Meliá Hotels International, S.A.

Good afternoon, everyone, and welcome to Meliá's fourth quarter and full year 2023 Earnings Conference Call. I am Stefan Baus, Head of Investor Relations. For the time being, 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 address any additional doubts. Please note, this event is being recorded. Before we begin, I would like to remind you that our discussion this afternoon will include forward-looking statements. Actual results could differ from those indicated in the forward-looking statements, and forward-looking statements made today speak only to our expectations as of today. This afternoon, as usual, on the call with me today are Gabriel Escader, our President and Chief Executive Officer, Andres Gerondo, our Chief Operating Officer Angel Luis Rodriguez, our Chief Financial Officer Juan Ignacio Pardo, our Chief Real Estate Officer and myself. Our President and CEO will provide an overall overview for the company's performance. Andres will then review our fourth quarter onwards. Following these 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 meliahhotelsinternational.com. And now, I am pleased to turn the call over to Gabriel.

Thank you, Stefan, and good afternoon, everyone, and thanks for joining us today. 2023 has been a positive year. A year that went from good to better in almost all regions with a solid underlying demand. Thanks to our premium and luxury positioning with a quality mix of leisure and pleasure destinations, we have been able to capitalize on the strong momentum in all segments. The solid overall trend of the year is confirmed in the fourth quarter. where our year-on-year own and lease rent part increased by 10.6% mainly driven overall by price which is plus 6.3% compared to 2022. Occupancy was 2.5 percentage points above 2022 and our system-wide rent part increased by 6.6% in this case mainly driven by volume increase. On a yearly basis, rent part for our own and lease hotels increased by 17.3% driven by overall equal gains in average daily rate and occupancy. Our system-wide rent part increased by 10%. thanks to volume recovery. It should be known that this red bar increase is affected by pricing decrease in Cuba, which is explained by the valuation of the local currency. Excluding this effect, our system-wide red bar increased by 16%, with both occupancy and average daily rate fostering this increase. In this context, Hotels Intl Ord Hotels Intl Ord Hotels Intl The increase is of 7.3% even though own and lease available rooms are minus 8.7% compared to the same period. This shows the positive contribution of Redbar increase and the retention within our management systems of the hotels changing from own and lease towards management contracts. sales through melia.com direct channel strategy continue to show increases of 17.4% compared to last year accounting to more than 46% of our centralized sales our digital and direct channels remain important drivers to increase demand at a more efficient cost to us and our owners in 2024 We are celebrating our 30 year anniversary of our loyalty platform, Melea Rewards, with more of 16 million of registered customers. Operating expenses increased by 12.6% with respect to the previous year and by 7.5% compared to 2019. Despite wages and OPEX inflation, profit margins at EBDR level are in line with pre-pandemic thanks to the cost control implemented by the company without affecting our service quality while enhancing client satisfaction. Regarding EBDA margins, these are not fully comparable due to the change in the equity portfolio rental agreements. switching from fully fixed amounts to fully variable. We are glad to see that this change in strategy has surpassed bottom line contribution of this portfolio compared to 2019. As we anticipated in our annual shareholder meeting, I am glad to announce that our objective to reach at least 475 million of EBDA has been achieved thanks to the strong demand and margin recovery. Our strong top line combined with cost control measures allow us to post EBDA excluding capital gains of 486 million euros. an increase of 16.2% compared to 2022 and of 3.3% compared to 2019. Net financial result has been impacted by the higher financial interest rate during the year. In 2023, our average financial interest rate stood at 5.16% compared to 3.13% in 2022. Interest rate increase for the year could be softened thanks to our fixed interest rate debt exposure, which at the end of 2023 stands at 35.5%. It is worth noting that the outlook for the upcoming months suggests that rate hikes have reached their peak. is together with that reduction should write financial expenses down from now on effective income tax rate for the year is of 12.9 percent lower than the rates of around 25 percent at which the group has historically stood essentially this reduction is a consequence of the impact of the constitutional code declaring certain precepts of Royal Decree Law 3 2016 void and in particular regarding the reassessment of the application of tax losses against future profits and the corresponding recognition of deferred tax assets. Therefore, consolidated net profit of the parent company reached a positive 117.7 million euros, improving by 7 million euros compared to the previous year and also surpassing 2019 figures. Turning to the balance sheet, with regards to debt, a decrease of 59.9 million euros was registered during the course of the year. ending with 2,613 million euros of net debt. Pre IFRS 16 financial net debt decreased by 46.7 million euros, closing the year with an amount of 1,163 million euros, showing our progress towards debt reduction. Regarding asset rotation, In 2023, progress has been made. We have received advance payment amounting to 30 million U.S. dollars related to the sale of a minority stake in a subsidiary which owns a hotel in Mexico, pending to be approved by Mexican competence authorities. This transaction will generate capital gains in 2024 once the approval from the competent authorities has been issued. I'd like to briefly discuss one of our most recent announcements. On February 19 this year, we announced the signing of an agreement with an investment vehicle from Banco Santander for the subscription of new shares in a subsidiary owned by Melian. By means of this transaction, the investment vehicle takes a participation of 38.2% stake in that subsidiary, which will own three premium hotel assets located in premium locations. This transaction amounts to a total of 300 million euros which will be received during the month of April. This transaction is part of our strategy to continue to strengthen our balance sheet. The value of the transaction is in line with the asset appraisal we published in July 2022 allowing us to crystallize asset valuation. Apart from this, An additional asset rotation operation is currently underway, which we expect to complete during the course of the following months in the Caribbean and another one in the Canary Islands. These transactions will be made through a sale of a minority stake. Regarding our investments, it should be noted that in 2023, The company made key money agreements payments of 31 million euros of ensuring long-term management contracts of various hotels, including the equity in wellness portfolios. At the end of the year, the liquidity situation amounts to 330 million euros. It should be noted that before year-end, we have been able to refine part of our 2024 and 2025 debt commitments in order to smooth debt commitments for the nearest future. We remind that Melilla does not have any debt with financial covenants, while mortgage debts stand at approximately 250 million euros.

This implies a loan to value of 27.4% of mortgage assets.