Sol Meliá S.A. Business Information, Profile, and History

Company Perspectives:

Sol Meliá is the leading hotel company in Spain, Latin America and the Caribbean, the third largest hotel company in Europe and number ten in the world ranking. Sol Meliá is also the largest resort hotel chain in the world. The company provides more than 350 hotels in 30 countries under its Meliá Hotels, TRYP Hotels, Sol Hotels and Paradisus Resorts brands.

History of Sol Meliá S.A.

Sol Meliá S.A. owns and manages more than 350 hotels and resorts worldwide, placing it among the top ten international hotel companies. The company, based in Mallorca, Spain, has long been that country's leading hotel group, and Sol Meliá's extensive portfolio of hotels--featuring more than 90,000 rooms across 350 hotels in more than 30 countries--places it among Europe's top three hotel companies. Sol Meliá also claims the spot of the world's leading resort chain operator. Sol Meliá's hotels operate under four core brands. Meliá Hotels & Resorts target the higher-end, four- and five-star hotel bracket. Sol Hoteles offers family-oriented hotel and vacation packages. Tryp hotels are geared toward business travelers in Spain, targeting especially the city market. Paradisus is the group's luxury all-inclusive resort operator. After growing quickly into the early 2000s, notably through acquisitions, Sol Meliá has begun launching a series of partnerships and joint ventures in the difficult post-9/11 hotel and vacation market. In 2003, the company launched its first Hard Rock-themed hotel, in Chicago, in partnership with Hard Rock owner the Rank Group. That opening also marked Sol Meliá's entry into the United States. Two more U.S. hotels are slated to open in the mid-2000s, in San Diego and New York. Sol Meliá also has teamed up with Warner Bros. to launch a chain of Flintstones-themed hotels, primarily for the European and Asian markets. Sol Meliá is listed on the Madrid Stock Exchange. The founding Escarrer family remains actively involved in the company: founder Gabriel Escarrer Juliá serves as chairman of the board, while son Gabriel Escarrer Jaume, Jr., chief architect of the company's international expansion, is group CEO. In 2004, Sol Meliá posted sales of EUR 1.04 billion ($1.3 billion).

Majorca Origins in the 1950s

Born in 1935 on the island of Majorca, Gabriel Escarrer Juliá embarked on an early career which took him to London in the 1950s, where he worked as an agent for the Thomas Cook Travel agency. In 1956, however, Escarrer, then just 21, returned to Majorca to go into business for himself as a hotelkeeper. Escarrer leased the Altair Hotel, a 60-room building located in the residential area of Palma de Majorca.

Escarrer's timing was right. By the 1960s, Majorca had begun to take off as a popular tourist destination, particularly among British and other northern vacationers. Escarrer's early experience with travel agents led him to develop cooperative efforts with tour operators and travel agencies, increasing the flow of tourists to his hotel. At the same time, Escarrer launched a strategy of plowing profits back into his business, notably in order to finance the purchase of additional hotels and properties.

In this way, Escarrer's company, Hoteles Mallorquines, grew into a full-fledged chain, focused on the Spanish islands, including Majorca, the Canary Islands, and the Balearic Islands. In the mid-1970s, with the continued rise of tourism in Spain--especially after the end of the Franco dictatorship--Escarrer became determined to expand his company onto a national level.

Escarrer now began buying properties in other popular Spanish tourism destinations. By the early 1980s, the company had covered much of Spain, and had developed a new brand and name, becoming Hoteles Sol in 1984.

That year marked the company's emergence as Spain's leading hotel group, as the company completed the acquisition of the Hotasa Hotel chain, backed by Aresbank, the Spanish unit of the KIO Group. The Hotasa added 32 hotels to the Sol group, primarily along the Spanish coast. Yet Hotasa also owned several hotels in the Spanish urban market, marking Sol's introduction to the operation of city-based hotels. The purchase of the Hotasa group also placed Sol among the world's top 50 hotel groups, with a 37th place ranking.

With its growth at home secured, Sol became interested in the international market in the mid-1980s. The company's interest turned to Bali, which at the time had not yet attained its later popularity as a tourist destination. Sol acquired a property at Nosa Dua in Bali and began constructing its first international resort in 1987.

