FIRST HALF RESULTS 2014

Transcription

1 FIRST HALF RESULTS 2014

2 meliahotelsinternational.com

3 FIRST HALF 2014 (Million Euros) jun-14 jun-13 REVENUES 703,9 661,6 6% EBITDAR 165,5 169,9-3% EBITDA 113,8 119,7-5% EBIT 66,1 93,4-29% TOTAL FINANCIAL PROFIT (LOSS) 59,3 61,0-3% EARNINGS BEFORE TAXES 4,3 15,6-72% RESULT FROM CONTINUING OPERATIONS 3,4 11,6-70% RESULTS FROM DISCONTINUING OPERATIONS -0,3-0,4 25% NET PROFIT 3,2 11,2-72% NET PROFIT ATTRIBUTABLE 6,3 10,3-39% EBITDA ex capital gains 98,5 73,1 35% Operational Ratios REVPAR 62,1 56,0 11% EBITDA MARGIN 16,2% 18,1% -193 bp EBITDA MARGIN (ex - capital gains) 14,3% 11,9% 242 bp Meliá leadership in the global resort industry allowed further strengthening of the hotel business performance in Q2, achieving 11% RevPAR growth and leading to an EBITDA improvement of 35% excluding capital gains Business performance: Overall improvement of margins The Company focus on the Revenue Culture allowed a RevPAR increase of 11%, mainly explained by increased prices. Highlights included the evolution of the resorts in the Mediterranean and Caribbean, and particularly the performance of recent incorporations such as the Paradisus Resorts in Playa del Carmen or the Gran Meliá Palacio de Isora. Meliá s expertise in the leisure segment also benefited the performance of city hotels, maximizing their leisure component and allowing hotels in Spanish cities to achieve RevPAR growth of 6%. The P&L further strengthened, generating a 35% improvement in EBITDA without capital gains, leading to an increase in margins of 242 bps. Among the key drivers behind these positive results are the consistently positive evolution of melia.com (+29%) and the contribution of the Meliá loyalty program. Debt management Net debt decreased vs March 2014 by 80 mn to mn, explained by the higher contribution of all business units, cash inflows from asset disposals, and the recovery of outstanding amounts with associates. Mention should be made of a) the incorporation of 29 million euros in debt held by the Company Colon Verona S.A., owner of the Gran Meliá Colon, after its consolidation on 1st January 2014 (in accordance with IFRS 10); and b) the devaluation of the Venezuelan Bolívar, which had an impact of 20 million. The Company maintains its commitment for 2014 to deleverage the balance sheet, partially thanks to asset rotation (for a minimum of million), the improvement of the business performance and the possible conversion of the 200 million Convertible Bond which matures in Dec Development strategy In 2014 the Company has signed 12 new hotels, of which 3 have already opened: the Sol Taba, Sol Dahab and Tryp Estepona Valle Romano. The latest incorporations, the Gran Meliá Ulaanbaatar and the Meliá Cartagena bring the Company to a total pipeline of 61 hotels (16,500 rooms). In light of the strategy focused on shared growth, Meliá announce the signature of a framework agreement which provides the construction of the 5 hotels in Venezuela by Franco Biocchi Zurita and their management by Meliá. Under this agreement, the first hotel already included in Melia s pipeline is the the Innside Punto Fijo, that will open in The Company is confident of achieving the goal of new contracts in 2014, all them under low capital intensive formulas, and all them outside Spain, with special emphasis on emerging markets. Outlook 2014 The Company remains confident about achieving a summer season above last year s figures, benefiting from the consolidation of projects such as Calvià Beach, Katmandú Park & Resort, the opening of the ME Mallorca and ME Ibiza (all them in the Balearic Islands), and the contribution of the Gran Meliá Palacio de Isora (Tenerife). Given the positive outlook, guidance points towards a RevPAR increase for the first 9 months and year end of a high single digit growth, mainly explained by price increases. 3

4 Gabriel Escarrer, Vice-President & CEO of Meliá Hotels International We are pleased to release solid results for the first half of During the second quarter, we continued to generate strong results in the hotel business, mainly thanks to the sustained economic recovery in many markets around the world, favorable industry trends in the resort segment worldwide -and more particularly in LatAM and southern Europe-, and a preference for our brands which has led to RevPAR growth in Meliá of 11%. The quality of this RevPAR growth is also particularly significant given that it is largely explained by price increases. I am thus delighted to inform stakeholders that Meliá has registered RevPAR growth in every quarter over the last 4 years, with the second quarter of 2014 exceeding our expectations and driving even stronger operating results and margins, showing an underlying EBITDA growth of 35% and a 242 basis points margin improvement. In line with our strategy to focus on reducing the capital intensity of the business, given the interest of global demand in prime hotel assets, and taking advantage of Meliá s leadership of the resort industry, the Company has had the opportunity for further asset disposals at strong multiples. This has allowed the Company to strengthen its balance sheet, a process that will be consolidated by the impact of the conversion of the Convertible Notes during the year. We continue to remain focused on growing our footprint around the world with high quality hotels under our 7 brands. We currently have over 16,000 rooms in our development pipeline, an almost 10% increase over a year ago, highlighting recent incorporations such as the ME Milan or the Innside New York, reflecting hotel owners confidence in our brands and operational strength. In this regards, the loyalty of our guests, our global sales force, our guest-facing technology and our local teams enable us to deliver even greater value to hotel owners. Looking ahead, current trading trends make us confident about the rest of the year, especially taking into consideration that the summer season in the Spanish resorts is expected to generate results above last year, partially thanks to the expected recovery of domestic demand, and especially due to the excellent contribution of melia.com, which has grown by 29% YTD versus the same period in Results already achieved, emphasize the success of the Company in the development of a distribution strategy focused on strengthening our own channels, customer information, and innovation through the launch of new products and services that allow us to avoid hotel commoditization. We remain committed to increasing RevPAR, growing our distribution globally and controlling costs in order to drive earnings and shareholder value, with guidance still foreseeing RevPAR growth for the third quarter and for the full year 2014 of mid to high single digit growth largely explained by prices. 4

