Sol Meliá has announced results for the first nine months of 2003 reflecting a positive performance in resort hotels over the summer season, particularly in Spain and the Caribbean. Over the period, net profits grew to 41.8 million Euros, an increase of 33% over 2002.
Company earnings before interest, taxes, depreciation and amortisation (EBITDA) reached 179.5 million Euros, 7.1% less than the previous year, while revenues for January to September, 2003 were 761.6 million Euros, a 2.9% decrease over 2002. Both figures have been affected by the strong appreciation of the Euro with respect to the US Dollar. Ignoring the currency effects the same figures would have changed by 0% and 5%, respectively.
The company has seen general improvements as the year has gone on, noting that EBITDA for the first quarter, affected by the war in Iraq, showed a 26.1% decrease, reduced to a 13.5% decrease in the second quarter and a 7.1% decrease in the third quarter.
With regard to the performance by business area, the companys European Resort Division has seen the most positive results, with a RevPar increase of 3.5%, confirming a positive performance of resort hotels over the summer, particularly in Spain and in the Balearic and Canary Islands within Spain.
Although the third quarter is the least relevant of the year for city hotels, the companys European City Division continued to be affected by a general slow down in activity and by the cancellation of congresses and conventions that has affected most European capitals and major cities all year. RevPar decreased by 4.7%.
According to a report by Deloitte & Touche on the future of the European city hotel business, RevPar for the industry as a whole has decreased by 9%. The company has sought to compensate this reduction through an increase in direct sales made through solmelia.com. Website revenues have grown by 254% over the first nine months of 2003.
With regard to the Americas Division, RevPar fell by 20.4% due in large part to the appreciation of the Euro with respect to the US Dollar. Nevertheless, recovery is becoming more apparent in destinations such as Mexico and the Dominican Republic, where RevPar would have increased by 4% and 17% respectively if the currency effect were ignored.
2003: a year for major alliances
2003 seems to be closing with the international travel industry on the path to recovery after two years of difficult trading conditions. For Sol Meliá, this improvement in the outlook for the business has also been accompanied by a new impulse to company growth and innovation.
After two years focused on the consolidation of the hotel portfolio based on a strict application of brand standardisation and a much more selective, profitable and sustainable growth strategy, the Spanish hotel company has now turned its attention to opportunities for development through strong alliances with major travel partners and the creation of new hotel products and services.
* New distribution channels and new markets
Growing the company can either be done by adding more hotels or by increasing revenues from existing hotels through using new sales techniques or reaching more potential customers.
Sol Meliá has most recently opted for the second route to growth and hopes to achieve this in part thanks to agreements reached with two of the most important companies in the world of hotel distribution: lastminute.com, the European leader in the online travel market, and Cendant Corporation, the worlds largest travel company and market leader in hospitality, car rental, time share and travel reservation processing. The partnerships will also allow Sol Meliá far greater access to new and important markets, particularly the United States.
* Creation of new hotel concepts
After almost 50 years in business, Sol Meliá is still a very innovative company when it comes to the creation of new hotel products. To do so the company has been fortunate to work with some of the heavyweights in the travel and leisure business, such as Warner Bros. in the development of a new range of Sol Flintstones theme hotels, Cendant Corporation in the promotion and development of the Meliá Vacation Club timeshare business, and the Rank Group in the joint venture development of Hard Rock Hotels in America and Europe.
All of the mentioned initiatives have been welcomed by financial markets, leading to a 65% increase in the company share price for the year to 30th. September.
Sol Meliá has also successfully placed a 150 million Euro exchangeable bond issue, thus successfully completing the refinancing program for short and medium term debt.
Each bond has a nominal value of 10,000 Euros, a tenor of 5 years and an annual coupon rate of 4.3%, thus achieving an exchange rate set at 11.90 Euros, representing an issue premium of 80%, one of the highest available on the market.
Portfolio growth in the first three quarters of 2003
Over the first three quarters of 2003, Sol Meliá has added 12 new hotels (2,545 rooms) to its portfolio, reaching a total of 335 hotels with 80,505 rooms. On 30th. September, the company had already also signed agreements to add an extra 20 hotels (4,449 rooms).