Managing The COVID-19 Crisis: Meliá Has 157 Hotels Open And Continues To Strengthen Liquidity And Competitiveness In A Period Of Maximum Uncertainty Due To Outbreaks
- The results of the first 9 months confirm the severity of the impact on travel companies, distorting comparisons with previous years
- Travel restrictions and capacity limits continue to have an impact across the entire world with the exception of China and Vietnam
- Digitalisation is confirmed as a major competitive advantage, with melia.com generating 60% of sales
- Trends show a preference for domestic travel, greater dynamism in second-tier cities and the predominance of individual travellers over other segments
- With 51.5% of rooms available compared to 3Q 2019, Meliá earned €111.1M in revenue, improving the figure achieved in Q2
- All of the hotels opened during the pandemic met the "break-open" criteria by which having a hotel open makes a greater net contribution than having it closed
- Costs fell by -60.6% in Q3, mitigating the impact of the reduction in revenues (-78.6%), and leaving Q3 EBITDA at - €27.6M
- Net Profit (-€111.1 M) fell by 308.5% in Q3
- Sales through melia.com (with 60% of total sales, 82% coming from the MeliaRewards programme) allow the company to defend its room rates as a key factor, meaning that the decrease in RevPAR (-44,7% in the 9M) is mainly attributable to lower room occupancy due to COVID
- The Stay Safe With Meliá program as well as the innovation on service and F&B concepts were key for improving the safety, satisfaction, retention and spending levels of hotel clients during COVID
- By region, only China has recovered a level of activity similar to that before the crisis, followed by the positive evolution of Vietnam
- The company reports monthly cash consumption of €34Mn in Q3
- The Group has a solid liquidity position, which at the end of September amounted to €442.5M
- The Net Financial Result in Q3 improved by 71.7% compared to the same period in 2019
- Debt has increased by €102.3M in Q3, with an increase of €396.9M since the beginning of the year
Industry leader in sustainability:
- In October 2020, Meliá was named the 7th most sustainable company worldwide, as well as the top hotel company, in the ranking of the World's Most Sustainably Managed Companies prepared by the Wall Street Journal
- The lack of visibility regarding Q4 is accentuated by new lockdowns in place or predicted in some markets, especially in Spain, Germany and the United Kingdom, whilst practically all the Group's hotels in Mexico and the Dominican Republic will be open by December 1st
- Resilience and flexibility continue to define Group strategy, which is committed to liquidity, cost containment, and a new, more digital and efficient operating model
- Forecasts continue to indicate that the recovery will begin earlier in resort and leisure hotels rather than in city hotels
- The Company remains cautious but confident that, as anticipated, the turning point that kicks off the gradual recovery will occur in Easter 2021
Gabriel Escarrer Jaume, Executive Vice President and Chief Executive Officer "the first nine months of 2020 confirm the terrible impact of the COVID-19 pandemic on the travel industry and highlight the correctness of our response to the crisis, with a focus on activating the drivers of our resilience and improving our competitiveness and efficiency.
In the short term, our Contingency Plan has allowed us to guarantee the viability of the company in a context of maximum uncertainty and an unprecedented drop in demand. At the same time, an agile management of hotel openings combined with flexibility, safety (through the Stay Safe With Meliá-programme) and our sales capacity, have allowed us to maximize the number of hotels open (157 at the end of September) and their results, with 100% of the opened hotels meeting the criteria of recovering jobs and business activity without negatively affecting the viability of the company.
In the long term, the company has begun a strategy review, reinforcing its basic strengths in terms of solvency, talent, digitalisation, brand diversification and a renewed hotel portfolio, which will place it in an unbeatable position to take advantage of the growth opportunities that will emerge due to the foreseeable consolidation of the industry after the pandemic."
Meliá Hotels International presented its results today for the first nine months of the year, which clearly reflect the difficult conditions it has faced due to the "tsunami" that has paralysed a large part of the travel industry. Up to September, the company performed in line with the industry on a global level, that showed RevPAR falls ranging between -44,6% in Middle East and -59,3% in Europe. The evolution of revenues and costs
was greatly influenced by three factors: digitalisation, flexibility and safety.
