2017 Integrated Annual Report
LEISURE AT HEART, BUSINESS IN MIND Leisure at heart,business inmind
GRAN MELIÁ PALACIO DE ISORA I SPAIN Con tents
Consolidated RESPONSIBLE HOSPITALITY 2017 Year of Sustainable Tourism 118 Management Report Sustainability in the business 122 Human rights & children 128 People 132 INTRODUCTION Environment 140 Interview with the Executive Vice -Chairman Calvià Beach Case Study 150 and Chief Executive Officer 08 Our Essence 10 CORPORATE GOVERNANCE About this Report 28 Overview of our environment 30 Corporate Structure 154 Materiality analysis 32 Corporate Governance 155 Strategic focus 34 Risk Management 160
ABOUT THE BUSINESS ANNEXES
Significant milestones 42 Corporate Information and Contacts 168 Recognitions 44 GRI Indicators 169 Business model 46 Annual Corporate Governance Report 186 Social Cash Flow 50 Meliá Footprint 52 Positioning map 56 Our hotel brands 58 Consolidated Customer relations 80 Property management 84 Annual Accounts Digitalisation & innovation 86
CONSOLIDATED ANNUAL ACCOUNTS PERFORMANCE Consolidated Balance Sheet 248 Interview with the Chief Operating Officer 90 Consolidated Profit and Loss Account 249 Global figures 92 Consolidated Statement of Evolution and results of the business 94 Comprehensive Income 250 Consolidated Statement of Changes in Net Equity 251 Consolidated Statement of Cash Flow 252 Notes on the Consolidated Annual Accounts 253
This is a free translation from an original document prepared in Spanish. If any discrepancy between the present translation and the original document appears, the text of the original Spanish- language document shall always prevail.
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 3 Conso lidated Manage ment
CONTENTS Report
INTRODUCTION 06
ABOUT THE BUSINESS 40
PERFORMANCE 88
RESPONSIBLE HOSPITALITY 116
CORPORATE GOVERNANCE 152
TANZANIA 166
I ANNEXES MELIÁ SERENGETI Conso lidated Manage ment Report
Intro duction
The renewal and strengthening of our values once again demonstrates our dedication to leadership and business excellence, which are gaining ever increasing importance in the cultural transformation and essence of our company TANZANIA I MELIÁ ZANZIBAR INTRODUCTION
GRI 102-14
Interview with Gabriel Escarrer
A year ago, Gabriel Escarrer Jaume took over the leadership of the company to which he has dedicated 22 years of his life. Under his leadership Meliá is starting on a new stage in a more global, complex and competitive environment. In this new context, Meliá will be advancing towards a more profitable, sustainable and responsible company model.
In recent years we have seen considerable changes in the way in which Meliá reports its corporate information. Could you explain to us what these changes consist of?
Together with other leading companies, in 2012 we participated in the pilot project led by International Integrated Reporting (IIRC) that aimed to lay the foundations for a new approach.
Including these criteria and the updating of the GRI standards allowed us to make significant advances in the way we transmit the information. In addition, the recent entry into force in 2017 of European Parliament Directive 2014/95/EU has urged large companies to expressly report their non- financial information. These requirements now demand GABRIEL ESCARRER JAUME aspects on which we, at Meliá, have been working for some Executive Vice-Chairmanand time. We will continue in the future to promote a report that Chief Executive Officer looks at the achievements, challenges and risks from a global perspective, like the international company that we are, and we will continue to give greater visibility, in an integrated manner, to financial and non-financial information.
I am very proud that we are pioneers in this area in the tourism industry, and I encourage the rest of the industry to move forward along this path.
The new environment has required us to carry out a new materiality analysis. I am pleased to confirm the correspondence between the materiality issues selected by our stakeholders and our strategic focus.
I would like to emphasise that this Report is the result of the coordinated efforts of the entire company. Excellent coordination, teamwork and dedication were what made it possible.
8 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 What were the main challenges and achievements Meliá is immersed in an intense process of when developing your current Strategic Plan? transformation. How are you finding it?
