Melia Hotels Intl Ord

Good morning and welcome to the Nelia Hotels International fourth quarter and full year 2020 earnings conference call. All participants will be in listen-only mode. After the presentation, anybody who is interested will have a chance to ask questions so we can resolve any additional doubts. Please note this event is being recorded. I will now turn the call over to Stéphane Bell, Head of Investor Relations. Please go ahead.

Thanks operator. Welcome to Mediasforce Q&A Year 2021 Earnings Call. Before we begin, we would like to remind you that our discussion this morning will include forward-looking statements. Actual results could differ from those indicated in the forward-looking statements, and local forward-looking statements made today speak only to our expectations as of today. This morning, as usual, we have Gabrieles Carrer, our Vice President and Chief Executive Officer. Andres Gerondo of Chief Operating Officer It has those of Chief Financial Officers and Mark Holiner or Chief Real Estate Officers and me. Gabriel Escarre will provide an overview of the current operating environment. Andres will then review our fourth quarter onwards. Following their remarks, we will be happy to take your questions. In any case, the investor relations team will be available following this conference call to give you a chance to clarify anything else you might need. You can find our earnings release on our investor relations website at mediahotelsinternational.com. And now, I am pleased to turn the call over to Gabriel.

Thank you, Stefan, and good morning, everyone, and thanks for joining us today. 2021 was another difficult year for the global population as a result of a pandemic that is still with us and that, despite the global vaccination program, has continued to disrupt society in general and trouble in particular based, as we all know, on mobility and interaction between people. 2021 began as 2020 has ended. This meant that the key drivers of our resilience in 2020, our liquidity, efficiency and collaboration with our partners and stakeholders continue to be needed in 2021 to manage a very complex and volatile financial year. As our results show, we made significant progress in our recovery throughout 2021. We saw a meaningful increase in demand for travel and tourism. In this context, turning to results, for the fourth year and fourth quarter, for the fourth year, we grew Red Park by 14.9%, mainly thanks to the improvement of the average on rate during the year, We have seen a quarter on quarter increase, with the fourth quarter showing an improvement in RESPAR of 163% compared to same period 2020. RESPAR was roughly 76% of Q4 2019 levels with average room rate 5.8% above Q4 2019 numbers. Consolidated revenues, excluding capital gains, increased by 56.6% compared to 2020. For the fourth quarter itself, revenues increased by 212% compared to 2020, that represented 76% for the same period, 2019. Operating expenses increased by 13.6% with respect to the previous year and decreased by 14.8% compared to 2019. Excluding the expenses associated with capital gains and the extraordinary expenses in 2020 costs increased by 16.7% compared to 2020. While some costs will come back in as we continue to recover, we remain extremely focused on cost discipline. Given our business model and the actions we took during the pandemic to further streamline our operations, We expect permanent margin improvements versus 2019 levels in 300 basis points over the next few years EVDA, excluding capital gains, reached €61.5 million compared to €-130.5 million in 2020 Depreciation and amortization decreased by 135.8 million euros compared to the previous year. The main difference was the impairments included in 2020 accounts. The net financial results improved by 15.7%, representing 11.8 million euros of improvement compared to the same period in the previous year. mainly explained by the improvement in other financial results for which the same period in the previous year saw the impact of the impairment of other financial loans of minus 14 million euros, as well as the improvement in financial expenses associated with leases caused by changes in interest rate estimates due to the renegotiation of some lease contracts due to COVID. Interest expenses increased by 17.5% compared to the same period in the previous year due to the increase in bank debt The net loss of the parent company reached minus 192.9 million euros But we are confident that in 2022 we will be able to reverse this situation and end the year with a positive net profit Turning to the balance sheet, we ended the year with 2,853 million euros of net debt, an increase of 41.2 million euros over the final quarter of the year. During this same period, the financial net debt pre-IFRS 16 increased by 24.7 million euros to 1,285 million euros. meaning an increase of 30.7 million euros over the entire 2021 financial year. At the end of December, the liquidity situation amounts to 404 million euros, representing 98 million in available cash balances plus 306 million of on-draw credit lines. We would like to remember that Melia does not have any debt with financial covenants. It is also worth noting that our mortgage debt currently stands at around 300 million euros, which represents a loan to value of the existing owned properties below 9%, a limited proportion of the value of the company's owned properties. I would also like to point out that 52% of the debt is at fixed interest rate. Additionally, I would like to highlight that the company is working on the refinancing of upcoming maturities, which will extend the average maturity of the debt to 4.6 years. Close this chapter, I would like to inform you that the company continues to analyze alternative ways of reducing debt and increasing liquidity after sales with the possibility of the long-term management contract. I will now turn the call over to André to talk about our operational performance during the fourth quarter and forwards in more detail. Please, André.

