THE OBSERVATORY
“MUCH MORE THAN A BUSINESS STRATEGY”
An in-depth analysis of a key strategy
for the Meliá group: rebranding.
In 2012, Meliá Hotels International began an exciting adventure:
the renovation and repositioning of its most iconic urban and holiday hotels. Since then, over 500 million Euros have been invested. Spain is
just the first step.
It all started in 2011 when Sol Meliá stopped being Sol Meliá to become Meliá Hotels International. A change of name, a word; apparently, it was only that, but with it a new era was inaugurated for the company: an era of renovated hotels, destinations and brand. Based on an ambitious business strategy, it was in keeping with the company ’s corporate policy of social responsibility. As Gabriel Escarrer, Meliá Hotels International’s VP & CEO explains, this renovation was necessary: “Today ’s rapidly changing scene calls for a greater need to evolve. Today, there is an extraordinary segmentation of guests with a very wide range of profiles; hotels must adapt to them and customise their value propositions. In addition, the globalisation of the tourist market is a fact as are the changes in the ways we travel, purchase trips, recommend them, etc. Wanting to be prepared for all this entails an in-depth process of transformation for our hotels, attributes and brands, as well as our processes, people and, in general, our company ’s culture.”
Between 2011 and 2016, Meliá Hotels International invested 500 million Euros in Spain, of which 220 million were devoted to the Calviá Beach (Magaluf) project. This is the flagship of this
renovation of Mediterranean holiday destinations, offering a second lease of life to this mature destination, making it shine as brightly as when it was launched more than 60 years ago. For the Escarrer family, this project goes beyond purely the economical. As Gabriel says, “Meliá is a multinational group from Mallorca and it began operating big resorts in the Magaluf area, among others. There is, therefore, also a sentimental component and commitment to the destination, and we are proud of having proved that the “pioneering” destinations of the tourist boom of the 60s and 70s can now enjoy a second chance and recover their splendour and their social and economic profitability.”
The global project is a case study at business universities and schools; the starting point of a strategy that includes rebranding, architectural renovation as well as new processes and management systems, innovation, etc., and which has affected not just the hotel, but also the destination as it also involves collaboration with the public sector and various stakeholders. “Big repositioning projects must be tackled with a commitment to collaborate with local public administrations so that both the drive and the investment – mostly private – go hand in hand with matters such as public order, improved urban planning, security, enhancement of the shopping and hotel offer, infrastructure, beach cleaning and management, etc.”
However, Calviá has not been the only case. Other mature destinations – mainly on the Mediterranean coast and in the Canary Islands – have witnessed how some of their most iconic hotels have been refurbished and rejuvenated. This is true of the Meliá Gorriones in
Las Palmas, Meliá Salinas in Lanzarote, Meliá Jardines del Teide in Tenerife and five hotels in Torremolinos. “Having a great hotel is not enough if the destination is dirty, unsafe, unsustainable or, in short, ‘badly managed’. This gave rise to a discipline called ‘destination stewardship’ that focuses on a holistic approach for destinations. As a company, Meliá understood this very early on, launching our big hotel renovation and repositioning projects within a framework of repositioning destinations, because if the destination has no value, the hotel will not have value, and the community will be impoverished.”
MADRID AND THE PALACIO DE LOS DUQUES HOTEL
With regard to urban hotels, the flagship of this change is the new Gran Meliá Palacio de los Duques in Madrid. Located in the palace of the Duke and Duchess of Granada de Ega, on the Cuesta de Santo Domingo street, the old Hotel Ambassador was transformed into a contemporary luxury urban hotel “combining leisure and business to adapt to the demands of current travellers who, also when travelling on business, increasingly seek bespoke lifestyle, leisure, wellbeing, culinary, etc. experiences.”
