Spanish markets look finally to have turned positive, and investor confidence has stabilised, enabling Spanish groups Melia and NH to both look back on a year where their businesses were tidied up, and forward to brighter times ahead.
With the exception of Madrid, which appears to be dipping still lower, Spanish city markets are now at least stabilised, with some heading into positive revpar growth once more. NH, exposed substantially to the Spanish market, recorded quarterly revpars through 2013 at -1.5, -0.3, 1.8 and 2.7%. At Melia, where Spanish hotel stays now only represent 20% of the company’s activity, 2014 is expected to be a stable year, with a focus on selling Spanish city locations to both business and leisure travellers.
Melia’s upbeat 2013 report was clouded by an accounting consideration that meant its headline profit took a EUR76m hit. A mark to market consideration of convertible bonds led to the writedown, but Melia chief executive Gabriel Escarrer noted there would be no impact on cashflow. Revenues at EUR1,352m reflected a 5.2% overall increase in revpar. By region, the Americas delivered a 10.2% increase, and EMEA hotels 10.9%. The luxury end of the portfolio did particularly well, with ME hotels in London and Madrid reporting a 17.7% increase in revpar.
Escarrer called 2013 a “historic year” for the company, which saw it open 30 new hotels, restructure debt and set the stage for further international expansion. Over the next two years, 58 hotels are set to be added, all in locations outside Europe.
Melia is hoping a “hybrid” sales approach, aiming at both the business and leisure traveller, will help turn around its weakest Spanish market, Madrid. The approach has already seen a positive impact in other Spanish locations. It is also pushing hard to grow direct sales, and during 2013 grew direct website sales volumes by 26%.
NH looks back on a year when it secured a new equity investor, Chinese travel group HNA, and managed the refinancing of its large, complex debt pile. An analysis of the portfolio has also decided how best to arrange the hotels under four new brands, and which are to be disposed of. The refinancing has delivered EUR200m to spend on refurbishing hotels, and on improvement projects across a range of operations including IT, branding, and revenue management.
Central European hotels were the best performing in the portfolio, with occupancy up 4.6%. Munich was the best performing city, with hotel revpar up 8.3%. Elsewhere, the Americas delivered a lumpy performance, with revpar up 7% in Mexico but hotels in Argentina seeing weaker rates.
NH is continuing to trim costs, and has promised to sell a further EUR125m of hotels this year, to help cut debts. “The group continues to terminate and renegotiate lease agreements with a view to realigning costs with prevailing demand,” said the report, while there will also be exits from hotels that do not fit with the new brands.
HA Perspective [by Katherine Doggrell]: Earlier this year Meliá presented a study published by the Meliá Hotels International Tourism Studies Chair, to raise awareness about the "Levers of Competitiveness in the Tourism Industry", looking into how visitors to Spain viewed their experiences.
To put it another way, after a few torrid years, the company has decided to find out why things have been so awful and what they can do about it. Better late than never.
Outside such “findings” as the Brits and Germans enjoying the sun, the study found that, despite high ratings in "tangible" factors such as climate, beaches, nature, cultural heritage and gastronomy, the Spanish were not meeting expectations in terms of customer service.
Vice chairman and CEO of Meliá, Gabriel Escarrer, called for strengthened public-private cooperation to contribute to the overall competitiveness of an industry which, he said, is the “engine for growth” in Spain. Our tourism model he said "should move towards greater excellence, and this means we cannot have professionals that are any less than excellent." He added: “Spain cannot just be a ‘commodity’ destination that benefits from problems in northern Africa, but rather a first-class tourism brand internationally and a model of excellence in itself.”
Spain is now largely in recovery, but, as previously domestic-bound travellers start to look overseas, the competition has never been greater. STR Global’s Elizabeth Winkle told the International Hotel Investment Forum in Berlin that travellers in Europe would continue to favour Europe as economies got back on their feet.
Europe is a large place, with many sunny spots and some cheap ones. Spain must consider how it sells itself and, as Meliá pointed out, its hotel companies cannot do this alone.