Earnings Call: Q2 2021

Jul 29, 2021

Quarterly report

Good morning, and welcome to the Melio Hotels International First Half twenty twenty one Earnings Conference Call. All participants will be on listen only mode. After the presentation, anybody who's interested will have a chance to ask questions so that we can resolve any additional doubts. Please note this event is being recorded. I'll now turn the call over to Stefan Baus, Head of Investor Relations. Please go ahead. Thanks, operator. Welcome to Melia First Half twenty twenty one Earnings Call. Before we begin, we would like to remind you that our discussion this morning will include forward looking statements. Actual results could differ from those indicated in the forward looking statements. And forward looking statements made today speak only to our expectations as of today. This morning, as usual, we have Gabriel Escarell, our Vice President and Chief Executive Officer Andre de Rondo, our Chief Operational Officer Pilar Dors, our Chief Financial Officer and Marc Holinot, our Chief Real Estate Officer, Annie. Gabriel Descareres will provide an overview of the current operating environment. Andre will then review our Q2 onwards. Following these remarks, we will be happy to take your questions. In any case, the Investor Relations team will be available following this conference call to give you a chance to verify anything else you might need. You can find our earnings release on our Investor Relations website at mediatosinternational.com. And now, I am pleased to turn the call over to Gabriel. Thank you, Stefan, and good morning, everyone. We certainly appreciate you all joining us today, and I hope that you and all those close to you are safe. Melia's results in the first half of the year continued to be impacted by the pandemic with constant changes in their evolution on different destinations and markets. The return to normal in some feeder markets such as the United States has led to more activity in Caribbean destinations from May. The other side of the coin is in city hotels in Spain and the rest of Europe, where the recovery is slower and more irregular than expected due to the different waves of the pandemic and erratic policies regarding restrictions in some markets and destinations. Thanks to our focus on resort hotels and leisure, the ones that are recovering fastest over digital capabilities and the confidence of the Stay Safe with Maria program offers our nearly 40,000,000 loyal customers, we have so far been able to open up to 2 50 hotels approximately 80% of the total. I would like to highlight the performance of the emelia.com direct sales channel and the loyalty program, which generated more than 53% of centralized sales for the semester. In this context, turning to results for the first half and second quarter, as it was announced at the end of June, the company transferred 6 of its own hotels and its stake in 2 additional hotels to another company. The net capital gain from these asset sales amounted to €64,000,000 Consolidated income excluding these capital gains reached €229,900,000 that's 28% less than the 1st semester 2020. Important to note that in the 2nd quarter itself income excluding capital gains doubled those of the first quarter. One of our most immediate concerns during the pandemic period was cutting operating cost. Operating expenses in the semester decreased by 22.6% with respect to the same period in the previous year. Excluding the expenses associated with capital gains and the impairment in 2020, costs fell by 20%. This cost reduction has allowed us to compensate by 86% the drop in revenues suffered during said period. The company continued to negotiate and signed agreements with the owners of some leased hotels, reaching several types of agreements as moratoriums, waivers, etcetera. EBITDA reached plus €1,500,000 and excluding capital gains or impairments stood at minus €62,500,000 which compared to minus €50,300,000 in 2020. At the EBITDA level, June ended with a positive number, excluding extraordinary items, which reflects the positive recovery trends seen in recent months. The net attribute result reached minus €151,000,000 compared to minus €358,000,000 in last year, which included assets value impairment for an amount of €148,000,000 On a financial level, faced with the exceptional situation and difficulty in forecasting its duration, one of the company's top priorities is to maintain enough liquidity to allow us to face the coming months with maximum confidence. To preserve our liquidity, the company has completed an asset sales with a net cash impact in June of 100 and €75,000,000, plus meeting its commitment to make asset sales to increase liquidity due to the crisis caused by COVID-nineteen. During the Q2, net debt increased by €20,000,000 to €2,768,000,000 at the end of June, mainly caused by new lease hotels in corporations and the extension of various lease contracts, partially compensated with the asset disposals. Net financial debt pre IFRS 16 had a reduction of minus EUR143,000,000 