First Half 2012 Results

Transcription

1 First Half 2012 Results Profit & Loss Account (million Euros) RevPAR % Ebitdar margin 23.3% 24.2% -90 bp Ebitda margin 16.2% 16.9% -71 bp Ebitda margin ( ex-extraord.) 13.5% 12.3% +121 bp Ebt margin 2.0% 1.7% 31 bp Net profit margin 1.5% 1.3% 24 bp Covenants Ratios Adj. Net Debt / Ebitda (< 3.5x) 3.25x 3.49x EBITDA / Adj.Interest Exp. (>4.5x) 4.56x 4.99x Stock Performance MEL VOLUME MEL LAST IBEX LAST Week Average Volume 2,135, Week High, August 2nd Week Low, June 04 th Market cap ( 4.765) August 1st / $1,079.8 Bloomberg: MEL SM ; Reuters: MEL.MC Jun 2012 Jun 2011 % REVENUES % EXPENSES ( ex - Operating leases) % EBITDAR % Rental expenses % EBITDA % Depreciation and amortisation % EBIT % Total financial profit / (loss) (35.6) (43.3) 17.8% Profit/(loss) from Associates & JV (8.3) (4.5) -83.3% Continuing EBT % Discontinuing Operations Profit before taxes and minorities % Net Profit % Net Profit attributable % Operational Ratios 0 Highlights RevPAR & Net Profit increased by 8.5% and 24.3% respectively The results are broadly explained by the positive evolution of the Hotel business which registered a healthy RevPAR increase of +8.5% totally explained by price increases (+11.2%). This was offset by the lower contribution from the Real Estate division ( 38.0 mn in 2012 vs 43.2 mn in 2011) and the non securitization of the customer portfolio of the Vacation Club unit in 1H12 ( 3.5 mn of Ebitda in 1H11). Excluding the latter two effects, Ebitda and Ebitda margin improved by 15.5% and 121 bps. Below the Ebitda level, the generation of financial capital gains of 7.6 mn more than offset the negative contribution of the JV in some Spanish Resorts ( -2.4 mn as of 1H12) at the Profit/Loss from Associates & JV level, which are expected to recover in Q3, coinciding with the summer season. Outlook: Mediterranean Resorts to increase vs 2011 in Q3 The Company is witnessing a positive evolution in Spanish Resorts, especially in the Balearic Islands and mainland Spain, due to the trends in European feeder markets and direct channels, offsetting the sluggish performance of the Spanish market. This will lead the Mediterranean division to report mid-single digit growth in Q3 that, together with the strength of LatAm and the positive evolution of melia.com on the books (+34.3% in revenues vs. 2011), could make the overall RevPAR performance of the Company even better. It is not expected nevertheless a change in the sluggish trend of the corporate travel to the Spanish cities. Strengthening of international positioning YTD, Meliá s current pipeline stands at 31 new hotels with 10,491 rooms, of which 92% are in the Upscale/Premium category, all of them under low capital-intensive formulas (leases & management) and 90% outside Spain, with 54% in emerging markets. Meliá meets covenants, reduces debt and reinforces net debt commitment by year-end (< 900 mn) The Company met its bank covenants and reduced net debt versus Q1 by 68.5 mn principally on the back of asset sales. The Company maintains it commitment to progressive financial de-leverage with a net debt below 900 mn by the year end on the back of further asset disposals and FCF generation. Melia enjoys the confidence of domestic and international financial institutions, as reflected in the renovation of 100% of the amount of credit facilities maturing in On the maturity side, the Company is working on the extension of its average debt maturity period. Regarding preferred shares, refinancing decision, excluding any equity deal, is expected before year end. Report released on August 2, 2012

2 Table of contents 1. Letter from the C.E.O. and Vice-Chairman Information on Operations Energy consumption Emission savings Income Statement Balance Sheet Cash Flow Statement Expansion

3 1. Letter from the C.E.O. and Vice-Chairman Dear friend, uneven evolution of economies on a global basis Meliá Hotels International is releasing its first half 2012 results within a framework in which the global economic recovery during the second quarter of the year has shown signs of further weakness. Job creation has been hampered, financial markets and sovereign stress in the Euro area periphery have ratcheted up close to end-2011 levels, while growth in a number of major emerging market economies has been lower than forecast. Within this scenario, last July the International Monetary Fund revised slightly downward its forecasts, while in the Travel & Tourism Industry the main institutional bodies such as the World Travel and Tourism Council also posted a moderate downgrade from the beginning of the year. The Company thus maintains a cautious stance on the overall business evolution, especially in relation to corporate travel in Europe in late 2012/2013. On the other hand, leisure trends remain comparatively robust. In Spain in particular, recent data (up to June) from the Ministry of Industry, Tourism and Trade pointed to an increase of 2.9% in international travellers coming to Spain, reflecting a positive trend in practically every month and significant increases in the main feeder markets i.e. Germany or France but also in other feeder markets such as United States or Russia. underlying Ebitda: +15.5% (+121 bps in margins) RevPAR: Q1: +7.2%; Q2: +9.7% Confidence for a positive summer season Innovation as a competitive advantage Within this context, the positive performance of Meliá Hotels International is of note, showing a consolidated EBITDA during the period of 105 million Euros, an increase - excluding the Real Estate Division and the non - securitization of customer portfolio within the Club Melia in 1H12 of 15.5%. We would like to highlight the positive performance of the hotel business which has seen RevPAR increase by 8.5% after an acceleration during the second quarter of the year which saw RevPAR increases of +9.7%. Even more important is 11.1% recovery in prices which has led to a significant improvement in Company margins. The robust performance in LatAm (RevPAR: +25.5%) and European cities (+4.7%) offset the worse performance of the Spanish cities Division, where RevPAR has decreased by 2.4%. In LatAm, our allinclusive Paradisus brand continues to be one of the major drivers of such growth on the back of the quality of product, service added values combined with high brand recognition in the US. The opening of the two Paradisus resorts in Playa del Carmen (Mexico), will definitively contribute to strengthen the brand positioning. Going into the summer season, after a good set of results in June and July, the Company remains confident about a positive summer season especially in destinations such as the Balearic Islands and mainland Spain. The booking position considering U.K, Central European tour operators and company owned channels-, points towards a mid single digit growth versus last year figures in the Mediterranean while in the Spanish feeder market, the slower evolution of the mainstream tour operators has been partially offset by the better performance of Online Travel Agencies and company owned channels. Following the summer season there is a potential effect of the rise in VAT in the tourist industry from 8 to 10% from September According to our estimates, and within a scenario in which the Company will assume 100% of the impact, our consolidated accounts may be impacted by around a 2.5 million decrease at the EBITDA level for the whole year In the light of current pricing negotiations, we understand the output VAT will have a limited impact on Company s ARR figures. We are proud to comment on the positive impact that the recently opened resorts in the Balearic Islands, the Sol Wave House and Beach House, may have. These two resorts are part of the "Calviá Beach Resort project, which aims to revitalize a resort destination in the south-west of Mallorca ( Magalluf ), where the Company has 3,500 rooms. The project, favourably highlight some of the strategic foundations of the company: a commitment to innovation, analyzing customer needs and anticipating future demand to remain a benchmark in the industry, while continuing to be committed to sustainability as a competitive advantage. 3

