Sol Melia Chairman Looks to Growth, Diversification in 2010

Sol Meliá held its Annual General Meeting 2010 this week, during which the company Chairman and Founder Gabriel Escarrer Juliá summarized the management of the company in 2009 as “one of the most critical years in the history of travel and tourism,” as well as explaining the vision that the leading Spanish hotel company has of the current situation in travel and tourism and the outlook for 2010.

With regard to the assessment of the business environment, Mr. Escarrer explained the major differences by region and also the dynamism of emerging markets, highlighting the huge potential of China, where Sol Meliá recently inaugurated its first hotel, the Gran Meliá Shanghai.

In a context of what he described as “generalized losses amongst our main competitors,” Mr. Escarrer mentioned the “moderately positive” growth of the hotel group, which managed to stay in profit throughout 2009 thanks to its healthy balance sheet and the efficiency of the anti-crisis contingency plan.

Mr. Escarrer also highlighted the enhanced value of the company’s hotel brands, intense diversification, and the rejuvenation of the hotel portfolio as driving factors for growth, and also pointed out that share value actually increased by 38.5 percent in 2009.

Mr. Escarrer also praised the decision-making and flexibility of the company management team in “a period of uncertainty,” focusing company activities around four major Action Areas -- enhancing revenues, rationalizing costs, controlling risks, and safeguarding the health of the balance sheet and cash-flow.

With regard to the business model, the Sol Meliá chairman stressed the hotel company’s desire to diversify (geographically, by feeder market, by product and by brand), particularly in the area of hotel operational formulas, reminding the audience that 30 percent of the total number of rooms are currently owned by the company, 48 percent are operated under management agreements, 5 percent are franchises and the remaining 17 percent are operated under lease agreements.

In 2008, Spain provided 43 percent of the company’s earnings. In 2009, this figure fell to 24 percent, accompanied by parallel growth in alternative destinations such as Latin America and the Caribbean. Guests from outside Spain now represent two-thirds of the entire customer base at Sol Meliá.

With regard to growth, Sol Meliá strategy continues to focus on the enhancement of its brand equity, reinforcing its presence in markets where it has competitive advantages and opening up new markets, such as the recent additions in Austria, Colombia, Crete, Luxemburg, Andorra, Cabo Verde or China, where Sol Meliá faces an extraordinary opportunity with the Gran Meliá Shanghai, which Mr. Escarrer referred to as one of the most emblematic hotels in China.

As to the outlook for the future, the chairmen offered his view from the perspective of the first five months of the year and the contracting under way. Mr. Escarrer reminded the audience of the better industry outlook on an international level and forecast a gradual recovery in bookings and an incipient stabilization in price levels.

In his conclusions for shareholders, Mr. Escarrer emphasized his confidence that Sol Meliá will emerge from the crisis even stronger than before, a confidence based on the greater solvency and financial strength of the company, internal efficiencies, diversification, and particularly on enhanced levels of teamwork, an achievement which has built a more united front amongst its employees, to whom Mr. Escarrer has always referred as the “company’s most important asset.”

Mr. Escarrer summarized the nature of the last two financial years as a period in which “Sol Meliá was able to restructure in time to resist the worst effects of the global crisis, and be in optimum conditions to benefit from the opportunities which are likely to arise in the future.”