Thank you, Gabriel, and good morning, everyone. Briefly, and as far as 2021, just to confirm the evolution of the company's revenues by quarters, whereas Q2 doubled revenues of Q1, 153 million versus 76 million, and Q3 nearly doubled Q2, 291 million versus 153. And as explained, Q4 revenues stood at 76% of 2019 levels despite Omicron, Showing the evolution of the business Q4 in general started to show good signs of demand recovery mainly in Emilia capitals with better than expected pickups in Paris, Rome, Milan, Madrid and others as well as a solid beginning of the winter season in the Caribbean and Canary Islands confirming our views that 2022 was to be a positive year despite limited visibility once borders were reopening and restrictions to travel lifted. As far as outlook, and despite a continued lack of visibility, the beginning of the year has been affected by the Omicron virus, which had an impact on booking cancellations in January and mid-February. But with a foreseeable recovery from March onwards, so we remain optimistic about accelerated recovery across all segments throughout 2022. Subject, it is, to the uncertain development of the Russian war with Ukraine. We anticipate strong leisure trends to continue again this year, driven by pent-up demand. Our revenue position for summer season is already ahead of 2019 levels. One of our key drivers continues to be the strengthening of the company's strategy towards qualitative rest bar. As such, our average daily rail on the books is nearly 20% above 2019, driven by the strong positioning of our premium hotels, superior categories and suites, and extended food and beverage and destination experiences, reflecting our understanding of the new trends and expectations of our customers. Traveling with a Purpose It is as well the right approach to absorb some of the increments in goods and services and impact on inflation and to guarantee a better flow through moving in the right direction in achieving better margins as discussed on several occasions. Needless to say that for the development of our brand and our distribution capabilities, this is as well a key element. As far as our regions, and again with the occurrence of the actual situation in Ukraine demands, We believe springtime will show signs of recovery for travel in the main European capitals, with a similar trend as last autumn, with solid demand in the short term, while our resort destinations, our strong leisure components, are showing positive signs for our summer season. Canary Islands had initial impacts this winter given Omicron, as well as our Caribbean operations. But they now show good signs of recovery, and we see that the demand is there. So some of the momentum loss will be recovered throughout the rest of the year. It is important to emphasize the performance of Melia.com and Melia Pro, our B2B strategy, which accounted for 51% of the revenues in 2021 and continue to lead this year along with a solid yield management strategy. In general terms, corporate business still shows limited visibility and signs of recovery. Same as my business. which some have been postponed in the Caribbean. However, a large portion of the business are incentive groups and requests continue to evolve with pent-up demand for winter 2023. As far as development, in 2021, we progressively resumed the pace of openings, opening 13 new hotels between January and December 2021 Seven of them in Europe, in cities such as Barcelona, Liverpool, Frankfurt, Newcastle, and capital cities such as Amsterdam and Luxembourg. One in China, and five resorts located in Phuket, Thailand, Rose Ridge, Benidorm and Mallorca in Spain, and Marrakech in Morocco. We also have continued to grow with new properties during 2021, signing 21 hotels. with more than 4,800 rooms, most of them in Mediterranean vacation destinations like Spain, Greece, Sicily, Albania and Croatia, as well as Indonesia and China, under brands by Inside-affiliated Melia and Melia Collection. In recent days, we have been closing expansion agreements, such as the one signed with the RINCO Group, a strategic alliance with the largest hotel owner in Vietnam. through which we will add 12 luxury hotels in the country by 2022 under the joint brand Melia Vinpearl. This alliance, including more than 3,900 rooms, which added to the 12 hotels already operating and in preparation that Melia has in the country, will position ourselves as the second hotel company with the largest presence in Vietnam, with 24 establishments and 6,900 rooms. Our performance reflects our clear commitment to brands, online distribution and loyalty programs, as well as our focus on the growing luxury segment, strategy that has also driven the group's expansion by positioning us as a safe harbor for independent hotel management and small chains, at a time of growing competition and market consolidation. I will now turn back the call over to Gabriel to summarize the main messages of the call. Thank you André.

