The big interview: Gabriel Escarrer Jaume

As the Meliá team took to the stage for the third time at November's European Hospitality Awards, it was clear to the 300 or so diners in attendance that we were witnessing something quite special.

ME London had already been declared Best New Hotel and as housing the Best Hotel Suite when it was revealed as this year's Overall Winner, a prize for the property defined by our judges as the outstanding hotel across all categories. It was a victory that bucked a trend.

Here was a predominantly new-build luxury property in a major European capital at a time when luxury properties in major European capitals are not being built. Furthermore, this new-build luxury property in a major European capital is not only managed but also financed by a European hotel operator.

Investment in bricks and mortar simply is not something hotel companies with aspirations of international growth do these days. 'Asset light' is the buzz phrase in hotel boardrooms from Paris to Phoenix, management contracts and franchising agreements the engines of growth.

"We were extremely proud of that," Gabriel Escarrer Jaume, CEO of Meliá Hotels International, recalls fondly when we catch up six weeks or so after Meliá's evening of triumph. "In principle, we too are completely focused on this asset-light model, and our strategy in each region is consistent with that principle. However, we also need to be flexible enough that, when the right opportunity comes along in the right market, such principles don't stop us from taking full advantage."

The ability to identify the right opportunities and act accordingly must be a skill the CEO inherited from his father, recipient of the lifetime achievement accolade at 2011's European Hospitality Awards. In 1956, the then 21-year-old leased the Altair Hotel in Palma, Majorca.

This act of startling precociousness was merely a taste of what was to come, as Gabriel Escarrer Juliá went on to establish properties across the Balearic islands, followed by the Spanish mainland and, eventually, through a series of mergers and acquisitions, around the world.

A tale of two segments

The company founder remains as chairman and majority shareholder, but his son has been CEO since 2009, having shared the position with his brother for two years prior to his sole appointment. Needless to say, that period has demanded a huge amount of flexibility and creativity as the hotel industry has been buffeted by a global economic crisis the likes of which not even Escarrer Juliá had ever experienced.

While international markets are very much the driver behind ambitious expansion plans at Meliá Hotels International - well over 90% of pipeline properties are overseas - the Spanish group remains hugely exposed to a domestic economy in crisis. For Escarrer Jaume, it has been a tale of two distinct segments.

"You have a duel situation in which the holiday segment has just seen a summer of record, with more than 60 million tourists coming to Spain, while city hotels continue to suffer," he explains. "Being an international group has helped us in
Madrid and Barcelona, where foreign visitors account for 68 and 82% of our guests respectively, but in secondary cities, where closer to 90% of our clientele is domestic, you cannot simply position your properties to attract international visitors."

Despite this, Escarrer Jaume believes his group has suffered less than many of its competitors in these markets, posting a revPAR drop of just 1.5%. While forecasting "mid to high single-digit revPAR growth" for Madrid and Barcelona in 2014, he does not see Spain's tertiary cities climbing above 2%. Recovery is going to be a slow process.

"At some point, there will be consolidation in the Spanish market," Escarrer believes. "Most of the hotels in the city segment are not affiliated to hotel companies and are now in the hands of the banks. Over the longer term, there is plenty of potential there, but I don't see any major investment being made in the next year or so; we're focusing elsewhere."

'Elsewhere' predominantly means Latin America and Asia. For the former, cultural ties and a longstanding presence provide the operator with a distinct advantage over much of the competition.

"As a Spanish-born multinational, I like to say that we speak Spanish in many languages," Escarrer says with a chuckle. "Latin America has always felt like a natural fit, and we were pioneers in the development of the region's tourism sector. Meliá now has 87 properties there, but we're not only talking about the Spanish-speaking markets: we have 17 hotels in Brazil and have just signed two management agreements in the English-speaking Caribbean. Brand recognition is high, and these locations have a soul and magic all of their own. What we have to do is bring the operational expertise."

Premium investment

In Asia, Meliá has managed to more than double its signed portfolio in just two years. An alliance with Jin Jiang in China, and an agreement with Greenland, one of the country's largest real estate groups, has seen it make strong inroads into the world's most active hotel market, but amid all the talk of international signings and multimillion-dollar investments, Escarrer sees a rather more homespun factor at play.