4 We are satisfied also with the increasing level of loyalty of our customers throughout 2012 when the number of regular customers in the mas loyalty program reached the figure of 2.7 mn vs 2.5 mn by yeanend Currently a 25% of roomnights are explained by Melia s loyalty program. Going further into the year and the beginning of 2013, we see continuity in the positive trends in Latin America & the Caribbean, partially explained by the strength of the Groups segment, where requests for proposals and bookings continue to strengthen. At this stage, negotiations with the main US and Canadian tour operators have resulted in positive commercial terms. In European Cities, after the summer break, the Trade Fair and Congress business is also expected to perform well, especially in Germany, while in Spanish cities there is no major change. Contingency Plan in Spain, full speed abroad strength of the internationalization process pipeline 31 hotels / new rooms accomplishment of covenants This overview reflects the duality of the situation inside and outside Spain, with the business broadly evolving at two different speeds: we forecast a scenario of growth and maximization of profit and margins in the international arena, while in Spain, that represents a 20% of the operating profit, more rigorous cost control will be applied in headquarters, hotels and the vacation club business. The outlook for the Company should also be favoured by the intense internationalization process at Meliá, both in regard to the positioning through new openings in international markets, and also to the efforts of our sales force to boost demand from alternative feeder markets. The Company has compensated the weakness in domestic demand, where roomnights fell by around 9% to June, and that was anticipated way in advance by Melia, with higher sales from traditional feeder markets such as France or Germany- and also from Latin American feeder markets - particularly Mexico, Brazil or Argentina and the Russian market. Meliá Hotels International has reached an extraordinary level of maturity with regard to the added values offered to hotel properties as a manager, i.e. global sales leadership, loyalty programme, hospitality IT systems, brand standardisation, etc. For this reason, the roll out of our business model in the future will be primarily through low capital intensive formulas or joint ventures when capital will be required, maintaining our portfolio diversification. The current pipeline stands at 31 hotels with 10,491 rooms that will further increase Meliá s network in new countries, especially in emerging markets, where 54% of the total new capacity will be added, reinforcing our presence in countries such as Brazil, Costa Rica, China, Indonesia and Cape Verde. The opening of the ME London hotel will be in September and will represent a fundamental step forward in our internationalization process and a major contribution to the London luxury hotel industry. With regard to sustainability, last June the Company released its Sustainability Report 2011 including the design of the company's Code of Ethics, compliance with the commitments to UNICEF, the set up of an alliance with the ONCE Foundation with the signature of the Convenio Inserta with the aim of improve accessibility in our hotels. With regard to reputation, the official Spanish Chamber of Commerce in Brazil hosted the third edition of its Sustainability Awards for Spanish companies operating in Brazil that have carried out the best social or environmental protection projects, delivering the award in the Contributions to Improvement in Corporate Development category to Meliá Hotels International. The Company is also proud to have reduced the CO2 Emissions and Water Consumption per stay by 8.5% and 10.1% respectively within the period. Regarding the financial situation, the Company has been able to meet its bank covenants mainly linked to the syndicated loans, maintaining the confidence in its ability to meet them again for the full year Within a conservative debt management framework, the Company to date has 405 million Euros of cash, which compares with 383 million Euros maturities in the second half of 2012 and 2013 (excluding the revolving credit facilities and Preferred shares), thereby allowing Meliá to work well in advance in the refinancing of the main maturities. In this regard, year to date, Meliá has renewed 100% of the amount of its credit facilities that mature in 2012 ( 200+ mn Euros) and also two bilateral loans, evidencing once again the confidence and support obtained from the main financial institutions. Regarding the evolution of the cost of debt, this reached 5.0% in line with the guidance of the Company for the whole year. 4

