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We are fully committed to meeting your company's needs. At NH Hoteles, we excel at responding to the needs of a great company.Our efficiency and capacity for service has made us Spain's top business hotel chain. See for yourself in the 240 NH hotels in 16 countries.
902 115 116 / www.nh-hotels.com
End-to-end commitment to your satisfaction.
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Introduction 4Letter from the President 6
DEVELOPMENTS IN 2003 9
New Ownership Structure 10Shareholders and Financial Information 102003 Results 112003-2004 Strategic Plan 13
A MULTINATIONAL COMPANY 15
New Openings | New Signings 16Our Hotels 17NH Hoteles and its Employees 18
STYLE, INNOVATION AND QUALITY 21
Agua de la tierra 22New Global Technology System 23Other New Features 23New Products 24International Tourism Fairs 25NH Short Story Award 26NH Stock Art 27Community Development 28
INNOVATIVE GASTRONOMY 31
Fast Good 32Gastronomy Scholarships 34nhube 35
SOTOGRANDE 37
The Estate 38I. La Reserva 38II. Other Developments 38
New NH Sotogrande Hotel 39NH Almenara Declared Europe's Best Spa Hotel 39Reorganization of Sotogrande 39Earnings 40
BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE 41
CORPORATE GOVERNANCE 43
Annual Report on Corporate Governance 44Audit Committee Report 56
Inside back cover2003 CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
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The NH Hoteles Group (www.nh-hotels.com) now ranks third
among Europe's business hotel groups. At the end of March
2004, NH Hoteles had 239 hotels in operation, with 34,458
rooms, in 16 countries in Europe, Latin America and Africa,
and 25 hotels under construction, which will add 3,598 new
rooms.
Following a phase of major acquisitions, NH Hoteles focused
firmly on assimilating and adapting to its new position in 2003;
considerable operating savings were identified and achieved,
and the hotel portfolio was streamlined, divesting
establishments that did not conform to NH Hoteles' concept
and service.
The company culminated the process of unifying the brand in
all the countries where it operates.
NH hotels stand out because of the quality of their services
and facilities, which are decorated to a uniform high standard
to appeal to all tastes and make customers feel at home. They
have the most advanced technology to enable customers to
communicate, work and relax. During the year, the company
implemented a combined back/front office system to enable
it to manage and consolidate results much more efficiently,
optimize sales force efforts and offer a better customer
service.
Early in March 2003, NH Hoteles inaugurated its first "nhube",
a pioneering experience in the hotel industry which was
conceived for the NH chain by prestigious restaurateur Ferran
Adriá, founder of El Bulli. In March 2004, the second nhube
was inaugurated in the recently-opened NH Cartagena hotel.
A further 25 nhube facilities are under construction.
INTRODUCTION
NH Palacio de Ferrera | Avilés (Spain)
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NH Hoteles also opened its first "FastGood" facility, another
pioneering initiative of Ferran Adrià that will revolutionize the
concept of fast yet healthy food.
NH Hoteles' ownership structure has varied considerably in
recent months: Amancio Ortega, through his investment
company Pontegadea, increased his stake from 5% to 10%,
and Caixanova and Caja Murcia created the 50:50 joint
venture Hoteles Participados, which acquired 5% in NH
Hoteles.
In 2003, NH Hoteles was the target of a tender offer for part
of the capital, which was rejected by the majority of
shareholders.
Following the restructuring of the Sotogrande business at the
end of 2002, which included the acquisition of a 17.3% stake
by Caja Madrid, NH Hoteles now owns 79% of Sotogrande.
Sotogrande's real estate business is performing well: after the
launch of La Reserva, Sotogrande achieved record pre-sales
of more than 70 million euros.
NH Hoteles also owns 21% of the Jolly Hotels chain (Italy) and
5% of the Warner Bros. theme park in Madrid.
NH Hoteles is listed on the Stock Exchanges of Madrid (it is
included in the Ibex-35 index) and Amsterdam (Euronext). NH
Hoteles is also one of the EuroStoxx 600 companies, which
includes Europe's leading companies, and it forms part of the
prestigious Morgan Stanley Capital International (MSCI)
indexes. The company is also traded on the New York Stock
Exchange in the form of level 1 American Depository Receipts
(ADR).
On 31 March 2004, the NH Hoteles Group had over 12,500
employees of 99 different nationalities.
NH Frankfurt-City | Frankfurt (Germany)
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Dear shareholders,
We had a bittersweet year in 2003.
On the positive side, I would like to highlight the excellent
progress of the Latin American business, the very successful
cost-cutting plan, the amortisation of the bulk of goodwill
from the acquisition of Astron, the sale of the Princesa Sofía
hotel, which generated sizeable capital gains, the
considerable effort to reduce the cost of debt in Mexico, plus
the record level of committed sales in Sotogrande.
On the negative side, RevPAR remained stubbornly low in
Germany (with the consequent negative contribution to
EBITDA), there was a sharp increase in the supply of hotel
accommodation in Spain, and the restructuring and
rebranding process proved to be costly.
Thanks to our shareholders, our more than 12,000 employees
and our business partners, we are now more unified, leaner
and better-prepared for the future. We have always known
that the most complicated aspect of mergers and acquisitions
is not the operation itself but the subsequent integration
process. Accordingly, now that we have achieved our growth
target outside Spain and attained a healthy size, we have
dedicated, and will continue to dedicate, a large part of our
efforts to consolidating our company, now a veritable
multinational.
I would also like to add my special thanks to all of you for your
support last summer following the failed takeover bid
launched against the company.
In the last twelve months, we have worked very hard in the
face of difficult market situations in the countries where we
operate, particularly in Germany, where we have reorganised
and reinforced the management and sales teams, and
practically completed the integration of the Astron hotel
chain, which we acquired in May 2002.
In addition to implementing a major plan to cut operating costs
in 2003, we have reorganised our hotel portfolio to obtain a
more homogenous product which meets NH Hoteles' high
standards. Specifically, we have sold a total of fourteen hotels
and two restaurants, generating proceeds of more than 200
million euros.
Under our strategic plan, no major acquisitions were made in
2003 in order to concentrate on digesting previous years'
acquisitions.
The Sotogrande real estate business received a healthy
boost, with a record number of committed sales, worth more
than 70 million euros, yet to be booked.
LETTER FROM THE PRESIDENT
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These combined efforts have enabled us to reduce debt by
28%, as well as remunerate shareholders.
