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Meliá Strategic Commitment To The Renovation And Repositioning Of Hotels And Destinations

July 19, 2016 Hotel Developments No Comments Email Email

Tourism is a dynamic industry that evolves together with society and that sometimes even gets ahead of social change given that travel tends to foster innovation and cultural exchange.

Magaluf general_0

This means that hotels in travel destinations and the destinations themselves need to be in a state of almost permanent renewal.

The digital revolution and the globalization of travel has also made it possible to personalize customer service and thus segment hotels to meet the increasingly diverse needs of guests with different demographic and psychographic profiles. Hotels can thus be adapted to cater to the needs of a particular customer segment that books their stay individually, offering them greater added value and earning greater profitability.

This situation is often accompanied by the “maturity” of some emblematic travel destinations, which often detonates a process of degradation and the loss of any value they might contribute to their communities. This is the case in some destinations in the Mediterranean and Canary Islands, where Meliá Hotels International is a leader in resort hotels and where our Company has once again got ahead of competitors through a comprehensive strategy to renovate and reposition our products, brands and tourist destinations which is already generating extraordinary results.

The main focus of this strategy has so far been in the Canary Islands, Costa del Sol and the Balearic Islands, and especially in a privileged coastal area in the southwest of Mallorca called Magaluf.

Magaluf has been a popular destination for northern Europeans since the 1960s, but had deteriorated during the 1990s and 2000s due to poor planning, urban disorder, overexploitation, and the emergence of greater competition from alternative beach destinations in North Africa and the eastern Mediterranean. Meliá is a major player in Magaluf with more than 3,500 rooms, but the hotels had become unprofitable and the reputation of the destination as a Mecca for hooligans also damaged the Company’s image. The destination faced a dilemma: “renovate or die”.

The Vice Chairman and CEO of Meliá, Gabriel Escarrer, was very clear about which of the two options was best, and the Company began to work on a project that would lead to the renovation of the 11 Company hotels, also attracting major international investors and support from the regional government and the Calvià town hall to launch the largest public-private partnership to convert a mature destination in Spain.

Five years later, Meliá Hotels International has now invested with its partners more than 150 million euros, supported by a government which has financed urban reforms and, above all, presented a common front to promote greater security and peaceful coexistence by eliminating dangerous and antisocial behaviour in the destination. The “snowball” effect has also led to other companies investing in renovation, creating a virtuous circle which is having a positive effect on the quality of hotels and complementary facilities, rate increases and profitability, job creation and repositioning of hotels to attract a customer segmentation based more on families and adult couples.

This “success story” for Meliá in Magaluf has defined a path that many other destinations will have to follow, and on a smaller scale the Company has already converted and repositioned obsolete resort hotels in traditional destinations in the Costa del Sol, Menorca and Ibiza with similar results, and is preparing new repositioning projects in the Canary Islands and elsewhere. As Mark Hoddinott, Executive Vice President for Real Estate at Meliá Hotels International, says “the challenge was to unite all of the public and private players in one project which is of interest to us all and to society, following the example of similar projects such as Miami Beach in the 1990s, which thanks to strong leadership and a public-private partnership was able to completely reposition the destination“.

For Gabriel Escarrer, Vice Chairman and CEO of Meliá, this process is a very ambitious challenge with results visible in the medium to long term, and which – he assures – is not open to all: “on the one hand, Meliá had the ability and influence to change things thanks to its extensive presence and impact in the destination; and, on the other hand, the return on investment in renovation and repositioning of hotels may be extremely satisfactory, but it also requires having the right know-how, brands, and sales capacity to resist and drive through changes in customer segmentation“.

The Meliá hotels repositioned in 2015 achieved an average of 30% higher RevPAR in their first year under their new brands, which points towards a very important improvement for the refurbished products over the coming years.

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