.

He closed his speech by commenting on the importance of urgent and decisive government action to back the tourism industry. In line with BBVA estimates of an expected loss of 20% of GDP in Spain, he said that the second quarter would be the worst ever in the history of global tourism, and appealed for an urgent and comprehensive plan to support and eventually rescue the industry financed by the Spanish government and with assistance from Brussels, to ensure the survival of the tourism industry itself and employment at the end of the year.

The Meliá VP appealed for public-private partnerships to promote a recovery based on a transformation of the tourism model, and recalled the scarce funding allocated by the Spanish government to the tourism industry (just over €4bn, almost all through loans guaranteed by the ICO) compared to the priority that other European governments have given to the industry and with the European Commission recommendation that 25% of funds be allocated to the tourism industry in the post-Covid-19 recovery.

Escarrer stated his appreciation for the good will shown by the Spanish government, but explained that “we need something more if we want our companies to survive and our country to continue to be a tourism leader, and Meliá and Exceltur once again offer our full support and collaboration to the Spanish government to achieve this.”

 

Insight: Mélia is no stranger to strategic overhauls, with it and domestic buddy NH Hotels Group shining themselves up significantly after the euro crisis and generally showing other hotel companies how it’s done. As Minor noticed when it battled off a number of groups to pick up NH.

Mélia has been able to lean on its digital strengths as well as its resort holdings, which has meant that its revpar drop was not as severe as many of the other larger operators. It has less of its estate open, but is expanding all the time, led by breakeven requirements.

All this strength will, of course, mean that it is ever more the takeover target. Coming through two destabilising events only serves to remind investors that there’s nothing wrong with having a place in the sun. Or three.