Meliá Posts Double Profits in the First Quarter of 2014

The first quarter of 2014 has confirmed the positive trends in underlying EBITDA that Meliá Hotels International had been seeing since last year, and may prove to be a real turning point in the behavior of Spanish domestic demand if it continues in future quarters.

With impressive numbers which include net profits which are double the amount of the previous year, or a 10% increase in RevPAR, the company hotel confirms it has entered a new stage of growth and increased profitability

Meliá earned 8.2 million euros between January and March 2014 , representing an increase of 99% over the same period in 2013. Revenues reached 316 million euros, up 12% on the previous year, and EBITDA not including capital gains from asset sales increased by 22%, leading to a significant improvement in profitability and an increase in hotel EBITDA margins of 136 basis points.

The evolution of the global business, with improvements in all regions, is consistent with the positive trends in international tourism, and particularly in Spain, where the exceptional progress seen in the resort hotels  thanks to international demand now combines with an upturn after several years of negative numbers in domestic demand for Spanish city hotels, dependent on domestic, private and business consumption.

Meliá Hotels International attributes a large part of the results to the growth in its most important sales channel, melia.com, where on-the-books reservations are 40% ahead of the same period last year, and which points towards around +25% growth for the full year, and also the decision of the Company to purchase the remaining 50% of the Gran Meliá Palacio de Isora, an asset which is currently achieving record results, as it will be amongst the major contributors to the Company's Ebitda, and the first in Spain.

Among the challenges, Meliá explains how its net debt rose by 84 m? in the first quarter 2014; 1) the consolidation in accounts of the "Colón Verona", the Company that owns the Gran Meliá Colón (Seville) according to the IFRS10 accounting standard, meant the addition of 29 million in debt, and 2) the continued devaluation of the Venezuelan Bolivar that had an impact of 20 million euros, added to the coincidence of the 3rd Quarter with the months in which cash generation is structurally lower. Company is committed to reducing its debt during the year via asset rotation, ( with a 100-120 m? goal) by the possible conversion of the Convertible Bond - 200 m?- by December 2014, and of course,  also via a better business performance.

Americas: excellent first quarter in which RevPAR grew by 17.3%, primarily due to the business performance in Mexico (+25.3 % in RevPAR compared to the first quarter of 2013). The main contributors to the result were once again the Paradisus La Esmeralda and Paradisus La Perla resorts in Playa del Carmen which improved EBITDA by 20% over the previous year despite increases in value added tax. The resorts expect to end the year with a profit close to $28 million. Meliá also highlights the positive evolution of the Paradisus Cancun, one year after being its rebranding under the Paradisus brand.

The Dominican Republic achieved a 7.4% increase in RevPAR, with a positive performance from the resorts in Punta Cana and particularly the The Reserve boutique hotel, at the Paradisus Punta Cana (RevPAR +23%), as is the case with The Reserve at Paradisus Palma Real, which also saw a significant improvement .

The latest addition to the hotel portfolio in America, the Meliá Nassau Beach, the company's first hotel in the English-speaking Caribbean, has also achieved very positive figures and is strengthening its position in the market month after month. In December, the hotel will be renamed "Meliá at Baha Mar" as it is part of the largest tourism and leisure complex currently under construction, "Baha Mar" .

EMEA: the owned, leased and managed hotels in the EMEA division posted positive figures, with owned and leased hotels increasing RevPAR by 11.6%. This excellent global result stems from improvements in the hotels in Paris with a 9.7% RevPAR increase, hotels in Germany with a 6.1% increase thanks to the positive impact of the opening of the Innside Dusseldorf Hafen and the hosting of important trade fairs in Dusseldorf, and the UK, where RevPAR grew by 7.1% partly due to the sterling exchange rate versus the Euro. In pounds sterling the improvement in RevPAR would be 3.2%, largely thanks to improvements in individual travel, particularly amongst key accounts and transient programs.

ME Europe: Meliá Hotels International reports its ME hotels in European cities or resort destinations and the three Innside Madrid hotels separately (the only hotels that are reported separately from the hotels in the EMEA or Spain regions).

Thus, the ME hotels in Europe, currently ME Madrid and ME London (to which will be added this summer the ME Mallorca and the ME Ibiza, as well as the ME Dubai and ME Milano in 2015) saw a dramatic rise in RevPAR of 48.8% thanks to the figures achieved by ME London, with the second highest RevPAR in the whole Company after an increase of 110% in the last quarter. ME Madrid also achieved positive figures thanks to the innovation regarding F&B offering and wellness experience.

Mediterranean: RevPAR in the Spanish resorts increased between January and March by 24.3% thanks to the positive performance in both price (+11.3%) and occupancy (+11.7%). The key to this result was mainly the outstanding results in the Canary Islands, even though Easter did not come until April 2014.

Regarding the results of the Canary Islands, which exceeded all expectations, the Company attributes the numbers to the increasing attraction achieved by Meliá of alternative source markets that were not "traditional" in the Canary Island, such as the Scandinavian, the French and the Belgian, and also to the successful yield management policy through Melia.com, without forgetting the conflicts in Egypt. Meliá remains confident that the situation will stabilize and that the Canary Islands and Spanish destinations in general will keep progressing on their own merits, thanks to their good performance and their competitive advantages.

Spanish cities: up to the end of April, thus eliminating the impact of Easter falling in April, the RevPAR of Spanish city hotels increased by 5%. Even without eliminating this bias, i.e., looking at results from January to March, RevPAR for city hotels in Spain, including the 7 upscale and luxury hotels in Spain which the Company reports in the EMEA region, increased by 1.6%, with positive numbers in most cities, Madrid included (although challenges remain in hotels next to Madrid Barajas airport, highly dependent on air crews and layovers).

Equally important is that Meliá has seen a gradual improvement in all the Spanish urban Hotels' results month after month, with RevPAR falling by 07% in January, and already growing by 1% in February, and by 4% in March.

Source: The Wall Street Transcripts