Gabriel Escarrer Julià: “I can assure you that we have been through very difficult crises and situations over more than six decades in business, but never has their impact been so great as to force us to close practically 100% of our hotels simultaneously.”
Gabriel Escarrer Jaume: “We are on the verge of a global recovery which Meliá intends to leverage to grow, recover value and then multiply that value in the future for our shareholders, partners, employees, customers, suppliers, and society in general. After 15 months of negative results, we expect to achieve a positive EBITDA from June onwards”.
After the Chairman and founder, Gabriel Escarrer Juliá, described the commitment of the company to its stakeholders in the face of the greatest challenge in the history of tourism, the Executive Vice President and CEO of Meliá explained the key factors behind the resilience that has characterised the company’s response to Covid, and, above all, the progress made in digitalisation and operational efficiency. According to the CEO, in normal business conditions and with revenues similar to those prior to Covid, this progress would allow a significant improvement of around 300 basis points in its operating margin.
Meliá Hotels International held its Annual General Meeting today, chaired by Gabriel Escarrer Juliá and with shareholders attending in person or online in compliance with Covid-19 protocols and corporate governance recommendations.
The Annual General Meeting agreed to renew four directors, including the Executive Director of the company, Gabriel Escarrer Jaume, and to appoint Ms. María Antonia Escarrer as a proprietary director, replacing the company Hoteles Mallorquines Consolidados, S.L. The annual accounts for 2020, the proposal for the application of results (without a dividend payment) and the new Board Remuneration Policy were also approved for 2022 to 2024.
The non-executive Chairman of the company explained the most important impacts of Covid-19 on the tourism industry, highlighting the resilience of Meliá, which he attributed in part to the significant strengths the company had when the pandemic began, particularly its financial solvency, the strong investment it had made in renovating and repositioning its hotel assets, its commitment to digitalisation and its effective crisis management.
65 years as Chairman
Escarrer Juliá reminded attendees that MHI is celebrating its 65th anniversary this year, before highlighting the role and responsibility of family businesses – which the World Survey carried out by PWC estimates contribute more than half of global GDP – and how family values have driven the responsible and collaborative management the company has developed with its employees, customers, suppliers, hotel owners, shareholders and the third sector throughout the 15 months of the pandemic.
He summarised the support offered by Meliá to employees and its efforts to preserve employment, encourage teleworking and promote training and especially online training, while also accompanying its employees on an emotional level and protecting their health in all of their different workplaces. He then described the cooperation with the owners of many of the hotels operated by the company which has led to significant savings given the closure of hotels and absence of revenue, and how the company has complied with all of the subsequent agreements and commitments. With regard to suppliers, Escarrer Juliá thanked most of them for their understanding and empathy, as well as for the solidarity shown by those that offered products and services free of charge to hotels that Meliá offered to be converted into hospitals.
He also highlighted the company’s relationship with and proximity to its customers, ensuring maximum flexibility and support, maintaining and even extending the benefits for loyal customers despite the decrease in sales, leading to 4% growth in membership of MeliaRewards in 2020 to a total of 13.5 million members. Escarrer thanked investors and shareholders for their trust and confidence and promised them that the company would recover and increase its valuation after the crisis. Despite continuing high volatility, he also emphasised how the market has recognised the value of Meliá Hotels International, with the share price recovering after its initial sharp drop and maintaining a stable and positive trend, which is expected to continue as the recovery kicks in.
The Chairman ended his speech with the commitments of the company to society, the victims of Covid and essential workers, as well as the progress made in company strategy to combat climate change, despite the setback in the global environmental agenda caused by the health emergency. In this regard, he mentioned the use of 18 hotels as centres for quarantines or for essential workers, as well as donations and other types of support for employees in developing countries. He also expressed his satisfaction with the company being named the Most Sustainable Hotel Company in the World in 2019 and the second most sustainable company in 2020 in the Corporate Sustainability Assessment published by Standard & Poors Global, and for its inclusion among the “European Climate Leaders“ by the Financial Times and the Statista consultancy.
Prudent management and strategic adaptation
Gabriel Escarrer Jaume began his speech with an emotional tribute to the 11 company employees who lost their lives due to coronavirus in Spain, Mexico, Brazil and the Dominican Republic. He then went on to present the negative result obtained in 2020 and the first half of 2021 due to the major impact of the pandemic on tourism, delays in the distribution of vaccines and a lack of international coordination. The Executive Vice President and CEO of the company regretted not having been wrong when he predicted at the beginning of the crisis that tourism would not recover until the third quarter of 2021.
