Spanish hotel groups to merge

NH and Hesperia to combine operations

Spanish hotel groups NH Hoteles and Hesperia today (September 14) announced a merger of their hotel operations.

The tie up creates the largest hotel chain in Spain's cities.

NH is the third largest hotel group in Europe.

In a statement the two groups said: "The agreement aims to consolidate the hotel management business of both groups maximising synergies through unified management of all hotels and taking advantage of complementary strategies."

It added that one of the main advantages of the agreement was that NH Hoteles would reinforce its "strategy to lead the European market in the urban segment and extends its domestic and international presence without recurring to either capital or debt increases, taking into account that the agreement only assumes the management of all Hesperia hotels and not the purchase of their owned or leased hotels."

Hesperia bought up 25% of NH, a chain for business travellers across Europe, in July.

Under the new deal it will join the NH board.

Shares in NH, which is listed on the Madrid stock exchange, were suspended before the announcement. Hesperia is not listed.

NH has 349 hotels in 22 countries, including much of Europe, Central and South America, the US and South Africa.

Hesperia has 51 hotels,  among them 47 three-, four- and five-star properties in Spain,  one in London , one in Andorra and two resort hotels in Venezuela.

Under the deal these will be managed by NH.

The move comes a few weeks after NH announced a net loss of €41m in its first half results for 2009.

It said turnover had dropped by 21% compared with the same six months in 2008 although earnings before tax were positive at €36.3m.

NH said the six months showed a drop of 14% in occupancy, a 10% fall in rates and a resulting fall of 22% in revPAR (revenue per available room.)

Business was particularly hit in Spain, the Benelux countries and the Americas where occupancy in Mexico and Argentina fell by double digits because of swine flu.

In response NH implemented a cost saving plan aimed at saving it €74m.

This included cancelling five "low return" contracts in Spain and Italy and scrapping a planned contract for South Africa.

It also successfully raised €221m in a sale of 98.6m new shares in July.

www.nh-hotels.com   www.hesperia.com