Two years have passed since the launch of the current It is a stimulating and intense process that already forms part Strategic Plan. Throughout this time we have worked hard of our daily work. Our strategic approach includes different to consolidate our 2020 Vision. levers to ensure the transformation of Meliá into a company that can move towards an management excellence model Our extensive international presence requires us to ensure with an asset management strategy that fits the customers' that this momentum reaches all our business units. expectations of the product. In this transformation, digitalisation plays an important role. It is allowing us to create The main challenge is to ensure that this strategic thrust closer bonds with customers, strengthen our relations with reaches all of Meliá. The objectives set are a challenge in them and improve their experience at our hotels, through a themselves and also mean that the Strategic Plan must fit strategy based on omnichannel marketing. every cultural reality, environment and needs. We have increased our proximity to our customers through The increasingly high standards of transparency, good the comprehensive management of their relationship cycle governance and ethics can be perceived throughout the with Meliá. reading of this report. To advance in this direction we have hired new talent with I feel satisfied with our achievements this year and the high digital skills and abilities, and ensured that our own skills evolve. level of commitment and desire for improvement of all our teams. I would like to highlight our growth and the internationalisation that we are promoting. We already operate in over 40 countries. We are committed to an asset-light model to How would you sum up your first year as a top consolidate our leadership in the leisure and bleisure executive? segments, the latter being a perfect combination between business and leisure. The results confirm that we have taken full advantage of the positive situation of an industry that has posted We have an extraordinary background due to our more sustained and significant growth worldwide. The sector than 60 years of history, excellence and leadership. The has experienced significant growth in many countries in new times will require us to evolve and adapt in order to the Americas, Europe and Asia. Spain deserves a special remain leaders. mention, as it has risen to second position among the countries that receive tourists, exceeding 82 million in Meliá Hotels International is the brand that differentiates 2017. us in a highly competitive industry. For this reason, this year we have integrated the corporate values of Meliá into our Despite several negative impacts this year, we have met the brand strategy so as to combine our value proposition and market expectations and the results have been valued very our corporate culture. positively by the market. Leisure at heart, Business in mind is the concept behind We have some significant challenges for 2018, and we this evolution. It describes our dedication to excellence and will tackle them with enthusiasm. To achieve this, we will leadership in leisure and urban leisure hotel management, have drivers that I believe are recognised strengths and and how our service orientation, emotional connection that set us apart: the potential of our teams, a very well- and the personalised experience of our customers is at the defined corporate culture, our values, a great capacity heart of everything we do as a company. for transformation and, of course, a sound strategy and positioning. All of us who are part of Meliá are part of this transformation process.
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 9 INTRODUCTION
10 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 Meliá Hotels International: always seeking excellence
From the beginning, our main cornerstone has been Our aim is to continue to position ourselves as one of the excellence in service. Because of our capacity for world's leading hotel groups. We have therefore updated transformation and adaptation, we have remained at the the definition of the Meliá Hotels International corporate forefront of the changes in the hotel industry, by satisfying brand and of our hotel brands, with the aim of ensuring the demands of our stakeholders. that our service culture is indeed our company culture, in line with the new brand definitions. In an environment of constant changes, where the boundaries between business and leisure travel are blurred and the expectations of our stakeholders are increasingly ambitious, we want to ensure that we are strong and competitive, but also remain true to our origins and our essence.
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 11 INTRODUCTION SPAIN MELIÁ SANCTI PETRI I
12 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 New brand model
The new brand model is based on the guidelines and The result is a powerful statement that makes us unique conclusions of the HAVAS study carried out in 2015 and and different, allowing us to define our own recognisable exhaustive consultations with our stakeholders. Our main culture of service. This process has confirmed that our challenge is to find a balance between a differentiating, origins in Spanish leisure and warmth are not only key unique approach and a scope broad enough to attract all attributes of our brand but also define us and are our main interested parties. levers for international growth.