5 1. INFORM ON THE HOTEL OPERATIONS: EVOLUTION PER AREA AMERICA America has registered an excellent first half, maintaining in the second quarter the double digit growth seen up to March, leading to a 1H2014 RevPAR improvement of 19.1%. By country, the best performance was seen in Mexico, where RevPAR saw a 44.7% increase compared with the same period in 2013, partially thanks to the success of the Paradisus resorts in Playa del Carmen, the second largest contributor to the Company in terms of EBITDA. During the 2nd quarter of particular note was the evolution of the Paradisus La Esmeralda which achieved near +30% RevPAR growth up to June. The hotel focuses on family travel and took advantage in the second quarter of the school holiday season, achieving improvements in ARR in April greater than 30% (in US dollars). On the other hand, La Perla has a high season period that is different to La Esmeralda, more focused on Business Groups-, and has registered an improvement in RevPAR of 9% year to date. At the operating level, the success of the project is reflected in their contribution to the P&L which was almost 30% above last year at the EBITDA level, exceeding the figures estimated in the project feasibility plan, and allowing the Company to maintain excellent guidance for the full year, even taken into account the impact of the rise in VAT in the Mexican Caribbean area and the fact that price negotiations were already closed in promotions already launched and group contracts already signed. Also of note is the contribution of the Paradisus Cancun (RevPAR +22%). It should be considered that the hotel was rebranded in December 2012, making 2013 a year of transition. In 2014, now the Paradisus brand is better positioned, the hotel is registering very strong figures, with an improvement at the EBITDA level up to June 2014 that was 50% above last year. Equally good was the performance of the resorts in the Dominican Republic, where RevPAR improved by 9.8%, strengthening the positive trend seen in the first quarter partly due to: a) a higher contribution from groups in the Paradisus Palma Real after the construction of a new convention centre and; b) the impact of the launch of the new The Level Adults Only in the Meliá Caribe Tropical, which has generated significant price increases. All the above mentioned offset the poorer performance of the hotel in Caracas (Venezuela) (Q %; 1H +12.6%), impacted by the social unrest together with the economic situation in the country, leading to a drop in occupancy levels. In terms of Available Rooms (-14%), the evolution is explained due to the disaffiliation of the Meliá Mexico Reforma (Mexico) after its disposal last December On the evolution of the hotels under management, also of note is the evolution of Meliá s first hotel in the English-speaking Caribbean, the Meliá Nassau Beach, which is registering very positive figures above expectations. In this hotel, as a part of the project Baha Mar, the Company has begun a refurbishment which is expected to be finished in December this year. NOTE: We inform you that the operating results of the hotels Meliá Puerto Vallarta and Meliá Cozumel have been transferred with retroactive effect from January 1, 2014 to the Club Meliá business, which will now exclusively operate both hotels. You can find more information about the change in the Club Meliá chapter. ME EUROPE RevPAR increased 16.7%, thanks to the contribution of the ME London (RevPAR +47%) which up to June had the second highest RevPAR and Rates of all the hotels in the Company, proving its strong positioning in the market thanks to Company efforts to make it a benchmark for the hotel industry in London. In this regards, it is worth mentioning that during its second year of operations, the hotel has recovered more than 25 points in RGI (Revpar Penetration Index) when we compare with its competitive set due to an important improvement on MPI (Market Penetration Index). Melia.com made a very positive contribution to results, with the ME London the third highest ranking city hotel by sales. Also of note is the success of the hotel F&B facilities, a result of the partnerships with some of the world leaders in F&B. Regarding the evolution of the hotels in Spain, the ME Madrid hotel also registered positive figures for the second consecutive quarter, positively affected by the lobby and F&B renovation which is achieving very positive results thanks to the agreement with the Tragaluz Group and the launch of a boutique wellness centre, but also due to a change in sales strategy seeking greater volume in line with the progressive recovery of the market. Following the successful launch of the ME London in March 2013, the ME brand will now grow its ME Resorts in Europe with two openings in the Balearics. On 15 May the Company opened the new ME Mallorca (before Sol Beach House), included in the Calvià Beach project, while on 15 June it opened the ME Ibiza (before Sol S Argamassa). On the ME Mallorca evolution, the Company is proud to announce that during its 2 first months of operations, the hotel has doubled the RevPar achieved during the same period last year, with the forecast for the third quarter even better. At the same time, the rebranding has allowed the hotel to achieve a healthy customer segmentation -with a higher contribution of online channels (including both OTAs and melia.com)- and greater customer diversification, with a higher contribution from alternative feeder markets. News from ME Ibiza is also very positive, achieving in June and July figures above forecasts thanks to its excellent rate positioning, and aiming to become one of the top Meliá hotels in the ranking of ARR. In this regards, the hotel became part of The Leading Hotels of the World: the first hotel to be admitted in Ibiza and the third in the Balearic Islands. Available rooms increased by 24% after the rebranding of the ME Mallorca and ME Ibiza. 5