compared to the end of March 2021 to EUR 1263,000,000. If we exclude the impact of the asset sales and the impact of exchange rate difference on net debt, monthly cash consumption in this last quarter has been around €12,500,000 compared to €45,500,000 in the previous quarter. It should be note that in the Q2 of 2021, the company received €18,700,000 in direct aid from the German government to offset part of the business losses during the pandemic in 2020. At the end of the second quarter, our net liquidity improved to approximately €405,000,000 representing €115,000,000 in available cash balances plus €290,000,000 on credit lines. I would like to highlight after 15 consecutive months in June, the company reached a positive cash flow performance excluding the cash in due to the asset sales. We would like to remember that Melia does not have any debt with financial covenants. It is also worth noting that our mortgage debt currently stands at less than €298,000,000 which represents an insignificant proportion of the value the company's own properties. I will now turn the call over to Andre to talk about our operational performance during the Q2 and forwards. Please, Andre? Thanks, Gabriel, and good morning, everyone. Global RevPAR is currently quite below pre pandemic levels. We don't believe analyzing versus 2020 as of the second quarter makes most sense. However, if we compare Q2 RevPAR just as a reference, we are 95% above 2020. Certain countries continue to experience concerning levels of COVID cases, yet more and more people are getting vaccinated every day. Demand is rebounding in some of our largest regions. Over 80% of our hotels are open globally, and we've seen overall worldwide occupancy improve every month this Q2. We remain positive by the strong recovery in the Caribbean and Mainland China, While several markets were impacted by strict government mandated lockdowns at the beginning of the year, demand recovered quickly once COVID cases were under control and restrictions were relaxed. In general terms, the hotel business during the period has improved as restrictions were relaxed similar to previous quarters. There has been a greater focus on local markets, although the Caribbean has become the first destination with international visitors, especially in Mexico where there has been a rapid recovery, thanks to the significant progress with the vaccination program in the U. S. Market. Again, in the Americas and specifically in Mexico, the lack of border restrictions compared to other Caribbean destinations made it the preferred destination for travelers, particularly from the United States. The Doctor, the Dominican Republic, has seen a gradual recovery in average occupancy. New York is seeing a positive improvement and the rest of Latin America in general saw growth in revenues compared to the Q1 due to the beginning of the recovery in Brazil. In Spain, the 2nd trimester has been the gradual reopening of our resort hotels with a significant increase since mid May given the recent openings. In EMEA, there has been a gradual improvement. In Germany, practically all of our hotels are open with a large number of domestic travelers this quarter. As in the Q1 of the year, the effects of the pandemic continued to have a negative impact on tourism in Cuba. As far as Asia is concerned, China has entered a period of stable growth. Consumer confidence is high and this is clearly influencing our hotel revenues. In other areas of the region, however, the challenges seen in previous quarters continued due to restrictions on international flights and border closures. As it refers to the outlook, at this point, it's very important to remain cautious given all rapid changes in the situation. Having said that, we remain positive and optimistic. So with plenty of challenges ahead, we would like to share some insights as what to be expected in Q3, specifically in the Resort and Glacier segments. Despite the overall situation, we believe Media is well positioned and in the right path to recovery. Our distribution model, our brand vision and our product and quality locations have proven once again to be the right strategy. One of our priorities has been to defend our ADR, our price, our rate strategy. And as such, we expect Q3 resorts to be above 10% of 2019. So by reinforcing melia.com, all personalized experiences and with our more than 14,000,000 members of our Melia Rewards, It is also relevant to note that for Q3, our premium portfolio is behind 2,000 revenues levels by only 6%. We have been able to drive demand to our superior rooms and suites and those resorts with open spaces, good wellness and gastronomic offer. It is fair to say, however, that in those 4 star resorts depending on the U. K. Market, we are still facing several challenges. When we look at the overall picture, there are 2 fitter markets that are really driving recovery through this Q3. 