5 Asset valuation contributing to the progressive de-leverage Melia reinforces net debt commitment by year-end (< 900 mn) Up to date, Meliá has a portfolio of 63 majority owned hotels, of which only 13 are mortgaged, making up 260 million mortgage loans, compared to a total asset valuation of 3,243 million euros according to the recent Jones Lang LaSalle valuation. Melia Hotels International has therefore scope for asset-backed financing on the back of its unencumbered properties. Additionally, the asset rotation of these properties, will certainly contribute to the progressive financial deleverage of the Company. As the Company informed last month, in June the Company sold the hotel ME Cancun for $76.5 million, contributing positively to achieving the guidance of net debt below 900 million Euros for the year end. To conclude this letter, also within the debt management scope I would like to emphasize the further diversification of financial risk as another of the main priorities of the Company, with implications for the existing sources of funding and also how the Company is moving into the future, highlighting the importance of capital markets which are expected to play a greater role in Meliá in the future, contributing to the lengthening of maturities and exposure to international markets e.g., exposure to financing in USD. Best regards, Gabriel Escarrer CEO & Vice-Chairman 5

6 2. Information on Operations 2.1. Hotels RevPAR for owned and leased hotels has increased by +8.5%. Occupancy levels decreased by -2.4%, and the Average Room Rate (ARR) increased by +11.1%. During the second quarter, RevPAR growth accelerated versus the first quarter, increasing by 9.7%, highlighting again a healthy RevPAR growth which is totally due to price increases. Margins from the hotel business improved by 87 basis points America In America RevPAR grew by 25.5% (+15.9% in dollars) thanks to the Company strategy focused on strengthening market segments less sensitive to prices, allowing ARR increases of +29.5%. The improvements in results during the semester have been mainly possible thanks to: a) The progressive recovery of leisure travel due to higher consumption in the US and Canada b) The better performance of Meetings, Incentives, Congresses and Events (MICE) likewise linked to the above mentioned recovery; c) The rise in arrivals from Latin American markets, especially from Mexico, Venezuela and Brazil. d) Higher arrivals from Europe to the Caribbean given the adjustments in tour operator flight schedules. By country, the best performer was the Dominican Republic, where the agreements signed with European tour operators boosted demand, especially in the Meliá Caribe Tropical and Paradisus Palma Real. During the semester the strong group base in the Paradisus Palma Real also allowed significant ARR increases. Mexico also reported good results led by the evolution of the hotels in Cancun but also by Playa del Carmen, where the Paradisus La Perla and La Esmeralda resorts performed above expectations, partially due to the strong performance of the Groups segment, in many cases coming from the domestic market. Is also worth noting the positive performance of Venezuela, where the hotel Gran Meliá Caracas held significant government events, while in Puerto Rico the excellent performance of the individual leisure segment - partially favoured by the bankruptcy of some hotels in the area -, allowed the Gran Meliá Puerto Rico to make improvements both in occupancy and ARR. The Company indicates that the EBITDA generated by the American Division hotels during the semester represents around 65% of total EBITDA generated for the whole year. Looking ahead, given the current situation and demand coming from the leisure and business groups, and the status of negotiations with mainstream tour operators from U.S and Canada, the Company expects to maintain the trend for the winter season and throughout Operating Expenses (excluding rental expenses) increased by 18.7% (9.2% in USD) when excluding changes in perimeter, which implied a 20.4% increase in Cost per Stay (10.8% in USD). The main reason lies behind the increase in personnel expenses in Venezuela (aligned with the inflation rate), jointly with higher tributes in Dominican Republic. In terms of Available Rooms (+15.0%), the evolution is explained due to the incorporation of two Paradisus resorts, La Esmeralda and La Perla in Playa del Carmen (Mexico). 6 ME Madrid

7 2.1.2 EMEA In EMEA, RevPAR went up by 4.7%, thanks to a 5.1% improvement in prices, highlighting the RevPAR acceleration in the second quarter compared to the first (Q1 +3.1%; Q2 +6.1%). By country, France registered the best performance (RevPAR +13.9%) given the efforts made to reduce exposure to tour operators and key accounts more sensitive to price increases while reinforcing leisure activity at the weekends as reflected the increase in sales through centralized channels. Some important events in May and June also helped to boost demand in Paris favouring better yield management and significant ARR increases. Secondly, RevPAR in Germany increased by 7.4%. During the second quarter cities such as Berlin, Munich and Dusseldorf benefited from strong MICE activity, especially in Trade Fairs and Congresses. The mixed evolution of tour operators was offset by alternative promotions with different partners allowing Meliá to maintain occupancy levels. In the U.K, the Meliá White House also reported good results, with a RevPAR increase of +6.0%. The Company emphasizes how positive are these results given that the June was a challenging month due to the celebration of the Queen s Jubilee which for 10 days displaced some business groups and key accounts. On the negative side, in Italy a) the slowdown in domestic demand, b) increases in hotel supply and c) strong pressure on prices, led to lower occupancy levels in our hotels, especially in the Meliá Milano, that was also affected by the loss of some air crews. Given the complex situation in Italy, the Company is implementing an action plan to adapt to the economic environment and minimize the impact at the P&L level. Operating Expenses increased by 2.5%, while total cost per stay increased by +2.4% mainly due to increases in personnel expenses in Germany. Available Rooms changed by -1.0%, due to the disaffiliation of Tryp Verona (August 2011), the sale of Tryp de Saxe (December 2011) and Tryp Blanche Fontaine (March 2012), offset by the incorporation of Meliá Genova (September 2011) Premium Europe RevPAR in Premium Europe fell by -1.2% although there was an improvement in average room rate of +3.9% and an overall better performance in the second quarter (RevPAR Q1-2.2% vs Q2-0.4%). In city hotels, the best performance was seen in hotels with a higher exposure to the international business segment, and also in hybrid hotels with a mix of business and leisure segments due to the fact that the leisure component partially offset the lack of business transient travellers. Within this framework, the performance of Gran Meliá Fénix (Madrid) and Gran Meliá Victoria (Palma de Mallorca, Balearic Islands) was particularly positive. Additionally, Meliá highlights the positive contribution of the new Gran Meliá Rome, which is contributing positively since opening last April. This property is expected to be an important contributor not only for the Premium segment but also for the Company as a whole and will consolidate in Company statements from August Regarding resorts, hotels biased towards international feeder markets reported better results, i.e. Meliá de Mar (Palma de Mallorca, Balearic Islands) and Gran Meliá Don Pepe (Marbella). The Meliá de Mar hotel has repeated for the second consecutive year its innovative Adults Only concept, achieving ARR increases of 11.1%. In mainland Spain, the Gran Meliá Don Pepe also reported significant ARR increases (14.4%) mainly thanks to a) refurbishment in some panoramic suites and b) good segmentation in terms of nationalities with a higher exposure to Russian, Arab, Scandinavian and Belgian clientele. On the 7