6 EMEA In owned and leased hotels in EMEA, RevPAR increased by 3.8%, fully explained by the price improvement (+3%). Note that after 4 quarters affected by a change in the perimeter of the EMEA region in Q some hotels previously included in Premium Europe were reclassified as EMEA- now the comparable figures of EMEA are covered by the same scope. By region, the main highlights are the following: a) Germany: The Company recorded positive figures (+4.3%) after the hosting of several trade fairs which had a significant impact. The incorporation of the Innside Wolfsburg last June, and especially the Innside Düsseldorf Hafen in September 2013 also contributed positively, with the results of the latter hotel above Company expectations and becoming one the main benchmarks in the city. b) United Kingdom: registered good figures (+7.4%), partially helped by the changes in sterling exchange rates, mainly due to the improvement in the Individual traveller segment, especially Key Accounts and Transient Programs. c) Paris: maintained a positive trend (RevPAR +8.7%) despite the impact of the increase in the VAT (from 7% to 10%) which negatively affected the whole hotel industry in Paris. d) Italy: Registered a slight drop due to the impact of the Gran Meliá Rome hotel, explained by the business generated by the naming of Pope Francisco in In any case, it is important to recall that the segmentation of the Gran Meliá Rome is quite different from the rest of Meliá hotels in Rome, with the contribution of the leisure segment more significant. In this regards, prospects in the hotel remain strong with a positive third quarter forecast. When excluding the Gran Meliá Rome, RevPAR improved by 2.6%. To a lesser degree, of note is the better evolution of the Meliá Athens in Greece (RevPAR +34.3%) affected in 2013 by the political instability in the country, and the positive contribution of the Meliá Vienna, which during the first months of operations is achieving positive Operating Results, above its feasibility plan, and a satisfying rate positioning in the market. Regarding the hotels in Spain, included in the EMEA division, they also registered improved performance also impacted by the consolidation from January 1st of the Gran Meliá Colón (Seville) (in accordance with the IFRS 10) and Gran Meliá Palacio de Isora (Tenerife). The latter hotel registered an improvement in RevPAR of 18% and an improvement of 23% at the EBITDA level reaching 7 million euros up to June 2014-, becoming the largest EBITDA contributor in Spain and the top seller through melia.com, a channel that now generates 50% of total sales of the hotel. Available rooms increased by 16% mainly due to the incorporation during the period of the Innside Düsseldorf Hafen and the Meliá Vienna, together with the consolidation of Gran Meliá Palacio de Isora and Gran Meliá Colón. MEDITERRANEAN RevPAR in the Mediterranean grew by 17.4%. Particularly relevant was the increase in prices which explained 9.2% of the growth, mainly due to the success of the Company with the implementation of an improved Revenue Management strategy in the light of the new Company Revenue Culture. The Company is happy to announce that, despite the fact that contribution of the second quarter is not so significant in the whole year, Meliá has achieved positive figures in all destinations in 2Q, reaching double digit growth in RevPAR in all cases. Especially relevant, as was the case during the last quarter, was the evolution of hotels in the Canary Islands. Also worthy of mention is that the second quarter has been affected by the Easter holidays, generating more than 27% of RevPAR growth in the month of April. Analysing the behaviour of the different markets, in 2Q there was a slowdown in Russian arrivals, -due to the devaluation of the Russian Rouble and the instability in the country- which in 2014 may impact the Balearic Islands. However, on the other hand, the Company saw more positive evolution in the domestic market. Meliá Hotels International continues to make progress in its strategy to upgrade and reposition its brands and products being an example the re-launch of the Sol Hotels & Resorts brand, -leader in the resort segment-, with the creation of innovative concepts that aim to reinvent the traditional sun and beach experience, enhancing the customer value proposition and adapting to an increasingly demanding and segmented customer base. This rejuvenation aims to generate further growth for the brand in key vacation destinations including Spain but also internationally, improving its attractiveness and competitiveness. Within this framework, and in light of the Management Model in Meliá Hotels International, should be included the Calviá Beach and the Katmandú Park & Resort that serve as a springboard for the launch of new brand concepts. In this regards the Company has gone a step further with the re-launch last May of the ME Mallorca hotel (before Beach House) that aims to attract quality tourism and contribute to the progressive restructuring of Magaluf as a destination. It is expected that in the near future the Sol rebranding will continue to pay off, advancing the brand leadership in the leisure segment and in brand repositioning. 6

7 INNSIDE SUECIA Madrid, Spain SPAIN RevPAR in Spain increased by 5.1% after a strong second quarter that showed a 9.9% RevPAR increase impacted by the excellent performance in April (RevPAR %) -partially affected by the Easter holidays-, and the consolidation of the positive trend in May (+16.1%) when the Company registered strong results during the long weekend of 1st May. We understand that Meliá s leadership and expertise in the leisure segment contributed positively, also allowing the city hotels to strengthen business in their leisure component. In this regards, the positive news in recent months seems to continue, being particularly significant for the Company the following data: a) Travel Agencies revenues up to June with origin Spain to all the hotels in Meliá s portfolio was 13% above last year (60% impacting the Spain region and 40% to EMEA (because of the Premium Spain hotels included in EMEA). b) Business Travel revenues from Key Accounts up to June grew + 4,5% vs c) In the Meetings & Incentives segment total sales grew almost 3% up to June. All the above mentioned allowed the Company to register negative figures in only 4 secondary cities, while 80% of the Spanish cities in which Meliá operates achieved positive numbers. Especially positive was the performance of cities such as Alicante, Valencia or Palma, which benefited from certain congresses and events, together with the rebound of the individual Spanish traveller which had a positive impact, specifically in Seville. The evolution of groups is also showing a slight rebound although some cities still suffer from a lack of business groups. The Company wishes to highlight that after many months of negative figures, Meliá has been able to correct the trend and is now showing positive figures in most cases. Regarding primary cities, Barcelona continues to enjoy a positive trend, while Madrid saw a 5% RevPAR increase year to date. The Company remains cautious about Madrid given the situation of hotels near Barajas airport which still penalize the performance of Madrid overall. In those hotels, the lack of lay-overs and intense competition to attract new air crews or keep existing ones has impacted performance. Total available rooms in Spain decreased by 2.5% mainly due to the disaffiliation of the Tryp Las Matas and Tryp Diana, both underperforming hotels which also did not meet brand standards. From 23rd June 2014, Spain has a new hotel: the Tryp Estepona Valle Romano. 7

