Spanish Brand CEOs Eye 2013 Global Expansion

Global expansion, an extensive reassessment of existing operations and renovating aging assets are the main strategies of Spain’s three major hotel chains as they strive to prosper in a daunting domestic market pummeled by an ailing local economy, according to executives.

“Last year was a very complicated one for the Spanish tourist sector,” Gabriel Escarrer, CEO and vice chairman of Meliá Hotels International, told a press conference at Madrid’s FITUR travel trade fair.

“But thanks to our expansion outside our home market and helped by our strong brands, 80% of our profit came from our business outside Spain, and we opened a hotel every three weeks in 2012,” he said.

With 350 properties totaling 90,000 rooms in 35 countries around the world, Meliá is Spain’s largest hotel group with such brands as Gran Meliá Hotels & Resorts, Innside by Meliá, Me by Meliá, Sol Hotels and Paradisus Resorts.

According to the CEO, the group estimates revenue of €1.4 billion ($1.9 billion) for 2012, or 5% above the prior year.

“Last year our (revenue per available room) was 8% above that of 2011, with hotel income up 6.4% and management fee payments increasing by almost 5%,” Escarrer added. “Our domestic properties account for only 20% of our income, but over the past two years, our resorts have been doing well.”

That 80-20 split between global and Spanish operations will be the same in the group’s expansion plans over the short term, with 41 hotels totaling 12,000 rooms in the pipeline for the next two years.

“We’re focusing our international efforts in the Asia/Pacific region and especially the main cities in China, Vietnam, Indonesia, Cambodia, Thailand and Myanmar (Burma),” he said, highlighting the group’s recent alliances with two separate Chinese partners, Jin Jiang International Hotels Company and local real estate giant Greenland.

Further growth in thriving Latin American markets, a favorite target for Spanish hotel groups, is also in Meliá´s sights, with new openings under consideration for Mexico, Brazil, Colombia, Peru and Cuba.

“We also want to expand in the English-speaking Caribbean with our Paradisus Resorts and looking further into the future, New York City and Miami,” the CEO told reporters.

In Europe, the group will consolidate its presence in major cities in Germany, France, Italy and the United Kingdom, while studying the introduction of its premium brands into the Persian Gulf market.

Escarrer described Meliá´s strategy for Spain as “extremely selective,” with additional opportunities in Madrid and Barcelona with the Innside by Meliá, Tryp by Wyndham and other brands under the umbrella of Wyndham Hotel Group, with which Meliá has a strategic relationship.

Last week in Madrid, the group opened its first Innside in Spain. The brand targets the young, tech-savvy business traveler and had previously been restricted to Germany. Another Innside is to open later this month in the Spanish capital.

“Spain remains important to us as it is the world’s fourth-biggest tourism destination,” Escarrer noted.

As Spanish tourists curtail their vacations at home and abroad, it is foreign visitors who have thrown the local industry a lifeline. In 2012, the Ministry of Industry, Energy and Tourism found that 58 million foreign tourists came to Spain, a 3% increase over the previous year and the third best year on record.

Once again, Britons led the influx at 13 million, followed by the Germans at 9 million and visitors from Scandinavia in third place with almost 4 million, according to figures released by the Ministry of Industry, Energy and Tourism.

At the same time, tourist spending in Spain set a new record of €56 million ($76 million), an almost 6% rise over the 2011 figure.

At troubled NH Hoteles, Spain’s second-largest hotel group and the third biggest in Europe with 400 hotels comprising 60,000 rooms in 26 countries that is aimed at the business travel sector, new CEO Federico Gonzaléz Tejera said he is still redefining a strategic plan for the company.

“I’ve been here a month, during which I’ve had the opportunity to adapt to the corporate culture and see what works and what doesn’t,” he said at the trade fair. “It will take a total of three months to come up with a strategy for NH, which I will then present to the board, probably in March.”

Saddled with a debt of almost €1 billion ($1.4 billion), NH reached a deal last year with its creditors to refinance 76% and vowed to shed hotels worth between €200 million and €300 million ($271 million and $407 million) to guarantee payments.

NH is also in talks with the U.S. private equity firm KKR, with Spanish press reports saying the latter could take a stake in the chain by purchasing a 15.7% share held by the debt-ridden BFA-Bankia saving bank valued at around €107 million ($145 million).

Pressed on the negotiations, Gonzaléz would only say they were “going well.”

With its focus on 4-star business properties, many in secondary Spanish cities, the chain is also looking to foreign markets for its future.

“NH has great potential, especially outside Spain, and so we are working hard to boost its strengths and transform the brand into the preferred choice of potential customers,” he said. “When a guest is reserving a room somewhere, I want them to ask: ‘Is there an NH there?’”

Gonzaléz said the group would concentrate on a broad and diverse portfolio with a stronger presence in major markets, with European expansion in the cards.

“We only have two hotels in London, for example, and that is an important market where we could grow, and we should also have a larger presence in Paris,” the CEO said. “We also want to explore opportunities in Mexico, Chile and Colombia, and in Turkey where the economy is booming but, we’re not there yet.

“This year will be a year of transition. We’ll be looking at each hotel to assess whether it is a strategic asset for us. There are some hotels in Spain, which we own or operate, that are not performing well,” he explained.

At vacation-oriented Barceló Hotels & Resorts, with 38,000 rooms in 140 hotels in 16 countries, renovating existing properties is the focus for this year after opening four new properties in Spain, the Czech Republic and Germany, and four in Italy, the group’s newest market, in 2012.

“This year, the chain has confirmed the opening of two new establishments, one in southern Italy and the other in Greece, and we are holding talks on new contracts, especially in the Mediterranean,” a Barceló press release said.

At the same time, six of the group’s most important hotels, four in Spain and two in Mexico’s Riviera Maya resort region, are to be renovated during the year, and the chain is fine tuning its “adults only” concept at a number of properties in Spain and the Dominican Republic.

Source: Hotel News Now