8 negative side, the performance of one property in Lanzarote (Canary Islands) where the Company is implementing operational and marketing efforts to reverse the trend throughout the year. Finally highlight the positive evolution of the Other Income, mainly due to the better performance of the Meeting rooms item at the hotel Meliá Madrid Princesa. Operating Expenses (excluding rental expenses) decreased by 0.8% thanks to the implementation of the contingency plan in Spain that included actions such as the optimization of the staff according the occupancy levels, or the staff recruitment trough temporary work agencies, allowing a decrease by -0.4% in personnel expenses per stay Spanish Resorts (Mediterranean) RevPAR in Spanish resorts dropped by -1.2% due to the evolution of occupancy rates (-6.8%), while in terms of prices the Company made an upward adjustment (+6%). During the second quarter, coinciding with the opening of most hotels in the Balearic Islands and mainland Spain, RevPAR performed above last year, with a +1.4% increase influenced by the evolution of prices (ARR 2Q +6.5%). It should also be mentioned that the change of management regime at the Sol Tenerife (522) and Sol Antillas Barbados (757) is also contributing negatively at the RevPAR level, given that the impact is now confined to the management fees level. By region, the robust evolution of the Balearic Islands which in May and June registered significant RevPAR increases (+5.7% up to June) while the hotels in mainland Spain also reported good results (RevPAR +4.3 up to June) led by the performance of the hotels in Alicante and Malaga. On the negative side, the Canary Islands performed below last year, with RevPAR decreases of -11.3% given the strong comparables in 2011 and the effect of the progressive recovery in tourist arrivals in some destinations in Northern Africa. The Company points out that the evolution of the Division is largely explained in the third quarter, coinciding with the summer season in Europe, when 90%+ of Ebitda is generated. Going into the summer season, Meliá highlights the good performance of hotels in June and July. The current booking position from the early-booking feeder markets, i.e. the UK, Germany and Benelux, point to mid single digit growth in terms of bookings. Regarding the Spanish feeder market, the mainstream tour operations are performing below last year, which is offset by the better situation of the Online Travel Agencies and the company owned channels. During the summer season a positive impact is also expected from: a) the implementation of the adults only concept in additional hotels such as Sol Costablanca and Sol Los Fenicios and b) the implementation of All Inclusive service in Sol Falcó and Sol Mirlos Tordos. Operating Expenses decreased by -16.4% (-4.5% like for like) while cost per stay increased by 6.8% (5.4% like for like) given that hotels must retain a certain fixed component of structure (i.e. permanent staff). During the semester the Company has implemented contingency plans in most hotels including staff realignments according to occupancy levels, the schedule of staff holidays during low occupancy periods or renegotiations with local suppliers. Available Rooms (-15.2%) were affected by the change in management regime of the Sol Tenerife (December 2011) and Sol Antillas Barbados (June 2011), together with the sale of Sol Galúa (December 2011). 8

9 2.1.5 Urban Spain (Spain) RevPAR in the Division declined by -2.4%, with the RevPAR in the second quarter slightly better than the first (-1.0% in Q2 versus -3.9% in the Q1). During the prices increased by +1.0%. By city, almost all of them saw declines in RevPAR with the exception of Barcelona and some hotels in Madrid where the higher exposure to the international business segment led to better results. The better performance of the leisure segment benefited those hotels with a better mix of guests between corporate and leisure segments. As far as business segmentation is concerned, the better performance of the leisure segment (both in individuals and groups) did not compensate the weakness of individual business travel, especially transient business and crews - impacted by the chapter-11 of Spanair and manpower realignments in many airlines. Going forward, the Company has introduced a Contingency Plan in Spain, including actions in hotels such as the disaffiliation of underperforming hotels and hotels that do not create value for the brand, and the renegotiation of lease agreements. Within this context, the hotel Meliá Alto Aragon (Formigal, Spain) was disaffiliated last June, being significant given that its management contract included a minimum guaranteed yield, while Tryp Sondika (Bilbao, Spain) and Tryp Albayzin (Granada, Spain) were also disaffiliated given their negative contribution to consolidated accounts. Operating Expenses decreased by -4.0% (-2.9% like for like) while total cost per stay decreases by - 3.0% thanks to the implementation of the contingency plan, which included actions such as fitting the cost structure to the brand standards. Available rooms (-3.2%) in the Division went down as a consequence of the disaffiliation of Tryp Iberia (October 2011), Tryp Urdanibia (December 2011), Tryp Sancho Ramirez (December 2011), Tryp Sondika (March 2012), and Tryp Albayzin (April 2012) partially offset by the incorporation of Meliá Valencia in September Table 1: Hotel statistics Owned and Leased hotels 12 / 11 (RevPAR & A.R.R. in Euros) % Occupancy RevPAR A.R.R. 9 Available rooms AMERICA % ,224.0 % o/ % 25.5% 29.5% 15.0% % ,064.2 EMEA % % o/ % 4.7% 5.1% -1.0% % ,001.6 PREMIUM EUROPE % % o/ % -1.2% 3.9% 0.0% % MEDITERRANEAN % ,280.6 % o/ % -1.2% 6.0% -15.2% % ,510.7 SPAIN URBAN % ,683.0 % o/ % -2.4% -1.0% -3.2% % ,738.4 TOTAL % ,491.9 % o/ % 8.5% 11.1% -2.4% % ,627.7