8 HOTEL STATISTICS OWNED & LEASED 14/13 (in Euros) % Occupancy RevPAR A.R.R. Available rooms AMERICA ,2% 88,7 116,3 982,7 % o/ ,7% 19,1% 14,9% -14,4% ,5% 74,4 101, ,4 EMEA ,1% 86,4 123, ,7 % o/ ,7% 3,8% 3,0% 16,4% ,6% 83,3 119, ,3 PREMIUM EUROPE ,8% 138,9 196,3 78,1 % o/ ,6% 16,9% 1,2% 23,6% ,2% 118,8 194,0 63,2 MEDITERRANEAN ,1% 34,0 51, ,7 % o/ ,5% 17,4% 9,2% 1,8% ,4% 29,0 47, ,6 SPAIN ,1% 44,1 72, ,9 % o/ ,3% 5,1% 1,7% -2,5% ,1% 42,0 70, ,7 TOTAL ,5% 62,1 92, ,0 % o/ ,7% 11,0% 7,0% 0,6% ,1% 56,0 85, ,3 HOTEL REVENUES SPLIT OWNED & LEASED 14/13 (Million Euros) Room Revenues F&B and Other Total Revenues Total Expenses (*) EBITDA AMERICA ,2 101,9 181,1 125,9 55,2 % o/ ,6% 1,0% 1,7% 0,8% 8,0% ,2 100,9 178,1 127,0 51,1 EMEA ,0 51,8 174,8 153,9 20,9 % o/ ,2% 45,3% 23,6% 34,1% 51,4% ,1 35,6 141,4 127,6 13,8 PREMIUM EUROPE ,8 14,0 24,8 26,8-1,9 % o/ ,5% 35,9% 43,0% 51,5% ,8% ,5 10,3 17,4 17,3 0,0 MEDITERRANEAN ,9 31,3 76,2 78,1-1,8 % o/ ,5% 14,3% 17,5% 19,8% 55,3% ,6 27,4 64,9 68,9-4,1 SPAIN ,6 33,0 105,7 112,2-6,6 % o/ ,5% 2,3% 2,6% 9,8% 2,7% ,9 32,3 103,0 109,4-6,4 TOTAL ,6 232,0 562,7 496,8 65,8 % o/ ,1% 9,2% 11,5% 10,4% 20,8% ,3 212,5 504,7 450,2 54,5 These figures (2014/2013) do not include the Gran Meliá Puerto Rico 2013 figures have been adjusted with the incorporation of the hotel Gran Meliá Colon 8

9 MANAGEMENT MODEL IN MELIÁ HOTELS INTERNATIONAL Given the focus of the Company on the asset-light model and the growing importance of exposure to management agreements, from year end 2013, the Company changed its reporting method to include more detail on the profitability of the overall management model. The table below reflects the income generated by Meliá as a hotel manager, including: At the revenues level: the management fees from third parties but also from Melia s owned and leased hotels. Additionally, this item includes other revenues, mainly commissions and other services. At the expenses level: mainly includes the sales, marketing, and distribution expenses, etc. It is worth mentioning that the Management fees from third parties in the first half of 2014 reached 23.1 million euros, a near 2 million euros decrease versus the same period of 2013 mainly due to the impact of the consolidation of Gran Melia Palacio de Isora together with lower management fees in Cuba. OTHER HOTEL REVENUES Million Euros 1H 2014 Total Rev Fees Owned & Leased hotels 34.4 Management Fees Third Parties 23.1 Other Rev Total exp EBITDA 25.8 The Other hotel revenues item basically includes the contribution of casinos, golf courses and Sol Caribe Tours, a tour operator based in Latin America. Compared to 2013, the improved performance is due to the major contribution of the Iberia VIP lounges at the París-Orly, Madrid and Mexico airports, all managed by Meliá. HOTEL BUSINESS OUTLOOK In the short term the most relevant period for the Company is the summer season, for which, based on sales to date, the forecast points towards figures slightly better than the previous year, mainly explained by the increase in prices, the result of: a) the Company s focus on a new revenue culture, implemented through a yield management strategy and a healthy product distribution with special emphasis on developing our own channels; b) a strategy focused on attracting less price-sensitive markets; c) the success of the Meliá Rewards loyalty programme, and d) the general increase of rates with tour operators. The strong results are also due to the contribution of new hotels that will also contribute to a general increase in average rates in the Company, highlighting projects such as the ME Mallorca, ME Ibiza, or the Gran Meliá Palacio de Isora. In this regards, the Company expects a good performance from the resorts in mainland Spain and the Balearic Islands. The Balearic Islands, especially Mallorca, will suffer from a certain slowdown in Russian tourist arrivals, -due to the devaluation of the Russian Rouble and the instability in the countryalthough the better performance of the Spanish domestic market should partially offset this. With regard to the Canary Islands, until August Meliá hotels will maintain high growth rates, while from August 2014 they will see a slowdown given strong 2013 comparables (impacted by the conflicts in northern Africa). Regarding the resorts in LatAM & the Caribbean, despite the fact that the third quarter coincides with the low season in the region, forecasts point towards an improvement over last year. Equally important is the fact that the Company has begun negotiations for 2015, achieving price increases of around 8% in all hotels and destinations in the Caribbean. Advanced bookings point towards very good figures, making the Company optimistic about the expected performance for next year. The Company also remains moderately optimistic about the expected evolution of Spanish cities in view of the recovery in the individual business traveller segment in Spain, and also the better performance of the Business Groups and Meetings & Events segment. In the M&E segment, total sales year-to-date are 19% above last year (considering sales to end of June plus sales on the books for the remaining months of the year), also taking into consideration that the month of September will see important events in some cities with a positive impact on Meliá s hotels in cities such as Barcelona. As mentioned in the chapter Spain, the Company remains cautious about Madrid given the situation of hotels near Barajas airport which still penalize the performance of Madrid overall. As mentioned in the chapter Spain, the Company remains cautious about Madrid given the situation of hotels near Barajas airport which still penalize the performance of Madrid overall. On the other hand, cities in Europe also forecast good numbers, partially thanks to the contribution of the latest additions to the portfolio, highlighting the ME London, the Gran Meliá Rome and the recently opened Innside Wolfsburg, Innside Düsseldorf Hafen and Meliá Vienna. All in all, for the 3Q, and also to the year end, the Company forecast high single digit RevPAR growth, mainly explained by the improvement in prices. We understand that the positive performance of the underlying business is mainly linked to: i) the Company globalisation process, combined with a regionalization strategy which has strengthened outbound sales, resulting in healthy revenue segmentation and greater customer diversification ii) the excellent performance from our direct sales channel melia.com, becoming the leading source of sales for Meliá which up to June achieved 29% growth in sales: iii) the important role of our Meliá Rewards loyalty programme, which in 2013 contributed 66% of the sales made through melia.com. 9