1, as said before, is the U. S. Market going into Mexico. Mexico is now in terms of airlift above 2019 levels, obviously not for the rest of the other markets. The second market which is really driving our business is the Spanish market to our Spanish resort, especially in the mainland Spain. So with the U. K. Market having some influence by the different decisions made, this is our 3rd key fitter market in progress, but limited of uncertain challenges. For Q3 and beyond, we see some demand in the MICE market, Europe at a slower pace, sorry, but the Caribbean with much more with the U. S. Market is generating more requests. Overall, we expect that winter 2021 2022 in the Caribbean will regain traction. This is the best news as it would seem some sense of normality is close, again with all precautions on this statement. For our urban hotels for Q4, it is still too soon to tell. However, countries like Germany are showing some increased interest and we are positive of the idea that the U. S. Market might now be open to travel to our key European destinations. Thank you. Gabriel, please. Thank you, Andre. To end, I would like to highlight the following messages. In this Q2, despite continuing to be heavily penalized by the pandemic, we have started to appreciate a reopening of the business, allowing us to close the month of June with a positive EBITDA excluding extraordinary items. As we look ahead to the rest of the year assuming continued progress with vaccinations and improving consumer and macroeconomic environment in many regions around the world, we believe that the pace of the global recovery will continue to accelerate. While trends will vary by region, we expect overall leisure demand will strengthen further into the summer months. We believe this is transient and group will continue to slowly improve for now. And then business demand could really accelerate in the fall as more businesses reopen with business function returning faster than group given the lead time that is generally required for booking group businesses. We would like to reiterate our strong commitment that one of the company's top priorities is to maintain enough liquidity to allow us to face the coming months with greater confidence. To preserve our liquidity, the company has completed an asset sale with a net cash impact of €175,000,000 thus meeting its commitment to make asset sales to increase liquidity due to the crisis caused by COVID-nineteen. At the end of June, the liquidity situation including liquid assets and credit lines amounts to €405,000,000 Our strength and brand strategy in recent years combined with our optimized management system allow us to look forward to significant organic growth over the coming months, becoming a safe harbor for smaller hotel chains and independent hoteliers, which require sales support, digital capacity, recognized brands, efficient systems, a major base of loyal customers and the economies of scale required to face the highly competitive post COVID environment. Along these lines, Melia has relaunched its franchise model and created a new affiliated by Melia program to respond to the needs of the post COVID business environment and support its selective and strategic expansion. Despite the fact that activity continued somewhat slow down, the company has detected great development opportunities for well known brands with great distribution capacities and continue to grow strategically signing 2 of the new hotels in 2021 to date. Focused on strengthening its vacation leadership in the Mediterranean area where ten out of the 12 hotels' incorporators are located. Also note, we opened 10 new hotels through June, including 3 hotels in Europe under the Insight by Melia brand, including our first hotel in Amsterdam, the inside Amsterdam, the inside Newcastle and the inside Luxembourg as well as the spectacular Melia Frankfurt City, the Melia Chongqing in China and the Oasis Marrakesh in Morocco. Further details on our Q2 and first half can be found in the earnings release we issued last night. In closing, we are increasingly confident that the pace of recovery will improve significantly from here. We hope we have been able to explain the situation to your satisfaction. We will now be happy to answer any questions you may have. Please let me remind you that I'm here with Andrei Rando, Leonardo Doss, Marc Hodinot and Stefan Bauch. We will now open the line for questions. Operator, please. Our first question comes from Guillaume Sampal of Caixa Bank. Guillaume, your line is now open. Hello, good morning. Thank you for taking my question. So the first one, so as the recurring liquidity improves, do you see balance sheet actions possible including here additional asset sales, convertible on this or even the right issue? And second question, can you comment on the impact of the delta variant of the virus on your booking behavior? 