The company had revenues of €430.3 Mn up to September, a decrease of -69% compared to the first nine months of 2019. The advanced digital transformation of the Group allowed income to be optimised, with 60% of sales coming through melia.com, 82% of that by members of the MeliaRewards loyalty programme. This channel, specially relevant given the difficult situation of the Tour Operation segment, also allowed it to adapt to demand and maintain its commitment to preserve average room rates, an effort reflected in the evolution of RevPAR (Revenue per Available Room), where the decrease is mainly attributable to a fall in occupancy due to COVID, and to a much lesser extent by falls in prices. Accumulated occupancy as of September was 38,8%.
Sophisticated tactical management combined with the security brought by the Stay Safe With Meliá programme, certified by Bureau Veritas, flexibility and the company's sales capacity, allowed the company to optimise the hotel opening and closing process, keeping the maximum number of hotels open without damaging the financial viability of the group. 100% of the hotels opened in the third quarter met the criteria that the company calls "break-open", in which an open hotel makes a higher net contribution than if it were closed.
Also, the health and safety guarantee offered by hotels under the Stay Safe With Meliá programme, without any detriment to the guest experience, became one of the company's key selling points in the third quarter. Customers' perception of safety combined with Meliá's commitment to new and attractive dining concepts adapted to health and safety requirements, boosted consumption in hotels and led to a 43% increase in Food and Beverage revenues per-stay in the third quarter.
Along the same lines, recurring operating expenses for the 9 months fell by 49% thanks to numerous actions, particularly renegotiation with suppliers and the owners of leased hotels. This aims to safeguard the company's viability through a collaborative process with stakeholders in order to distribute in a more balanced way the costs of a crisis that is a case of "force majeure" the likes of which have never been seen before. In these exceptional circumstances, the priority objective of safeguarding company talent and ensuring maximum possible employment has also been helped by governmental measures such as different furlough schemes in each country and also by the design of a new operating model that aims to adapt the organisation to the new requirements of the digital economy and the new competitive environment.
In general, the comprehensive digitalisation process in which the company is immersed, supported in recent years by strong investments which have been kept up in 2020 due to their priority status, is already allowing significant improvements in efficiency. This will be essential to compete in the post-COVID ecosystem and cope with the market contraction that is expected to last until 2023 or 2024.
As a result of the revenue and cost performance, EBITDA excluding capital gains for the first nine months stood at -€98.9Mn, while the Net Profit was -€469.6 Mn. Financial results fell by 23.9% compared to the same period in 2019, with pre-IFRS16 net debt standing at €1,125.1Mn. On a financial level, Meliá continues to work on refinancing the debt due to mature over the coming years. At the end of September, the liquidity situation (including liquid assets and undrawn credit lines) amounted to €442.5 Mn, while the company reported a cash consumption of €34Mn per month in the third quarter. The Company reports that the new financing has been obtained without any covenants or mortgage commitments, highlighting that it has assets valued at more than € 2,100 Mn, 75% of which is mortgage free.
In October, Meliá Hotels International was named the seventh ranked company in the world in sustainable management according to the prestigious ranking of the "World's Most Sustainably Managed Companies" prepared by the Wall Street Journal.
It is also the top travel company in the ranking and one of only two Spanish companies in the "Top 10" of "Companies managed in a sustainable way" worldwide (for which more than 5,500 listed companies have been analysed).
The ranking assesses the policies, programmes and performance and results of companies with regard to how they manage their businesses in a sustainable way, a strategic priority for Meliá. The results are in line with the ones achieved in the Corporate Sustainability Assessment 2019 (Gold Class) made by SAM, a sustainable investment agency and part of Standard & Poors.
Meliá ended September with 157 hotels open around the world. In Spain, the quarter has been marked by outbreaks in different cities and regions and by intermittent restrictions in key international markets on travel to Spanish destinations, from which the Canary Islands was recently excluded. A sales strategy focused on direct channels such as melia.com, customer and employee safety, and attracting domestic travellers, allowed more than 50 hotels in the country to be open at the end of September, highlighting the performance in second-tier cities above that of Madrid or Barcelona, more deeply affected by the slowdown in the MICE and corporate travel segments.
In EMEA (Europe, Middle East and Africa) the company had 80% of its hotels open at the end of September, with Germany leading with 25 and Portugal with 14, followed by the United Kingdom and Italy with 3 each, and France with 2. Limitations on international travel affect cities such as Paris, London, Rome or Berlin far more, with second-tier destinations such as Genoa, Milan, Dresden, Hamburg or Leipzig attracting more domestic travellers, currently the most dynamic market. Germany, with practically all hotels open until the recent lockdown announcement which has forced 7 hotels to temporarily close, is the country that is recovering fastest due to its high component of domestic travel (65%). The evolution in the region has recently slowed down due to the measures taken by various governments to combat the second wave of COVID.