10 DEVELOPMENT Additions ( 6 hotels / 1,486 rooms) Up to June the Company added 6 hotels to its portfolio with 1,486 new rooms. Out of these 6 hotels, there are 3 new contracts under lease agreements, including the stylish Meliá Vienna (253) designed by the eminent architect Dominique Perrault. The Meliá Vienna becomes Meliá Hotels International s first property in Austria, playing a key role in dynamic growth and further increasing Meliá brand recognition in the German-speaking market. This is also assisted by the opening of the Innside Wolfsburg (219), Meliá s 24th hotel in Germany, now Meliá Hotels International s second biggest market in Europe after Spain. In the Spanish market, in June the Company opened the Tryp Estepona Valle Romano (218) located in Malaga. Under management and franchise agreements the Company has added the Tryp Lisbon Airport (168) within the Spain region, and since March has been operating the Meliá Paulista (397) in Sao Paulo in Brazil which over recent months has performed above initial expectations- and the Meliá Jinan (230) in China, the latter part of the strategic alliance with the Chinese Greenland Group to promote growth and brand awareness for Meliá in China through the management of hotels owned by Greenland. Furthermore, after the closure of the second quarter, the Company has continued to grow in the resort hotel segment with the opening of two hotels in the Red Sea region of Egypt, the new Sol Taba and Sol Dahab that opened in July with a total of 658 rooms. Losses (3 hotels / 1,037 rooms) During the period, 3 hotels have been disaffiliated: the Meliá Palacio da Lousa (46 rooms) in Portugal under a franchise agreement, and the Meliá Atlanta (502) in the USA and the Meliá Mexico Reforma (489), both under management agreements. Regarding the Meliá Mexico Reforma, it should be taken into consideration that after its disposal last December, the Company continued to operate the hotel for two months under a management agreement to ease the transition in the business. Future Incorporations YTD (61 hotels / 16,500 rooms) Americas: Meliá is an international leader and benchmark in the resort segment and is progressively expanding the Company s footprint to all major vacation destinations. In this regards, last week the Company announced the opening of the new Meliá Cartagena in Cartagena de Indias, scheduled for December Colombia is one of the most dynamic markets in Latin America with a strategic location in the Caribbean and one of the prime destinations for a vacations and business events. Today, Meliá takes this opportunity to announce that the Company has just taken an important step in the expansion in Latin America with the announcement of a framework agreement which provides the construction of the 5 hotels by Franco Biocchi Zurita in Venezuela and their management by Meliá. The project implies, an excellent entry into a market with high growth potential, where Meliá has a high recognition level, always materialized through low capital intensive formulas. Based on this agreement, the two companies also signed a management contract for the first hotel to be developed in Punto Fijo, the Innside Punto Fijo (116 rooms), which will open in 2015 representing the positioning of the Innside by Meliá brand in Venezuela. It is worth to mention that Franco Biocchi Zurita is also de owner of the Meliá Puerto Ordaz, hotel already in the pipeline since 2013, that will open in All in all, Meliá s pipeline in the region includes 21 hotels and almost 5,200 rooms of which only one will be operated under a lease agreement: the Innside New York (312) scheduled for 2016, a project that will be a first for the Innside brand in the U.S. after its success in Europe for both business travel and city leisure breaks. The remaining hotels will be operated under management agreements, of which in 2014 the Company foresees the opening of the Tryp Belo Horizonte (151 rooms) in Brazil. Asia: In Asia, another major focus for the Meliá global expansion strategy, the current pipeline stands at 11 hotels with almost 3,000 rooms (all them under management), of which 2 hotels will open in 2014, the Gran Meliá Xian and Sol Danang. In 2014 Meliá has strengthened its focus in Asia with the signature of the Innside Makassar and Innside Legian (both in Indonesia), and more recently the signature of the Gran Meliá Ulaanbaatar (Mongolia), expanding Meliá s footprint in new markets in the Asia Pacific region, one of the primary focuses of growth for the company in the coming years. ME Europe: The ME Europe pipeline includes the ME Dubai, which is expected to become a flagship property for the ME brand in the Middle East. Also in Europe, the Company announced last quarter the signature of the ME Milan Duca (132 rooms), a project by the prestigious architect Aldo Rossi, which is expected to open in 2015 under a lease agreement. EMEA: From 2015 onwards Meliá has 20 hotels and almost 4,300 rooms in the pipeline, of which 55% will be under lease agreements and 45% under management. The new openings will intensify the positioning of the Company in the main capital cities in Europe and also will give Meliá the chance to penetrate new markets. Mediterranean: The region has 5 hotels in the pipeline with around 3,600 rooms, all them under management and outside Spain, including hotels in Cape Verde, Croatia and Bulgaria. In 2014 the Company will open the Meliá Las Dunas in Cape Verde (1,100 rooms). To conclude this chapter, the Company is confident of achieving the goal of new contracts in 2014, all them under low capital intensive formulas, and all them outside Spain, with special emphasis on emerging markets. 10

