Meliá Hotels International, S.A. (SMIZF) Q4 2023 Earnings Call Transcript

Meliá Hotels International, S.A. had a positive year in 2023, experiencing solid demand in all regions. The fourth quarter was particularly successful, with owned and leased revenue per available room (RevPAR) increasing by 10.6% compared to the previous year. The company’s overall RevPAR also saw growth, with a 6.6% increase driven by volume. Consolidated revenues rose by 14.8%, and sales through the company’s direct channel strategy saw a significant increase of 17.4%. Meliá Hotels International, S.A. achieved its financial objectives, reaching a minimum of €475 million in earnings before interest, taxes, depreciation, and amortization (EBITDA). Additionally, the parent company’s net profit reached €117.7 million, and debt decreased by €59.9 million, demonstrating progress in the company’s debt reduction efforts. The company’s commitment to strengthening its balance sheet was evident with the signing of an agreement for the subscription of new shares. With a liquidity position of €330 million at the end of the year, Meliá Hotels International, S.A. aims to return to pre-COVID net debt-to-EBITDA multiples by the end of 2024. The strong performance in all regions, particularly in European cities, the Dominican Republic, Spain, and Asia, can be attributed to the company’s premium and luxury positioning. Meliá’s direct channels and tour operators performed well, and the meetings, incentives, conferences, and exhibitions (MICE) business showed solid performance.

Overview

Meliá Hotels International, S.A. had a positive year in 2023, experiencing solid demand in all regions. The company achieved several key milestones, including increased RevPAR in the fourth quarter, consolidated revenue growth, and a successful direct channel sales strategy. Additionally, Meliá Hotels International, S.A. achieved its objective of reaching its EBITDA goal and made progress in reducing net profit and debt. These achievements have further strengthened the company’s balance sheet and solidified its liquidity position. Throughout the year, Meliá Hotels International, S.A. maintained its premium and luxury positioning, which contributed to its overall growth and success.

Performance in Q4 2023

In the fourth quarter of 2023, Meliá Hotels International, S.A. displayed a strong performance across all regions. The company experienced a system-wide RevPAR increase of 6.7%, showcasing its ability to generate revenue and maintain profitability. This growth was driven by various factors, including increased demand and effective management strategies.

Specifically, European cities, the Dominican Republic, Spain, and Asia regions experienced positive RevPAR increases during this period. These regions were able to capitalize on a favorable market environment and attract a steady flow of guests. Meliá Hotels International, S.A.’s presence in these regions proved to be a strategic advantage.

Furthermore, the company’s direct channels, including sales through melia.com, performed exceptionally well. The direct channel strategy saw a significant increase of 17.4% in sales, further highlighting Meliá Hotels International, S.A.’s ability to reach customers directly and optimize revenue generation.

In addition to direct channels, tour operators also played a crucial role in driving sales during the fourth quarter. Meliá Hotels International, S.A.’s partnership with tour operators allowed them to tap into a broader customer base and attract guests to their properties. The success of this strategy contributed to the overall positive performance of the company.

Moreover, the Meetings, Incentives, Conferences, and Exhibitions (MICE) business segment showed solid performance during the fourth quarter. Meliá Hotels International, S.A.’s ability to attract and host large-scale events and conferences further bolstered their revenue and enhanced their reputation in the industry.

Increased RevPAR in Q4

Meliá Hotels International, S.A. experienced a significant increase in RevPAR during the fourth quarter of 2023. Specifically, the company achieved a 6.7% system-wide RevPAR increase, indicating both the effectiveness of their operations and the overall strength of the market.

This increase in RevPAR was driven by various factors, such as increased occupancy rates and average daily rates. Meliá Hotels International, S.A.’s ability to attract a high volume of guests to their properties, combined with their strategic pricing strategies, contributed to their RevPAR growth.

The positive RevPAR performance was particularly notable in European cities, the Dominican Republic, Spain, and Asia regions. These regions were able to capitalize on favorable market conditions and attract a steady flow of guests, resulting in increased RevPAR for Meliá Hotels International, S.A.

By achieving increased RevPAR in the fourth quarter, Meliá Hotels International, S.A. demonstrated their ability to generate revenue and maintain profitability, even in a challenging market environment.

Consolidated Revenues Increased

Meliá Hotels International, S.A. witnessed a significant increase in consolidated revenues during the fiscal year of 2023. Comparing to the previous year, the company achieved an impressive growth rate of 14.8%. This growth indicates the success of their business strategies and highlights their ability to generate substantial revenue from their operations.

The increase in consolidated revenues can be attributed to various factors, including increased occupancy rates, higher average daily rates, and sales through direct channels and tour operators. Meliá Hotels International, S.A.’s ability to attract a wide customer base and capitalize on market demand contributed to their revenue growth.

Furthermore, the company’s positioning in premium and luxury segments played a crucial role in driving revenue growth. By targeting affluent customers and offering high-quality services and amenities, Meliá Hotels International, S.A. was able to command higher rates and generate substantial revenues from their properties.

The growth in consolidated revenues reflects the overall success of Meliá Hotels International, S.A. in 2023 and validates their business strategies and market positioning.

Growth in Direct Channel Sales

Meliá Hotels International, S.A. saw remarkable growth in direct channel sales during 2023. The company’s direct channel strategy, which primarily included sales through their website (melia.com), proved to be highly effective in generating revenue and enhancing customer engagement.