Customers
Suppliers Employees
Investors Partners & & Analysts Owners
Government Local departments communities
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 13 INTRODUCTION CHINA I MELIÁ SHANGHAI HONGQIAO
14 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 Our “Unique Selling Proposition” and the 4 pillars are the basis of the brand
UNIQUE SELLING PROPOSITION (USP) OUR PILLARS
Our Unique Selling Proposition is the phrase that defines all Our brand pillars support our USP and define our personal, the things that distinguish us from our competitors, that is, human approach in greater detail. They have been carefully the characteristics that no other hotel company can claim. selected to be competitive, authentic and relevant.
They are values that help guide the actions of the company and in turn define the characteristics of the corporate brand for the outside world. It is vital to understand them “The only international hotel group as each pillar has an impact across the board on all areas that has an origin in leisure and of the business. the ideal size to offer exceptional hospitality”
We are unique in our competitive environment because our origins are in leisure. We therefore understand leisure like no other hotel brand and we have the ideal scope for building up our management model in a more human, personal way.
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 15 INTRODUCTION
Warmth & Conviviality
MEDITERRANEAN HOSPITALITY GUEST-CENTERED
Taking advantage of our Mediterranean culture and Spanish At Meliá Hotels International we operate by interacting with heritage, at Meliá Hotels International internal and external our stakeholders, always keeping in mind our fundamental links are handled in a warm and personal manner. purpose: to offer our guests incredible experiences.
BALANCED CULTURE
When we defined our corporate culture, we were mainly inspired by the essence of our hotels, which means combining fun with professionalism and balancing familiarity and formality.
16 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 Caring & Nurturing
CAREFUL MANAGEMENT SOCIALLY COMMITTED
Our size, an ideal balance between the small and the large, We seek to have a positive impact on the destinations and allows us to maintain personal links while investing time to be involved with the local communities, their reality and dedication to taking care of our assets. and needs. We offer them the benefit of our experience, influence, commitment and capacity for work.
PART OF THE FAMILY
We take care of our employees, recognising them for their commitment and promoting the development and management of internal talent.
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 17 INTRODUCTION
Little extras
PERSONAL EXTRAS HOTELIER HERITAGE
Because of our size we are able to stand out from our Our core business is the hotel business and our extensive competitors by adding personal touches and little extras to experience makes it natural for us to stand out in the hotel our relationship with our stakeholders. industry.
INTIMATE CONNECTIONS
As we are both a listed company and a family company, we can strengthen relationships and maintain an open dialogue with corporate partners.
18 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 SPAIN I MELIÁ MADRID SERRANO
Innovation
ALWAYS IMPROVING CUSTOMER INNOVATION
With a vision focusing on the future, we reinvent ourselves From our loyalty programmes to our development strategy, constantly to stay ahead of the curve and position ourselves by way of our talent and leadership, at Meliá Hotels against our competitors. International we undertake a constant search for innovative solutions that will allow us to provide more value to our customers. GLOBAL PIONEER
Over the years, we have increased our internationalisation, gradually expanding into new markets and countries, especially the major European cities and emerging markets.
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 19 INTRODUCTION
20 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 Our corporate brand concept
How could we express all this information in a more The perfect union of two poles. An attractive combination attractive way? We were looking for a tagline that would that unites the heart and mind, and encapsulates the include the four pillars, our USP and our history. reasons why all our target audiences feel close to us. More than a slogan, it keeps the corporate brand strategically united, giving it meaning and coherence. “Leisure at heart, business in mind”
At heart, because it is our emotional side At heart, because it is at the centre of everything we do At heart, because it is our nature
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 21 INTRODUCTION
GRI 102-16
Our corporate values, mission and vision are expressed through our behaviour
Our corporate values are the way we make the four pillars OUR MISSION visible and help them to make sense to outsiders. The way in which the corporate values come to life, through the Offer global accommodation experiences and services using behaviours that we promote among all our employees. criteria of excellence, responsibility and sustainability, and as a family company, we want to contribute to achieving a better world. Proximity, experienced through a warm and welcoming demeanour, 2020 VISION excellence and consistency, with which we make sure our professional behaviour is exemplary, Our ambition is to position ourselves among the top hotel a service vocation, which is born of our hospitable groups in the world in the middle and upper, urban and leisure essence, segments, strengthen our leadership in this segment and be recognised as a world leader in excellence, responsibility and and innovation, which guides our behaviour and sustainability. creative work.
