The chain launches ‘Affiliated by Melia’ to boost its franchise model in Southern Europe and negotiates corporate operations.
Meliá is preparing to leave the Covid “stronger and bigger”. With this mantra, the hotel group has defined its growth roadmap and is negotiating corporate operations and alliances that will allow it to make a “quantitative leap” under the premise of growing in quality projects where it can contribute its brand values.
María Zarraluqui, Global Vice President of Expansion of Meliá Hotels International, advances to EXPANSIÓN the pillars of this plan that will begin to bear its first fruits with alliances and operations in the first half of next year.
The Spanish chain expects to reach agreements in the coming months to grow in management, either individually with hotels or chains that want to transfer operations to Meliá, or with more far-reaching agreements that also involve transferring ownership. In these processes, it will go hand in hand with investment partners – venture capital funds, family offices or insurance companies – who will keep the brick.
“There are conversations with operators who are open to change and also with companies in complex situations that we analyse with other partners where we would play the role of operating partner. Some of these should materialise in the first half of 2021,” the management says.
Meliá, with 326 open hotels and 84,600 rooms, has 52 more projects in its pipeline (hotels already signed and in the process of opening in a maximum of 2 years). “Until now, we have added about 20 or 30 new hotels per year. The objective, once the situation is normalised, is to grow beyond these numbers with interest groups that can contribute volume”, he adds.
Zarraluqui recalls that the bankruptcy of Thomas Cook a little over a year ago was a hard blow for many companies in the sector. “For some hotel companies, it’s raining wet with the Covid,” he points out.
In this context, Meliá is presented as a solution for those who want to change their strategy and for others who are going through a complex situation and want to sell assets. “We are supporting potential investors with our participation as an operator,” he says.
Zalarruqui explains that, in an environment of uncertainty, there are creative formulas for reaching agreements with earn out sales (where the seller receives an amount for the disinvestment that can increase in the future depending on the evolution of the market in the following years) or owners priority models, which give priority to the owner in obtaining a certain return. “At the beginning of next year we will see interesting operations in the market through these formulas,” he says.
On the other hand, he acknowledges that, in such a turbulent environment as the current one, funds interested in buying the company have approached him. “We are an appetizing company and they have approached us but, as the Escarrer family -controlling shareholder- has said many times, there is no intention of selling, nor of going out, at the moment. We want to be what we are, but bigger”, he assures.
Another of the group’s growth focuses on accelerating its franchise model with the incorporation of new partners in southern European countries, including Spain.
In addition to establishments operated by third parties with the Meliá brands, it wants to attract independent hotels that are grouped under the chain’s umbrella and share its standards. “We have launched a quality seal, ‘Affiliated by Melia’, for four-star hotels or above, holiday or bleisure, with good levels of service and third party ratings such as Booking or Trip Advisor. These hotels will be able to maintain that independent essence but be part of a larger group and take advantage of synergies in sales, distribution and business models,” he underlines.
Although the franchise business is not a model that the group has developed proactively so far, Meliá has experience in this area as it has important partners in countries such as Portugal, Bulgaria or Croatia. “There is a real desire to grow with products that fit us and where we can bring value to the owner”, says Meliá’s global vice-president of Expansion.
Of Meliá’s current portfolio, 45% is under management contract, 27% is for rent, 17% is owned and 12% is franchised. Meliá’s project for the future is to strengthen management and franchising and to continue to opt for an asset light model (less patrimonial).
As for buying portfolios or assets, Meliá opens the door to analysing opportunities, but its model does not involve increasing the weight of the property. Similarly, although he has no need to sell assets due to cash flow problems, “as a good property manager we are going to think about the greatest profitability of these”, stresses Zarraluqui.
MEDITERRANEAN, SOUTHEAST ASIA AND CARIBBEAN, KEY MARKETS
Meliá is clear that its growth model is to focus on the priority markets for the group: the Mediterranean basin, South-East Asia and the Caribbean. In addition to these markets, the chain will continue to focus on the holiday and leisure market (travellers who take advantage of a business stay to go sightseeing). Currently, its portfolio is balanced with beach hotels and other urban hotels, but with a leisure component that complements business travel. “The holiday operation is the most resilient and the one that works best in the different cycles of the global market. Even in a situation as extreme as the current one, it will be the segment that recovers first and is strengthened the most,” Zarraluqui points out. Among the countries with potential is China, where Meliá hopes to add 30 or 35 hotels, including the six it already has in its portfolio, in the next three or four years. “China had an absolute halt in January and February but its recovery is being spectacular with occupations already reaching pre-Covid levels of 70-80% and with price falls that are not substantial. The expansion market has also reactivated very quickly,” he warns.