In America, in the second quarter the company opened most of the hotels in Mexico in line with the 50% limit on occupancy determined by the "amber traffic light" situation, with a predominance of domestic travellers and visitors from the USA, with 50% of bookings coming through melia.com. In the Dominican Republic, however, lower demand in the domestic market and a shortage of flights to the destination forced all the hotels to remain closed until September. Hotels in Brazil show positive trends thanks to the beginnings of a market recovery and the potential of the domestic business travel segment.
In Cuba, until the resumption of flights in September some hotels were partially operational to accommodate travellers who had not been repatriated before the closure of borders. The reopening of hotels for the domestic market began in July, along with the opening of destinations such as Cayo Santa María, Jardines del Rey and Cayo Largo to international travellers. The hotels have taken advantage of this quarter to undertake important pending renovation work which would have been difficult to carry out under normal conditions.
Finally, in Asia the company has already reopened 80% of its hotels but with very uneven results, from the recovery of occupancy to levels similar to 2019 in hotels in China and the positive evolution of Vietnam (where Meliá has a strong presence), to the situation in Indonesia, Malaysia, Thailand and Myanmar, where the pandemic continues to cause borders to be closed to travellers.
The Company cautiously maintains its forecast of seeing Easter 2021 as the "turning point" that will be the possible start of a gradual recovery. The complexity of forecasting scenarios in a business environment with so much uncertainty and volatility (increased by lockdowns caused by the second wave of the pandemic) has not prevented Meliá from preparing to react swiftly to any change in the short term, while at the same time preparing to benefit from post-COVID market opportunities in the medium term.
To this end, it has continued to develop its business continuity plan ("The Day After"), aiming to accelerate the recovery and leverage its proven resilience to resurface even stronger and with a renewed business philosophy. The plan has two key perspectives: on the one hand, ensuring liquidity through questioning every expense, including renegotiation with suppliers and hotel owners, and on the other hand, through a new operating model that guarantees efficiency and professional service, with a focus on the comprehensive digitalisation of the company's back and front-office processes and the customer experience, as well as other initiatives focused on adapting operations to the changing environment.
With a view to the fourth quarter, the Group reports that by the 1st of December, most of its hotels in México and the Dominican Republic (countries that concentrate the main part of its portfolio in the Caribbean) will already be open, in order to maximize operations during the high season. In the EMEA
area, demand has recently slowed due to the measures taken by governments to deal with the second wave of COVID. In Spain, once the seasonal hotels are closed at the end of the third quarter, the entire focus in resorts falls on the Canary Islands, which due to their positive pandemic data will be able to benefit from the opening of such important markets as the UK and Germany as soon as they lift their lockdowns. The company continues to support the creation of safe travel corridors between these markets and the key Spanish destinations. City hotels continue to be affected by restrictions and a possible second lockdown, with recovery expected to take longer than in the resort segment. In Cuba, the company has gradually restarted operations with some tour operators given the positive evolution of epidemiological indicators.
About Melia Hotels International
Founded in 1956 in Palma de Mallorca (Spain), Meliá Hotels International is one of the largest hotel companies worldwide, as well as the absolute leader within the Spanish market, with more than 380 hotels (current portfolio and pipeline) throughout more than 40 countries and four continents, operated under the brands: Gran Meliá Hotels & Resorts, Paradisus by Meliá, ME by Meliá, Meliá Hotels & Resorts, INNSIDE by Meliá, Sol by Meliá and TRYP by Wyndham. The strategic focus on international growth has allowed Meliá Hotels International to be the first Spanish hotel company with presence in key markets such as China, the Arabian Gulf or the US, as well as maintaining its leadership in traditional markets such as Europe, Latin America or the Caribbean. Its high degree of globalization, a diversified business model, the consistent growth plan supported by strategic alliances with major investors and its commitment to responsible tourism are the major strengths of Meliá Hotels International, being the Spanish Hotel leader in Corporate Reputation (Merco Ranking) and one of the most attractive to work worldwide. Meliá Hotels International is included in the IBEX 35 Spanish stock market index. Follow Meliá Hotels International on Twitter @MeliaHotelsInt and Facebook meliahotelsinternational.