• The hotel chain is preparing for three years of intense growth which will be sustained by a stronger organisation and a major investment effort.
  • An increase in revenues in the hotel business and Vacation Club, along with a consistent international expansion policy are the keys to growth.
  • The hotel chain sees 2008 as a year for implementation and promotion of the new strategies and policies designed to facilitate a major qualitative change in 2009 and 2010.

After presenting historic annual financial results for 2007, Sol Meliá today presented its new Strategic Plan to the media and leading Spanish banks. The Plan will guide the actions of the leading Spanish hotel chain over the period 2008 to 2010.

Sol Meliá held an “Investor’s Day” yesterday in Madrid during which the company announced the focus for its activities over a period which is expected to bring major qualitative changes for the hotel company. The new Business Model for the leading Spanish hotel chain begins in a year which presents greater uncertainties in the markets, and in response to which the company plans to focus activity around five strategic areas.

The company announced the successful completion of its Strategic Plan 2004-2007, a period during which it launched new businesses such as the Sol Meliá Vacation Club, and also applied strict financial discipline to bring about an important reduction in company debt and enable the company to face a new stage of development from a stronger position over a period which, while not exempt from difficulties, is expected to offer new investment opportunities and witness a slowdown in the growth of hotel supply after the unsustainable growth of recent years.

2008: positive performance in an uncertain environment:

during the presentation of the new strategy and business model, Sol Meliá admitted its prudence in making forecasts for 2008 within a context of a sluggish market and economic uncertainty. According to the company, whereas the Strategic Plan for 2004-07 occurred during a period of greater confidence and sustained economic growth, the new Strategic Plan 2008-2010 is the company’s response to a new economic scenario.

The company reported a positive performance of the business for the current season, based on growing diversification of the origin of guests, important growth– around double digits – at Sol Meliá Vacation Club, and a sustained increase in Revenues per Available Room over the period (RevPAR) of between 5 and 7%. These factors are expected to compensate the negative trends which, according to market analysts, will affect the macroeconomic situation, the credit supply, exchange rates and the real estate market. This will allow Sol Meliá to repeat the excellent results seen in 2007 in spite of an environment characterised by slowing consumer spending.

In the three year plan included in the Strategic Plan, Sol Meliá also considers this year as the year for implementing the new strategies in the hotel company along with the new organisational model and management culture that will accompany them. During 2008 the company will carry out a series of investments which are expected to form the basis for more significant growth in the following two years as detailed in the Strategic Plan.

2008-2010: A new strategic and business model:

“Hoteliers more than ever before”

The Joint Vice Chairmen and Chief Executive Officers of Sol Meliá explained the company’s value creation model, highlighting the growing importance of such complementary activities as the hotel business, the Sol Meliá Vacation Club, and Leisure Real Estate. Emphasising their desire to remain “hoteliers more than even before”, Sebastián and Gabriel Escarrer Jaume explained how the development of land or mixed ownership formulas will reinforce the hotel business and avoid the loss of synergies and opportunities.

Towards the “New Sol Meliá”.

In general terms, the Strategic Plan outlines a larger and better known company, where the development of five key strategic areas and a rigorous investment policy will allow Sol Meliá to generate a major qualitative change.

Together with organic growth and improvements in RevPAR in hotels and the Vacation Club, the Strategic Plan forecasts increases in operating margins thanks to the internal efficiencies which the new organisational model will generate from 2008, creating greater synergies between the different business units, building an organisation around each of the brands, and facilitating management and control processes. All of this will be given greater momentum by a new organisational culture focused on leadership, together with business rankings on employability and sustainability.

The implementation of the Strategic Plan is expected to generate the following results over the three year period 2008-2010:

With regard to organic growth, the company expects to add 19,700 rooms (around 80 hotels) over the period.

To face such major development, Sol Meliá has begun a reorganisation process, now almost completed, which sees the different business responsibilities structured around the company’s different brands, as well as giving greater weight to the Vacation Club and Leisure Real Estate within company EBITDA. Other key features are greater internal efficiencies which will allow the creation of a Shared Services Centre for the back-office functions of the whole company, and the implementation of a new business style and culture brought about by the generational change at the top of the company and characterised by greater balance, empowerment and teamwork.

With regard to specific strategies, Sol Meliá explained the objectives, plans and results expected in each of the five key strategic areas that form part of the Plan 2008-2010:

  1. Brand Equity, including actions aimed at enhancing the value of the brands, repositioning the brands on a higher level, and increasing brand awareness in the market.

    The total investment over the period of the plan for actions in this area is 442 m €.

  2. Customer knowledge and contact, including actions in Customer Relationship Management (CRM) designed to favour direct sales channels and raise customer satisfaction and loyalty levels while also reducing costs.

    The value created for the company by this strategic area is expected to reach 32 m€ over the period.

  3. Development of Leisure Real Estate and Mixed Ownership Formulas, products with a great potential for growth in Europe which are both attractive for customers and for the company. The Vacation Club is expected to grow at an annual rate of 12% worldwide and presents a level of stability and benefits for potential customers which make it an option with a great future.
  4. Talent management and empowerment: including policies and measures to attract, retain and enhance human capital, one of the most important of Sol Meliá’s assets.
  5. Sustainability, an area which includes corporate responsibility in environmental, social and cultural spheres in the areas in which the company operates. During the presentation, the Joint Vice Chairmen of Sol Meliá reviewed the responsibility that travel companies have for the natural environment, and the high profitability of investments in sustainability, such as the Save Programme which the company implemented 4 years ago which has decreased Co2 emissions by 2,900 tonnes and saved 1.6 million € in consumption. During 2008 -2010, the programme is expected to save 6.7 million € and 8,000 tonnes of Co2 emissions.

New Investment and Communication policies:

The investments allocated to the Strategic Plan for 2008-2010 are set at 1,100 million €- in land, construction, hotels and hotel chains which must generate a ROCE of 16%, and which will be financed in full by company cash flow. The investment will be shared between actions focused on enhancing Brand Equity and company growth.

Alongside these investments, Sol Meliá expects to invest 120 million euros over the three years in an ambitious communications and advertising plan aimed to increase brand awareness across all markets.

Maria Umbert
Communication Senior Manager
+34 971 22 44 64
Melia