In 2004, we are committed to standardising our product,
continuing expansion in countries where we already operate,
such as Spain and Mexico, and preparing for entry into new
markets, such as Italy. Moreover, we will continue to reinforce
our Group sales strategy following reorganisation of the
German business last summer.
We want to continue offering innovative, homogenous and
personalised products and services in line with our customer's
preferences. Accordingly, we will continue to develop unique
products such as the “nhube” and “Fast Good” gastronomic
concepts and the new “Agua de la Tierra” toiletry kit.
We are convinced that we have a unique product and team,
which will enable us to maintain profitable growth.
Many thanks,
Gabriele Burgio
President and CEO of NH Hoteles
NH Palacio de Oriol | Santurce - Bilbao (Spain)
NH Nacional | Madrid (Spain) NH Palacio del Duero | Zamora (Spain)
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902 115 116 / www.nh-hotels.com
Innovation & NHExcellence in every field. Innovation in every service.That is our philosophy. We go the extra mile.
0011
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DEVELOPMENTS IN 2003
NEW OWNERSHIP STRUCTURE 10
SHAREHOLDERS AND FINANCIAL INFORMATION 10
2003 RESULTS 11
2003-2004 STRATEGIC PLAN 13
01 DEVELOPMENTS IN 2003
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PONTEGADEA INCREASES
ITS HOLDING
In July 2003, through his holding company Pontegadea,
Amancio Ortega increased his stake from 5% to 10%. This
evidences his strong support for NH Hoteles and he is now
the largest shareholder.
CAIXANOVA AND CAJAMURCIA ACQUIRE STAKES
IN NH HOTELES
In November 2003, Hoteles Participados S.L, 50/50 owned by
credit institutions Caixanova and Cajamurcia, acquired a 5%
stake in NH Hoteles.
Accordingly, Hoteles Participados is now a core shareholder.
The Investor Relations Department provides information for
shareholders on NH Hoteles' strategy and gives feedback to
the company on shareholder preferences. Shareholders can
contact NH Hoteles by calling the shareholder hotline (+34 91
451 9724) or by e-mailing [email protected].
Shareholders can also access all relevant information via the
corporate website (www.nh-hotels.com).
In addition to serving shareholders, the department is also
responsible for:
• Maintaining a stable shareholder base
• Contributing to the correct valuation of the share
• Generating market trust, by making the Company the
primary source of information
• Informing NH Hoteles management of investors' views
The Investor Relations Department stepped up its activity in
2003 and worked closely with the management team, not just
to explain to shareholders the company's strategy and
managers' stance with regard to the takeover bid but also to
listen to and incorporate shareholder suggestions. This effort
to communicate with and listen to shareholders involved 5
road shows in Europe and the US, more than 179 meetings
with fund managers, 41 with analysts, 3 conference calls to the
financial market and 27 presentations. The company also
participated in seven conferences.
There are currently 32 financial analysts providing ongoing
coverage on the company and NH Hoteles is included in the
most-widely distributed sectoral reports in the financial
market.
Hoteles Participados 5%
Pontegadea 10%
Free Float 65%
NH HOTELES OWNERSHIP STRUCTURE
(March 2004)
C.F. Caja Madrid 5%
FINAF 92 5%
Management team 5%
Bancaja 5%
NEW OWNERSHIPSTRUCTURE
SHAREHOLDERS ANDFINANCIAL INFORMATION
NH Inglaterra | Granada (Spain) NH Amsterdam Centre | Amsterdam (The Netherlands)
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NH Hoteles earned a total of 50.86 million euros in 2003, after
registering sales levels similar to 2002 (927.34 million euros).
The company decided to use a large part of the extraordinary
gains from property sales to accelerate amortisation of the
goodwill (40 million euros) generated on the acquisition of
Astron.
EBITDA stood at 155.3 million euros, confirming the upward
trend in 4Q03, since EBITDA fell 30.5% in 2003 as a whole,
compared to a drop of 33.2% in the first nine months of the
year.
The achievement of these objectives has enabled NH Hoteles
to reduce debt by 28%, from 667 million euros to 478 million
euros, placing it among the most financially solid companies
in the sector worldwide.
The company made a considerable effort to reduce costs,
leading to a 6.1% reduction in operating costs per available
room.
Considerable progress was made in cost-cutting, another
strategic objective. While the average number of rooms rose
14.3% on 2002, the average number of employees rose by just
6.9%.
The hotel business contributed revenues of 870.5 million
euros, up 0.4% on 2002. Sales in Europe increased by 0.9% to
805 million euros. The German business registered the
poorest performance: like-for-like sales fell 12.4%.
In Latin America, the hotel business performed very positively.
Revenues in local currency rose 64% in Argentina, 46% in
Brazil and 12.7% in Chile. Revenues in Mexico grew 0.8% in
local currency terms.
The decline in EBITDA was due mainly to the reduction in the
average price per room. EBITDA fell 22.3% in comparable
hotels in Europe but grew 8.7% in Latin America.
Sotogrande also performed well: 56.88 million euros in
revenues from booked property sales and a record number of
committed sales yet to be booked worth 70.2 million euros,
with a margin of 42.2 million euros. On 31 December 2002,
sales not yet booked amounted to 34.8 million euros, with a
margin of 15.9 million euros.
The contribution to group EBITDA from the Sotogrande real
estate business amounted to 31.56 million euros.