11 01/01/2014 ADDITIONS LOSSES CHANGES 30/06/2014 SIGNED TOTAL GROUP H R H R H R H R H R H R H R AMERICA Owned Hotels Leased hotels Management & Franchised EMEA Owned Hotels Leased hotels Management & Franchised ME EUROPE Owned Hotels Leased hotels Management & Franchised MEDITERRANEAN Owned Hotels Leased hotels Management & Franchised SPAIN Owned Hotels Leased hotels Management & Franchised ASIA PACIFIC Owned Hotels Leased hotels Management & Franchised TOTAL OWNED HOTELS TOTAL LEASED HOTELS TOTAL MANAGEMENT & FRANCHISED TOTAL MELIÁ HOTELS INT ME Mallorca Spain 11

12 2. OTHER BUSINESS REAL ESTATE Within the framework of the asset rotation activity, on 30 June 2014 an agreement was reached for the sale of 261 apartments at the hotel Sol Aloha Puerto, located in Torremolinos, (Spain). The transaction generated 20,8 million euros in cash and capital gains at the EBITDA level of 14.7 million Euros. Taking into consideration the above, together with other minor capital gains generated during the period, total capital gains up to June 2014 reached 15.3 million Euros, compared to 46.6 million Euros in the first half of including the asset disposals up to June 2013 together with 4 million Euros asset revaluations linked to one asset in Venezuela. The Company reaffirms its commitment to dispose of assets for a minimum of million euros in 2014 to decrease net debt levels. CLUB MELIÁ In 2014 the focus of Club Meliá is on strengthening sales, especially taking into consideration: a) the better global economic climate which could favour the purchase of this type of finance-driven product; and b) the contribution of the Paradisus Resorts in Playa del Carmen (Mexico) which are progressively improving performance, the stronger performance of resorts in the Dominican Republic, and the contribution of the Gran Meliá Palacio de Isora. Additionally, the Company has taken further steps to maximize Club Meliá revenues with the implementation of a new sales strategy which involves the management by Club Meliá of two hotels: the Meliá Puerto Vallarta and Meliá Cozumel. In both hotels, the room inventory that is currently allocated to the timeshare business is very high, making both hotels a perfect fit to convert to 100% Club Meliá. Up to June 2014, total revenues in Club Meliá improved by 13.9 million euros versus the first half of 2013, showing a better performance in terms of: a) Increases in prices was mainly possible due to a sales mix more biased towards a Premium Product, as well as the sale of biannual weeks in all sites and the impact of the upgrade activity. b) The number of weeks sold, even after the closure of the Meliá México Reforma where the Company had a sales office, and the slowdown of sales in Puerto Rico linked to the asset disposal process which penalized Club Meliá sales. On the positive side, there was an increase in sales in the Dominican Republic, Playa del Carmen and Tenerife. c) The contribution of the Meliá Puerto Vallarta and Meliá Cozumel that generated almost 1 million Euros, now included within the Club Meliá results. From the cost perspective, Club Meliá is taking advantage of the control of headquarters and personnel expenses, as well as the synergies between the Meliá Club and the hotel business, all this allowing to improve margins. Also recall that one of the main focuses in 2014 is the control of delinquency rates, expecting an improvement for the whole year mainly thanks to stronger sales (through the capture of better prospects) and the implementation of best-in-class customer service for the most efficient and effective fit. OVERHEADS DEPARTAMENTS Recall that this item only includes the overheads in Meliá Hotels International. The changes versus the same period in 2013 lies in the consolidation in June 2013 of Idiso, Meliá s distribution platform, which has become a key driver for income generation in the Company, together with the evolution of the Onerous contracts, that allow some improvement at the EBITDA level. A contract is onerous when the inevitable costs of fulfilling the contractual obligations exceed the expected economic benefits. Estimated future results from rental agreements are reviewed annually based on expected flows from the relevant cash-generating units, applying a suitable discount rate. Should costs exceed benefits, the Group recognizes a provision for the difference. In view of the result of the rentals renegotiations with the owners of the hotels (operated under lease agreement), the Company has reduced the provision in 5.5 million euros, included in this line. The evolution of overheads in Meliá Hotels International is in line with the Company regionalisation strategy which aims to ensure the regions stay close to the business units and enjoy the appropriate management and sales force resources. 12