10 Table 2: Hotel revenues split 12 / 11 for owned / leased hotels Room Revenues F&B and Other Total Revenues Total Expenses * AMERICA ,4 105,5 185,9 124,9 61,0 EBITDA % o/ ,3% 22,3% 30,9% 32,2% 28,4% ,7 86,3 142,0 94,5 47,5 EMEA ,7 26,2 102,0 80,5 21,5 % o/ ,6% 2,6% 3,3% 3,7% 2,0% ,1 25,6 98,7 77,6 21,1 PREMIUM EUROPE ,0 15,2 43,2 40,6 2,6 % o/ ,2% 1,2% -0,3% -0,9% 9,2% ,3 15,0 43,3 40,9 2,4 MEDITERRANEAN ,5 23,0 56,5 58,2-1,7 % o/ ,3% -22,9% -19,1% -14,9% -217,2% ,0 29,9 69,9 68,4 1,4 SPAIN URBAN ,7 34,6 108,2 102,9 5,4 % o/ ,5% -4,6% -5,2% -3,7% -26,9% ,0 36,2 114,2 106,9 7,3 TOTAL ,4 204,4 495,8 407,0 88,8 % o/ ,9% 6,0% 5,9% 4,8% 11,3% ,2 192,9 468,1 388,3 79,8 * Includes rental expenses 10

11 Table 3: Third parties management fees Management fees increased by 9.5% (2.2 million Euros), positively affecting the Other Business and Overheads. In America, management fees increased by 8.6% (+1.4 million Euros) mainly due to the good performance of Cuba and in a lesser extent the incorporation of two hotels in United States, that partially offset the disaffiliation of one property in Costa Rica. Management fees in EMEA increased by 0.1 million Euros due to the change of regime of Tryp de Saxe in December 2012 and the incorporation of Meliá Zanzibar. In Premium Europe, the better performance (+0.2 million Euros) is linked with good results in Gran Meliá Palacio de Isora (Tenerife, Canary Islands) while the evolution in the Mediterranean, that increased by +0.6 million Euros, is explained by the change of regime of Sol Antillas Barbados and Sol Tenerife together with the incorporation of the Meliá Tortuga Beach Resort in Cape Verde. Finally in Spain, total fees went down by -5.7% (0.1 million Euros) due to the already mentioned weak evolution of the corporate segment in the Spanish city hotels. MANAGEMENT FEES REVENUES (million Euros) jun-12 Var 12 / 11 jun-11 AMERICA Basic % 10.4 incentive % % 16.3 EMEA Basic % 0.2 incentive % % 0.3 PREMIUM EUROPE Basic % 1.3 incentive % % 1.6 MEDITERRANEAN Basic % 1.4 incentive % % 1.9 SPAIN URBAN Basic % 2.6 incentive % % 2.9 TOTAL BASIC % 16.0 TOTAL INCENTIVE % 7.0 TOTAL %

12 2.2 Club Meliá During 2012, the total number of weeks sold decreased by -16.3% versus the same period last year, impacted by: a) suspension of sales of Me Cancun inventory; b) the closure of the sales offices in Madrid and Puerto Rico; c) the challenging situation of Gran Meliá Palacio de Isora in the Canary islands due to the situation of Spanish consumption; d) changes of customer profiles in hotels in Dominican Republic and Mexico towards a corporate or group client, who are not generally considered to be qualified prospects for Club Meliá. Another factor contributing to the decrease in number of weeks sold, is the major sale of biannual contracts (implying the right to use the property on a biannual basis), which in the accounting are registered as half week. Biannual sales represented 65% over the total in 2012 versus 54% in Independently of the type of weeks sold, total contracts signed increased by +0.9%. On the other hand, the average price increased by 15.7% principally thanks to the product mix sold, mostly high-end inventory in Dominican Republic. This situation led to a Net Club Sales decrease of - 3.1% compared to the same period of 2011 On the cost side, total expenses decreased by -2.8%,driven by the implementation of a contingency plan with savings derived from the reduction of sales structures on site, a focus on more profitable channels for prospect generation and the incorporation of electronic tools to improve the selling process. At the EBITDA level it should be noted that 2011 was positively impacted due to securitisation of the Club s customer portfolio, which represented a favourable impact to the results of the first half of 2011 of approximately 3.5 million Euros. There has been no securitisation in Real Estate During the quarter the Company sold the ME Cancun (Cancun Mexico) hotel for 61.2 million Euros, generating capital gains of 27.6 million Euros. Furthermore, during the first quarter the Company sold the Tryp Blanche Fontaine (Paris France) for 12.8 million Euros, generating capital gains of 8.6 million Euros. Asset disposals in 2012 compares with 37.5 million Euros in 2011 due to the sale and lease back of the Meliá Lebreros (Seville Spain) and the contribution of the Sol Antillas Barbados resort (Balearic Islands Spain) to a 50% joint venture with a partner. Additionally, should be noted that in 2011 was generated an additional capital gains that led the division to report 43.2 mn at the Ebitda level. All these transactions should be put within the framework of the strategic movement towards an asset light model, which has implications not only for the existing owned hotel portfolio but also how the Company will grow into the future. Table 4: Asset Rotation 12 / 11 ROOMS PRICE Capital Gains (EBITDA) jun-12 jun-11 jun-12 jun-11 jun-12 jun-11 Melia Lebreros ,3 16,8 Sol Antillas Barbados ,0 20,7 Tryp Blanche Fontaine 66 12,8 8,6 Me Cancun ,2 27,6 TOTAL ,0 104,3 36,2 37,5 Regarding the other real estate businesses, in the Dominican Republic total revenues decreased by - 3.1% due to strong comparables in 2011 given the extraordinary sale of a plot of land in 2011 while in Venezuela, revues coming from the rentals of the shopping premises generated additional 0.4 million Euros. 12