2003 RESULTS
NH Ciudad de Almería | Almería (Spain)
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FY 2003 FY 2002 03/02NH HOTELES GROUP (millions of euros) (millions of euros) Change
Room revenues 515.74 510.11 1.1%
Food service revenues 270.33 266.97 1.3%
Other revenues 84.39 89.59 (5.8%)
Property sales and other revenues 56.88 63.44 (10.3%)
TOTAL REVENUES 927.34 930.11 (0.3%)
Real estate costs (15.39) (20.22) (23.9%)
Direct management expenses (602.37) (564.98) 6.2%
MANAGEMENT PROFIT 309.57 344.91 (10.2%)
Leases and property taxes (154.24) (121.32) 27.1%
EBITDA 155.33 223.59 (30.5%)
Amortisation and depreciation (79.44) (75.04) 5.9%
Write-down of Sotogrande consolidation difference (2.60) (3.43) (24.2%)
EBIT 73.30 145.12 (49.5%)
Financial result (29.94) (35.06) (14.6%)
Equity-accounted affiliates 0.83 (2.90) (128.7%)
Extraordinary results 28.36 27.93 1.6%
EBT 72.55 135.09 (46.3%)
Corporate income tax (16.92) (28.32) (40.3%)
PROFIT before minority interests 55.63 106.77 (47.9%)
Minority interests (4.78) (21.11) (77.4%)
NET PROFIT 50.86 85.66 (40.6%)
Average number of shares 119,532,898 119,532,898
NH HOTELES 2003 RESULTS:KEY FIGURES
Source: Morgan Stanley and NH Hoteles
FINANCIAL STRUCTURE - DEC. 2003
0.0
10
40
80
90
70
60
50
30
20
* Financial leverage defined as NetDebt/Market Capitalisation (%)
84.7
45.2 42
36.233.7
22.5
Sol M
eliá
Whi
tbre
ad
NH
HO
TELE
S
Acc
or
Hilt
on
Gro
up
Inte
rco
ntin
enta
l
NET BANK DEBT/EQUITY
02000 2001 2002 2003
0.5
1
1.25
0,75
0,25
1.031.09
0.81
0.56
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NH Príncipe de la Paz | Aranjuez - Madrid (Spain)
NH Hoteles' 2003-2004 strategic plan involves a number of
actions aimed at further consolidating the company's financial
situation and remunerating shareholders. Specifically, NH
Hoteles projects cost savings totalling 30 million euros from
2005 onwards. The company already achieved significant
savings in 2003, increasing the average number of rooms by
14.3% while the average number of employees rose just 6.9%.
Accordingly, the employee/room ratio fell by 6.4% in the year
to 0.36.
Another of NH Hoteles' commitments in 2003 was to freeze
large development projects, like those undertaken in recent
years, instead limiting investment to developing and opening
hotels for which it already had signed contracts.
Thirdly, one of the most important strategic decisions taken in
2002 and 2003 was to optimise the chain's hotel portfolio. In
2003, NH Hoteles proposed the sale of assets worth 182
million euros which no longer conformed to the company's
high standards. This figure was amply exceeded as NH
Hoteles obtained more than 200 million euros in 2003 and
2004 (to date).
NH Hoteles also decided to accelerate the sales process at
Sotogrande; as a result, it considerably increasing committed
sales.
Following the successful implementation of these actions, the
company's net debt fell 28% to 478 million euros.
Furthermore, NH Hoteles has decided to propose a dividend
of 0.25 euros/share to the Shareholders' Meeting, breaking
the trend of recent years. The amount of the dividend is in line
with that offered by the majority of companies in the Ibex-35
and, if approved, it will be paid following the Shareholders'
Meeting.
In 2004, the company will continue to focus on cost-cutting
and on optimisation of the hotel portfolio through the sale of
some additional assets.
NH Hoteles is keeping a close eye on the Italian market in order
to seize any profitable opportunities which may arise. Italy offers
great potential to a company like NH Hoteles as its hotel sector
is highly fragmented. NH Hoteles also plans to continue
expansion in Mexico and it is currently studying various
opportunities there in addition to the management contracts
signed with three hotels (two in Mexico City and one in Puebla)
in recent months.
2003-2004 STRATEGIC PLAN
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That's what makes NH Hoteles employees stand out from the rest. Efficient service and a friendly atmosphere. That's how we are and how we work.Find out for yourself at any of the 240 NH hotels in 16 countries.
902 115 116 / www.nh-hotels.com
We make our mark as people.We make our mark as professionals.
0022
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02 A MULTINATIONAL COMPANY
A MULTINATIONAL
COMPANY
NEW OPENINGS | NEW SIGNINGS 16
OUR HOTELS 17
NH HOTELES AND ITS EMPLOYEES 18
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NEW OPENINGS | NEW SIGNINGS
NH Palacio de la Merced | Burgos (Spain)
NH Tropen | Amsterdam (The Netherlands) NH Jousten | Buenos Aires (Argentina)
HOTELS OPENED IN 2003
Spain Mexico Germany Hungary Total
Hotels 7 1 2 1 11
Rooms 821 132 583 160 1,696
HOTELS OPENED IN 2004
Spain Total
Hotels 2 2
Rooms 192 192
HOTELS SIGNED IN SPAIN IN 2003
Madrid Cádiz León Cáceres Total
Hotels 1 1 1 1 4
Rooms 224 106 51 50 431
HOTELS SIGNED IN REST OFWORLD IN 2003
Mexico Total
Hotels 3 3
Rooms 336 336
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OUR HOTELS
Germany 26%
Other 2%
The Netherlands 16%
Switzerland 2%
Spain 34%
BREAKDOWN OF ROOMS BY COUNTRYMARCH 2004
• A total of 80% of rooms are located in Spain,Germany and Benelux
Austria 2%
Mercosur 5%
Mexico 9%Belgium 4%
BREAKDOWN BY ROOMMARCH 2004
YEAR-ON-YEAR ORGANIC GROWTH VS.
DECEMBER 2003MARCH 2004
2003
1,696
2004E
1,717
2005E
1,849
2006E
224821
132
160
583
1,184
348
185
1,051
592
224
1,000
0
2,000
Spain
Germany
Austria
Mexico
The Netherlands
206
EUROPE TOTAL LEASED OWNED MANAGED
NH HOTELS Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
Spain 105 11,831 68 7,858 19 2,623 18 1,350Germany 53 9,085 51 8,718 1 223 1 144The Netherlands 28 5,350 9 1,279 18 3,991 1 80Belgium 12 1,434 1 241 10 1,153 1 40Switzerland 5 668 2 329 3 339 0 0Austria 6 797 6 797 0 0 0 0Hungary 1 160 1 160 0 0 0 0Portugal 1 83 1 83 0 0 0 0
TOTAL EUROPE 211 29,408 139 19,465 51 8,329 21 1,614
LATIN AMERICA TOTAL LEASED OWNED MANAGED
NH HOTELS Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
Mexico 14 2,955 3 381 6 1,244 5 1,330Argentina 7 952 0 0 7 952 0 0Cuba 1 277 0 0 0 0 1 277Uruguay 1 136 0 0 1 136 0 0Brazil 1 135 0 0 1 135 0 0Chile 1 122 0 0 1 122 0 0
TOTAL LATIN AMERICA 25 4,577 3 381 16 2,558 6 1,607
OTHER COUNTRIES TOTAL LEASED OWNED MANAGED
NH HOTELS Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
South Africa 2 239 1 197 1 42 0 0Ghana 1 234 0 0 0 0 1 234
TOTAL OTHER COUNTRIES 3 473 1 197 1 42 1 234
NH TOTAL TOTAL LEASED OWNED MANAGED
Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
NH TOTAL 239 34,458 143 20,043 68 10,929 28 3,455
PROJECTS SIGNED TOTAL LEASED OWNED MANAGED
NH HOTELS Hotels Rooms Hotels Rooms Hotels Rooms Hotels Rooms
EUROPE 22 3.250 14 2.531 4 366 4 353LATIN AMERICA 3 348 2 224 0 0 1 124
TOTAL PROJECTS 25 3.598 16 2.755 4 366 5 477
Managed 10%
Leased 58.2%
Owned 31.8%
NH Hoteles portfolio as at 31 March 2004
Projects signed by NH Hoteles as at 31 March 2004
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NH HOTELES AND ITS EMPLOYEES
NH Hoteles' professionals are our key asset. This makes us
one of the most admired companies and a preferred
employer among hotel professionals. NH Hoteles' capacity to
attract, develop and retain the best talent gives it a major
advantage over its competitors.
