Spain’s operators hailed growth in the domestic market when reporting strong full year results.
The focus is now on maintaining this performance after the terrorism concerns which have driven many travellers to Spain fade.
The results came as HNA Group sold 541,931 shares in NH Hotels to avoid launching a mandatory takeover bid. Following the sale, it holds 102.8 million shares of NH Hotels, representing 29.34% of capital and 29.98% of voting rights in NH Hotels. HNA is facing other issues in Europe after the Rezidor Hotel Group recommended that shareholders reject its offer for the shares it did not already own.
At NH Hotel Group the company delivered a net profit, of EUR11m, for the first time in eight years. Spain led the group’s results, with revpar up 12.9% for the year, while revenue rose by 13.5% to EUR359m. The company hailed the success of its current strategic plan, which has combined disposals with repositioning of the remaining portfolio.
Over the year, the group used the sale of non-core assets to cut debt by EUR91m to 4.1x by year-end 2016, against 5.6x at year-end 2015. The EUR200m repositioning plan is close to complete, with seven hotel refurbishments pending completion, five of which are already underway.
Between the launch of the plan and December 2016, some 59 hotels have been fully refurbished, with one in every five of the group’s hotel rooms belonging to its premium brands: NH Collection and Nhow, twice as many as two years ago.
Over the year, the company signed 16 new hotels with 2,114 rooms, all of which are under lease and management regimes, most of which in the upper-scale segment in large city destinations such as Milan, Venice, Antwerp, Eindhoven, Marseilles, Leipzig, Monterrey, Mexico City and Santiago de Chile.
The company, which is due to see Ramón Aragonés take the helm as CEO, said in a statement: “The new revenue management strategy put in place, the upside at the refurbished hotels, the improvements made to the customer value proposition, a more efficient management model and ongoing portfolio expansion and streamlining are among the group’s strategic priorities for 2017.” It has forecast 2017 Ebitda between EUR220m and EUR225m, against EUR181m in 2016.
At Meliá Hotels International, the company also credited the success of its repositioning and restructuring for a successful year.
Gabriel Escarrer, vice-chairman & CEO, said: “The 2016 results once again show a strong performance from the hotel business as a result of a positive international travel environment, especially in resorts, and our successful strategy over recent years, laying the groundwork for more profitable and qualitative growth in the coming years.
“Together with a significantly healthier balance sheet, and a business model increasingly based on international growth and management agreements, all of this places us in an unbeatable position to face the significant geopolitical, economic, social and technological challenges that affect the industry on a global level.”
The company opened 17 new hotels in 2016 and has plans for 23 new openings for 2017, in “dynamic and safe destinations” in the Mediterranean and Caribbean, led by Asia Pacific. The company is also growing again in Spain, with three new hotels for 2017.
Debt was reduced by EUR226m over the year, taking the net debt/Ebitda ratio to a historically low multiple of 1.9x. Looking ahead, the company said it expected to increase revpar by a medium to high single digit, against 2016’s 14% increase, as results were set to “remain robust in resorts and in hotels in cities popular with tourists”.
The results were released as Christie & Co warned that 2018 would be a “crunch” year for Spain, with visitors from the UK likely to be put under pressure by the falling value of sterling.
The company said: “Brexit has not had a substantial impact on the behaviour of British tourists visiting Spain so far. Tour operators and hoteliers’ expectations on the future consequences of Brexit are not positive: more than 70% of our survey respondents expect negative repercussions on their businesses, estimating that Brexit could considerably dampen their occupancy rates and average prices.”
HA Perspective [by Katherine Doggrell]: With HNA Group backing off from NH for the time being – a surprising move given their frequent open-letter-writing and general foot stamping – the mood at NH is back to work. HNA has plenty to deal with around Rezidor Hotel Group and having recently closed on Carlson, although no-one would be shocked to see renewed vigour later in the year as it looks again at building a European platform.
Attendees at this year’s IHIF were warned that the current boom in Spain would not last forever, with Maria Zarraliqui. global development managing director, Meliá Hotels International Group, commenting: “We want to ensure that will not have to rely on other people’s problems to be successful.” To achieve this, she said, the company would compete not on price “but on a service level. We want customers to come back and be loyal to us. We have to invest to create a differential from our competitors”.
Both Meliá and NH, forced into shaking up their businesses as a result of Spain’s previously-parlous economy, are now limber enough to face off the competition and just in time. Not only is Brexit likely to loom and terrorism fears subside, but Madrid is thought to be considering limiting hotel developments, following the lead of Barcelona. The dangers of this are likely to be complacency as a result of a lack of new supply to compete with, in addition to inability to expand. After a flurry on innovation, the country could see its room stock slip back into the doldrums, while, conversely, those assets which are already open see values spike.