22 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 23 INTRODUCTION
24 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 OUR SERVICE CULTURE IS BORN OF A SENSE OF BELONGING Belonging begins here
BELONGING: belonging as an expression of Spanish warmth and hospitality and the expression of our emotional benefits.
BEGINS: the task of creating this sense of belonging depends on each of our contributors and their role in the company.
HERE: our brand service culture is being experienced and created all the time. Right here and now, in our hotels and at our head offices.
All our brand work has led us to define our culture of unique, inspiring service. As a company based on excellence in service, our culture is defined by the way in which we provide this service. It is a constant, ongoing task, a work in progress, that is always being created and recreated. Here is our declaration of our service culture. SPAIN MELIÁ CALA GALDANA I
MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 25 INTRODUCTION
BELONGING DEFINES THE APPROACH OF OUR LOYALTY PROGRAMME Belonging means more
Belonging is also the benefits offered by our loyalty programme, Meliá Rewards. In addition to the functional benefits of belonging to the loyalty programme and its multiple rewards and extras, belonging also includes the emotional feeling of being part of something bigger.
This feeling is backed by our approachability and the fact that we are still a family business that takes care of our customers and our staff.
26 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 27 INTRODUCTION
GRI 102-48 / GRI 102-49 / GRI0102-53 / GRI 102-54 / GRI 102-55 / GRI 102-56
About This Report
Over the years, companies, their business models and VERIFICATION OF THE INFORMATION value creation processes evolve and change due, among other factors, to the global context in which they operate. The information contained in the consolidated annual These changes are interdependent and lead to advances accounts was prepared based on the International Financial and demands, such as the need for greater transparency, Reporting Standards (IFRS) and is subject to review by PwC, requirements for reporting more reliable information, which issued the corresponding independent audit report. the importance of material issues and the availability of resources, among others. The non-financial information was also subjected to external verification by the same auditing firm, a process Given this context, and following international standards initiated in 2010, The result was the Independent Review and recommendations on reporting, we have made a Report, which is based on the GRI Standards Guide and the commitment to publish corporate information that reflects performance indicators proposed in its core option. our performance, current challenges and future objectives. Furthermore, the information on the Internal Control In addition, the challenge of reporting in this way requires Systems for Financial Information (SCIIF) contained in us to do so with greater consistency and transparency. In section F of the Corporate Governance Annual Report was 2017, with the aim of placing ourselves at the forefront of reviewed by the Group’s auditor. reporting, we took an important step forward by presenting our information using the Integrated Report model. These independent verification reports may be consulted at the end of this report. This model ensures that the information we share with our stakeholders is consistent and transmits the alignment between our strategy, governance model, operation and INTERPRETATION OF INDICATORS financial and non-financial performance. We have also incorporated the ESG vision (Environmental, Social and The numerical indicators referring to operating results Governance), analysing its relevance and its overall impact are shown in the management report from an aggregated on our company. viewpoint, grouping together information from all the business units whether owned, leased or managed, unless indicated to the contrary.
“Responding to requirements The definition of the alternative measures of yield used regarding financial and in this report can be found in Note 2 of the Consolidated non-financial information” Annual Accounts.
For additional information, the consolidated historical CONTACTS series of indicators and GRI indicator tables that are aligned with the benchmark applied are attached to this report. For any queries or suggestions relating to this report, Melia The information was also obtained, registered, analysed Hotels International offers the following channels for direct and submitted for evaluation by an external auditor. The contact: methodology and scope of the external review can be found in the Independent Review Report. Financial information: Department of Investor Relations ([email protected])
Non-financial information: Corporate Responsibility Department ([email protected])
28 MELIÁ HOTELS INTERNATIONAL INTEGRATED ANNUAL REPORT 2017 REPORT PREPARATION PROCESS
RELEASE O THE 2017 ANNUAL REPORT DIGITALISATION PU LI ATION