13 BUSINESS SEGMENTATION OF MELIÁ HOTELS INTERNATIONAL 2014 Hotel Business Owned & Leased MANAGEMENT MODEL Hotel Business Owned & Leased Other "Hotel" business" AGGREG HOTELS REAL ESTATE CLUB MELIA OVERHEADS TOTAL AGGR. CONSOLIDATED REVENUES 97,7 562,7 27,4 687,8 26,0 45,7 41,9 801,5 703,9 EXPENSES 71,8 438,6 25,1 535,5 7,6 37,9 53,0 634,0 538,4 EBITDAR 26,0 124,0 2,3 152,3 18,4 7,8-11,0 167,5 165,5 % EBITDAR 27% 22% 8% 22% 71% 17% - 26% 21% 24% RENTALS 0,1 58,2 0,0 58,4 0,0 0,0-4,7 53,7 51,7 EBITDA 25,8 65,8 2,2 93,9 18,4 7,8-6,3 113,8 113,8 % EBITDA 26% 12% 8% 14% 71% 17% - 15% 14% 16% D&A 0,3 40,9 0,4 41,6 0,3 1,0 4,8 47,7 47,7 EBIT 25,5 24,9 1,8 52,3 18,1 6,8-11,1 66,1 66, Hotel Business Owned & Leased MANAGEMENT MODEL Hotel Business Owned & Leased Other "Hotel" business" AGGREG HOTELS REAL ESTATE CLUB MELIA OVERHEADS TOTAL AGGR. CONSOLIDATED REVENUES 93,9 504,7 26,6 625,3 54,9 31,8 31,4 743,4 661,6 EXPENSES 62,5 400,3 25,2 487,9 6,7 28,0 50,3 573,0 491,7 EBITDAR 31,5 104,4 1,5 137,4 48,2 3,7-18,9 170,4 169,9 % EBITDAR 34% 21% 5% 22% 88% 12% - 60% 23% 26% RENTALS 0,0 49,9 0,0 49,9 0,0 0,0 0,8 50,7 50,2 EBITDA 31,5 54,5 1,5 87,4 48,2 3,7-19,7 119,7 119,7 % EBITDA 34% 11% 5% 14% 88% 12% - 63% 16% 18% D&A 0,2 39,4 0,5 40,1 0,3 1,1-15,2 26,4 26,4 EBIT 31,2 15,1 1,0 47,3 47,9 2,6-4,5 93,4 93,4 13

14 3. COMMITMENT AND RESPONSIBILITY Meliá continued to make progress in CSR during the first half of the year, and for the second consecutive year was named as the Spanish travel company with the best corporate reputation (MERCO 2013). The Code 2014 has named Meliá as one of the 42 most important members in the global travel industry thanks to its commitment to sustainable and responsible tourism and the successful implementation of the six criteria required, specially focus on the protection of children and adolescents from sexual exploitation in the industry. As a complement to the policy on certifications, Meliá has also sought the addition of its hotels in the USA, UK, France, Germany, Spain, Greece, Italy, Luxembourg, Austria and Portugal to the TripAdvisor Green Leaders Programme. This programme rewards hotels that are committed to implementing sustainability in its operations and is audited by TripAdvisor. Since the launch of the programme in April, 49 hotels have earned the award, 24% of the portfolio affected. Environmental Management The first half of the year saw positive evolution in terms of reductions in emissions and energy consumption, achieving the Meliá strategic environmental management objectives and continuing the trend of previous years in emissions and consumption. The following is a summary of the key figures on environmental management at Meliá 1) Average based on the accumulated figures from January to May. Excludes hotels in the Dominican Republic, with the exception of water consumption that includes the entire portfolio 2) Calculated based on a constant emission coefficient, by year and territory As the table shows, emissions and consumption have been reduced over the period in both absolute and per stay terms. The variations were slightly higher than those of the first half of last year. Meliá has recently signed a new energy supply contract with Endesa which focuses on contracting electrical energy from renewable sources, also strengthening the Meliá commitment to fighting climate change. New projects have also been implemented with energy companies to optimise energy use in several hotels. Finally, Meliá remains committed to locations classified as Biosphere Reserves by UNESCO in which Meliá has invested around 2 million in hotels in Menorca, Fuerteventura, La Palma and Mallorca in the first half of this year. Social Commitment In partnership with IBM and the EULEN Group, Meliá has signed a cooperation agreement with the Rey Juan Carlos University to create a new degree course in Science, Management and Service Engineering beginning in September The Company will provide its experience and industry knowledge as well as internship programmes for training in the service industry. Meliá has decided to take part in this pioneering educational project given its alignment with the company s commitment to improving the employability of young people in Spain, and to greater professionalism in the industry. In an effort to promote the employment of special interest groups, along with the Italian Association for Downs Syndrome, Meliá has developed a project named A 6-star hotel which has been filmed for a documentary by RAI3 and broadcast for 6 weeks during February and March. The Meliá Roma Aurelia Antica in Rome offered work experience for the first time for a group of 6 men and women with Downs Syndrome between the ages of 18 and 31. The group worked with the hotel team on daily tasks within the framework of a training programme designed to create real opportunities for their future employment. The documentary has been seen as a landmark on Italian television as it deals for the first time with the issue of disability in the workplace with the aim of promoting employability and training. 14