13 2.4 Other Business and Overheads At the revenues level, the item Other Business and Overheads increases by 12.4 million Euros mainly due to higher management fees coming from the hotels under management and franchised contracts, higher revenues from the tour operator activity in Cuba and higher commissions. Total expenses increased by million Euros mainly to the greater volume of activity in the tour operator in Cuba. That is offset by the increase in revenues, while at the EBITDA level, Sol Caribe tours increased by +0.2 million Euros. At the EBITDA level, Other Business and Overheads improved by 5.9% (+1.5 million Euros)

14 3. Energy consumption Emission savings ME Viena Table 5: Environment and Energy Average ytd % / Av Average ytd Environmental Metrics CO2 Emissions ( Kg) 41,400, % 46,097,643 per stay % Water Consumption ( m3 ) 1,190, % 1,349,553 per stay % Energy metrics Fuel (kwh) 49,262, % 58,837,808 per stay % 14,66 Electricity (KWh) 61,825, % 66,405,396 per stay % Note: To compare the efficiency at the same levels of Occupancy, the metrics per stay corrected per Occupancy are: CO2 Emissions per stay: 10.51Kg (-8.5%), Water Consumption per stay: 0.302m3 (-10.1%), Diesel per stay: 13.51kwh (-14.7%), Electricity per stay: 15.70Kwh (-5.1%) As seen in the data, there has been a reduction in both energy consumption and CO2 emissions (reduction of 10.2%) and also an 11.8% reduction in water consumption. The results confirm the trend of reduced energy and water use and lower emissions which the company has been working on via the SAVE project since We would like to point out the improvement in energy efficiency, reflected in a reduction in CO2 emissions per customer of 8.5%. This result comes from an improvement in the ratios of energy consumption per customer. There has been a notable reduction of 5.1% in electric power consumption per customer, the result of investments made during 2011 within the SAVE project (Meliá Hotels International energy efficiency and saving programme), relamping of lighting using low-energy led technology, and improved control systems. Fuel consumption reductions have been maintained, involving savings of 16.3% in absolute terms and 14.7% in per customer values. As part of efforts to maintain leadership in energy efficiency and its strategic commitment to sustainability, Meliá Hotels International invested 500,000 euros in 2012 in actions directly associated with energy efficiency. These investments included within the strategic investments and the SAVE programme focus on projects which add the greatest value to hotel operations and a lower payback period (PRS of months on average). The projects associated with these investments are expected to be completed in the second half of 2012 and will affect 45 hotels. Furthermore, we are in the process of installing 4 heat production improvements using an ESC model (Energy Service Company), the comprehensive reform of energy production and water facilities in the Gran Meliá Cancun, and remote management of power supplies in hotels in Spain. In addition to the above projects specifically aimed at energy efficiency, in the design of all of our planned reforms, new hotels and brand standards, Meliá Hotels International incorporates a commitment to implementing energy efficiency and savings measures. 14

15 4. Income Statement Revenues Total revenues increased by 4.6% (28.7 million Euros). The split by division remained as follows: Revenues from the Hotel Division increased by 5.9% (+27.7 million Euros). Real Estate decreased by - 8.7% (-4.3 million euros) on the back of lower gross capital gains. Club Meliá fell by 13.1% (-6.2 million Euros) mainly due to the lack of the securitization of the portfolio, while Other Revenues increased by 20.9% (+11.6 million euros) mainly due to higher management fees, higher revenues coming from tour operation activity in Cuba and higher commissions. Operating Expenses Raw Materials increased by +3.0% (+2.3 million Euros) due to the changes in the perimeter mostly due to the incorporation of two resorts in Playa del Carmen. When excluding the perimeter and the exchange differences rates, raw materials would have remained flat (+0.4%). Personnel Expenses went down by -3.4% (-6.7 million Euros) affected by a change in the system of account that makes the Company account the staff recruited in Mexico through Employment agencies as External Services rather than Personnel Expenses. Excluding this extraordinary effect, personnel expenses would have decreased by 1.6%. On a comparable basis, personnel costs increased by 1.9%. Other operating expenses item increased by +16.8% (+31.9 million Euros). On a comparable basis, when excluding changes in the perimeter and the exchange rate effect and other extraordinary the item increases by 4.6% ( 8.2 Mn) mainly due to higher advertising ( 2.0 million) energy expenses ( 2.0 million) due to increase of kwh and m3 of water by 11% and 13% respectively and maintenance and repair expenses ( 1.8 million). The remaining could be linked to consulting expenses and commissions. Rental Expenses have increased by +1.9% (+0.8 million Euros) due to the Sale & Lease back operations (Meliá Lebreros, Meliá Milan and Meliá Atlanterra) and changes in the perimeter. When excluding the above mentioned effects, rental expenses would have remained flat thanks to the renegotiation of rental agreements. Ordinary Profit / Net Profit The financial result improved by 17.8% (7.7 million euros) mainly due to: Higher financial income generated through the sale of a financial stake in a resort in Los Cabos (Mexico) in 2012 ( 7.6 million Euros), together with higher interest generated by the loans to associates. Higher interest expenses principally resulting from: 1) the increase in the variable interest rate as a result of higher spreads due to the renewal of the credit facilities, 2) the increase in the fixed interest rate due to the signature of new loans during the second quarter of 2011 and early 2012, highlighting the Playa del Carmen financing operation. Remark that total cost of the debt reached up to June 5.0% compared to 4.3% in June Less Exchange Expenses by -7.6 million Euros given the different dollar behaviour during the period. While during the first semester 2011 the dollar depreciated by -7.9%, in 2012 it appreciated by +2.9%. At the Associates level, this figure decreased by -3.8 million Euros mainly thanks to the effect of the JV in some Spanish resorts (- 2.2 million Euros), a trend that is expected to be softened during the third quarter, when historically these hotels generate 90% of the Ebitda for the whole year. On the positive side, it is worth noting the better performance of Gran Meliá Palacio de Isora (+0.6 million Euros) and the impact of the Meliá Milano (+0.2 million euros) after the sale in December The tax rate increased up to 18.6% from 18.4% in June