To end, I would like to highlight the following messages. In terms of outlook, we remain optimistic about accelerated recovery across all segments throughout 2022. We anticipate a strong lecture trend to continue again this year, driven by pent-up demand. The underbooks for summer seasons in Resorts Spain are above 2019 levels, especially in the average price, driven by demand and the group's commitment to its brands, its distribution channel, its loyalty program and its focus on the luxury segment. 2021 once again demonstrated the great competitive advantage represented by digitalization, thanks to which Melia Hotels International has positioned itself as a leader in distribution, with its own Melia.com channel already contributing more than 51% of the group's total centralized sales. This also contributed to maintain its commitment to preserving the average home rate, an effort that is reflected in the evolution of Red Park, which is increasingly qualitative with an improvement in the average rate that partly offset the regular performance of occupancy. In addition to distribution, Medea's commitment to leading the digital transformation also includes the back and front of its processes, optimizing personalized customer service throughout the use of new technologies. While some costs will come back in as we continue to recover, we remain extremely focused on cost discipline. Given our business model and the actions we took during the pandemic to further streamline our operations, we expect permanent margin improvement versus 2019 levels in the range of 300 basis points over the next few years. We would like to reiterate our strong commitment that one of the company's top priorities is to maintain sufficient liquidity and to see debt reduction. The company continues to consider asset disposal with the possibility of the long term management contract in addition to the one made at the end of June 2021. We work hard to ensure that our hospitality continues to have a positive impact on the communities we serve. We are honored to be named as one of the global industry leaders in the corporate sustainability assessment made by Standard & Poor's Global for the fourth year in a row, which placed the company in the Silver Plus category in its 2022 Sustainable Yearbook. Coming to development, I would like to highlight the fact that 42 new hotels have been added in the last six months. all of them through management and franchise agreement as the almost 11,000 rooms included in these new agreements practically multiplied by three the average number of rooms per year signed in the last three COVID years 2018 and 2019 this report coincided with the end of the so-called sixth wave caused by the Omnicom variant Although we must still remain extremely present, this may become a turning point that will mark the end of the global disruption caused by COVID and the beginning of a new era of living with a virus that has changed everything. Again, with the greatest presence, if there are no major surprises, we believe 2022 will be a historic year for resort tourism. which may recover the restaurant level seen in 2019 thanks to reduced disruption and a new stage that will allow greater social interaction and mobility releasing all the pent up demand for travel At Melea Hotels International we expect to be at the forefront of this historic change and as a leading company in the tourism industry we will continue to do our very best to lead a solid, responsible and sustainable recovery together with all our stakeholders. We hope we have been able to explain the situation to your satisfaction. We will now be happy to answer any questions you may have. Please, let me remind you that I'm here with André Ginando, Pilar Rose, Mark Holyrock and Stefan Baus. Operator, please.

Thank you. As previously mentioned, those interested in asking questions will have the opportunity to do so now. To do so, please press star followed by one on your telephone keypad. Also, please remember to keep your microphone muted while others are speaking. The first question comes from André Julliard from Deutsche Bank. André, please go ahead.