Growing into an International Leader in the 1990s

The year 1987 became still more significant to the company's history. In June of that year, the Escarrer beat out a number of other, larger hotel groups in his bid to acquire the luxury-oriented Meliá hotel group. The Meliá group consisted of 22 four- and five-star hotels, with a strong presence in the European market, but also in the Americas, Caribbean, and Mediterranean. Meliá had been owned by Interport, based in Luxembourg, and run by Giancarlo Parretti. The addition of Meliá encouraged the company to change its name again, becoming Sol Meliá.

Escarrer was joined by son Sebastian Escarrer Jaume. The younger Escarrer, who had completed an MBA at the Wharton School, now led the group into the restructuring of its organization, transforming Sol Meliá into a modern corporation ahead of a renewed growth effort in the 1990s. Among other features introduced to the company and to its growing international hotel chain during the early 1990s were information technology, stricter accounting and financial management controls, and quality control systems. Escarrer also redeveloped Sol Meliá as a holding company for two separate components: Inmotel Inversiones, which owned the company's hotel properties, and Sol Meliá S.A., which became exclusively a hotel management company. The completion of this restructuring led the Escarrers to bring Sol Meliá to the stock market in June 1996, marking the first time a hotel management company in Europe had gone public. Another of Escarrer's sons, Gabriel Escarrer Jaume, Jr., became CEO of Inmotel.

Throughout this period, Sol Meliá had continued to develop its international network of hotels. The company targeted especially markets such as South and Central America, as well as properties in Mexico, while continuing to build up its European holdings. As part of its push into the Latin American market, the company created a second property investment vehicle, Meliá Inversiones Americanas (MIA), which was launched on the Madrid Stock Exchange in 1998. Following the creation of MIA, Inmotel was repositioned to focus on building up the company's European hotel property portfolio.

By the end of the 1990s, the company had extended its hotel empire to more than 260 hotels. In 1999 alone, the company spent more than EUR 605 million building 27 hotels and buying 34 more. This investment campaign enabled the company to secure a presence in most of the major European capitals, including London, Paris, and Rome.

In the meantime, the growing consolidation of the hotel and resorts industries, with a flurry of takeovers and cross-mergers in the late 1990s and early 2000s, encouraged Sol Meliá to adapt its own organizational structure. In 1998, the company launched a new restructuring, integrating its two hotel-owning companies into its core Sol Meliá management arm. That process was completed in 1999, and Sol Meliá S.A. became an integrated hotel group. The move placed Sol Meliá at the number 12 spot among the world's top hotel groups, with operations in 27 countries and a market capitalization of EUR 2.3 billion.

Hotel and Resort Leader in the New Century

Sol Meliá was rumored to have entered takeover talks with Hilton International at the approach of the new century. The takeover of Sol Meliá by Hilton was viewed as a logical strategic move for both companies, giving Hilton access to Sol Meliá's leading position in the fast-growing Spanish tourist market, while adding Sol Meliá's industry-leading resorts holdings.

Yet by September 2000, those talks appeared to have been abandoned. Instead, Sol Meliá struck out on its own, announcing its acquisition of Spanish rival Tryp Hotels. The deal, worth as much as $240 million, gave Sol Meliá control of Tryp's 60 business-class hotels and reinforced Sol Meliá's presence in the Spanish urban market, including 17 hotels in the Madrid area. Tryp also added a number of resorts to Sol Meliá's portfolio, including an entry into the ski resort market for the first time. With the purchase of Tryp, Sol Meliá emerged as Europe's third largest hotel group, while entering the global top ten for the first time.

Following the Tryp acquisition, Sol Meliá streamlined its brand portfolio, cutting in half the number of hotel chains under its control. The company's four brands were now Sol, Tryp, Meliá, and the luxury resorts chain Paradisus. The rebranding effort was completed in 2001.

Yet the collapse of the global tourism industry following the attacks of September 11 that year put a chill on Sol Meliá's growth. The company now focused its efforts on investments meant to improve its portfolio. As part of that process, the company streamlined its holdings, dropping the number of hotels under its controls back from 350 to just 331 by 2002.