16 Table 6: Meliá Consolidated Income Statement (Million Euros) Jun 2012 Jun 2011 Hotel Revenues Leisure Real Estate Revenues Club Revenues Other revenues Total Revenues % Raw Materials (82.7) (80.2) Personnel expenses (192.9) (199.7) Other operating expenses (222.5) (190.6) Total Operating Expenses (498.1) (470.5) 5.9% EBITDAR Rental expenses (46.0) (45.1) EBITDA % Depreciation and amortization (48.2) (46.5) EBIT (OPERATING PROFIT) % Financial Expense (45.9) (36.1) Financial Income Exchange Rate Differences (0.4) (8.0) Other Interest Expense (6.3) (6.1) Total financial profit/(loss) (35.6) (43.3) -17.8% Profit/(loss) from Associates and JV (8.3) (4.5) Profit/(loss) from ordinary activities % Extraordinary profit/(loss) Profit before taxes and minorities % Taxes (2.4) (1.9) Group Net profit (loss) % Minorities (0.6) (0.5) Profit (loss) of the parent Company % 16 16

17 Table 7: Business Segmentation of Meliá Hotels International Consolidated Income Statement Mn euros AMERICAS EMEA (EX SPAIN) HOTEL BUSINESS MEDITERRANEAN (RESORTS) PREMIUM EUROPE SPAIN (CITIES) TOTAL HOTELS REAL ESTATE CLUB MELIÁ OTHER BUSINESS & OVERHEAD EXPENSES AGGREGATED CONSOLIDATED 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % 1H2012 % REVENUES 185,9 30,9% 102,0 3,3% 56,5-19,1% 43,2-0,3% 108,2-5,2% 495,8 5,9% 45,5-8,7% 40,6-13,1% 110,2 12,7% 692,0 4,5% 649,0 4,6% EXPENSES 124,9 32,2% 63,6 2,5% 54,6-16,4% 35,5-0,8% 81,9-4,0% 360,5 5,1% 7,4 14,2% 38,9-2,8% 134,2 9,1% 541,1 5,6% 498,1 5,9% EBITDAR 61,0 28,4% 38,3 4,8% 2,0-57,6% 7,6 1,7% 26,3-8,9% 135,3 8,1% 38,0-12,1% 1,7-74,3% -24,1 4,8% 151,0 0,7% 151,0 0,7% RENTALS 0,0 0,0% 16,8 8,6% 3,7 14,9% 5,0-1,7% 20,9-2,8% 46,5 2,5% 0,0 0,0% 0,0 0,0% -0,5-124,2% 46,0 1,9% 46,0 1,9% EBITDA 61,0 28,4% 21,5 2,0% -1,7-217,2% 2,6 9,2% 5,4-26,9% 88,8 11,3% 38,0-12,1% 1,7-74,3% -23,5 5,9% 105,0 0,2% 105,0 0,2% D&A 16,6 31,2% 3,8-10,3% 9,5-11,8% 5,7 2,1% 7,2 3,3% 42,8 6,5% 0,3 90,4% 0,9-12,2% 4,2-18,1% 48,2 3,6% 48,2 3,6% EBIT 44,4 27,4% 17,7 5,1% -11,2-20,1% -3,1 3,1% -1,8-573,6% 46,0 16,2% 37,7-12,5% 0,9-84,8% -27,7 8,0% 56,8-2,5% 56,8-2,5% 17

18 5. Balance Sheet Assets Emphasizes the reduction of the "Tangible assets" item by 20 million Euros due to the asset disposals during the period, -sale of ME Cancun and Tryp Blanche Fontaine with a book value of 30.0 and 5.8 million Euros respectively - offset by the balance sheet restatement in Venezuela and a greater valuation in the Playa del Carmen resorts. Higher Other non-current financial assets of 91 million Euros is partially linked to the increase of "Longterm Loans to Associates" (+59 million Euros) mainly due to the loans to Adprotel, owner of the ME London together with the increase of Other long term debt (+30 million Euros) mainly due to the effect of the non-customer securitization in the Club Meliá division in 2012 and hence the reclassification of the amount sold from Trade and other receivables to Other long term debt. Liabilities & Shareholders Equity Trade and other payables reduces by 25.0 million Euros as a consequence of the increase in Shortterm taxes payable (-11.0 million Euros) and Anticipated income (-6.0 million Euros). Regarding debt levels, net debt reached 1,016.3, which implied an increase by 13.5 million Euros (+1.4%) versus December 2011, but a decrease by million Euros (-3.8%) versus June Debt levels are mainly explained due to the finalization of two resorts in Playa del Carmen (Mexico) as well as the works in ME London hotel, partially offset by the intense asset rotation activity during the last year. 18