Along with the competitive advantages mentioned by the Chairman, the vision of the company CEO and his ability to react allowed Meliá to implement a highly effective contingency management system focused on key areas to ensure resilience: the safety of employees and customers, the preservation of employment and talent supported by furlough systems, and the liquidity and continuity of the business.
After recalling the key achievements in each of these areas, Escarrer explained how the company has prepared itself for the new post-Covid tourism age through a plan known as “The Day After”, deciding to take advantage of the circumstances to accelerate a reset of the business in terms of digitalisation, efficiency and sustainability. The progress made in digitalisation, the evolution of the organisation towards a more digital and efficient structure, and sustainability, allowed Escarrer to affirm that in normal business conditions and with revenues similar to those achieved before Covid, the company would see an improvement of 300 basis points in its operating margin.
Escarrer also explained the transition from a contingency management situation to a new strategy designed for the post-Covid environment and until revenue levels reach those of 2019 (which experts expect around 2024). The strategy prioritises creating an even more resilient company through growth in profitability and a consequent reduction in corporate debt.
Based on the 2030 strategic vision declared in the 2020 Strategic Plan, involving “the aspiration to position ourselves among the world’s leading hotel groups in midscale and upscale hotels, consolidating our leadership in the resort and bleisure markets and becoming a benchmark for excellence, responsibility and sustainability”, Meliá will focus over the coming years on boosting its sales and distribution capacity, which, as the pandemic has shown, is one of its most significant competitive advantages. At the same time, it will continue to seek high- quality, sustainable and profitable growth in its portfolio, driven by strong brands and a new “affiliated by Meliá” franchise model which allows third-party hotels to be added through highly flexible partnerships, something considered fundamental given the current market conditions.
Regarding company expansion, he stated that 11 new hotels have been signed up to date in 2021, a figure which is expected to more than double over the year. All of the hotels have been added under “asset-light” formulas and all of them in resort destinations, the segment that is expected to be the quickest to recover after the crisis. Escarrer praised the launch of efforts to grow through franchises and “affiliated by Meliá” hotels, whose versatility and flexibility have allowed growth in holiday destinations in Spain, Greece and Italy even during the crisis. He also emphasised the positive evolution of the Innside by Meliá brand, which continued to add hotels in cities such as Luxembourg, Amsterdam or Newcastle, as well as featuring in hotel rebrandings in Madrid and Mallorca. Finally, he affirmed that company strategy will continue to focus on its hotel management model or the “Meliá system”, and on the sale of experiences and “total revenue” as drivers of greater profitability.
The prelude to recovery
The Meliá CEO insisted that caution is still required given the continuing low visibility surrounding international travel and the fragility of the health situation in certain markets, although he insisted that the start of a “consistent recovery” is expected for the second half of this year. To support this, Escarrer quoted international air traffic data, the growth in bookings after the end of the State of Emergency in Spain (already 50% above the same period in 2019), and the strong performance in other markets such as Germany or France. He also highlighted the changing trend in the number of cancellations, which generated negative growth in sales during some periods of the pandemic.
Meliá’s exposure to the resort segment and its geographical diversification, has once again helped create a protective shield, as destinations such as China, Mexico or the Dominican Republic have long since recovered the booking levels they had prior to Covid, with resort hotels recovering far quicker than any other segment. Escarrer announced that if the recovery continues as expected, the company will not be consuming cash from July onwards and will once again begin to generate a positive cash flow.
A year of responsibility
In recent years, the leader of Meliá Hotels International has also been leader of the Exceltur Tourist Alliance, and also used his speech to make an appeal to both Spanish and European institutions to support public-private partnerships given the vital role that both will have in the recovery of the tourism industry after the pandemic.
After recalling the guidelines indicated by the Secretary General of the United Nations, Antonio Guterres, for the sustainable and competitive recovery of the tourism industry, similar to those that Exceltur has also been demanding, Escarrer regretted that the Independent Fiscal Authority has confirmed that aid to companies in Spain has generally been among the most restrictive and most delayed in Europe. Escarrer once again requested a Business Rescue Plan for tourism in the short term from the Spanish authorities, and an investment plan in competitiveness and sustainability for the medium and long term, in which the European Union Next Generation Funds will have to play a fundamental role.
As industry leaders, Escarrer insisted that Meliá has shown its responsibility and been involved from day one, not only in internal contingency management, but also in supporting society and defending of the industry before public authorities.
Finally, the Meliá CEO reminded shareholders that while he always said that 2020 would not be a year for thinking about profits, but rather to demonstrate the company’s resilience, preserve its value and prepare for the future, 2021 will be the year in which we will see a change in trends and the beginning of the recovery.