3rd one, how do you cross read for Melia the relatively solid recovery we've been seeing in corporate demand in the U. S. Once the restrictions are lifted in Europe? And 4th, if I may, what kind of risk for the outlook for the Caribbean do you see as travel restrictions for other destinations out west? Thank you. Good morning. Mark Holydon speaking. Regarding the first question in terms of additional possible balance sheet actions should we say, And I think it's going to depend really upon the evolution as we go forward. Obviously, the first milestone was to get to, to say, to terminate cash burn, so we're getting positive cash flow in. And now we have to see the next few in the next few months how that develops. But so and so which possible alternative might be used and I think that the medicine will depend upon the type of the need that we see arises. Would you mind repeating can we go question by question if you don't mind? Would you mind repeating number 2 again? Yes. Just on number 1, a follow-up. Aside from asset sales, convertible bond or rights issue, it's something that could come to your mind over, I don't know, at least the end of the year? Yes, Mikhail, it's Stefano speaking. David, we will see what the trends in the coming months. And then for sure, we will see the possibility that we have. And we will take all the possibilities and we will take care of all of that. But right now, we have done the Canadian decision. We will see the trend that we will see in the Q3. Okay. So the next question, can you comment on the impact of the delta variance on the bookings we have? Yes. Jaime, this is Andre again. Yes, thank you. I think that this is directly proportionate to the restrictions specifically going to green lights, then we went into Ambar. We remain in Ambar, so this is cautious. So we've been having a good pickup, but we've probably increased about 8% to 10% of the cancellations overall from the U. K. Market in the past couple of weeks. However, bookings keep coming. Germany, as you know, has also implemented some recommendations to travel to Spain. So this is directly proportionate to the restrictions that are being applied in every country and those are the 2 that we've seen the most. Business in Spain for Spain remains strong. We haven't seen any specific impact on that regard. And we have not seen any specific impact in the U. S. Market going to the Caribbean agron. Okay. Thank you. So in terms of the third question, there's been a strong or relatively solid like I said, pickup in corporate demand in the U. S. That we've flagged by some fellow players there. How can we cross risk this recovery to Meliad situation? And I'm thinking about the Q4 in particular, which has a more European component in the case of Nordea. I think that what we've seen now, it is very important for us to strengthen and we can't emphasize enough, you know this well, that for us it's been very relevant. 60% of our portfolio resorts, 40% of our portfolio are urban hotels. But in that 40%, half of it are glacier destinations. So those destinations are moving ahead at a very positive term as even as good as the resorts. For the remaining of the business, which is concentrated, as you will say, in Europe, and then again in Europe on certain countries and destinations, Please remember that Paris, London, Milan, Rome, those are glacier destinations. So as we see the pickup on the demand for leisure and the U. S. Market opens, it also impacts the performance of those destinations. Now in Germany and some other destinations, it is still very soon to tell. We have not seen any specific demand, while we are in summer. So we expect as of September that depending on the situation, the delta variant and others, we will expect some recovery into going into business. There is, however, a pickup on the demand on the request for proposals for Mike's business, which is usually several months ahead. And we think companies are getting ready for the comeback in Odonto. But that as far as we can have the visibility right now given. Okay, perfect. So final question and answer for taking that much time. What kind of risks do you see for the outlook in the Caribbean as travel restrictions for other destinations than with it? Right now, our focus is that our main drivers are our main resorts are in Mexico and Dominican Republic. And even though there are continuous recommendations for being more cautious from the U. S. Customers and from the local destinations, demand into Los Cabos, Cancun, Riviera Maya, Vallarta remains strong. And we have seen no impact as for the Q4 in general terms. For us, what's very relevant to see is that Airlift again is above 2019 from the U. S. Market. And obviously, the more limitations there are to Europe and other destinations for the U. S. Market, the more concentration we will have in the Caribbean. So this is the case. We are not noting any specific impact that is decreasing our forecast for the Doctor and Mexico at this point. Then our hotels in the U. S. Are improving, whether it's New York and Orlando. And in Brazil, on and off things are moving forward. I don't know if this answers your questions, but we have no specific impact right now. Our next question comes from Bruno Della Rosche Brochard of Bryan, Garnier and Co. Bruno, your line is now open. Okay. Good morning, everyone. Maybe a follow-up on the booking. Would you mind to give us the trend compared to the recent trend on bookings compared to the end of June and especially regarding cancellations? 