19 Table 8: Consolidated Balance Sheet (million Euros) Euros Dec 2011 Jun 2012 ASSETS NON-CURRENT ASSETS Goodwill Other Intangibles Tangible Assets 1, ,798.9 Investment Properties Investments in associates Other non-current financial assets Deferred tax assets TOTAL NON-CURRENT ASSETS 2, , % CURRENT ASSETS Inventories Trade and other receivables Tax assets on current gains Other current financial assets Cash and cash equivalents TOTAL CURRENT ASSETS % TOTAL ASSETS 3, , % 19

20 Table 8: Consolidated Balance Sheet (million Euros) cont EQUITY Dec 2011 Jun 2012 % Issued capital Share premium Reserves Treasury shares (110.4) (110.5) Results from prior years Other equity instruments Translation differences (183.0) (148.0) Other adjustments for changes in value (7.1) (7.2) Profit attributable to parent company EQUITY ATTRIBUTABLE TO THE PARENT CO. 1, ,096.7 Minority interests TOTAL NET EQUITY 1, , % NON CURRENT LIABILITIES Issue of debentures and other marketable securities Bank debt Finance lease creditors Other non-current liabilities Capital grants and other deferred income Provisions Deferred tax liabilities TOTAL NON-CURRENT LIABILITIES 1, , % CURRENT LIABILITIES Issue of debentures and other marketable securities Bank debt Finance lease creditors Trade and other payables Liabilities for current income tax Other current liabilities TOTAL CURRENT LIABILITIES % TOTAL LIABILITIES AND EQUITY 3, , % 20

21 6. Cash Flow Statement Table 9: Cash Flow Statement June 2012 (Million of Units) CASH FLOWS FROM OPERATING ACTIVITIES 33.6 Proceeds from operating activities 44.2 Proceeds / (payments) from profit taxes (10.6) Other proceeds / (payments) from operating activities 0 CASH FLOWS FROM INVESTING ACTIVITIES (4.0) Payments for investing activities: (64.1) Companies of the Group, associates and business units (loans to subsidiaries) (40.9) Fixed assets, intangible assets and property investments (Company Gross Capex) (23.0) Other financial assets (0.1) Other assets 0.0 Proceeds on sale: 60.1 Companies of the Group, associates and business units 25.7 Fixed assets, intangible assets and property investments 34.4 Other financial assets 0.0 Other assets 0.0 Other cash flows from investing activities: 0,0 Proceeds from dividends 0.0 Proceeds from interests 0.0 CASH FLOWS FROM FINANCING ACTIVITIES (74.9) Proceeds and (payments) for equity instruments: (0.1) Issue 0.0 Amortisation 0.0 Acquisition (0.1) Sell 0 Proceeds and (payments) for financial liabilities: (31.8) Issue 23.1 Repayment and Amortization (54.9) Dividends paid and payments for other equity instruments: 0.0 Other cash flows from financing activities: (42.9) Interest paid (39.3) Other proceeds and (payments) from financing activities (3.7) EFFECT OF EXCHANGE RATE CHANGES 10.6 NET INCREASE IN CASH AND CASH EQUIVALENTS (34.6) CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE FINANCIAL PERIOD CASH AND CASH EQUIVALENTS AT THE END OF THE FINANCIAL YEAR PERIOD Cash Flow from operating activities includes 39.2 million Euros of gross capital gains generated trough the asset rotation activity. Cash Flow from Investment activities is primarily explained by the payments to associates ( 40.9 million) pointing out loans to Adprotel ( 18.2 million) owner of the Me London hotel and Evertmel ( 5.4 million), owner of Sol Antillas Barbados, partially offset by the Proceeds from Associates ( 25.7 million). Fixed assets and property investments include 23.0 million Euros investments, of which 14.0 million Euros are linked to the maintenance capex while 9.0 million Euros are linked to the investments made in Playa del Carmen in On the other hand, proceeds on sale (fixed assets) ( 34.4 million) includes the book value of the assets sold. 21

22 7. Expansion The table below shows a description of the progress made in the Meliá hotel portfolio up to June 2012 Table 10: Expansion Plan. 01/01/2012 ADDITI LOSS. CHANGE 30/06/2012 SIGNED TOTAL GROUP H R H R H R H R H R H R H R AMERICA 67 22, , , ,426 Owned Hotels 16 6, , ,385 Leased hotels Management & Franchised 51 15, , , ,041 EMEA 45 7, , , ,198 Owned Hotels 6 1, Leased hotels 28 4, , , ,828 Management & Franchised 11 2, , ,420 PREMIUM EUROPE 13 3, , ,875 Owned Hotels 6 1, , ,331 Leased hotels Management & Franchised 5 1, , ,552 MEDITERRANEAN 80 26, , , ,743 Owned Hotels 28 9, , ,025 Leased hotels 11 2, , ,215 Management & Franchised 41 14, , , ,503 SPAIN 94 16, , ,526 Owned Hotels 9 2, , ,571 Leased hotels 45 6, , ,920 Management & Franchised 40 6, , ,035 ASIA PACIFIC 7 2, , , ,719 Owned Hotels Leased hotels Management & Franchised 7 2, , , ,719 TOTAL OWNED HOTELS 65 20, , ,262 TOTAL LEASED HOTELS 86 14, , , ,955 TOTAL MANAGEMENT & FRANCHISED , , , ,270 TOTAL MELIÁ HOTELS INT , , , ,487 THIRD PARTIES (**) , ,801 TOTAL GROUP , , , ,288 (*) Hotels incorporated within the framework of Wyndham Agreement 22