15 4. INCOME STATEMENTS Within the framework of the International Financial Reporting Standards (IFRS 10), although the consolidation of Colon Verona (owner of Gran Meliá Colón), Ayosa (operator of Sol Trinidad-Jamaica and Sol Guadalupe) and S Argamassa Hotelera (ME Ibiza) took place on January 1st 2014, reporting standards requires the release of previous fiscal year comparable figures. For the purpose of improving comparability, certain non-material adjustments have been made to 2013 figures. Revenues Total revenues increased by 6.4%. Hotel revenues increased by 11.5% thanks to an 11.0% improvement in RevPAR, while Club Meliá also reported good figures with a 43.9% improvement (14 million Euros improvement versus 2013). The contribution of the Real Estate division (-29 million Euros) in the first half 2014 was impacted by lower capital gains from asset disposals. Operating Expenses Raw materials, Personnel expenses and Other operating expenses increased by 10.4%, 10.4% and 8.4% respectively, affected by changes in the perimeter. On the same basis, the evolution of expenses would be the following: Raw materials +5.1%, Personnel expenses +1.6% and Other operating expenses +6.7%. Rental expenses grew by 2.9% (+1.5 million euros). The most relevant facts were: a) the accounting of the Equity Inmuebles leases as operating rentals (since December 2013 considered Financial Leases); and b) the reduction of the existing onerous contracts provision. A contract is onerous when the inevitable costs of fulfilling the contractual obligations exceed the expected economic benefits. Estimated future results from rental agreements are reviewed annually based on expected flows from the relevant cash-generating units, applying a suitable discount rate. Should costs exceed benefits, the Group recognizes a provision for the difference. In view of the result of the rentals renegotiations with the owners of the hotels (operated under lease agreement), the Company has reduced the provision in 5.5 million euros, included in this line. EBITDA All the above mentioned allowed Meliá to register an EBITDA of million Euros (-5%). When excluding capital gains in both periods ( million Euros / million Euros), EBITDA would have increase by 35%. Below the EBITDA level, in 2013 also of note was the impact of the integration of Idiso in the Meliá Hotels International consolidated group. The transaction generated a negative consolidation difference of 20.6 million euros. At the Profit / (loss) from Associates and JV level, the better results of Adprotel, owner of the ME London, together with better figures in Altavista Hotelera and Evermel allowed an improvement in this item. There was also an impact from the consolidation of the Gran Meliá Palacio de Isora and Gran Meliá Colón. Meliá Vienna Austria 15

16 (Million Euros) June 2014 June 2013 Revenues Split: Total HOTELS 687,8 625,3 Management Model 97,7 93,9 Hotel Business Owned & Leased 562,7 504,7 Other Hotel Business 27,4 26,6 Real Estate Revenues 26,0 54,9 Club Meliá Revenues 45,7 31,8 Overheads 41,9 31,4 Total Revenues Aggregated 801,5 743,4 Eliminations on consolidation -97,6-81,8 Total Consolidate Revenues 703,9 661,6 Raw Materials -91,5-82,9 Personnel expenses -206,1-186,7 Other operating expenses -240,8-222,1 Total Operating Expenses -538,4-491,7 EBITDAR 165,5 169,9 Rental expenses -51,7-50,2 EBITDA 113,8 119,7 Reestructuring -2,7 Depreciation and amortisation -47,7-44,3 Negative differences in consolidation 20,6 EBIT (OPERATING PROFIT) 66,1 93,4 Financial Expense -58,7-55,3 Other Financial Results 0,0-6,4 Exchange Rate Differences -2,2-7,8 Other Interest Expense 1,6 8,5 Total financial profit/(loss) -59,3-61,0 Profit / (loss) from Associates and JV -2,4-16,8 Profit/(loss) from ordinary activities 4,3 15,6 Extraordinary profit/(loss) 0,0 0,0 Profit before taxes and minorities 4,3 15,6 Taxes -0,9-4,0 Continuing operations 3,4 11,6 Discontinued Operations -0,3-0,4 Group net profit/(loss) 3,2 11,2 Minorities -3,1 0,9 Profit/(loss) of the parent company 6,3 10,3 16

17 5. BALANCE SHEET The decrease in Tangible Assets of 34 million Euros is mainly linked to the amortisation and depreciation for the period and the book value of the assets sold in 2014 (4.6 million Euros), partially offset by the cumulative impact of the accounting restatement to adjust for the effects of hyperinflation in Venezuela (+13.7 million Euros). The Other current and non-current financial assets items were impacted by the recovery of some outstanding amounts with associates. Total Net debt increased by 4.7 million Euros versus figures reported in December 2013, showing an 80 million Euros decrease versus March Net debt levels reached million Euros, mainly due to the better performance of the hotel business, the Sol Aloha asset disposal, and the recovery of outstanding amounts with associates. As the Company released last quarter, it should be recalled that 2014 figures have been negatively affected by: a) the incorporation of 29 million euros in debt held by the Company Colon Verona S.A., owner of the Gran Meliá Colon (Seville), after its consolidation on 1st of January 14 (in accordance with the IFRS 10); and b) the devaluation of the Bolívar in Venezuela which had an impact of 20 million Euros. Euros Jun 2014 Dec 2013 ASSETS NON-CURRENT ASSETS Goodwill 33,8 33,7 Other Intangibles 102,4 105,2 Tangible Assets 1581,6 1615,0 Investment Properties 127,4 136,4 Investments in associates 170,5 100,6 Other non-current financial assets 186,9 319,8 Deferred tax assets 152,5 153,3 TOTAL NON-CURRENT ASSETS 2.355, ,1-4,4% CURRENT ASSETS Non current assets held for sale 100,3 100,3 Inventories 69,9 63,4 Trade and other receivables 273,2 260,6 Tax assets on current gains 24,1 24,7 Other current financial assets 88,8 44,1 Cash and cash equivalents 508,0 436,9 TOTAL CURRENT ASSETS 1.064,2 930,1 14,4% TOTAL ASSETS 3.419, ,2 0,7% Gran Meliá Palacio de Isora Tenerife, Spain 17