It is both a great satisfaction and responsibility to present to you the Sustainability Report for the 2008 financial year. This year has been full of major challenges for the travel and tourism industry in general, and for Sol Meliá in particular, a year which has tested our ability to adapt to a new economic environment without losing our focus on sustainable development. After the unprecedented boom of 2007, the financial year described in this report shows a deterioration in the business performance which begins to grow in importance in the second half of the year when the slowdown in the economy begins to show through in travel patterns in all markets. It’s not all bad news, as we will see. It is also a year in which the Company has strengthened its internal capacity after an intense process of change in its organisational and strategic models, and also continued to enhance its brand equity and growth while approving a new Sustainability Policy.
The current crisis hit our Company in a period of extraordinary internal strength, after an historic 2007 in terms of financial performance and the presentation in 2008 of our Strategic Plan to investors all over the world. Sol Meliá was facing the crisis from a very solid base thanks to a highly committed team, a healthy balance sheet – after the important debt reduction carried out between 2004 and 2007 – and strong, differentiated brands. Alongside this progress, in 2008 our Board of Directors also approved our Global Sustainability Policy, defining the basis for the integration of sustainable development principles from an integrated point of view and with a long-term vision. This policy – a copy of which accompanies this Executive Report – must be put into practise through specific management policies, generating social, cultural and environmental objectives and commitments in our planning and decision-making processes, and creating a single interpretation of what sustainability means to Sol Meliá. This will also allow us to make progress in the implementation of the principles of the United Nations Global Compact, an initiative to which we have signed up in 2008.
Although our Strategic Plan is the guiding light for both the present and the future of our Company, the current recession has forced us to put the safeguard of our financial health before the application of strategic projects. The situation now requires that we focus on the basic aspects of stabilising and strengthening the Company as we face uncertainty and the crisis, aspects which in Sol Meliá we have named our “Anti-Crisis Action Areas”, the basis for the implementation of a rigorous Contingency Plan.
After the intense process of readjustment started in July 2008, our goals now include generating savings of 55 million euros in 2009, prioritising service and the guest experience, reducing investments to less than 90 million euros (basically for optimising maintenance in hotels), enhancing our revenues and taking a more proactive approach to risk management, while at the same time keeping up our commitment to social responsibility and sustainability. Our acknowledged discipline in cost management and our extensive sales network will undoubtedly be key in helping us achieve these objectives.
The volatility of stock markets or the reduction in profits are inevitable consequences of the high levels of uncertainty and fall in consumption, but they should not mask the progress made by our Company in many areas in which value is undoubtedly added. Thanks to our effort and the strengths described above, we will be in a position to unearth opportunities in the midst of a crisis which may still last for some time.
Together with partners, in 2008 Sol Meliá invested more than 300 million euros in new hotels and in the renovation of others. This included the Gran Meliá Palacio de Isora in Tenerife, the purchase of the Me by Meliá Barcelona, or the renovation of Meliá hotels such as the Meliá de Mar, Meliá Barcelona, Meliá Madrid Princesa, Meliá Sol y Nieve or Meliá Sevilla, amongst others. The Company added a total of 13 new hotels with 4,635 rooms, a trend which has carried over into 2009 with agreements signed in the first quarter for 6 of the approximately 19 hotels we are scheduled to add, all of them under management or lease agreements, formulas which allow us to maintain sustainable growth levels without any increase in our debt and also perfectly aligned with our business model and our vocation as hotel managers.
In this context, the differences will be made by the way each organisation is able to manage the uncertainty and the crisis, and at Sol Meliá we have reacted well before many of our competitors, and above all we have reacted better than our competitors, meaning that even under the current circumstances we retain the competitive strengths and advantages that place us above the average for the industry.
In keeping with the strategic focus of the Company on sustainability, this Report also aims to be an exercise in environmental responsibility. The executive version (the only version that will be printed) has allowed us to save an important amount of paper without any adverse effect on our transparency thanks to the access to all information through the Internet. There are several items showing progress on environmental protection in the Report, an area in which we aim to continue to play an active role in the international travel and tourism industry.
With regard to our social responsibility, the fact that we are a family company makes us particularly sensitive to the needs of children, an area in which we have shown a firm commitment to the fight against the sexual exploitation of children, amongst other things. Amongst our other stakeholders, I would like to highlight one in particular: our team of employees, the Company’s most important asset, whose efforts every day make it possible for us improve the numbers that appear in this Report every year.
With respect to the structure of the Sustainability Report 2008, the corporate information is once again presented in terms of “value”. Sol Meliá has continued to provide value to its employees, customers and shareholders: Management Value, Economic Value, Business, Commercial and Human Value, Investment, Communication, Social, Cultural and Environmental Value. Safeguarding our financial health is currently a factor which provides value to the Company and our stakeholders, but it is equally or even more important to ensure that the wealth thus generated provides a benefit to people and society, and that is why we have considered it more coherent to describe other types of value, perhaps more intangible, which we bring to our stakeholders through our activities.
I sincerely hope that the information contained in this Report meets with your expectations and also that you, our shareholder, our customer, our employee, the owner of one of our hotels, our supplier, or just a member of the public, find a real commitment in these pages to contribute to the more balanced and sustainable development of the societies in which we operate and the people that form part of those societies.
Sol Meliá Hotels & Resorts is the world's largest resort hotel company and the largest hotel chain in Spain in both resort and city hotels. Sol Meliá is third in the European ranking and the twelfth largest hotel chain in the world. As well as being the resort chain in the world it is also the largest hotel company in Iberoamerica and the Caribbean. The company currently operates more than 300 hotels in 30 countries on 4 continents. Sol Meliá includes Melia, Tryp Hotels, Sol Hotels, Gran Melia, Innside, Paradisus Resorts and Me by Melia.