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Covid19 hotel development analysis: Meliá Hotels International [Infographic]

by | 20 Jun 2020 | Chains

An exclusive deep-dive into the TOPHOTELPROJECTS construction database to find out how Meliá Hotels International’s hotel development plans have been affected by Covid19.

The hospitality industry has been rocked by both the severity and longevity of the Covid19 crisis. Since the novel coronavirus first emerged in late 2019, countries around the world have adopted drastic measures in an effort to contain its spread, from imposing travel bans to temporarily closing certain industry sectors.

Meliá Hotels International, which has around 400 hotels spread across more than 40 countries in Europe, Asia, the Middle East, Africa, North America and South America, has certainly been hit hard by the pandemic. Founded by Gabriel Escarrer Juliá in 1956, the Mallorca-headquartered company has grown to become one of the world’s largest hotel groups with almost 50,000 employees, and is behind the upper upscale brands Gran Meliá Hotels & Resorts, ME by Meliá, and Paradisus by Meliá; upscale brands Meliá Hotels & Resorts, and Innside by Meliá; and midscale brands Sol by Meliá, and Tryp by Wyndham.

In this article, we assess Meliá’s pipeline of forthcoming developments worldwide. We also analyse how the company’s share price and messaging have evolved along with the rapidly changing situation on the ground.

Meliá builds for the future

By analysing the data held by market research company TOPHOTELPROJECTS, we can see that Meliá still has plenty of schemes on the go around the world, with 48 projects in progress, eight more on hold and just one cancelled as of 2 June 2020.

In terms of which brands are most active, Meliá Hotels & Resorts (33) has nearly three times as many live projects as Innside by Meliá (12), with Gran Meliá Hotels & Resorts (five), ME by Meliá (three), Sol Hotels & Resorts (two) and Paradisus Resorts (one) all in single figures:

At the time of writing, it remains unclear what the long-term implications of Covid19 will be on the hotel development industry – it’s perfectly possible that Meliá will decide to mothball or cancel more schemes if it feels that the outlook for the global economy is worsening. That being said, however, it’s heartening to see that the business is still pressing ahead with the vast majority of its projects, with only a sixth either on hold or cancelled to date.

Meliá’s share price struggles to recover from Covid19

Meliá’s commitment to realising its busy development pipeline may be sorely tested by the fact that the share price of the company, which is listed on the Madrid Stock Exchange, dropped sharply when investor fears about coronavirus grew earlier this year.

Shares in the company were trading at a relatively steady level up until 21 February 2020, when the price stood at €7.29 (US$8.11) per share. Over the next month, however, the value fell steeply, bottoming out at just €2.74 per share on 18 March; this means that Meliá’s shares lost nearly two-thirds of their value in less than a month.

Since then, the share price has rebounded slightly but progress has been slow. As of 15 June 2020, Meliá’s shares were trading at just €4.27 per share.

How the Spanish hotel giant has responded to coronavirus

Meliá has sought to keep shareholders up to date throughout the pandemic, and it’s interesting to see how the company’s messaging has changed as more of its properties have been caught up in the global health emergency.

On 26 February, for instance, the business reported its 2019 financials, which included only a cursory mention of Covid19. Investors were told that “other events such as the coronavirus in China have so far had only a moderate impact on company results”.

In terms of the outlook for 2020, Meliá merely said: “With respect to the impact of the incipient extension of the Coronavirus Covid19 virus outside China, the company has been affected by the cancellation of some MICE events such as the MWC in Barcelona and certain events in Milan. The company remains prudent with regard to its forecasts, subject to the evolution of the management of the Covid19 virus and the consequent impact it may have.”

Meliá offers free hotel stays to healthcare workers

Of course, Covid19 really only took hold in Meliá’s heartland of western Europe from March 2020 onwards, and by the middle of the following month the company had announced an eye-catching initiative that won it countless admirers. On 16 April, the business unveiled its “gesture to acknowledge the work of heroes on the front line against coronavirus”, pledging to offer healthcare workers 10,000 free two-night hotel stays for two people.

In addition, Meliá promised 10% of stays would be reserved for healthcare workers in hotels that have converted into hospitals throughout Spain. Interestingly, it also highlighted the extent to which this practice was happening at the time, pointing out that no fewer than 13 of its hotels had been converted into hospitals or were being used for essential services across Europe, including 11 in Spain alone.

Most of Meliá’s hotels shut down

The financial ramifications of the coronavirus crisis were all too apparent, however, in Meliá’s Q1 2020 results, published on 7 May. This extraordinary period saw the temporary shutdown of most of its hotels worldwide, with the company announcing losses of €79.7 million (US$88.6 million) compared to profits of €11.5 million a year earlier, revenues had dropped by 25.5% year on year to €293 million, and EBITDA had plummeted by 84.7% to €14.2 million.

Understandably, however, the business pointed out that comparisons with the previous year were “distorted by the sudden and unexpected closure of the business due to force majeure caused by the pandemic”. And looking ahead, the company explained that it was focusing all its efforts on developing its post-Covid recovery strategy.

Gabriel Escarrer Jaume, executive vice president and CEO of Meliá Hotels International, said: “The disruption caused by the Covid19 pandemic in the world economy and its brutal impact on the travel industry have generated an extreme turning point in the results of Meliá Hotels International…Without any doubt, our financial strength, our strategic commitment to digital transformation over recent years, and our geographic diversification, are strengths that will help us maintain our leadership and competitiveness in the new travel industry which emerges after Covid and for which the company is preparing itself intensively.”

ABOUT THE CHAIN

Meliá Hotels International was founded in 1956 in Palma de Mallorca (Spain) and is one of the world’s largest resort hotel chains, as well as Spain’s leading hotel chain.

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