Meliá Hotels International just wrapped up a stellar 2023, exceeding expectations and setting the stage for a potentially explosive 2024. But beyond the headline numbers and bullish guidance, the transcript from their February earnings call (1) reveals a subtle, yet potentially profound, linguistic pattern: the repeated use of the phrase "at least" when discussing their financial targets.

Could this be a mere coincidence, a harmless verbal tic? Or is it a deliberate signal, a hidden code hinting at an even more ambitious reality that Meliá is strategically underplaying? Let's dive into the transcript and see what we can unearth.

The phrase "at least" appears several times, each instance attached to a crucial financial objective. Gabriel Escarrer, President and CEO, proudly announced, "Our objective to reach at least €475 million of EBITDA has been achieved." Further solidifying this trend, he boldly committed to an EBITDA of at least €500 million, excluding capital gains" for 2024.

This pattern extends beyond EBITDA. Escarrer, underscoring Meliá's commitment to deleveraging, stated, "I would also like to commit to end 2024 with a net debt EBITDA ratio of 2.5 times pre-IFRS." While this statement lacks the explicit "at least," the context implies a strong desire to surpass this target, aligning perfectly with the previously established linguistic pattern.

The persistent use of "at least" suggests a conscious effort by Meliá's leadership to set a baseline, a minimum acceptable level of performance, while leaving the door wide open for exceeding those targets. This strategy has several advantages:

Managing Expectations: By setting a conservative baseline, Meliá avoids the risk of overpromising and underdelivering, safeguarding investor confidence and avoiding potential market disappointment. Strategic Understatement: The "at least" strategy allows Meliá to present a picture of strong, yet measured, growth, potentially masking an even brighter internal outlook. This strategic understatement could give them a competitive advantage, allowing them to quietly surpass rivals while they celebrate hitting publicly announced targets. Motivation and Drive: Internally, the "at least" strategy sets a clear challenge for the team: not only meet the stated targets, but push beyond them. This fosters a culture of ambition and continuous improvement, driving greater performance across the organization.

But is there evidence to support the hypothesis that Meliá's "at least" strategy is indeed a code for potentially explosive profits? Let's examine some key data points:

2023 EBITDA exceeded the "at least" target of €475 million, reaching €486 million. This demonstrates a clear pattern of exceeding their conservative baseline. Meliá is anticipating achieving its target net debt to EBITDA ratio of 2.5 times a full year ahead of schedule. This reinforces the idea that they are consistently outperforming their publicly stated goals. Robust demand, pricing power, and a strategic focus on luxury brands suggest strong potential for exceeding the €500 million EBITDA target for 2024. The travel industry is experiencing a remarkable rebound, and Meliá, with its strong brand portfolio and strategic positioning, is ideally situated to capitalize on this trend.

Revenue and EBITDA Growth

The following chart illustrates Meliá's revenue and EBITDA growth, highlighting their consistent performance and potential for exceeding targets. Data Source: Meliá Hotels International Financial Reports

While caution is always warranted, the "at least" language, combined with Meliá's recent performance and positive industry outlook, suggests a compelling case for an upside surprise. It's possible that the company is significantly downplaying its true potential, using a strategic linguistic approach to manage expectations while positioning themselves for explosive growth in the coming years.

"Fun Fact: Did you know that Meliá, founded in 1956, started with a single hotel in Palma de Mallorca? Today, it's a global hospitality giant, managing over 390 hotels in 40 countries!"

This "at least" strategy is a subtle, yet powerful, signal. Investors would be wise to pay close attention to Meliá's performance in the coming quarters. It's possible that a quiet revolution is brewing within this global hospitality leader, and those who decipher the code could be handsomely rewarded.