NH Hoteles currently has over 12,500 employees of 99
nationalities, which illustrates the multicultural global nature
of the chain. Our professionals are equipped to face present
and future challenges since they have a strong sense of
belonging to the chain.
In June 2003, an employee satisfaction survey was carried out
in every business unit, which identified a high degree of
commitment to the chain and a high level of employee
motivation. Nevertheless, NH Hoteles has developed action
plans for 2004 at hotel, business unit and corporate
department level in order to maintain and increase the high
level of motivation and satisfaction which the survey detected.
Dutch 17.70%German 15.15%
Spanish 35.57%
NATIONALITIES
99 Nationalities in NH World
Argentinean 2.19%
Mexican 14.03%
Austrian 1.47%
Other 11.44%
Belgian 2.45%
NH Apartments München | Munich (Germany)
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OUR PROFESSIONALS ARE OUR BRAND
The Human Resources Department's ongoing actions
include:
• Identifying potential through internal development
programs.
• Continuous employee training to cover current needs and
anticipate future training requirements.
• Internal rotation of personnel among the various business
units to enhance integration.
• Standardization of HR management and information
systems.
• Standardization of worldwide HR practices, policies and
procedures to promote the effective management of the
chain's workforce.
• Continuous training in occupational health and safety.
• Improving employee satisfaction through dialogue and
consensus with labour representatives.
• Guaranteeing equal opportunities in recruitment.
• Developing social policies to promote the integration of
disadvantaged groups into the labour market by signing
and implementing alliances.
The Human Resources Department plays a major role in the
integration process. As a services department, it should be
viewed as a human department creating value at all levels.
NH UNIVERSITY
NH University was created in 1996 as a solution to the need
to continue improving service within NH Hoteles and to
integrate and develop NH Hoteles' corporate culture as an
additional means of brand integration.
NH University has grown even faster than the company itself.
NH Hoteles believes that it is essential to involve and train its
employees to make them aware of customer needs and the
services on offer, so that our professionals are our best
ambassadors.
NH University's mission is to collaborate in achieving NH
Hoteles' corporate objectives, by translating the company's
mission and values into concrete actions. NH University also
expedites and facilitates change management and the
introduction of new systems, procedures and products at
corporate and local level.
In 2003, 200,000 training hours were given, involving all
employees in every business unit in the various countries in
which NH Hoteles operates.
NH University is an instrument to promote and transmit the
corporate values and culture and to establish excellence as one
of the principal measures of service quality. Accordingly,
common corporate training programs have been designed for
all business areas, as well as tailor-made programs intended to
meet each business unit's specific training requirements.
The corporate programs common to every business area
include:
• NH's Spirit of Hospitality.
• NH Management and Supervision with Passion.
• Building the future as NH.
The programs delivered to specific groups at local level
include:
• Internal Development Program (PDI) for employees with
potential.
• Cross-selling products in hotels.
• Training the trainer.
• Leadership.
• The art of selling NH.
NH Marbella | Marbella (Spain)
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Try getting away from it all. Try relaxing. Try resting. Try our service. Try our facilities. Try our breakfasts.Try enjoying a weekend in an NH Hotel. 240 hotels in 16 countries.
902 115 116 / www.nh-hotels.com
NH weekend.Try it and you'll come back.
0033
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STYLE, INNOVATION AND QUALITY
AGUA DE LA TIERRA 22
NEW GLOBAL TECHNOLOGY SYSTEM 23
OTHER NEW FEATURES 23
NEW PRODUCTS 24
INTERNATIONAL TOURISM FAIRS 25
NH SHORT STORY AWARD 26
NH STOCK ART 27
COMMUNITY DEVELOPMENT 28
03 STYLE, INNOVATION AND QUALITY
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“AGUA DE LA TIERRA”
New toiletry kit
For the first time, NH Hoteles has developed its own toiletry
kit under the brand name Agua de la Tierra, which is available
in all hotels throughout the chain. This modern kit is geared
towards customer needs.
Early in 2003, the Product Quality and Marketing team
developed a new toiletry kit for the chain in collaboration with
the Sales and Purchasing departments. After many months of
work and several market and customer surveys, a high quality
product has been produced, with a better image and more
competitive price than the previous kit.
Additionally, as an in-house product, it will provide significant
cost savings.
The Agua de la Tierra range takes its inspiration from Spain
and the Mediterranean. The new products have a refreshing
citrus aroma.
The products are packaged in high-quality 40ml bottles and
the Company has chosen first-rate, natural products such as
glycerine soaps and body lotion with orange extract, all
specially-designed to care for the skin.
The content of the new toiletry kit varies according to the
category of the hotel. At Collection hotels, the kit consists of
shower gel, shampoo, a bar of soap, a comb, shaving cream
and a razor, body lotion, a dental kit and a hairbrush. The NH
Hoteles line offers a different kit consisting of shower gel,
shampoo, a bar of soap, a comb, shaving cream and a razor,
body lotion and a dental kit, and the chain's economy line kit
includes shower gel, shampoo, a bar of soap and a comb. In
addition, customers can obtain a number of extra products,
such as a sewing kit, shower cap or sponge, at the hotel
reception desk.