"We're often competing with big international players whose brand awareness is far higher than ours, so it's important you also play to your other strengths," the CEO explains. "We're a public company, but the Escarrer family has been running this business for 58 years and still owns 66%. That means long-term commitment and real importance invested in relationships. In Latin America, the Middle East and South-East Asia, most of the developers we work with are also family-owned concerns. When it comes to securing management contracts, sharing our strong values with them can make a real difference."

With Meliá currently opening a new property every two to three weeks, it's a bond that clearly resonates.

Another factor is the group's strong commitment to launching and managing properties in the premium segment - of its 55 pipeline hotels opening within the next two years, 92% are upscale developments.

"In my opinion, there are two options for targeting growth," Escarrer explains. "You can either go after the lower end of the market, where hotels are in most cases viewed as a commodity, or you can try to sell experiences. I look at our industry and I worry about it going in the same direction as the European airline business, where all you are doing is selling a seat - there's little to differentiate yourself from the competition other than price.

"Our legacy, as a family company and a resort operator, means we're intent on selling experiences, and the way to deliver that is through focusing on the upscale segment. Furthermore, in order to be successful with budget hotels, you need to have critical mass, and getting there means adopting the franchising model. That is not something we're prepared to do in the short term. We'd rather focus on the management side."

The ME by Meliá brand is playing a major role in cementing Meliá as a leader in the experience-driven premium space, through the success of properties such as ME London and the signing of some of the most high-profile management contracts in the business, such as the October announcement of a Zaha Hadid-designed Dubai property, due to open in 2016.

"People talk about the size of the London investment," acknowledges Escarrer, "but it was a unique opportunity to establish the brand in a landmark city and will only help drive future growth. The London property has exceeded 80% occupancy in less than eight months in what remains such a competitive market, and we feel very well placed with this brand to meet a fast-emerging demand segment."

That segment is a hipper, affluent urbanite looking for a new type of lifestyle experience from the luxury hotel. Escarrer cites Morgans and W as the most prominent competition, but believes certain qualities set ME by Meliá apart.

"There are two types of hotel," he explains. "At one, you arrive at reception and immediately request a restaurant recommendation. At the other, you leave your luggage in your room and go back downstairs to explore. But aspiring to have the best restaurant and nightclub in any given location is not enough; we've invested a huge amount of effort in getting the quality of service right. This is something other lifestyle brands often miss; they spend so much time trying to be the coolest place in town, other vital aspects of hospitality are missed."

A family affair

Citing Morgans and W as direct competitors elicits another interesting comparison. When the former debuted in London on St Martins Lane, it was in a new-build property. Likewise, W's 2011 arrival in the UK capital also saw a huge amount of construction. ME London is the first hotel to be designed outside and in by Foster + Partners, but one wonders whether the brand could also be delivered through conversions.

"I don't think so," Escarrer answers candidly. "It is very difficult to create these experiences through transforming an existing property; I feel it needs to be from scratch. That may sound unreasonable, but I don't see more than 30 ME hotels worldwide. There are a few capital cities that are suitable, and we must also be selective when it comes to resorts. I also feel we need to have a very well-known architect or designer behind each development, as evidenced by Norman Foster in London and Zaha Hadid in Dubai."

Such discussion of globally renowned architects and destination properties in world capitals brings into sharp focus quite how far Meliá and the Escarrer family have come since the leasing of the Altair Hotel in Palma in Majorca in 1956. As he looks to establish his company as the world's premium luxury operator, one wonders how big a part this amazing family narrative still plays in Escarrer's day-to-day operations.

"My father inculcated this passion for the business in me when I was a little boy, and that's what still allows me to be successful today," the CEO answers enthusiastically. "As a family, there is a much stronger commitment to the longer term; we could never see Meliá as merely a means of earning money, it must make us proud, generation after generation."

Under Escarrer's stewardship, it looks as though there is little reason they cannot achieve both.