Our report

SUMMARY OF USEFUL INFORMATION

We are delighted to discover that, although 2012 could be defined as the height of the current crisis, Meliá Hotels International has remained true to its social, environmental and cultural commitments to the regions it operates in, shaping its strategy in order to reaffirm its position in those markets suffering the effects of the economic crisis, whilst at the same time maintaining the pace of its unstoppable international growth and continuing to generate value for our stakeholders that guarantees a sustainable outlook for the future.

We reacted to the situation by applying a two-speed strategy that consisted of imposing rapid growth rates and maximising revenue and margins in those markets which were dynamic, whilst stepping up our Contingency Plan for Spain or Greece.

84% of our Company’s operating results came from outside Spain, as part of our determined internationalisation strategy, 2012 saw the addition of a further 15 hotels, including 11 outside Spain.

Globally, employee numbers rose by 3.8%, and currently stand at 38,021.

Our commitment for the coming years is therefore based on qualitative progress that will enable us to further improve our position as a responsible company in the principal destinations and markets we operate in. Particular mention should be made of the fact that 2012 saw the launch of our Responsible Purchasing pilot scheme in Mexico and the Dominican Republic that will be significantly developed in all other hotels over the next year.

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In addition to our strategic focus, attention must also be paid to the evolution of our structure and organisation in order to maximise efficiency, communication and consensus between the functional and operating areas, placing our customers at the core of our organisation and sharpening up our decision-making processes. 2012 saw that start of work in this area under a new organisational model known as ‘Competing by Design’, which will be consolidated during 2013, making us better, more efficient and competitive.

Equity Story based on 3 main pillars:

1) Expertise in hotel management

Management expertise is underpinned by our strong set of brands, enhanced by added value proposals to complete the hotel experience, as counting on partnerships with leading companies in the F&B industry. These lead to contributing to the generation of additional revenue by €200+mn in 2012 (20%  over consolidated hotel business revenues) and, we reached a highly recognized position within the industry trough perceived quality (81.3%), RevPAR penetration Index and brand reputation (81.8% in Global Reputation) plus lots of awards.

Moreover, we want to remark, the support of a distribution strategy which generates improvements in profitability…

 -  Company focused on a Revenue Culture

            Development of  a technological platform to implement revenue procedures

 - Maximization of Average Room Rate (ARR) as a key driver of income

          Implementation  of Yield  Management Best Practices           

- Positioning in High Growth segments

         Reinforcing the strategy of Regionalization              

…underpinned by the increasing importance of the centralized channels…

       - 11 interactive websites in 7 languages

       - 95% Direct Customers

       - €161 million Euros contribution in 2012                   

       - www.melia.com main distribution channel

       - Evolution of sales, 2003 (24,2) to 2014 (203)

… and customer knowledge as a key for level for income generation, 3 million members (65% international) and melia.com contributes 50% of sales.

Excelent and maturity in the hotel management, leads us to outperform results versus the benchmark and to register 13 consecutive quarters of RevPAR growth while the Company maintains a positive overall outlook for the near future, focusing on e-commerce strategy. Finally, we enjoy a diversified geographical exposure (profits from Resorts 63%; from cities 37%)

2) Execution of an asset light strategy

We are looking for An Asset Light(er) Strategy structured around a development plan through low intensive capital formulas, enabling Meliá to become a Management Company and owner of specific core assets thanks to strengthening the positioning in the upscale segment or by exposure to high growth markets.

Lastly, we are seeking for an Asset rotation strategy, supported by Melia’s valuable asset portfolio.

Where, Gross Value of Melia Assets: €3,142 mn

-          Latin America €1,183 mn

-          Europe €387 mn

-          Spain €1,571 mn

3) Debt restructuring programme place

Twofold Financial Strategy focused on debt restructuring and progressive deleveraging

    3.1. Debt maturities restructuring

• Objective: Lengthening by 5 to 7 years part of debt maturities due in 2013 and 2014.

• First 2013 achievements:
-Issue of €200 mn convertible bond with maturity 2018 at 4.5% interest rate
- Prepayment of loans

- Additional refinancing
• Rest of maturities:

- Increase the exposure to US dollars.
• The company aims to control the average cost of debt which reached 5.4% in 2012.

         3.2. Deleveraging the balance sheet

•Deploy  the cash generation and the asset sales for the 2013-2014 period to reduce indebtedness

•Disposal of assets of a minimum of €100 million per annum during 2013-2014
•Does not have a strong expansionary investment budget for the next two years

All this ensure a comfortable liquidity position

MUCH MORE THAN A LEADING COMPANY !!!

3Our vision: We contribute to the sustainable development of the communities in which we operate and their people.

At a glance:

• The 19^th company worldwide with presence in 30 countries. The 3^rd largest Hotel Group in Europe.
• Market cap: 1,376 Million Euros
• Main Shareholders: Escarrer Family: 64.64%; Free-float: 35.36%
• Listed on the Spanish Stock Exchange since 1996
• Member of the FTSE4 Good Ibex index since 2008 (1^st Hotel Company)

3.2. Deleveraging the balance sheet
• 1M€ collected for UNICEF – Strategic Alliance

• 679 M€ - Value creation for our suppliers
• Managed under 4 formulas: Managed 52%, owned 24%, leased 20% and franchise 5%.