NH Hoteles also offers customers the Agua de la Tierra
Woman Style kit, exclusive to the chain, which is designed
specifically for women and consists of special products such
as makeup remover and body lotion, among others.
The aim of these initiatives is to improve our day-to-day
services, making each customer's stay as pleasant and as
comfortable as possible.
Due to the success of these new products, NH Hoteles has
decided to make them available for purchase in a 200ml size
gift set.
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NEW GLOBAL TECHNOLOGY SYSTEM
Prior to 2003, all of NH Hoteles' business units used different,
standalone IT systems for administrative, retail and
management processes, as well as internal and external
communication.
This made it difficult to standardise processes and compare
results and management ratios, and also led to greater costs.
As part of the “21st Century Project”, NH Hoteles has
radically modernised all IT systems and services. The project
led to:
• The creation of a single IT system for the business units, for
both front and back office applications.
• The integration of management applications.
• A unified corporate communication network.
• New integration tools.
• More secure data storage and access.
• Guaranteed scalability of IT systems, enabling ongoing, cost-
effective expansion, in line with the company's growth strategy.
• Redundancy within the IT platform and communications
network, providing a failsafe backup.
The modernisation process began in 2002 with the
implementation of the Human Resources, Administrative /
Financial and Procurement systems in Spain and The
Netherlands. A single e-mail domain has gradually been
introduced for all NH Hoteles employees.
The employee web portal (Intranhet), the NH Hoteles group
internal communication system, has proved to be an effective
means of providing relevant information on the company and
is also a standard access point to corporate applications.
The integration of the customer relationship management
(CRM) and front office systems has led to greater knowledge
of our customers and guests, including their preferences and
comments.
By 2003 year-end, all business units had a specific integrated
IT system, regardless of their geographic location and scope
of action.
OTHER NEW FEATURES IN THE LAST 12 MONTHS
• WI-FI: Wireless high-speed internet access is now available
in almost all NH Hoteles establishments in Europe.
• WEB SITE IN CHINESE: In order to access new markets, NH
Hoteles has launched a version of its web site in simplified
Chinese (used in continental China and Singapore). The site
will also be available shortly in traditional Chinese (used in
Hong Kong and Taiwan).
• ELYSIUM, THE SPA AT NH HOTELES: NH Hoteles has
opened two new Elysium Spa centres at the NH Marbella
and the NH Eurobuilding hotel in Madrid. These new
centres, which offer the latest health and beauty treatments,
are in addition to the NH Almenara Golf, Hotel & Spa in
Sotogrande.
• AGREEMENT WITH THISTLE HOTELS: NH Hoteles has
reached an agreement with Thistle Hotels to jointly develop
sales, marketing and communications in the markets in
which they operate, i.e. the UK, Continental Europe, Latin
America, Asia and Africa.
• CLIENT PAGE: NH Hoteles has developed a new online
service which offers customers an exclusive, personalised
web page, providing a more efficient booking service.
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NEW PRODUCTS
NH Hoteles has designed a number of new products with the
aim of becoming a benchmark company within the urban
leisure range. The intention is to offer the customer unique,
original products and activities that cannot be found
elsewhere in the market, by proposing a leisure alternative
that differs from the rest of the hotel sector.
Two examples of NH Hoteles' new proposals are "Content
Weekends" and the "Collection Pack":
• "Content Weekends" are special weekend packages which,
in addition to the opportunity to enjoy the chain's
establishments, offer a number of activities relating to
culture, art, sports, music, literature, nature, cinema, etc.
This initiative offers customers the chance to discover
aspects of Spanish culture, sport and art through renowned
individuals or institutions.
These initiatives are intended to promote a distinct,
innovative form of tourism that is cultural and intelligent,
covering a vast range of options: courses, debates, lectures,
master classes on various leisure, cultural and sporting
activities, etc.
A Content Weekend package includes accommodation,
breakfast, lunch on Saturdays (in most options) and
participation in all the activities featured in the program.
Prices vary according to the type of activity. Reservations
can be made through our information and reservation line
(902 115 200) or the web site (www.nh-hotels.com).
• NH Hoteles now sells the "NH Collection, a dream gift"
pack—a special, innovative way to give someone a night in
city hotels with special cultural charm in Spain.
NH Collection includes one night's accommodation (Friday,
Saturday or Sunday) in a double room or single occupancy
in double, including breakfast, for a total of 99 euros. The
pack is on sale at NH hotels in Spain and can be used until
31 December 2004.
Collection hotels are a superior category of NH hotels, in
beautiful privileged locations and emblematic buildings.
The hotels included in this original promotion are:
NH Príncipe de la Paz in Aranjuez, NH Palacio de la Ferrera
in Avilés (Asturias), NH Podium in Barcelona, NH Palacio de
la Merced in Burgos, NH Amistad in Córdoba, NH Abascal
in Madrid, NH Alanda in Marbella, NH Palacio de
Castellanos in Salamanca, NH Palacio de Oriol in Bilbao,
NH Palacio in Vigo (Pontevedra), NH Palacio del Duero in
Zamora and NH Gran Hotel in Zaragoza.
The Collection hotels in the rest of Europe will be added to
this selection.
Some of these hotels are former palaces that have been
fully restored while respecting the original structures to
preserve the buildings' history.
Gastronomy is usually an additional attraction. The
Collection hotels include the following restaurants:
Muserola (NH Príncipe de la Paz, Aranjuez), headed by
Jesús del Cerro, holder of one Michelin star; La Vinícola (NH
Palacio del Duero, Zamora), which offers local market
cuisine in an incomparable architectural setting; La Ontina
(NH Gran Hotel, Zaragoza), which has become a
gastronomical benchmark in Spain under the management
of Enrique Martínez, prestigious restaurateur and
gastronomical advisor to the chain; and Rincón de la
Merced (NH Palacio de la Merced, Burgos) where, advised
by Enrique Martínez, the two young chefs, Aitor Olabegoya
and Agustí Gebellí, offer seasonal local dishes with a
modern twist.
All Collection hotels boast NH Hoteles' standard details
and services: Wi-Fi wireless internet, the brand-new "Agua
de la Tierra" toiletry kit, a selection of pillows, hairdryer,
minibar, air conditioning, room service, etc.
This promotion is intended to offer a new way of presenting
hotel stays as a gift in cities with special charm and a wide
range of cultural and gastronomic delights.
