Deep dive with Gabriel Escarrer, CEO, Meliá Hotels International

Meliá Hotels International was recently ranked as the most sustainable European hotel group by Standard & Poor's for the fourth consecutive year, so we caught up with the company’s CEO on how it weaves ESG values into its developments.

Gabriel Escarrer additionally revealed the shape of the group’s pipeline and how its latest brand launches fit into its portfolio.

How do you incorporate sustainability into your hotel developments?

Sustainability is part of Meliá Hotel International’s (MHI) business model and integrates Environmental, Social and Governance (ESG) criteria throughout its value chain, therefore it is also an intrinsic part of our value proposition in our growth model. The company offers new owners not only a responsible and sustainable management model recognised since 2018 by the internationally renowned S&P Global ESG ranking, but also in this value proposition, we have design and construction manuals by brand, where standards have been incorporated that allow progress in an efficient, sustainable hotel construction model.

Given our many years of professional experience both in hotel construction and in sustainability positioning, we designed the first net zero hotel prototype, integrating all our knowledge in environmental, energy and water efficiency matters, as well as promoting an economic circular model, with the aim of minimising its carbon footprint.

To what extent do you consider sustainable values in choosing the suppliers you work with?

Our sector manages a value chain of great impact, by interacting with numerous suppliers or suppliers of different natures. Since 2018, MHI has been working to ensure that one of our main stakeholders, suppliers, comply with our responsible standards. In addition, adherence to the supplier code of ethics is required in the approval process.

The opportunity to improve our supply chain’s management has arisen with the implementation of one of the best-in-class platforms in the market. This platform, in addition to reinforcing a governance, management and control model of our supply chain, makes it easier for us to identify both our products and services under ESG or sustainability criteria. With all this information, we acquire knowledge under different dimensions, not only economic or quality, but also that the portfolio of products, services and FF&E have some characteristics or attributes that allow carbon footprint reduction. In addition, the requirements and demands promoted by the EU, in terms of environmental taxonomy for large, listed companies, require us to enrich products’ and services’ profiles from their origins.

What does your current hotel pipeline look like, and how has this progressed over recent years?

We currently have more than 60 hotel projects in the pipeline, a list that we constantly feed with new firms and with which we maintain a very positive growth trend. In fact, in recent years and since 2020, we have opened more than 40 hotels and added more than 12,000 rooms to our portfolio. In 2023, we expect to open more than 20 new hotels.

One of our latest major milestones in the international expansion of Meliá Hotels International has been our association with Vinpearl, the largest hotel owner in Vietnam, which, by adding 13 more hotels, has allowed us to become the international hotel operator with the most presence in the country, with 21 hotels and more than 4,000 rooms in the destination. In addition, we have another five projects in Vietnam in our pipeline.

We have also given a great boost to our luxury brands, which currently account for 23% of our pipeline. Our luxury portfolio is set to expand by 40% in the next three years. Among the projects we have in hand, the Gran Meliá brand stands out, which will arrive for the first time in destinations such as Mexico, Albania and Indonesia. One of our most recent brands, The Meliá Collection, continues to accelerate and has upcoming openings as special as Ngorongoro Lodge, a Meliá Collection hotel.

The company has also grown in recent years with the creation of Affiliated by Meliá. Since the creation in 2020 of the Affiliated by Meliá network, 73 hotels have already signed up to take the opportunity for independent hotels to benefit from all the experience and resources offered by becoming part of MHI. We will continue to support this model to grow through alliances that help us continue growing in key destinations, while supporting independent hotels in terms of distribution and loyalty along with other services adapted to their needs.

Why did you recently add the Falcon’s Resorts by Meliá and Zel Hotels brands to your portfolio?

The creation of the Falcon’s Resorts by Meliá brand came as a result of our alliance with the Falcon’s Beyond group, specialised in entertainment, together with which we have already successfully developed a hotel + park complex on the island of Mallorca, el Sol Katmandu Park, which is now ‘growing up’ and is sublimated in this concept of all-inclusive resorts within world-class entertainment destinations. The Falcon’s Resorts by Meliá will offer a unique ‘resortainment’ hospitality experience that will blend premium resort amenities with extraordinary entertainment experiences. In addition, the concept responds to our vocation to innovate and diversify the offer in the destinations, and the value proposition to our clients, through the offer of new experiences.

As for the Zel Hotels brand, it comes to shape a joint venture that makes us especially excited, an alliance with the great Rafa Nadal, whom we not only share our origins and our ‘Mallorcan’ soul with, but also family values and the vocation of spreading the essence and Mediterranean hospitality throughout the world. The opportunity to launch this brand and ‘cover’ this market niche, which we are sure will have a great reception in the market, arose from our friendship, and from the confidence we have in the inspiring power of Rafa as an image of a totally aspirational lifestyle for travellers of all generations, and in the solvency as hotel managers of MHI.

