Sol Melia Achieves Revenues Of 1,016 Million Euros In 2001 • Company Net Profits Reached 64.7 Million Euros For The Year

Net profits, however, decreased by 45% to 64.7 million Euros. This decrease is mainly due to the fact that there were extraordinary profits of 29.6 million Euros in the year 2000 after the sale of four hotels and, especially, to the significant decrease in demand and hotel occupancy in the final quarter of 2001 as a result of the tragedy of September 11th..

The impact of this decrease in demand can also seen from the comparison of net profits for the first three quarters of 2001 which, although they are compared against figures which already included the extraordinary profits from the sale of hotels, were only 10% below the figure for the year 2000.

Hotel RevPar (revenue per available room) for Sol Meliá as a whole reached 47 Euros, an increase of 1%, while average hotel occupancy was set at 69%.

2001: more than 75% of hotels renovated or added in the last 5 years...

2001 was also a key year for hotel renovations at Sol Meliá as it saw the conclusion of the major works carried out at such emblematic hotels as those in Paris, London, Madrid and Mexico. In cases such as those of the Meliá Zaragoza, Meliá de Mar, Meliá Tamarindos or Meliá Barcelona, the renovation allowed the hotels to be awarded a prestigious 5 star classification, while in others such as the Meliá Mexico Reforma or the TRYP Fénix, work resulted in the hotels being raised to the highest brand category within Sol Meliá: the Gran Meliá.

Thanks to the investments in hotels and their renovation, 2001 also saw 5 of the company's most prestigious hotels enter the exclusive club of "The Leading Hotels of the World": the Gran Meliá Salinas*****GL (Lanzarote, Spain), the Gran Meliá Bahía del Duque*****GL (Tenerife, Spain), the Gran Meliá Mexico Reforma*****GL (Mexico City, Mexico), the Gran Meliá Caracas*****GL (Venezuela) and the Meliá Playa Conchal*****L (Guanacaste, Costa Rica)

75% of the hotels provided by Sol Meliá have now been thoroughly renovated or added over the last five years, a fact which together with the "e-transformation" process carried out by the company to renew the technology behind its internal and external operations, has allowed Sol Meliá to become one of the most modern hotel companies in the business, both on a national and international level.

These improvements in hotel quality and the advances made in the standardization of hotel products and services have been strong influences on the new brand structure created in 2001 around 4 major brands: Meliá Hotels, TRYP Hotels, Sol Hotels and Paradisus Resorts. The simplification of the brand structure will allow Sol Meliá to focus efforts on the promotion of only four brands and also aims to reinforce the product and service quality standards of each of the brands, increase levels of brand awareness and improve the positioning of each brand with respect to its competitors.

... Award for "Best European Hotel Company"...

As far as expansion is concerned, 2001 was also an exceptional year for Sol Meliá. During the year the company added 28 hotels, taking the total hotel portfolio to 352 hotels, in 30 countries on 4 continents at the end of the year. The spectacular rate of growth the company has maintained over the last five years has seen its portfolio double in the same period. Sol Meliá has also already signed agreements to take over an additional 65 new hotels over the next two years. The icing on the cake as far as achievements are concerned was the selection at the end of the year of Sol Meliá as the "Best European Hotel Company" by the prestigious British trade magazine "Travel Weekly".

... but a year affected by strikes and the 11th. September

2001, however, is a year that will remain in the memory as a year greatly affected by the strikes by pilots and by coach drivers in the Balearic Islands and their highly damaging impact on the image of tourism in Spain and, above all else, the events of September 11th. Both circumstances have had a considerable effect on the results announced by Sol Meliá.

The mentioned strikes were largely behind a decrease in hotel occupancy all over the resorts of Spain, and at the time when the resort hotels generate their most lucrative business in the weeks of the high summer season. With regard to 11th. September, although the initial negative impact affected almost all hotels equally, later developments severely damaged business in Latin America and the Caribbean, the Middle East and North Africa, especially Tunisia, as well as major European capital cities such as Paris, London, Rome and some areas of Madrid, such as the central Gran Via, which receive a significant percentage of their business from the US market.

The changes in the behavior of European travelers, especially the trend towards a reduction of long-haul and long-stay travel has also had an impact on company results.

2002: positive expectations for Spain and Latin America...

The difficult period experienced in the international economy and, particularly, in the tourism industry, has caused the closure of some large airlines and the weakening of many important companies in the tourism industry. Sol Meliá's strong balance sheet, verified by the credit ratings of BBB (stable outlook) from Standard & Poor's and BBB + from FITCH, as well as the fact that the company has no pending major investments to make given the major investments committed in recent times, have made it possible for the company to successfully negotiate the downturn in the business as a whole.

Looking to the future, signs seem to indicate that tourism is experiencing a gradual recovery and that Spain, the second most popular tourism destination in the world according to the most recent data from the World Tourism Organization, will continue to be seen as a "safe harbor" for travel, and also providing excellent value for money. The security perceived in Spain is expected to attract many travelers in the spring and summer that may have chosen alternative destinations.

If forecasts are correct, and bearing in mind that 65% of the EBITDA generated by Sol Meliá comes from its Spanish properties, the results for 2002 are expected to show a satisfactory improvement with respect to 2001. The hotel occupancy seen in February 2002 in Latin America and the Caribbean also indicates that recovery is underway in these destinations and the expectations for the coming months are increasingly positive.

... one priority objective: consolidate our achievements

After a series of years of great achievements and important investments in hotel renovations and technology upgrades, 2002 is seen as a year for internal consolidation, even though the company will still be adding an extra 65 hotels, the agreements for which have already been signed. It is also a year for generating the profits expected from those same investments, particularly in regard to the acquisition and renovation of the hotels the company operates in Paris, London, Madrid, Milan and Mexico.

Hotel development 2001:
Additions: 28
Hotels at 31/12/01: 352
Signed contracts at 31/12/01: 65
Total: 417

Sol Meliá worldwide:
Spain: Market leader, both in city and resort hotels
Europe: Third largest hotel company
Latin America and the Caribbean: Largest hotel company
World: Largest resort hotel company
World: Tenth largest hotel company