Compared to the previous year, sales through the direct channel strategy increased by an impressive 17.4%. This growth indicates the success of Meliá Hotels International, S.A.’s marketing and promotional efforts to attract customers and encourage direct bookings.

The direct channel strategy offers several advantages to both the company and customers. For Meliá Hotels International, S.A., direct channel sales allow them to bypass third-party intermediaries and retain a larger portion of the revenue. This translates into higher profit margins for the company.

On the other hand, customers benefit from direct bookings through various incentives, including exclusive offers, loyalty rewards, and personalized experiences. The direct channel strategy enables Meliá Hotels International, S.A. to establish a direct relationship with their customers, enabling them to cater to their specific needs and preferences.

The growth in direct channel sales exemplifies Meliá Hotels International, S.A.’s commitment to leveraging technology and digital platforms to enhance customer experience and drive revenue growth.

Objective of Reaching EBITDA Goal Achieved

Meliá Hotels International, S.A. successfully achieved its objective of reaching at least €475 million of EBITDA in 2023. This achievement is a testament to the company’s strong financial performance and effective management strategies.

EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, is a key financial metric that measures a company’s operating performance. By reaching their EBITDA goal, Meliá Hotels International, S.A. demonstrated their ability to generate earnings from their core operations and achieve profitability.

To reach their EBITDA goal, Meliá Hotels International, S.A. implemented various cost optimization measures, revenue enhancement strategies, and focused on driving operational efficiency. These efforts allowed the company to manage their expenses effectively and maximize their revenue generation.

Achieving their EBITDA goal not only signifies Meliá Hotels International, S.A.’s financial strength but also provides a solid foundation for future growth and expansion initiatives.

Net Profit and Debt Reduction

Meliá Hotels International, S.A. achieved a net profit of €117.7 million in 2023, further highlighting their financial prowess and ability to generate substantial earnings. This net profit reflects the company’s ability to effectively manage their expenses and generate revenue from their operations.

Additionally, Meliá Hotels International, S.A. made significant progress towards debt reduction in 2023. The company reduced its debt by €59.9 million, demonstrating their commitment to improving their financial standing and strengthening their balance sheet.

Reducing debt is a strategic priority for Meliá Hotels International, S.A. as it improves their financial flexibility and allows them to allocate resources to growth initiatives, such as property renovations, acquisitions, and innovation.

The company’s ability to achieve a net profit and reduce debt simultaneously showcases their financial discipline and long-term sustainability.

Strengthening Balance Sheet

Meliá Hotels International, S.A. took steps to strengthen its balance sheet during 2023. The company signed an agreement for the subscription of new shares, which allowed them to raise capital and enhance their financial position.

By issuing new shares, Meliá Hotels International, S.A. was able to strengthen its equity base and increase its financial resources. This provides the company with a strong foundation to support growth initiatives, increase investment in properties, and pursue strategic opportunities.

Strengthening the balance sheet is essential for Meliá Hotels International, S.A. as it enhances their ability to withstand economic uncertainties and market fluctuations. A robust balance sheet also instills investor confidence and positions the company for long-term success.

Liquidity Position

Meliá Hotels International, S.A. maintained a healthy liquidity position at the end of 2023, with a total of €330 million. This liquidity provides the company with the necessary funds to meet their financial obligations and invest in growth initiatives.

Having a strong liquidity position is crucial for Meliá Hotels International, S.A. as it allows them to navigate unforeseen challenges, such as economic downturns or market disruptions. Adequate liquidity ensures the company’s ability to continue operations and seize market opportunities as they arise.

Maintaining a healthy liquidity position is a testament to Meliá Hotels International, S.A.’s financial stability, risk management practices, and long-term sustainability.

Target for Net Debt-to-EBITDA Multiples

Meliá Hotels International, S.A. has set a target to return to pre-COVID net debt-to-EBITDA multiples by the end of 2024. This target reflects the company’s commitment to reducing debt and optimizing their financial structure.

Net debt-to-EBITDA multiples are a financial ratio used to assess a company’s ability to manage its debt obligations in relation to its earnings. By setting a target to return to pre-COVID levels, Meliá Hotels International, S.A. aims to regain its financial strength and improve its creditworthiness.

To achieve this target, the company will continue to focus on debt reduction, cost optimization, and revenue enhancement strategies. By effectively managing their debt levels and maximizing their earnings, Meliá Hotels International, S.A. aims to achieve sustainable growth and ensure long-term financial stability.

Premium and Luxury Positioning

Meliá Hotels International, S.A.’s growth and success in 2023 can be attributed, in part, to its premium and luxury positioning. The company’s commitment to providing high-quality services and luxurious accommodations has allowed them to differentiate themselves in the market and attract discerning customers.

By catering to the premium and luxury segments, Meliá Hotels International, S.A. has been able to command higher average daily rates and generate substantial revenues. Their properties offer top-notch amenities, personalized experiences, and exceptional service, creating a sense of exclusivity and luxury for guests.

Furthermore, Meliá Hotels International, S.A.’s premium and luxury positioning aligns with the evolving preferences of travelers. Increasingly, guests seek unique and memorable experiences, and the company’s commitment to delivering exceptional service fulfills these desires.

Overall, Meliá Hotels International, S.A.’s premium and luxury positioning in the market has been a key driver of their growth and success in 2023. By continuing to prioritize excellence and innovation, the company aims to maintain its competitive edge and further expand its footprint in the premium and luxury segments.