Sol Meliá now began seeking partnerships as a means of generating new expansion opportunities. The company joined with the Hard Rock Café company, part of the Rank Group, to launch a new Hard Rock Café hotel concept. The first of these, which opened in Chicago in 2003, also marked Sol Meliá's first hotel in the North American market. The two companies then began preparations to open two new Hard Rock hotels, in San Diego, expected to be opened in 2006, and in New York, where renovation began in 2005.

In Europe, meanwhile, Sol Meliá teamed up with Warner Bros. to launch another hotel concept, the more family-oriented Sol Flintstones-themed hotels. The first of these hotels involved the renovation of two former Sol hotels in Menorca and Majorca and opened in 2003.

As the tourism industry began to revitalize toward the middle of the 2000s, Sol Meliá continued to seek out partnerships and alliances, such as cooperation agreements with tour operator Cedant and with online travel agency lastminute.com. The company also returned to organic growth, boosting its number of hotels back to 350, including the opening of its third hotel in the Dominican Republic in February 2005. From a single hotel, Sol Meliá had built one of the world's top hotel groups for the 21st century.

Principal Subsidiaries: Grupo Sol Asia, Ltd. (Hong Kong); Grupo Sol Services (Singapore); Hoteles Meliá, S.L.; Hoteles Paradisus, S.L.; Hoteles Sol Meliá, S.L.; Marktur Turizm, A.S. (Turkey); Meliá Brasil Administraçao; Meliá Inversiones Americanas, N.V. (Netherlands); Meliá Tour, S.L.; Parking Internacional, S.A.; Sol Caribe Tours, S.A. (Panama); Sol Group Corporation (U.S.A.); Sol Group, B.V. (Netherlands); Sol Hoteles U.K., Ltd.; Sol Maninvest, B.V. (Netherlands); Sol Meliá Benelux, B.V. (Belgium); Sol Meliá China, Ltd. (Hong Kong); Sol Meliá Croacia; Sol Meliá Deutschland, GmbH; Sol Meliá Europe, B.V. (Netherlands); Sol Meliá Finance, Ltd. (Cayman Islands); Sol Meliá France, S.A.S.; Sol Meliá Guatemala, S.A.; Sol Meliá Marruecos, S.A. (Morocco); Sol Meliá Perú, S.A.; Sol Meliá Services, S.A. (Switzerland); Sol Meliá Suisse, S.A.; Sol Meliá Travel S.A.; Tenerife Sol, S.A.; Torresol Des. Turísticos, S.A.

Principal Competitors: Loews Corporation; Radisson Hotels and Resorts; Orascom Group; Rallye S.A.; Carlson Holdings Inc; Compass Group PLC; Hilton Group PLC; MARITIM; SABMiller PLC; Protea Hotels and Inns Proprietary Ltd.; Itsui Fudosan Company Ltd.; Southern Sun Group; Marriott International Inc.; ACCOR S.A.

Chronology

• Key Dates:
• 1956: Gabriel Escarrer Juliá leases the Altair Hotel in Majorca.
• 1984: The company's name changes to Hoteles Sol and with the acquisition of the Hotasa hotel chain, it becomes the leading Spanish hotel group.
• 1987: The company opens its first international hotel in Bali; the Meliá hotel group is acquired, and the name is changed to Sol Meliá.
• 1996: The company is split into Inmotel Inversiones (hotel ownership) and Sol Meliá S.A. (hotel management); Sol Meliá begins trading on the Madrid Stock Exchange.
• 1998: The company creates Meliá Inversiones Americana (MIA), which is then launched in a public offering as part of an expansion in Latin America.
• 1999: Inmotel and MIA are integrated into Sol Meliá.
• 2000: The acquisition of Tryp Hotels places Sol Meliá as the number three European hotel group and number ten in the world.
• 2001: The company rebrands the hotels under four brands: Sol, Meliá, Paradisus, and Tryp.
• 2003: The first Hard Rock Hotel is opened in Chicago as part of a partnership with Rank Group; two Spanish hotels are converted to the new Sol Flintstones hotel brand as part of a partnership with Warner Bros.
• 2005: The company launches a renovation for a Hard Rock Hotel in New York City; a third hotel is opened in the Dominican Republic.