2nd question regarding reservoir. What surprised do I meet today? And finally, could you remind us the sensitivity to risk of EBITDA to risk for decrease? Thank you. Thank you, Bruno. I will let Stefan speak on the third one. But it is true that we need to compare portfolio like for like, And I think these are some of the challenges that we might have when trying to compare. What we're saying now is our expectation for Q3, I think we've said this before, is to be around 30% behind 2019. And we're working towards that direction. For the last week of June, the 1st couple of weeks in July, we were probably anywhere around 25% behind. It is true that that has decreased around 10% the past couple of weeks. But in the past few days, we've seen a trend of recovery. So we had 2 rough weeks with all the situation in U. K. And Germany, but we are on track to be around 30% behind 19 in terms of our booking pace and overall revenues. This is again resorts globally. As far as the price, we said that we are forecasting in our premium overall, I'm sorry, overall ADR for the company for Q3, we have a vision of about 10% above 2019. There are 2 very specific reasons for this. 1 is the increased volume through our melia.commelia rewards strategy, which are gross revenues, but that we have to say that this is focused mainly on our premium resorts. So as our premium and up scale resorts continue to drive demand, specifically again on superior categories and there is an impact on our 4 star hotels that require more critical mass from the U. K. Market, this is where you see the trend in price. However, 1 by 1, meaning each property by each property, we are still 10% to 12% above 2019 in all of those premium hotels. Okay, Bruno. Okay. Camenzawa, you asked me really a notice a question. As I said regarding the sensitivity with the respire and EBITDA is not easy when you don't have certainly the same portfolio of hotel opened. I will say that in a normal condition, but that was maybe prior to the COVID situation, we used to say that 1% increase in RevPAR. It was depending if the RevPAR was driven by price or by occupancy, we could say that it was drive by price, the EBITDA margin increased around 2.1%, 2.2%. But it was driving by occupancy. The increase in EBITDA must be around 1.8%. But honestly, this is more in a normal situation. Right now, I need to do the work. Being honest, I need to do the work to compare in a situation that we are now. It's okay, Bruno? Yes. Thank you, Stefan. I see. Okay, we go next one. Our next question comes from Andre Gillard of Deutsche Bank. Andre, your line is now open. Thank you. Good morning gentlemen. Two questions, if I may. The first one is regarding health you had from the German government. You mentioned that the German government gave you close to €19,000,000 in H1. Do you have some discussions with some other government and especially the Spanish one to have some help considering the weight of the tourism sector and the GDP in Spain. I'm a little bit surprised that the Spanish government was not more reactive to help the sector. So that is my first question. 2nd question is more follow-up regarding the balance sheet. You sold in H1 a portfolio of hotels, which supported your results. And regarding the rest of the year and the level of your net debt, you are mentioning that all options were still on the table. But could you consider some more asset disposal? Or do we have to more consider some other alternatives thinking about potential rights issue? And you are mentioning that if you are thinking about a potential right issue, an external growth or consolidation could be a good mix or convertible bond. Thank you. Our next question comes from No, no, no. I need to Just a second, so we can answer the question, please. Okay, Andre. Regarding the aid that we have received from Germany, it's true that the aid are coming from 2020 situation. And we always have other countries like Luxembourg, Vienna and France where we have collect another cash from the government. But being honest in Spain, that is aids we didn't have. We only have had some aids on the temporary unemployment, aids coming from the people who have not been working. That's the only situation that we have seen till now. I don't know if that answers your question, but this is the situation right now. Mark, could you go with balance sheet? Yes. And I think it's very much in line with what the first question of the call was. We're going to we'll monitor the situation in the coming months. And as we're transitioning out from the cash burn, cash negative situation in the first half And as we move forward, then we will evaluate and take decisions at a time and as to which possible method of, as you say, strengthening balance sheet we might entertain will depend really upon the climate or depend upon, I guess, also not just how the business develops, but also to depend upon how the financial