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Hotel Industry News |
Sunday July 6th, 2008 |
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Sol Meliá Reporst First Half 2007 Results |
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Earns 26.7% More In The First Half Of The Year And Maintains A Positive Outlook For The Summer |
The company is preparing a new Strategic plan together with an organisational transformation with greater emphasis on new business units alongside the hotel business organised around company brands
The company announces an agreement for development in Brazil with a leading local company and begins operations in Bulgaria with the addition of six hotels to the portfolio over a two year period. In addition, together with Talonotel, Sol Meliá has created a new independent company named Tradyso which will provide hotel distribution and sales services
Coinciding with the presentation of positive financial results for the first half of the year, the hotel chain Sol Meliá issued a report today to the Spanish National Stock Exchange Commission (CNMV) regarding certain issues of great interest which will have a fundamental effect on the future strategy of the company led by Gabriel Escarrer Juliá.
With regard to the financial results, Sol Meliá increased revenues by 9.4% in the first half of the year to 635.7 million euros. EBITDA (earnings before interest, taxes, depreciation and amortisation) grew by 7.1% to 148.4 million euros, while net profits reached 63.9 million euros, a 26.7% increase over 2006.
The increases in each of the three figures would have been 10.6% for revenues, 12.1% for EBITDA and 21.9% for net profits excluding the asset rotation activity carried out by the company. In the first six months of the year, Sol Meliá completed or committed to the disposal of real estate assets valued at 68 million euros, a figure which will allow the company to achieve its commitment to ending the year with an asset rotation volume of 100 million euros.
Specifically, Sol Meliá sold the Hotel Tryp Hidalgo in Ciudad Real, Spain and also disposed of land in the Dominican Republic and the 15% and 17.4% shares it held in the Paradisus Playa Conchal in Costa Rica and Paramount Hotel in New York, respectively.
The results announced for the first half of the year are a sign of the positive trends in the company's core business and have been achieved largely thanks to the favourable performance of city hotels in Europe and the vacation resorts in the Dominican Republic. The positive results in these two areas have compensated the effects of the lack of snow in ski resort hotels in winter and the effects of an early Easter which delayed the opening of seasonal hotels.
Sol Meliá also maintains a positive outlook for the current summer in Spain based on the results which have already been seen in the most popular resorts and the reservations on the books for August and September. Of particular significance is the demand in the Spanish market for both the Canary Islands and other destinations, and the response of the British market for Spanish destinations in general.
In the Americas the first half of the year has enjoyed the positive impact of the promotions carried out in Europe for hotels in the region, while city hotels operated by the company have also benefited from several major events and congresses.
Together with a positive performance by the Sol Meliá Vacation Club (SMVC) which has seen an increase of 51% in revenues in the first six months of the year compared to the same period in 2006, and also the encouraging results of asset rotation, the company continues to expect to achieve the objectives defined for the full year.
On the financial side, the company also announced the signature of a 5-year syndicated loan for a nominal amount of 200 million euros to refinance the syndicated loan taken out in December 2004 on more favourable terms and thus reduce the cost of the debt by 20 base points while increasing the due date of the loan and that of the overall debt of the company.
In recent weeks, it is precisely the positive news on company debt which has brought about an upgrade in the Standard & Poor's credit rating outlook for the company from 'stable' to 'positive', leaving the rating at the BB+ Positive level. This upgrade is in line with the upgrade already made some months ago by the Moody's agency which rated the hotel chain as investment grade Baa3 with a stable outlook.
New organisational structure and business model
The company has also announced today the ongoing changes to the future organisational and operational model which will define the Group structure over the coming years to align the organisation behind the objectives of the new Strategic Plan 2008-2010 scheduled to be presented in February. The strategies contained in the plan focus on enhancing brand equity, customer knowledge and service, the development of asset management, talent management and empowerment, and the priority of sustainability in all company activities.
An innovative organisational model will be managed on the basis of maximum employment stability and will also focus on the two new business areas of the Vacation Club - a successful development of the Timesharing concept - and Asset Management. The third business area, the traditional hotel operations business, will be organised around each of the different company hotel brands rather than the geographical regions used to date.
The Chairman of the Sol Meliá Group, Gabriel Escarrer Juliá, has announced his intention to progressively transfer to all of the organisation through his sons his extensive hospitality experience and know-how, and has also declared a desire to become increasingly involved with one of the strategic priorities of the Group in the area of sustainability -including social, cultural and environmental responsibility--, a decision which underlines the firm commitment of Sol Meliá to becoming a model company in regard to sustainable and responsible tourism.
Sebastián and Gabriel Escarrer Jaume have also announced their decision to permanently share the leadership of the company, occupying the same positions and with the same level of responsibility. The two CEOs believe that the current Joint Vice Chairman & CEO structure is the optimum expression of their complementary roles and their commitment to contributing maximum value and stability to the company.
Development in Brazil and Bulgaria and improvements in hotel sales and marketing
In the same report, Sol Meliá has also announced the addition to the hotel portfolio this year of three hotels in Bulgaria, to which three additional hotels will be added next year. These will be the first hotels for Sol Meliá in Bulgaria and will eventually total 2,700 rooms.
Sol Meliá has also announced additional advances in hotel development in Brazil after having reached an agreement with two local companies, Gafisa and Alphaville, leaders in constructions and real estate promotion, for the joint development of the hotel and residential complex the chain is working on in Salvador de Bahía (Brazil), one of the areas with the greatest potential for growth over the coming years.
Finally, Sol Meliá also reported to the CNMV the creation of a new company named Tradyso, focused on hotel reservations and distribution technology, together with the sales and marketing company Talonotel. The new company will allow associated hotels instant access to all of the major hotel distribution channels all over the world (central reservations offices, GDS, Internet, integration with major travel agency networks).
Tradyso is a 50-50 joint venture between Talonotel and Sol Meliá and will begin operations in September out of its head offices in Madrid.
Financial results first half 2007 (million euros)
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