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MELIÁ: good entry point. Recommendation changed (Bankinter Securities)

Expanding via asset-light model.

Meliá has embraced the management model to increase its global footprint. Almost all of its new capacity over the next three years (c. 33,000 rooms) will be added this way. We like this model: it focuses the management team on building the brand while the risk is passed to the property owner. Meliá will ride economic cycles better without being saddled with assets or long-term leasing contracts.

Less assets, less debt.

This strategy is leading to deleveraging its balance sheet, reducing it to less than 2x EBITDA. Even though management has stressed that it is not thinking about changing its payout policy, there are grounds to foresee an increase in shareholder remuneration in the medium-term.

It is not about more tourists, it is about more profitable ones

Barring any traumatic events, we expect other Mediterranean destinations (i.e: Tunisia, Egypt and Turkey) to increase their appeal for the 2018 summer season, thus reducing or halting growth of tourists coming into Spain. That is fine with Meliá, as its position and business model does not rely on travel packages.

No M&A on the horizon.

With the founding family having a controlling position (52%) and its expansion coming from managed locations, we do not think that Meliá will be involved in any sector consolidation (either as predator or prey) in the short to medium-term.

Regulator to the rescue.

After an explosive growth that caught regulators by surprise, they have started to push back against Airbnb, limiting operating days or banning it altogether in some cities. Meliá management has led lobbying efforts in Spain, and believes outright banning is in the cards. We are more sceptical and think that, given city halls thirst for tax revenue, a limit on operating days would probably be a standard solution.