Good morning, Sangamon and Pilar. Thank you for this conference call. First question about development. Could you give us some more color about the regions and the type of hotels you've been opening and signing? Second question, in terms of CapEx, what do we have to anticipate for 22 and 23 average level and I had a question about government health because you've been benefiting from additional aids during Q4 are you expecting some new health in 22 or not and if yes could you quantify that please thank you

Hello. Good morning, Anglais. Thank you very much for your question. This is Anglais Gerando. I will first answer the development question, if you allow me. A couple of things. One, to say that close to 90% of all development and hotels signed are asset-like properties, out of which 60% is in our franchise model that, as you know, we launched affiliated by Melia. and Melia Collection this year and 40% are management contracts. We have brands in our premium portfolio, meaning Grand Melia, me, and as well Melia and Inside Hotels. And what's very important is to strengthen our vision and our strategy of become and continue to be leaders in the leisure and pleasure segments. So we've been signing properties in the Mediterranean. reinforcing our presence in the volcanic area, Albania, Greece, obviously Spain, and as well as Southeast Asia, different destinations, Thailand, and of course, the strategic alliance with Vinpearl, which is going to drive us as the second largest hotel company in the area. That's basically it, unless you have any further specific questions.

Regarding the capes that respect for 2022 and 2023 and taking into account that remember that the sales of the assets that we have made in 2021 was the last author that they need some important capes. We expect to have around 70 million euros for 2022 and around probably 80 million euros for 2023. That could be the capital maintenance that we expect for this year. Going to the government helps, as we released yesterday, the company has received around 36 million euros as a direct help coming from the different governments in Europe. The main contributor in that way has been Germany. This has been cashed in, that means we only have put in the account the amount that we have receiving cash. We know that we could expect some additional, but that's going to be more in 2022. But once we receive the cash, we're going to include it. I cannot give you a number now because we wait. We need to see what is going to be the situation coming month. I think, I don't know, you have all the questions, André?

Thank you very much. Maybe one following one. You've always been saying that if an opportunity in terms of M&A would come, you would consider it. Do you see any opportunities coming in Spain or in other countries that could make sense for you?

Thank you, Andre. Not at this point. We are focused on growing our partnerships and the opportunities on development, but we have nothing really at this point that we can share.

But having said that, Andre, this is Gabriel Carre. I believe as an organic growth, you should expect a very good increase in the number of properties that will be added under management of franchises. I believe there is a good opportunity to keep increasing the portfolio of the company in organic growth mainly through leisure properties that are either in the Mediterranean wind in the Caribbean or Southeast Asia.

Andre, only one point additionally about the government health. Only to point that about the 36 million euros that we received or we put in the accounts in 2021, 15 million, 1.5 million euros was included in the Q4 numbers.

Yes, sure.

The next question comes from Guillaume Sampaio at CultureBank. Guillaume, please go ahead.

Hello, thank you for taking my question. So, just to rephrase, the first one, how should we think about cash flow evolution in the first quarter of this year? I'd say that's what is a bit It's difficult to have a lot of visibility, but any color would be good. And then just to clarify, in terms of the net profit, positive net profit expectations that you expect for this year, is it with or without potential capital gains with assets now?

Hi, Guillerme, how are you? Regarding the cash burn for the first quarter, it's true that, as Andrea and Gabriel have mentioned, the first quarter, January and February, had been hit by the Omicron. And we will have some cash burn in January and February. We expect for the full quarter some negative, some cash burn, but still I need to see the recovery that we're facing now in March. Let me see and I will give you more details in the coming months. We will have more vision. About the net profit, about the net profit that we expect for 2022 is excluding positive or slight positive, but is excluding the capital gains.

Okay, thanks.

The next question comes from Gerald Safala from Banco Santander. Gerald, please go ahead.

Yes, hi, thank you. Just, well, first, one follow-up on Guilherme's question, just to be clear. So the net profit will be excluding capital gains. That's just if you could confirm that. And then going to my question, just two questions from my side. I mean, what we've seen in the past two years in terms of the penetration of the direct channel has been impressive. Also, I think the pandemic also helped a lot in that sense. And when I look at 2022 and based on your outlook, do you expect still an improvement in ADR? and what I wanted to understand is how much of this is coming from let's say replicating the performance that you had in 2021 from the direct channel my question here is basically at some point shouldn't we expect to see the direct channel decreasing its percentage as a total sales as other channels become more become more popular and so that could impact your ADRs in I don't know it's in 2022 or 2023 so if you could share a bit of your view on what we expect from that and then also linked to this is the 300 basis points of EBITDA margin improvement I expect this also relies a great deal on having sales through the direct channel so if you could share basically give us your expectations in terms of what you expect direct channels to still contribute in the next 10 years. Thank you.