Collection Pack NH Abascal | Madrid (Spain)
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INTERNATIONAL TOURISM FAIRS
Madrid International Tourism Fair (FITUR) 2004
Madrid International Tourism Fair (FITUR) 2004
NH Hoteles once again participated in the Madrid
International Tourism Fair (FITUR) 2004 and the Berlin
International Tourism Fair (ITB) 2004.
NH Hoteles celebrates its 25th anniversary this year, and it
presented its new services and developments to visitors to
FITUR 2004. NH Hoteles focuses on constant evolution in
order to offer an improved service to meet customers' needs.
This year, NH Hoteles presented two new cutting-edge
gastronomical concepts—"nhube" and "FastGood"—co-
designed by restaurateur Ferran Adriá and NH Hoteles. The
chain also presented distinct innovative services, including Wi-
Fi wireless internet, the new "Agua de la Tierra" toiletry kit, the
NH Collection Pack and the Street Children project.
The stand was visited by Spain's Secretary for Trade, Tourism
and SMEs, Francisco Utrera, and the gastronomical advisor to
NH Hoteles, Ferran Adriá.
NH Hoteles was awarded the prize for the best hotel stand in
the Berlin International Tourism Fair (ITB) 2004 on 12-16
March. A total of nine thousand exhibitors participated in ITB
2004.
NH Hoteles came fifth in the "Tourism Company" category.
The chain's stand covered a total of 112 square meters over
two floors, and featured superb foodservice from NH Berlin
Mitte hotel.
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NH STORY AWARDSINTERNATIONALISATION OF THE NH SHORT STORY AWARDS: OVER 2 MILLION BOOKS PRINTED SINCE 1996
Winners of the VIII NH Short Story Awards with Pilardel Castillo, Spain’s Culture Minister, and ManuelHerrando, Director of NH Hoteles and Chairman ofSotogrande
In August 2003, NH Hoteles presented the VIII NH Short Story
Awards, which included a category in English for the first time.
This literary competition, the only one to be organised by a
hotel chain, awards the largest prize in Spanish language
(60,000 euros) and this edition reflected the company’s
international nature.
Over 400,000 copies of the last three issues containing the
award-winning stories from the previous edition were
distributed in Spain, Argentina, Chile and Mexico. This year,
the new edition was backed by Spain’s Culture Ministry, which
included the NH Short Story Awards in its Reading
Encouragement Plan. This Plan is aimed at reaching all levels
of society through initiatives to encourage reading.
Our hotels in The Netherlands and Belgium also provide our
customers with a copy in English in their rooms so that they
are aware of the award and can enjoy one of the chain’s most
popular products.
The awards cover different aspects of literary creation. In the
last edition, 18,500 euros were awarded for the best
unpublished book of short stories in Spanish (plus subsequent
publication), 9,500 euros for the best unpublished short story
in Spain, and 1,445 euros each to nine runners-up. A new
category in English was introduced, with a prize of 9,500 euros
and subsequent publication for the best unpublished short
story. Also, an award was created for the best book of short
stories published in Spanish in 2003.
The NH Hoteles Short Story Awards are aimed at supporting
short story writers and at encouraging and giving
opportunities to young writers. Focusing on culture, this
competition is intended to stimulate literary creation and
reading as a leisure activity.
THE VIII AWARDS CEREMONY
The awards ceremony was held in the Casino de Madrid in
January 2004. The jury was chaired by Gabriele Burgio and
comprised Luis Landero, Elvira Lindo, Fernando Sánchez
Dragó, Francisco Gutiérrez Carbajo and José Luis Martín
Nogales. The English jury was formed by English Literature
professors Ángeles de la Concha and Teresa Gibert. The
awards were given by Pilar del Castillo, Spain’s Culture
Minister, and Manuel Herrando, Chairman of Sotogrande and
Director of NH Hoteles.
Juan Eduardo Zúñiga won 9,500 euros in the category of best
book of short stories published in 2003 for “Capital de la
gloria”. Emilio Gavilanes won 18,500 euros in the category of
the best unpublished book of short stories for “La tabla del
dos”.
Mexican writer Ignacio Padilla won 9,500 euros in the category
of best short story for “Las furias de Menlo Park”.
Australian-born Gloria Montero won 9,500 euros in the first
edition of the award for best short story in English for
“Mènage á trois”.
The following short stories were finalists: “Las manos de
Akiburo” by Ángel Cabrera (from Granada); “Mentiras sobre
Ondarreta” by Juan Pimentel (Madrid); “Igual que entonces”
by Eloy Cebrián (Albacete); “El vampiro en la baldosa” by
Francisco Javier Sagarna (Madrid); “Ucronía” by Arcadio García
(Barcelona); “Adviento” by Juana Salabert (Madrid); “La
mirada del zimmermann” by Manuel Lozano Leyva (Sevilla);
“Han matado a la señorita Oteiza, mamá” by Javier Izcue
(Pamplona); “Doscientos años no es nada” by Lola Beccaria
(Madrid); and “Doy mi nombre” by José Manuel Abad
(Granada).
NH Hoteles has published over 2 million copies of its books since 1996
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Above, presentation of Stock Art in Berlin (Germany).Gabriele Burgio in the centre | Below, presentationof Stock Art in Amsterdam (The Netherlands)
NH STOCK ART GOES ABROAD
NH Hoteles presented the 50 works of art comprising the NH
Stock Art collection outside Spain for the first time. NH is the
only hotel chain that provides this innovative proposition,
which supports young painters and has reflected creative
trends since the 1980s.
NH Stock Art, which was created in 1998, is a collection of 50
works of art selected from among the over 3,000 pieces
comprising the chain’s private collection and it is aimed at
decorating the common areas of our hotels for our clients'
enjoyment.
NH Stock Art is a travelling exhibition open to the public which
is shown at the chain’s hotels. So far, the collection has travelled
to many Spanish cities such as A Coruña and Valladolid and in
2003, for the first time, it was presented in The Netherlands. The
exhibition opened in Berlin in March 2004 and will visit several
European cities between now and year-end.
THE NETHERLANDS
In 2004, there were exhibitions in Amsterdam, Maastricht and
Rotterdam as part of the NH Hoteles commitment to take its
works of art to all the countries in which it is present.
For the exhibition in The Netherlands, at the NH Amsterdam
Centre NH Hoteles acquired six new works by Dutch painters,
which enrich the collection and considerably enhance its
international dimension.
