Ramón Aragonés, CEO of NH Hoteles, has been in the business for more than 40 years. He has faced a pandemic and is now witnessing historic growth, although he prefers to be cautious. The vice president and CEO of Minor Europe and Americas also highlights Barcelona’s enormous potential for 2024.
NH earned 100 million in the third quarter and is moving towards a record year. What forecasts do you have?
The third quarter has been extraordinary and the prospects for the end of the year are exceptional. It’s going to be the best year in the company’s history. And I am optimistic about 2024. Another thing is in the medium and long term, we do not know if this is going to be sustainable.
What risks are there?
I am concerned about the high structural costs. Now we have very high prices that allow us to assume these cost increases without problems. But in the medium term, if demand is not so strong, business margins will be impacted.
What costs are you referring to?
Labor costs, energy costs, external suppliers, inflation… All this is impacting Europe. It is likely that in the coming years we will see an adjustment in the margins we are having in the sector.
What happened this summer? There has been a kind of champagne effect.
We come from covid, a time in which companies have had to go into debt. NH has been able to reduce its debt, but other companies have not. At the sector level, financial costs are a latent problem. After the pandemic we have seen an exceptional increase in demand in all sectors: corporate, [business] mice… It is general throughout Europe. Perhaps in 2023 the only exception has been Germany, where we are not meeting our expectations. In the rest of Europe the results are exceptional, with special mention to Spain and Italy.
Do you fear tourist saturation in some destinations?
It is a problem in some specific cities and has a lot to do with tourist apartments. There has been a massive increase in this supply, which is not well regulated. There are cities like New York that have already legislated and it is something that has to happen in others. Madrid and Barcelona are already working because it is a problem that has to be solved. As a country we have to decide if we are committed to quality tourism, which does not fit well with saturation. If we want to have a demand for quality we have to regulate tourist apartments, because they are polluting the cities.
What measures should be applied?
The same legislation as for hotels. If I open a hotel, regulations will be required of me and I will receive inspections. What doesn’t make any sense is that buildings for family use become tourist apartments. They do not have the necessary security measures. It is a disturbance of the environment. Hotels sell experiences and the environment is part of that experience. If I want to go to Las Ramblas, you can’t move. Or in Puerta del Sol.
How does the rise in interest rates affect NH?
It is affecting us because we have made a significant effort to reduce debt. There is also a collateral impact on suppliers, who find financing more expensive, raw materials increase, everything becomes more expensive. We are forced to pass it on to prices, but the market supports it. The demand is very strong. The question is how long we will be able to continue doing it. I am optimistic in the short term, for 2023 and 2024. Beyond that I don’t know.
Are there more elements that worry you? The labor costs?
Labor costs are rising in Spain and around the world. And I don’t see it as bad, workers have to be paid according to their productivity. At NH we have a committed team. In the covid we lost 600 million and now we have to pay them. Now, I think the reduction of working hours does not make any sense.
They have 350 hotels around the world. Is there any intention to open new ones?
Yes. We are in the Middle East, in Asia and we are going to enter Australia. It is a path with Minor that excites us. This exchange has allowed us to enter segments where we did not have a presence. We are betting on the vacation. We have opened in Tenerife and in Italy. We are also excited about the ultra-luxury segment. With Anantara we already have 8 hotels of this type in Europe, one in Spain, and we see a possibility of growing in this segment in European cities. We are going to open two hotels in Portugal and we are going to sign another one soon.
What horizon does Barcelona have?
I am very optimistic about Barcelona for next year. 2023 is going to be a record and I think next year will be too. The city has recovered the tourist attraction it had, also the corporate part and we are missing the conference part. I think 2024 is going to be the year of takeoff. We want to grow more. It is an attractive city, also because of the Copa América. And the cultural part has been taken care of a lot. For example, Barcelona is crying out for an Anantara.
And Catalonia?
I would like an urban hotel in Girona. And a boutique on the coast. Catalonia is a very attractive market, we would like to have more presence, more on the Costa Brava.
Will you focus on segments such as premium or new concepts?
The main part of the company is Collection and NH. Anantara offers us to enter a position where we had no presence. We believe that there is a very good opportunity to grow in luxury.
Do Madrid and Barcelona have room for super luxury?
Yes Yes. We have explored several options, but the sector is also a little crazy. I want to grow but I want to be profitable. I think some very very extreme operations are being done. I cannot sign a contract thinking about what is happening now, I have to keep my headlights on. We are analyzing the Mediterranean. We are looking at options, also in North Africa. There we go hand in hand with European investors.
What are the investors like?
In Europe they are financial investors who have already done things with us. In the Middle East and Asia they are sovereign funds. And in America they are private investors.
Are you considering selling assets?
We are a company that is always studying operations. At this moment we are not in anything, but we are not static at all.
Do you also shop?
Yes. Here we depend on our partner. We have 300 hotels in Europe and we believe that there are countries with new opportunities.
Do you have labor shortage problems?
Yes, we see a lack of qualified labor. Not only in Spain, throughout Europe. There is a lot of turnover and it is difficult to retain professionals. There are countries where it is dramatic.