Thank you. Yeah, it's confirmed that we've said net profit is excluding capital gains to your first question. And in terms of direct channels, it is true that we are not expecting in the short term to... This 51% has been impacted, as you well said, by the decrease in other segments and channels. However, we continue to strengthen the strategy in B2B and B2C. And today, in terms of the business we've generated so far for the future, we're still at 45%, 47% levels with media.com. So it might decrease a little bit, but our vision is that we should be able to stabilize 50% in the coming future. I think it's important to note that the portfolio has been upgraded, that we continue to strengthen our relationship with our over 13 million members of Milliag Rewards, and that everything points out as a trend on travel, which is expecting more demand, again, in superior categories, suites, and our premium brands. So, as we said, today on the books, we are over 19% above ADR of 2019 levels. And we still have room to grow in terms of occupancy, which is probably 12-14% behind. So, we will continue to maximize yield management and we'll continue to push for those elements. We're now launching our new Melia.com web in the coming months before the end of April, beginning of May and this will have added capabilities to continue selling other revenues and strengthening our position. So yes, we do believe that this is the way to move forward. This is where the demand is taking us. This is where we want to position the company. And as we've said before, it is a flow-through that is required in order to uproar some of the incrementing costs and allow us to continue the strategy of increasing the 300 basic points, along with the transformation of the company that we've explained before, digital and otherwise. I don't know if that helps answer the question.

Yes, thank you very much.

My pleasure.

The next question comes from Ivan San Felix at Renter4. Ivan, please go ahead.

Yes, good morning and thank you for holding the call and congratulations on the pace of the recovery. I'd like to ask you on a couple of issues, please. First, could you please tell us Give us some pointers on the outlook in America and the Canary Islands in the first quarter, given that it's high season in those markets. They may have a sense of bookings compared to pre-COVID levels. And then the second issue would be on the strategic agreement in Vietnam, given that you're Strengthening your exposure into the country. It's a great destination, by the way. Zach, we'd ask you a couple of questions on this. Maybe the expected date of opening of the hotels. What would be the contract like? Would it be a JV? Would it be a management contract? If you could tell us maybe if you foresee any changes changing traveling policies coming soon in Asia. And maybe if you could tell us what would be the main feeding markets into Vietnam, I guess China. Do you see any growing demand in traveling to Vietnam from other markets, given that traveling within Asia has been so restricted in the last few years? Those would be my questions. Thank you very much.