Various different spaces are open not just to its guests but also to the entire city – rooftop, lobby and the Dos Cielos restaurant headed by the Torres brothers – and are a clear example of the complete transformation carried out by Meliá Hotels International. Escarrer says, “This involved renovating, re-branding and repositioning an urban hotel in an extraordinary location – Hapsburg Madrid – to highlight its great architectural value and potential as a luxury establishment. The hotel has been admitted into the exclusive club of the Leading Hotels of the World, and, in just a few months was ranked among Madrid’s best top 3 hotels in Tripadvisor. ‘Rounding off ’ our Grand Luxury range in Madrid with this extraordinary product that reinforces the portfolio of luxury Spanish brands in view of the imminent arrival of other international Grand Luxury brands in our capital city was a challenge that we have successfully met.”
A RECIPE FOR SUCCESS
To achieve our goals for the Gran Meliá Palacio de los Duques and the Calviá Project, as well as all the other hotels, many other renovations and changes have been tackled concerning matters from marketing to real estate, and from interior design to corporate social responsibility. A harmonious combination of all of them has made success possible.
“Several key factors converge: the successful positioning of our brands, an excellent public-private collaboration to facilitate the projects, and a clear business strategy with first-class financial partners to undertake the significant investment needed in such a
short time, plus a brilliant sales strategy. I believe that our assets, financial and brand strategies make up the masterful combination of ingredients that have led us to success.”
THE NEW BRANDS
Our re-launch of the SOL brand with its four sub-brands in areas like Magaluf (Mallorca) or Ibiza and Menorca, and the Costa del Sol has been the trigger for clearly outlining the new vision for the Meliá group brands, and the company ’s other brands will follow suit in the future in Spain. The aim was to build a brand architecture with strong and differentiated characteristics, with a value proposition that was persuasive for owners, investors and guests alike.
“Having different categories of hotels is not enough today as there is also a need for products that are in keeping with demographic (baby-boomers, Gen X, Y and Z, millennials…) and psychographic profiles. Nor are purchases conducted mainly via wholesalers: today, they are more and more individualised and digital – hence we must know our guests and offer them more customised products. Today we must consider our relationship with guests from an integral perspective (what we call ‘the customer journey ’) before, during and after their experience with us so that we can understand them, anticipate their expectations, get them to identify with our brands and thus remain loyal.”
A SHARED PROFIT
“Companies must get involved with the communities where we are based. Tourism – and hospitality in particular – has an ability that few industries have for fostering social cohesion and economic development.” For Gabriel Escarrer, Meliá Hotels International’s goal as a company is to generate “shared value” (for shareholders, employees, and the entire community) and “has a commitment with the destinations and communities
with which it operates, in addition to having the moral duty of being an engine and example for society and the rest of the sector regarding these kinds of changes, and proving, with facts and figures, that the transformation of obsolete destinations is not only possible, but profitable”.
This also goes for the company ’s new openings that will take place in 2017 and 2018 in important destinations where it does not yet operate, such as Venice, Iguazú Falls, the Maldives, Serengeti, Dubai (with the ME Dubai, designed by Zaha Hadid). “In our company, we focus a great deal on newly built hotels, to principles of sustainable construction, and we implement systems of energy and water efficiency, waste management, etc. in all our establishments. In addition, we are committed to social and economic responsibility, supporting and including communities as we believe in the power of tourism as an engine for the social and economic development of communities.”
THE FRUITS OF THE HARVEST
The results of these investments are already visible. If we compare our 2016 data with those of 2012, our room revenues in Magaluf ’s hotels has grown by 98%; RevPar (revenue per available room) has increased by 83%; our gross profit margin by 56% and EBITDA by 67%. In addition, the company has enhanced its positioning and, thanks to its hugely successful digital adaptation, sales via melia.com have increased by 175%.
In addition, according to Escarrer, “These results are two-fold, a sort of win-win situation for the company as well as for the destinations: on the one hand, the repositioned hotels have increased their average income by up to 300%, such as our Ibiza hotels, while the increase has been 98% in Magaluf – they have increased their margins and extended the seasons staying open longer. These processes have had a very favourable impact on the destinations leading to a 94% increase in purchases from local suppliers, and a 45% rise in direct employment.”