Brexit and oil price rise contingencies developed by Melia Hotels

Melia Hotels has developed contingency plans to tackle the double impact of Brexit and rising fuel prices.

The disclosure came as the Spanish chain revealed that its hotels in resorts in Spain came under pressure during the summer peak due to the recovery of competing destinations in North Africa and Turkey during the peak summer months.

The company also suffered a drop in the number of last-minute bookings due to the heatwave in northern Europe and the impact of the World Cup.

Despite these factors, net profit grew by 10.1% to almost €120 million in the year to September.

However, revenue of €1.414 billion for the nine months was lower than in the same period in 2017 due to a significant number of hotels under renovation and in the process of opening throughout the year.

Revenue per available room (Revpar) improved by 2.9% in constant currency terms, attributable to increases in both prices and occupancy.

Looking forward, the company said: “Growing competition from Turkey, Egypt and Tunisia affects demand and the prices negotiated with tour operators which will increase the pressure on some resorts, especially luxury resorts in the Canary Islands.

“The company expects to limit and offset this impact through sales and marketing programmes to enhance the penetration of direct channels.

“The company also remains cautious with regards to two issues with a potential impact on international tourism: the evolution of oil prices and the results of the Brexit negotiations, and has developed contingency plans to limit the potential impact on operations.”

Reviewing the year to September, Melia said: “The complex environment in which Spanish resorts were affected by the recovery of alternative destinations such as Egypt and Turkey in essential feeder markets such as Germany and the UK, as well as by the unusually good weather in the north of Europe that reduced the number of trips abroad, and also by events such as the FIFA World Cup.

“Together with the impact of the oil price and strikes at various airlines, all this caused a reduction in the number of tourist arrivals in Spain for the quarter compared to the same period in the previous year.

“In spite of all this, the group’s hotels on the Spanish mainland coast ended the third quarter with improvements in both prices and occupancy, while the Balearic Islands increased occupancy at the cost of reducing average prices.

“The resorts in the Canary Islands suffered greater competition from alternative destinations, particularly Turkey and Egypt which have more competitive pricing for tour operators, and also from the renovations in hotels such as the Melia Salinas and Melia Fuerteventura over the summer.

“Positive progress was made by the group’s hotels in Cape Verde, in spite of the fact that some of them are still in the launch phase.”

CEO Gabriel Escarrer said: “I am proud to highlight the positive performance of the group in the first nine months of 2018, despite the competition from recovering destinations in North Africa and Turkey and the fall in bookings by northern Europeans caused by the exceptionally good weather they have had this summer.”

He added: “The first nine months of 2018 confirm the competitive advantage created by a strategy focused on digital and sales strength and the extensive renovation and repositioning of our assets and brands.

“Our commitment to a model that prioritises adding hotels under management agreements is also beginning to bear fruit, providing us with increasing revenues from management fees and maximising our scale and structure in different markets.”

Related Articles

The Pig hotels achieve B Corp status

Mandarin Oriental to open first hotel in Rome

Voice of Luxury: Four Seasons' Alejandro Reynal