Sol Melia Reports Nine-Month Profits Up 50.9 Percent.

Sol Melia Reports Nine-Month Profits Up 50.9 Percent

Sol Meliá presented results for the first nine months of 2010 which show a profit of 71.7 million euros, compared to 47.5 million euros in the same period in 2009, an increase of 50.9 percent, meeting market expectations after generating revenues of 976.7 million euros compared to the 899.9 million euros in the previous year. EBITDA grew by 16.5 percent to 216.1 million euros compared to 185.5 million euros in the same period in 2009.

In parallel to developments in the global macroeconomic environment, the tourism industry has also beat expectations, with the World Tourism Organization now expecting a 7 percent increase in international arrivals compared to the 4 percent it was previously forecasting. The data supporting this industry trend is varied, but key factors include the recovery in consumption in the United States and the reactivation of both individual and group business travel.

For Sol Meliá, the best news is found in its financial management -- after the most prudent and efficient crisis management and the evolution of the hotel business which has seen quarter-on-quarter growth in RevPAR (revenue per available room), 7.7 percent up to September. This trend was even stronger in the third quarter with RevPAR in the most important Spanish and European cities growing by 17.4 percent and with Latin America and the Caribbean, after the negative trend in the first semester affected by the earthquake in January in Haiti (down 6.3 percent), seeing an increase of 10.9 percent.

Within the first nine months of the year, the average cost per stay grew by 1.6 percent, and operational margins, under enormous pressure since the beginning of the recession, improving by 134 base points.

With regard to Spanish resort hotels, in summer Sol Meliá saw a significant recovery in RevPAR of 8.3 percent, far higher than the 1.5 percent increase achieved in the first semester, thanks in large part to the resorts in the Balearic Islands and price improvements. Sol Meliá expects to meet its covenants and continue to strengthen its balance sheet.

In 2010, the company has renewed 100 percent of the amount of the credit lines which ran out in the first nine months of the year, and has signed four loans for 74 million euros to ensure future liquidity levels, in addition to the sale of certain assets such as the Sol Pelícanos Ocas Hotel in Benidorm. Liquidity now stands at 487.4 million euros, thus guaranteeing the amortization of debt obligations up to December 2012 of 379.9 million euros.

With regard to the outlook for the future, the company expects to bring continued positive trends in the business, particularly with a recovery in room rates becoming increasingly relevant. The improvement in consumption in the United States point towards a positive first quarter for 2011, along with hotels in Latin America, the Caribbean and European cities, particularly thanks to the reactivation of individual and group business travel.

With regard to Spain, both urban business and leisure travel are improving in Madrid and Barcelona, although the evolution is less predictable in other cities, while current negotiations with tour operators point towards increased bookings for winter 2011, and a slight increase in rates for next year.

Sol Meliá emphasized that its “moderate optimism” is largely based on the positive evolution of the business expected for 2011 -- the company is projecting global RevPAR growth in the mid-single digits for the year providing that the recovery continues in the most important markets, which combined with the financial strength mentioned previously will allow the company to continue increasing its presence in key markets, in many cases through adding emblematic hotels.