Thank you very much. If I may, I'll start with the Vinpearl question. First of all, Vietnam is known to be probably the next Thailand of Southeast Asia. We're very excited because we're actually covering almost the full map of leisure destinations within the country. We're already before this agreement with Vinpearl. Vinpearl, as you probably know, is one of the largest conglomerates in in Vietnam ranging from energy to other services as well and we've come to an agreement to start managing some of their properties. So this is a strategic alliance to take over their existing properties. So we've already started managing two of their properties and from here until the month of June, the takeover of the other 10 properties will be happening. So by the end of June, we would have take over 12 properties with nearly 4,000 rooms and there's still room to grow with Vin Pearl who has over 30 properties, 30 hotel properties and is looking for a hotel partner. and this is where giving our experience in Vietnam and our performance of the past few years we've been in negotiations and conversations to drive the hotel strategy for the group there are different properties throughout the country some of them have an influence on domestic market but most of them are markets that are fed by the Asian market, at least pre-COVID. So we're starting to see some of the countries opening up, as you know, Thailand, Vietnam, slowly are opening up. So I think this is about getting ready for when things open up, we've been able to take over some of the properties, go through the learning curve, establish the relationship with Green Pearl, and from that point forward, potentially keep growing with them in our portfolio with different brands. So this is the relationship with Green Pearl. We're very excited because that represents a strong positioning of the company. Southeast Asia, as you know, one of the largest areas for nature in the world. And we believe that the agreement with Green Pearl will open up conversations for other larger agreements in the area. And to the point earlier of organic growth versus larger strategic alliances, This shows that we're able to drive major growth with partners in different directions. And these are management contracts again. In terms of America, you know that Omicron hit everywhere, including America. And America was probably a few weeks behind this whole COVID process. So for the first couple of months, we did get an impact, an important one for America. Mexico and Dominican Republic but it's important to note that we were already pacing above 2019 levels so we're going to end up Q1 very close to 2019 levels in Mexico and Dominican Republic but there's still demand so we're seeing that demand for Eastern and onwards still there as we said my business has been postponed for obvious reasons but there is a lot of interest for incentives from the US market so requests for proposal are moving forward for the end of the year and beginning of 2023 and same was the case for the Canary Islands so we did have an impact in January the first six weeks of the year is where Omnicron had an impact but we're now seeing the recovery in some of these destinations specifically with the UK opening up and and allowing allowing travel with less restrictions. So we think that the Canary Islands will be recovering the next in the next few months as well. I don't know that answers the question.

Oh, sure. That's very thorough. Thank you very much, Andre. And Vietnam looks very promising. So congratulations.

Thank you very much. Very excited.

The next question comes from Aim Belares from GVC Daesco. Aim, please go ahead.

Hello, good morning and thanks for the presentation. Just one question from my side. And taking into account the proven resilience of leisure hotels versus urban hotels during the pandemic, are you expecting or even experiencing more competition in the Caribbean? from for example big american urban chains that want to expand their operations to this region and what impact could this have on prices thank you

Yes, and thank you. Yes, clearly there's been a competition for some years now in the Caribbean from the U.S. brands. It is true that it's not under DNA in terms of all-inclusive resorts in the Spanish-speaking Caribbean, but they're investing and they're buying their way in. So we do expect competition from these companies, the likes of Marriott or Hyatt acquiring AM Resorts. We are very conscious of that. The reality is as well that we're also expecting we're going to drive more customers into those markets that we're not that familiar with the destination as well. So it is our mission to continue to grow market share within those competitors. Thank you. My pleasure.

The next question comes from Bruno de la Rochebrochard from Brian Garnier. Bruno, please go ahead.

Yes, good morning everyone. Maybe a follow-up on the quarter one. Could we expect positive numbers during quarter one of the war group? And also one remains which is what represents the region of the groups today.

Hi Bruno, regarding the Russians, if we go back to 2019 figures, that represents around 1.3%, below 1.5% of the total revenues or total room nights at the end. That's the participation on the total nationalities. and regarding the positive numbers that respect is a positive EBITDA for Q1 respect but next results still due to the COVID impact the Omicron we didn't see that I don't know that that's the answer that's okay Bruno yes thank you thank you

The next question comes from Bosco Opa from UBS. Bosco, please go ahead.

Hi, good morning. I just wanted to confirm, do you still keep your target to make this portal for around 200 million for the second quarter and how the process is going? And also just to confirm, I think you mentioned your pricing is up nearly 20%. I guess that's for the bookings that you have on your portfolio at the moment. I think you mentioned 20, but that 20% is that who are in bookings or is that your expectations for pricing? Thank you.

Thank you, Mosko. Good morning. Just to confirm, yes, we are 19% above ADR 2019 levels on the books today with a minus 15% in terms of room nights which allowed us to continue strengthening our yield management strategy but we do expect to be above 2019 levels probably the number the final number to be defined within the next few weeks

What's going on, Mark Honeywell speaking. Radio question on asset disposal.

Any possible asset disposal would be in the second half of the year, and it would be something between 117 to a million euros.

Okay, thank you.

The next question comes from Inigo Aguciza from Kepler. Inigo, please go ahead.