markets develop as well in terms of what availability there is for and at what cost for any different for the different sources of different sources of capital that we may estimate as being necessary if we consider it as necessary. So we will as you said, we'll cross that bridge when we get to it in terms of whether to do it, what to do and how much to do. And if you have just as a final kind of comment just regarding any fossil asset sales, I mean, if there were any asset sales, they'll be linked to continuity of management and within the portfolio. So just as a special mention, but as I say, we will see how that develops over the next few months. Okay. Just a follow-up, if I may. Regarding the net debt level, you have almost doubled the level of the net debt in 1 year, almost 1 year. Do you still have the objective to come back to the pre COVID level of net debt in the next 2 to 3 years? Or is it something which is more manageable? Andre, this is Gabriel Escarell speaking. And absolutely, our commitment is to reach back at the level previous to COVID. When it depends on the visibility and the performance of the business in the coming months. So I'm sure you won't see it in the next 2 years, but it's our aim to reach the same level, the sooner the better. Okay. Thank you very much. Thank you, Andre. Okay. We go to next one. Our next question comes from Miguel Medina of Affinbank. Miguel, your line is now open. Yes, good morning. I have three questions. I think it's easier if we take them 1 by 1. The first one is on the affiliated by EMEA approach. Could you comment briefly on the economics? The hoteliers that are interested in joining pay a flat fee and then you take a percentage of each booking that is made through Meliad, just to have an idea of how the model works? Thank you, Miguel. This is Andrea again. Yes, the affiliated VIMELIA model works in two directions. 1, it's mainly through the distribution. Please bear in mind that for the past few months, even from last year, there has been a serious decrease in performance of the traditional tour operator. And there is a large amount of smaller hotels, independent hotels and small chains that are having serious challenges in order to be able to drive business to their resorts. So mainly in the resort arena, mainly in the Mediterranean area and some others, but let's focus in the Mediterranean right now. Given the circumstance that milia.com has been able to drive over 55% of the revenues through our direct channels, This is some support that we can provide. So it is a distribution strategy that we're supporting with. But at the same time, there are other services that we are presenting. Those services are related to the economies of scale we can bring to the table, whether it's payroll management, whether it's revenue management, whether it's procurement. So we're adding some of those services to be affiliated by Melia, which is not a sub brand, but acts like 1. So there might be some cases of working as a franchise. So there are 2 double revenue streamlines for us. 1 is the royalty of using the affiliated by Melia standard or naming. And secondly, it's a percentage on the revenue that we contribute in terms of sales. If I may add and coming back to your question Miguel, regarding the affiliated by Melia, I believe there is a huge potential for development on that area in the sense that there is plenty of independent hoteliers mainly in the resort site in the Mediterranean that used to work before through a 2 operator model. This model is facing hard time and I believe it's not it's structural and it probably will take more than you expected to recover. And I'm sure this will give us a good opportunity to in terms of growing to take some of these independent hoteliers under one of our brands to help them to distribute their product through our own channel. So on that sense, I believe there's a good opportunity affiliated by Meliad to keep going. Okay. Thank you very much. Sorry, almost half of the portfolio we've signed this part of this year is affiliated by million. Okay. I'm moving to the second question, which is the transaction that you made with Banquinta, the hotel disposal. I was looking at the press release. And in the press release, it is mentioned that there is going to be a significant refurbishment CapEx program of around €125,000,000 that's going to be undertaken by the new co. It's not going to be a split between the new co and Meliad. Is that right? Undertaken by the holding company, yes. So by the new company. Okay. Speaking to this transaction, you mentioned the I understood from what you said that the proceeds have already been collected and they are already in your bank account as of June 30. You mentioned a capital gain of around EUR 64 1,000,000 impacting EBITDA. Can I take that as a proxy for the premium to the valuation of those assets? Miguel, I'm not sure to really understand. Remember that the book value that we have on the hotels are historical value. So it's not We Of the Of the Then it's the difference. Okay. Let