Meliá first semester results: satisfaction, optimism for the summer season and a significant asset revaluation

by Gabriel Escarrer, Vicechairman and CEO

We have just presented results for the first half of 2018, a period full of challenges during which Meliá Hotels International increased Net Profit by 7.2% and reduced debt by 2.2% between January and June.

The Company has also published forecasts for the third quarter, the most important quarter for the European tourism industry as it includes the summer season, and I have to say that we are more than satisfied. On the one hand, advance sales show 4.7% higher occupancy for summer compared with last year, and on the other hand our hotels in Spain and the Mediterranean continue to grow despite destinations in North Africa and Turkey recovering some of the demand lost over recent years due to instability and insecurity.

This means we have achieved what we always said we wanted to do: sustainable growth based on improving quality and repositioning our hotels rather than just relying on a boom in demand created by problems in other destinations. We are proud to say that we have consolidated the strength and solidity of the hotel business thanks to investments of more than 600 million euros in hotels in Spain over the last 6 years in line with our brand strategy, our sales and digital strength, our international expansion and a business model increasingly focused on hotel management.

The first half of 2018 was positive for tourism in general, with the industry showing very solid fundamentals and growing in line with World Tourism Organization forecasts of around 4% per year on a global level. As for the challenges, Meliá Hotels International was specifically affected by the depreciation of the dollar, which lost 15% of its value against the euro in the first quarter. Excluding this effect, the Company slightly increased revenues and improved EBITDA by 7.4% and Revenue per Available Room (RevPAR) by 4.6%. Market highlights include a significant improvement in France, Italy and Spain, a discrete evolution in the Americas, particularly in Cuba, where we are nevertheless beginning to see a positive change in trends.

In financial terms, as I mentioned before, highlights include the 2.2% reduction (-13.3 Mn €) in net debt between December 2017 and June 2018 and a reduction in financial costs. Meliá maintains its commitment to keep the Net Debt/EBITDA ratio at around 2X. In terms of hotel expansion, one of the main drivers of growth and resilience in the business, I would like to highlight agreements to add 10 new hotels signed between January and June and the strong pace of hotel openings. In 2018, we will open at least 23 hotels with an average of around one new hotel every two weeks.

Finally, the Group also presented a new valuation of its property assets carried out by Jones Lang Lasalle, the market-leading independent asset valuation specialists. Their analysis shows an increase in Gross Asset Value (GAV) of 23.2% compared to the valuation in June 2015, reaching a total GAV of 4,386 million euros. Net Asset Value per share (NAV) increased by 21.3% up to €15.2 per share. This is another important support for our share price and to the solidity of our shares for shareholders.