I EXPECTED TO CATCH UP WITH MELIA CEO GABRIEL ESCARRER AT THE NEW PALAU DE CONGRESSOS – the spectacular convention centre that is a flagship for the Balearics and for Melia’s move into managing major events centres beyond its hotels.
So I’m surprised our meeting is to take place on the other side of town, at the Melia Calvia Beach hotel in Magaluf – that infamous drink-till-you-drop hunting ground for British party animals. But all soon becomes clear. In this property’s sleek new wing of meeting rooms, I’m shown details of an ambitious €200 million project to transform and ‘reposition’ the area.
Now in its advanced stages, the project has involved refurbishing, upgrading and, in some cases, rebranding nine Melia properties. Other elements of this wide-reaching initiative include partnering with luxury beach-club brand Nikki Beach, creating conference facilities, public retail and dining spaces, and working with local authorities on the lax regulations that exacerbated the notorious pub crawls on the ‘Strip’. “This is an example of what, not only in Spain but in other mature or pioneer resort destinations, we should do to be competitive in the next 20 years,” says Escarrer, who has been at the forefront of this project. “Places like Magaluf, Torremolinos and others were developed in the 1960s and 70s.”
Back then, tourism was a new phenomenon, he says, and without foresight of what was to come there was no city planning. A combination of economic crisis, cheap competitor destinations in North Africa and Magaluf’s poor reputation meant that by 2011, when this project was launched, the area was in a slump, with a shrinking ‘season’ blighting revenues and employment. The key to extending the shoulder seasons is MICE (meetings, incentives, conferences and events), and to add to Calvia Beach’s refurbed events spaces, a new 1,000sqm facility is being built which will be shared between a cluster of three Melia properties. “For pre- and post-season MICE is a must,” says Escarrer. “You can’t have an industry working for just half the year.”
“Mallorca is well connected in terms of airline connectivity to most of the feeder markets including the UK, Germany, Italy, France, the Scandinavian countries. So it’s a good opportunity for us to increase profitability and to have these properties open nine to ten months per year.” It all sounds great, but is the persistent image of Magaluf a challenge? “Absolutely,” says Escarrer. “But the good thing is we have our sales teams in all these feeder markets, because we have hotels there, so it will be easier to increase brand recognition as a MICE destination.”
And how’s it been working with local government to revamp the area? “The first two years were really tough,” he says, “because they were not used to working in partnership with private companies. The learning curve – mainly from their point of view – took more than we expected. But in the end that curve is there, and the results are amazing.”
Another significant move is taking on management of the aforementioned Palau de Congressos. I ask if this is the start of a new business model for Melia. “We’ve been surprised to see the demand we’re already achieving in this congress centre.
In the MICE segment, I’m seeing clientele often demanding a ‘bleisure’ component – and, of course, Mallorca is a great bleisure destination. It will generate benefits for the whole island. We want to extrapolate the same bleisure meetings component to other resort destinations – Ibiza, Torremolinos, south Tenerife, and some other places in the Caribbean. I believe it has a huge potential.”
It’s this strategy, maintains Escarrer, that will ensure Melia thrives in the great global consolidation saga. “Organic, sustainable growth, and more specialisation” is how he see’s Melia’s strategy in a world of MarriottStarwood and Chinese acquisitions. “In the last three years we have incorporated an average of 24 to 26 properties per year. We want to specialise even more leading this resort-bleisure component. Our pipeline is completely different from the others.”
He doesn’t see consolidation as bad for travel buyers “because the market is fragmented; in Spain, less than 23 per cent of properties are affiliated to hotel groups. There’s no clear leader, even in mature markets.”
Another area of interest for Melia is Cuba, where the hotel group is adding eight properties this year. Escarrer says Melia is already seeing growth in business travel. “Since Obama opened up visas for US citizens to get into Cuba, we’ve seen a huge demand from US travellers, mainly to Havana, where RevPAR went up by 71 per cent last year. “We’ve been in Cuba for 31 years.
It was the first international joint venture by the Cuban government with an international company. I believe it has huge potential – it could be the jewel of the Caribbean – but when will the embargo end? This is the million-dollar question.”