me put it another way. Can you tell us what the difference was with the latest dilution of those hotels? It was the seats hotels that we had in the full consolidated was around 10%, 11% difference compared with 2018 valuation. But take in mind that it's important to say that the sale of the assets, we have a management backed contract and that give us some revenues in the future. And then this discount for me is not too high and always comparing with 2018 figures. But that's a very important point because all this valuation was made without management contract. And keeping a long term management contract, I'm sure it was more than the 10% discount that is. Not only that. Yes. I mean, at the end of the day, the present value of the income stream from the long term management contract is, I'd say, far greater than the 10% discount on that value. But remember, that discount on an asset value is just from 2018 values. It's not which is obviously at the peak of the market pre COVID, etcetera. So, we feel very satisfied with the values that we have achieved because obviously that gives us a very significant income stream going forward. And obviously, there is the important importance in generating that income stream and the overall value of the transaction comes because we are accelerating by doing the transaction, the renovation of those properties is being accelerated those hotels get to reach their full such that those hotels get to reach their full potential in the shortest possible time. And therefore, that is where the overall value is for everybody on the table. But yes, the fees that will be generated from those properties, as you say, going forward, just to have an idea, once the hotels are repositioned, approximately €6,000,000 a year, so once the hotels are renovating. So that gives you an idea as to what the value for the Equinox is for the company. And just one another small detail regarding the press release. In the press release, it is mentioned that there is another entity called GMA, which is a shareholder of the NewCo and is the managing partner. Who is exactly this GMA? GMA is a specialist advisory company with in the hotel market providing services for asset management. And I think if you can see on I'm sure there's certain information most information if you look at on that company. It's a company that's also provided services to them together with banking for another project. Yes. They're a specialist company. On their company. And I think it was important, banking, to consider that it was important to have them as accompanying them and to give greater confidence in terms of the asset management function, specializing in the hotel investment market. Okay. And then my very final one, it's they have been reported in the media about Melia acquiring together with an institutional investor, the Apollo Hotel in Barcelona for a significant amount. I guess that the bulk of the contribution if this transaction goes ahead will be made by the institutional investor. And could you comment briefly on what sort of financing commitment you would have to make if this transaction goes ahead? Miguel, Melia does not have bought this hotel. That means this bought by other funds, and we only have to keep the lease agreement. That's the only. I know the news has been really good in I think the newspaper make a lot of noise of that. But Melia has not bought this hotel. So you have a contract? The lease contract. I have a lease contract with this hotel, the new owner. A variable lease by the way. A variable lease, that's correct, for 20 years. Thank you very much. It's a strategy to retain the asset mainly. There's nothing new. Okay. Thank you. Thank you, Miguel. We go next one. Our next question comes from Joao Safara of Banco Santander. Joao, please go ahead. Yes. Hi, good morning. I'll try to be brief and also I'll go 1 by 1. Actually, the first is not really a question. It's moreover just to be sure because your message was I mean, I thought it was very positive, your outlook message. So just to confirm the figure that Andre provided. So we are talking about, well, 30% fall versus 2019 in the Q3, and this is only for resorts. We are also considering a 10% increase in ADR, and this is for all the properties. This is system wide? Yes, system wide. Okay. Then the other message was that basically, I mean, early bookings for 2019 in the Caribbean are up the 2019 levels. Is this also did I got it right? Listen, I think that on the Caribbean, we are getting closer to 2019 levels in terms of demand, specifically from the U. S. Market. Please bear in mind that we still have the challenge of other theater markets going to the destination. Okay. So it's not that we have Which is the most important market. Yes. Sure. But there's I mean, the message is that we'll probably have a very strong 4th quarter in the Caribbean, but not necessarily in line with 2019, given the other feeder markets? We still need to wait and see, Joel. Please bear in mind that Q4, usually in the Caribbean, starts mid November. So I think we