13 June 2017

General Shareholders’ Meeting 2017

Meliá Hotels International held its General Shareholders' Meeting, chaired by Gabriel Escarrer Juliá. Both the Chairman and the Executive Vice President and Chief Executive Officer of Meliá described to shareholders the positive results for 2016, as well as the key factors in the transformation of the company, and the most important factors that will affect its strategy in this new era. Both executives highlighted the company's significant progress in Corporate Social Responsibility, with a special focus on children, human rights, employability, education and culture in the destinations in which the company operates, as well as the fight against climate change. In particular, they explained their pride in the more than 44,400 company employees, with more than 8,000 people hired in 2016, 21% of them in Spain.

The generational transition process through which the founder and current Non-Executive Chairman, Gabriel Escarrer Juliá, handed over executive powers to his son, the current Executive Vice President and Chief Executive Officer, was mentioned in all of the speeches, showing that the combination of renewal and continuity that the family component brings to Meliá Hotels International is more effective than ever.

Customers, Team and Expansion, key factors

The Non-Executive Chairman, Gabriel Escarrer Juliá, briefly outlined what he considers the keys to Meliá's strength: its customers, the team, and international expansion. Escarrer recalled that in 2016, the company achieved a rating of 82% in employee satisfaction surveys, with a very high level (42.8%) of recommendation. Innovation and the hotel brands, which the company has continued to update in 2016, have also allowed it to differentiate its approach to all of the different contemporary customer profiles, as well as to personalize the relationship with customers through significant efforts in digitalization.

For the founder of Meliá, the company’s people have always been its most important asset, and in his speech Escarrer highlighted the role of the more than 44,500 team members and the policies deployed by the company throughout the world to attract the finest professionals, develop their talent through an innovative virtual university, and empower the leadership of managers. To back up his words, the Chairman mentioned some of the important awards received in 2016 and 2017, such as the Best Travel Company to work for in Spain (MERCO people) and the Most Attractive Company to work for in the industry, according to ADECCO. Meliá was also the second best Employer Brand in the hotel industry in China according to the China Hotel Tourism Awards.

People are also an essential part of the company's successful and intense international expansion, which its Non-Executive Chairman explained has allowed the diversification that has protected the company from adverse circumstances. 31 new hotels signed up in 2016, a pipeline of 64 hotels and 16,605 rooms for the year, and an intense schedule of new hotel openings (17 in 2016) were the main elements explained by Escarrer, who was especially proud that the company continues to break ground in new markets such as Myanmar, Iran, or New York, as well as of the flagship hotels the company already has in 43 countries and which it continues to open in parts of the world as far afield as the Serengeti in Africa, the Maldives or Dubai.

Social impact of results

The Executive Vice Chairman and Chief Executive Officer, Gabriel Escarrer Jaume, thanked the audience for their confidence and the honour to take part for the first time in the General Shareholders' Meeting, before going on to report on the positive performance of the company and the profound process of cultural change and strategic priorities that have made this performance possible, overcoming the difficult crisis that shook the travel industry over recent years.

Regarding the Meliá performance in 2016, Escarrer mentioned improvements in Net Profit (+180%), EBITDA (+14%) and Financial Results (+49%) among other parameters, especially highlighting the results in its most important KPI, Revenue per Available Room (RevPAR), which grew by 14% overall, with spectacular numbers in the Mediterranean region (+42%) and EMEA (+12.4%).

Above all, the Chief Executive of Meliá explained how these results have affected all the company’s stakeholders thanks to “social cash flow”, or the redistribution of revenues. Of the 2,878 million euros of total revenue, 1,256 million was paid out to suppliers, more than 600 million to employees, and 273 and 260 million, respectively, in payments to public administration and investments in product maintenance. 243 million euros was spent on hotel lease payments (28% of the portfolio) and 198 million euros to the owners of hotels under management, while 12,4 million was paid out to shareholders.

Transformation and strategy

Gabriel Escarrer Jaume explained the transformation process through which Meliá was able to manage the financial crisis and come out of it even stronger than before, having changed the corporate brand (from the former Sol Meliá to Meliá Hotels International), updated corporate values without losing any of the essence of being both a publicly-traded company with a strong family base, and introducing a new strategic vision focused on consolidating the company’s global leadership in resort hotels while moving away from a focus on costs towards excellence in revenue management, and from a business model based on owning a majority of hotels towards a model based on the management of owned hotels and those of third parties.

All made possible in a context of the modernization of the company’s hotel brands, digital transformation, and the empowerment of its people, as well as other intangibles such as reputation and corporate governance.

Following on from this, the strategic vision for 2017 and 2018 will prioritize:

a)       International expansion, keeping up the pace of new hotel agreements (30 hotels signed up in 2016) and new hotel openings (17 hotels opened during the year) seen over the last two years. Growth will prioritize the most popular resort destinations and cities with a strong leisure component (bleisure).

b)       Digitalization and personalization, with new B2C tools such as the new version of melia.com, the company’s biggest sales channel, and B2B tools such as MeliaPro, which recorded 71% growth over the year. The MeliaRewards loyalty programme grew by 44%, consolidating its role as an essential driver of the relationship with customers.

c)       Revenue Management strategy, further consolidating efforts that have already achieved that 80% of RevPAR growth is due to improved rates, and 27 quarters leading RevPAR growth in the industry.

d)       Strengthen the Real Estate strategy and growth through Joint Ventures with priority partners, and,

e)       The renovation and repositioning strategy (in some cases with a change of brand) of some of the company’s most important hotels and destinations. After the successful transformation of Magaluf, Ibiza, Torremolinos and others, Meliá is currently working on other projects such as the revitalization of the Palma seafront, spurred on by the recently-acquired Palau de Congressos Convention Centre, and an ambitious plan to renovate strategic assets in Spain under the Meliá and Gran Meliá brands, fundamentally. The Company has invested over 500 million euros in renovations in Spain between 2011 and 2016.

After reviewing the challenges and opportunities facing the travel industry in 2017, the Executive Vice Chairman and CEO of Meliá concluded, " I am very proud to have been able to present today a financially solid and healthy company with a very clear vision of the future of our business and the keys to us achieving this vision, thanking the management team and more than 44,500 employees for their work and loyalty, and also the Board of Directors, six out of eleven of which are independent.

Both Escarrer Jaume and his father also thanked the Meliá shareholders for their support and confidence, and assured them that they would continue to respond appropriately and generate value.

As expected, the General Shareholders' Meeting was attended by the required quorum and proceeded to approve all of the proposals set forth in the agenda.

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