Hi, good morning. Good morning, all. Thanks for taking my questions. Just a follow-up on the asset disposal. You mentioned that the sale is going to happen in the second part of 2022. This is the first question. and on the Asset Disposal as well. Are you planning to prepare a new gross asset value during 2022? And the second question on the next step, I would like you can clarify a bit the reasons why we have seen around 25 million cash burn in Q4 2021. considering that the BTA of Q4 was similar to Q3A BTA with an extra cash inflow coming from the subsidies in Europe. So the reason for this cash firm. Thank you.

Regarding asset valuation, we were expecting to do an asset valuation in the second half of the year, correct?

And also going through the question that Bosco says about this asset sales, to confirm that we are seeing more in the second part of the year.

Early second part of the year for new.

Then about the net debt in Q4 that usually happens. Remember that we used to have some resource hotels, personality hotels that used to be closed at the month of November, October, November. And that doesn't help for the cash situation. And probably that's one of the points. And every year you have something like that, that when the personality ends, You have some hotels they will not produce for a week, two weeks, and it's the moment that you start to close them. Then that doesn't contribute anything on the situation. I don't know, Inigo, if it's okay. Thank you.

Very clear. Gracias.

The next question comes from Fernando Adil from Atlanta. Fernando, please go ahead.

Hi, hello. Thank you for taking my question. I have a couple of things to say. So I know that there is limited facility of bookings around the world, but I think that it would be very useful considering the trends that you are highlighting and summer season looks strong here in Spain. So I was wondering if you could give us a guided range of group sales by 2022. It would be very helpful or at least what are you forecasting considering that you are targeting to be a slightly positive net profit this year. And second question is with regards to the sales channel. So I know that this strategy that you started a few years ago should be one of the main margins driver in the next few years but at the same time it requires a lot of capex or at least capex investments as well and we've recently seen that Marriott has decided to outsource their IT part of the CRS to an IT provider so I was wondering why or if you could clarify why your strategy is better than Marriott's for example or other entrepreneurs why of your strategy in terms of profitability yeah thank you Fernando and thank you for saying that strategy is better than Marriott's it's not what we're saying but we appreciate your vision no I think that

Two parts.

We will see 2019 levels achieved in terms of our total sales for the group. This is our expectations for the summer specifically in our resort destination. So we will see those levels. This is what we're aiming for and this is the way we are presenting our whole strategy. Specifically in Spain, we have pent-up demand for... Baleares and Kostas and we see where the numbers are heading and where the demand is heading so again I think we all need to recognize that given the circumstances with Russia and Ukraine we need to be very prudent on what we're saying this morning but other than that we should be able to reach those levels now in terms of our distribution I think the way to measure is that First we've been moving most of our services to cloud services and we're becoming far more efficient and we're putting all of our distribution capabilities as well into the franchise model and as you know this allowed us to have better economies of scale and of course increasing our footprint in our media rewards member in our different destinations. Now what's important for us today is that our direct channel is probably 8-10% more efficient than any other distribution channel and this is where we're going to strengthen our vision for the time being because we still have room to grow and we still have room to consolidate our relationship and the personalization and we're launching a new web so today we really need to make sure we control the whole process that we add value to our partners and that we are far more efficient than any other distribution channel time will tell if there's any other different strategy in the future I don't know if this answers your question Fernando.

Sure, thank you. Just to follow up on the sales and by the full year what sales, guides and financial sales would you expect? I think it's very difficult right now.

No, no, we wouldn't dare to give you an answer on that Fernando but probably within the future conversations we might. Okay, thank you very much.

Thank you.

Our final question is a follow-up from Guillaume Sampaio from CaixaBank. Guillaume, please go ahead.

Yes, good morning. Just a follow-up on the ADR references for December. So this 90% refers to the whole portfolio only to Spanish reserves.

Mainly to Spanish reserves at this point. But overall, we have a positive ADR versus 2019. Thank you very much for your attention and your time. We hope that we have been helpful here.

Please do not hesitate to contact our investor relations department for further

any further questions you may have thank you very much and have a nice day bye bye this concludes today's conference call thank you for joining you may now disconnect your lines