Specifically, NH Hoteles bought paintings by Lita Cabellut,
Nan Groot Antink, Eric Knoote, Jan Van den Berg, Warffemius
and Harry Wolfkamp.
GERMANY
NH Stock Art was presented at NH Berlin-Mitte hotel in
Germany on 17 March 2004. Gabriele Burgio presided over
the ceremony, which was attended by important German art
critics and cultural celebrities.
The collection will then travel to Frankfurt and Hamburg, for
which the chain has selected six new works by German
painters: Kurt Ebbers, Martin Gerwers, Harald Gnade, Thomas
Hartmann, Andre Martus and Wolfgang Sahlmann.
After the presentation in Germany, the collection will travel to
other countries in which NH Hoteles operates, such as
Hungary and Switzerland. The company is also studying the
possibility of exhibiting the NH Stock Art collection in Latin
America, in the NH hotels in Mexico and Mercosur.
Presentation of Stock Art in Berlin (Germany)
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CORPORATE SOCIAL RESPONSIBILITY
“STREET CHILDREN” PROJECT
NH Hoteles and Fundación Codespa signed an agreement
for the “Street Children” project in August 2003. This is the
first social programme in which NH Hoteles has involved all
the company and the only one of this type implemented by a
Spanish company in Mexico.
The project provides young people living in Mexico City’s
streets with opportunities for professional development and
social reintegration through training in the hospitality
business. During the course subsidised by NH Hoteles, the
chain offers the students the possibility of work experience.
The real spirit of the project is to insert young people into the
labour market, for which NH Hoteles proposes various actions
during the course in order to achieve all-round success. This
is a long-term initiative, a project for the future, a Company-
wide commitment.
Brochure of the “Street Children” project, in collaboration with Fundación Codespa
Presentation of the “Street Children” project in Mexico, with Gabriele Burgio, Chairman of NH Hoteles.
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COLLABORATION INITIATIVES
In 2003 and 2004, NH Hoteles collaborated with the following
institutions:
FUNDACIÓN CAROLINA (SPAIN)
MESSENGERS OF PEACE (ARGENTINA)
WAR CHILD FOUNDATION (THE NETHERLANDS)
COOPERADORA DE ACCIÓN SOCIAL (ARGENTINA)
SOLIDARIOS PARA EL DESARROLLO (SPAIN)
AMEX (SPAIN)
PRINCE CLAUS FOUNDATION (THE NETHERLANDS)
MADRID ROTARY CLUB (SPAIN)
MOTHER TERESA’S HOMES (ÁFRICA)
AFANIC (SPAIN)
UNICEF AWARDS (SPAIN)
SPANISH CANCER ASSOCIATION (SPAIN)
FUNDACIÓN IUVE (SPAIN)
FUNDACIÓN ESTEBAN G. VIGIL (SPAIN)
FUNDACIÓN PRESTIGE (SPAIN)
FUNDACIÓN CESAL (SPAIN)
MANOS UNIDAS (SPAIN)
CÁRITAS (SPAIN)
INTERMON (SPAIN)
SAVE THE CHILDREN (SPAIN)
SPONSORSHIP OF THE DALAI LAMA’S VISIT (SPAIN)
NUEVO FUTURO (SPAIN)
FUNDACIÓN MADRINA (SPAIN)
VILLA-PAZ HOMELESS HOSTEL (SPAIN)
SPANISH RED CROSS (SPAIN)
FUNDACIÓN MENUDOS CORAZONES (SPAIN)
FUNDACIÓN PEQUEÑO DESEO (SPAIN)
“UNA CASA PARA LOS POBRES” ASSOCIATION (SPAIN)
FUNDACIÓN SURT (SPAIN)
FUNDACIÓN SEMILLA (SPAIN)
FUNDACIÓN ADECCO AND SOCIAL AFFAIRS
MINISTRY (SPAIN)
FUNDACIÓN VALORA (SPAIN)
NH Hoteles’ mission in Ethiopia, where it shipped material last summer
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902 115 116 / www.nh-hotels.com
Gastronomy & NHDiscover our cuisine. Discover new sensations.Discover our service. Discover a unique gastronomic experience.Discover it for yourself at one of NH's 240 hotels worldwide.
0044
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INNOVATIVE GASTRONOMY
FAST GOOD 32
GASTRONOMY SCHOLARSHIPS 34
NHUBE 35
04 INNOVATIVE GASTRONOMY
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“FAST GOOD”
Fast Good |Eurobuilding | Madrid (Spain)
In March 2004, NH Hoteles inaugurated its first Fast Good
area at NH Eurobuilding in Madrid. This new gastronomic
concept, the result of research undertaken by Ferran Adrià
and his team, is an innovation destined to revolutionise the
current gastronomic offering in hotels. Fast Good combines
fast food and high quality with the added guarantee of Ferran
Adrià's hallmark excellence.
The new Fast Good area is situated on the corner of the NH
Eurobuilding in Madrid, one of the chain's flagship hotels.
Prestigious restaurateur Ferran Adrià and NH Hoteles are
convinced that the Fast Good concept will be highly
successful, not just in Spain but throughout Europe, where it
will be launched shortly. This is the second initiative to be
developed by Ferran Adrià and NH Hoteles, following the
success of nhube.
Ferran Adrià explained that “we arrived at the Fast Good
concept after researching the different country markets.
Business customers often have little time to eat but they are
interested in looking after themselves and eating well.
Therefore, we are convinced that this new concept is going to
be a success."
Fast Good offers a first-rate menu, in terms of both content
and preparation. Customers can choose from a wide range of
bottled drinks, such as mandarin & mango juice or yoghurt
with a hint of lime, among others. There is also a variety of
sandwiches, salads and homemade soups, such as autumn
broth or cream of sweetcorn with vanilla. For those with large
appetites, we recommend the panini or the fine selection of
hamburgers. Fast Good also serves a range of coffees, hot
chocolates and drinks to cater to all tastes.
As its name suggests, Fast Good combines supposedly
mutually-exclusive concepts in a natural, attractive and
appealing way.
The general atmosphere is informal, thanks to the strong
colours used: apple green for the windows, fuchsia pink
behind the counter and bright blue for the hanging lamps.
These three colours are used throughout the restaurant: the
tags identifying each dish, the seats and chairs, the logo on
packaging, the place mats and take-away cartons.
The elegant, sophisticated ambience is created by the dark-
wood tables, dark grey flooring and pearl grey walls, which
serve as a neutral backdrop to the explosion of bright colours.