still have to go through the end of September, obviously, October, beginning of November. So I think the message for us is we are getting ready for a positive 2021, 2022 season, and we should have good expectations for next winter. That's where I think we should stress the message. Okay. In this regard, is there I mean, do you have any additional color on the MICE segment? Are you seeing pickup in the segment for that 2020, 2021 season in the Caribbean? We're seeing some demand for winter 2022. But to be honest with you, we're seeing a stronger demand for 2022, 2023. You know that most of the mice business prepares ahead 18 to 24 months. It is true that lately, it's all, I want to say, shorter notice. But I think all most companies are preparing to get back into the incentive mode because most of this business are incentives and they're ready to drive their business back and bring their top producers in general terms as soon as the situation allows it. So they're preparing for that. That would be the key message, if I may. Great. Great. Very clear. Just one last one on also on what you mentioned, Andre, and sorry if I didn't get this. You mentioned at some point in the presentation, minus 6% decline, but I didn't get the number, sorry, because my connection was really bad. No, no. Thank you for asking. We're totally satisfied to everyone. We're talking about the premium portfolio of hotels. What we're trying to say is that the demand for upper and upper scale products it's only 6% behind 2019. This means that people that can afford to travel and are looking for larger types of accommodations, better service and attribute resorts have really increased the pace. So this goes in line with our strategy for the brands when we look at Gran Meliami and Paradisos Resorts overall and some of the Melias that we have refurbished. So I think the right message is our premium and upscale portfolio are very close to 2019 levels. However, please bear in mind that when we look at 4 star hotels that require more mass markets, specifically from the U. K, are struggling. This is where the balance on the minus 30 comes from. Does that make sense? Okay. It's clear. Yes, yes, yes. Perfect. And this was my last question on the outlook. And then I just have one final question that it has to do with an announcement you made a few weeks ago on the Steam Park joint venture with Falcon. I mean, my question here is basically what are Melius' financial commitments to this joint venture? And who will develop, own and operate these small team parks? The joint venture that we have regarding to the Kathmandu, which is hotel and theme parks, that JV has been has existed for the last few years. Our partner has recently merged with a very significant player in the engineering technology and also in advisory on the theme parks and entertainment destinations and entertainment attractions themselves. And therefore, we see that, that that means that the potential of creating and expanding that joint venture together is now much stronger. And we see that something that if we can now harness more technology into the concepts of the entertainment and therefore reduce the size of the, should we say, the footprint that such theme parks may require, there's a very interesting potential there. Regarding, as you said, the model, the capital model of that, then it's a question of our partners are using different sources of capital, which we will then work with them. But we do not see that we would be that's going to be something that we take on our, I should say, as a fully consolidated or owned asset. We'll be looking for opportunities together, which may be a mixture between, to say, co ownership or maybe more obviously on a management basis going forward. So, it's not something that we said that should be, I should say, affecting our balance sheet in an onerous way. And it may even be one of the opportunities that may arise for, should we say, any massive transactions on our own properties if we see there's opportunity for those to be, should we say, transformed into more entertainment based rather than just purely lodging properties, okay? So, it's not something that should be of concern on the balance sheet side. It should be considered I think something light. Okay, Joao? Thank you very much for your yes, all good here. Thank you. There is no other I saw that there is no other question then. No further questions. Yes. So well, I want to thank you all again for joining us this morning and your continued interest in Melia. We hope that we have been helpful here. And please do not hesitate to contact our Investor Relations department for any other further questions you may have. As we said at the outset, we continue to encourage at the pace of recovery around the world and look forward to hopefully sharing more good news a quarter from now. Thank you very much. And if you take some holidays, I wish you all the best and please make sure to take us into account. Thank you. Ladies and gentlemen, this concludes today's call. You may now disconnect.