Are you intending to launch any further brands in the coming years?

We are very proud of the set of brands we have created and for whose international growth we maintain a strong commitment, and we feel very comfortable with our brands in the midscale segment, (Sol by Meliá & Affiliated by Meliá), premium segment (Melia Hotels & Resorts, Innside by Meliá and Zel Hotels) and luxury segment (Gran Meliá, Me by Meliá, Paradisus and The Melia Collection), and we have no plans to extend the brand portfolio, nor to enter other segments such as low-cost or economy.

Which hotel segments do you think show the most potential for development?

We are essentially a vacation company and also specialise in urban leisure. Within this framework, we are increasingly focused on the premium and luxury segments, a portfolio that already represents 65% of the total, and represents no less than 80% of the hotels that we will open in the next three years, which will grow our luxury rooms by 40%.

The upper segments have proven to be more resilient in the face of changes in the economic cycle, and in addition to this resilience, the demand for superior hotels and rooms is strong and does not stop growing, as shown by our own data, as revenues for superior rooms increased by 36% in 2022, compared to 2019, prior to the pandemic.

Are you looking to target any particular countries, regions or destination types for additional hotels?

As of the end of 2022, we had a total of 14.352 rooms in our pipeline. This clearly reflects our development strategy, focused on the main holiday destinations in the world: the Mediterranean, the Caribbean and South East Asia (the ‘leisure axis’ as we call it), both in the resort segment and in the urban leisure or ‘bleisure’ segment. We will be consolidating our strategic position in countries such as Spain, Cuba, Mexico, Portugal or Vietnam, while introducing our portfolio of brands in Albania, Malta, Saudi Arabia or the Seychelles, which we are extremely excited about.

Are you focusing on growing specific brands?

I would say that our portfolio of brands actually covers all segments and, depending on the segmentation of the market and/or the characteristics of the hotel, we decide to include the property in a brand and endow the site with its specific attributes and values. I must point out that our brands have a demographic approach but, above all, a psychographic one; that is, they seek to respond to the expectations and demands of a specific customer profile, not only because of their age, but also because of their habits and preferences, because of the group with which the individual is identified, or by factors such as their more classic or contemporary tastes or the lifestyle and experiences to which they aspire. Besides business plans, a brand is also an ‘emotional’ choice since there are hotels that due to their magic, the sensations they transmit or their location, are ‘born’ for a certain brand.

Do you see more opportunities for newbuilds or conversions?

Conversions have been and will always be a key factor in the company’s development strategy. Throughout our more than 65 years of history, we have carried out many successful conversions in every market that we have a presence, both for our own hotels and for third-party hotels. We are looking for selective and qualitative growth, which adds value and profitability to our brands in the long term, and to our potential new partners, and not merely quantitative or speculative growth.

The factor that most determines the conversion opportunities that may arise in a given market is its maturity. In consolidated markets such as Spain, Italy or Greece, growing opportunities will mostly come through the conversion of existing hotels or buildings which have had a different use, but given its strategic location have the potential to become excellent hotel products, such as the conversion we are currently immersed in Milan in the astonishing Generali building, right next to the Duomo.

Other markets such as Mexico, Cuba or the Dominican Republic that used to be ideal for newbuilds are now experiencing important conversions in order to adapt outdated products to the increasingly demanding needs of the clients. Finally, there are rising tourism markets such as Albania and Montenegro that do not have the quality and strengths of our portfolio of brands in which we forecast both newbuilds and conversions.

How do you see MHI progressing as a group over the coming years?

This year, Meliá Hotels International celebrates 67 years of history, and I am extremely proud to confirm that we are committed to continuing in this business for many more years, since our vision is long-term, and we have the vocation to continue offering our hospitality and generating a positive impact in the destinations in which we establish ourselves. Having said this, we hope to remain at the forefront of the industry in digitisation and technologies, also innovating in products and services, but above all maintaining a personalised and excellent service, and taking care of it, above all, our collaborators, who are the authentic ambassadors and the future of our company.

Regarding how I see our positioning, I hope to be able to remain among the top 20 hotel groups internationally, and among the most sustainable companies in the world. I can say that 80% of our growth in the next 10 years will be concentrated in vacation destinations, maintaining a strong bias and leadership in this segment, and that our premium and luxury brand hotels will represent three-quarters of our portfolio in the middle term.