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Ferran Adrià featured on the cover of The New York Times and Le Monde supplements
The restaurant fixtures include a vast selection of washable
materials, from the tiled floor, the vinyl wallpaper, the
polythene and methacrylate seating, the stainless steel stools
and the ubiquitous shiny aluminium, to the laminated wood
tables and counters. No fabrics have been used in order to
avoid grime and odours but the ambience is nevertheless
warm and welcoming.
The high-tech kitchen area, in full view of the customers, is
entirely fitted out in steel to ensure easy maintenance and
impeccable hygiene.
The bathrooms are decorated in a combination of round
white stoneware tiles and grey stucco in keeping with the laid-
back, elegant style.
Various seating areas give an overall air of comfort and
liveliness, with high counters for the individual customer in a
hurry, tables for one, two or more which can be pulled
together, and easy chairs for more relaxed, informal dining.
Television screens showing travel, sports and fashion
programmes, visible from all areas, make waiting brief and the
stay pleasant.
A select menu which changes each week, a revolutionary
flexible prepayment system, and quick, specialist service
make Fast Good both traditional and innovative.
Rodrigo Rato, Ferran Adrià, Rafael Ansón and Gabriele Burgio at the tribute to Spanish cuisine
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GASTRONOMIC SCHOLARSHIPS
Gastronomic scholarships. The President of NH Hoteles and Ferran Adrià
In 2003, NH Hoteles launched the “1st NH Hoteles
Gastronomic Encounter” as part of the chain's new
gastronomic approach. Six young chefs from Europe and
Latin America were chosen from 700 hopefuls to receive a
years' training at the highest level, with accommodation and
a monthly allowance provided.
The NH Hoteles scholarships began on 1 July 2003 at four
internationally-renowned restaurants with a total of nine
Michelin stars between them. These scholarships once again
highlight the importance NH Hoteles places on fine food and
its commitment to haute-cuisine.
The four restaurants included in the scholarship programme,
where each student will spend three months, are: El Bulli in
Gerona, under the management of Ferran Adrià (3 stars, chief
advisor to the group); Martín Berasategui in Lasarte, managed
by Martín Berasategui (3 stars); Vermeer in The Netherlands,
managed by Pascal Jalhaij (2 stars), and Schlossrestaurant in
Germany, managed by Christian Scharrer (1 star).
The six scholarship students will receive a years' extensive
training under the tutelage of renowned restaurateurs before
being hired by the company.
NH Hoteles is committed to gastronomic excellence, in terms
of both customer satisfaction and staff training.
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“NHUBE”
Nhube at NH Balboa, a pioneering hotel concept created by Ferrán Adrià and NH Hoteles
In early March 2003, NH Hoteles opened its first nhube space,
a pioneering concept designed by Ferrán Adrià that
combines the lounge, bar/cafeteria and restaurant areas at
NH Balboa in Madrid. It provides a multi-functional space
where customers can watch television, surf the Internet, listen
to music, eat, drink, read or simply relax.
The concept aims to combine dining, leisure and relaxation,
for guests and non-guests alike. The first nhube space was run
as a pilot project to further refine the new gastronomic
offering according to customer needs and suggestions.
Given the positive results of the initiative and its superb
reception, NH Hoteles has decided to open new multi-
functional nhube spaces in various hotels. In 2004, five new
spaces will be opened in Spain in Cartagena (opened in
February 2004), Madrid and Seville. The company also plans
to expand the concept abroad. Nhube is scheduled to be
inaugurated at NH's hotel in the Hague (The Netherlands) in
2004, offering both international and Dutch customers an
innovative gastronomic concept. Another nhube space will
shortly be opened at the NH Vienna Airport hotel (Austria).
These nhube concepts will be similar to those launched at NH
Balboa (Madrid) and NH Cartagena, but adapted to cater to
each hotel's individual requirements.
The nhube decor is characterized by neutral colours and
natural materials and the specially-designed furniture helps
to define the different areas. The lighting combines fixed
halogen spotlights with indirect light, standard lamps and
uplighters, as well as built-in floor lighting, to create a magical
atmosphere. These features create a welcoming space which
is highly suitable for NH Hoteles business clientele and is in
keeping with the style of the chain.
The nhube menu, designed by Ferrán Adrià, is based on
simple, high-quality meals, where first-rate ingredients and
original presentation are key elements. Nhube will continue
to provide home-cooked quality to its guests..
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902 115 116 / www.nh-hotels.com
The World & NH240 hotels in 16 countries.
Over 35,000 rooms.Welcome to the NH World.
0055
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SOTOGRANDE
THE ESTATE 38
I. LA RESERVA 38
II. OTHER DEVELOPMENTS 38
NEW NH SOTOGRANDE HOTEL 39
NH ALMENARA DECLARED
EUROPE'S BEST SPA HOTEL 39
REORGANIZATION OF SOTOGRANDE 39
EARNINGS 40
BOARD OF DIRECTORS AND MANAGEMENT COMMITTEE 41
05 SOTOGRANDE
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SOTOGRANDE "A WAY OF LIFE"
La Reserva Golf Club | Sotogrande - Cádiz (Spain)
THE ESTATE
Sotogrande is considered to be the most prestigious
residential development on the Costa del Sol and one of the
most exclusive in Southern Europe. NH Hoteles currently
controls 78.7% of Sotogrande S.A. and completes the real
estate offering with projects related to exclusive leisure and
hospitality.
I. LA RESERVA
"La Reserva" is an area dedicated to golf, with views over the
finest courses, equipped with the best infrastructure and
services to offer year-round luxury.
In August 2003, NH Hoteles opened La Reserva's first golf
course. The 18-hole golf course, designed by Cabell
Robinson on a 72-hectare site, has been well received in the
few months following its recent inauguration, and it reflects
the major efforts made by La Reserva de Sotogrande. The
complex's first 6,950-meter golf course has four lakes and
impressive greens designed by Tom Lamb. Sotogrande plans
to build a second signature 18-hole golf course at La Reserva.
The spectacular La Reserva Club House is expected to open in
the summer of 2004 and will serve the complex's two golf courses.
At 2003 year-end, 270 of a total of 450 plots, most of which
have views of the golf course, went on sale. These plots are
among the best that Sotogrande has launched since its
creation 40 years ago.
"Los Cortijos de La Reserva", a development consisting of
homes overlooking the golf course, is also for sale. The 76
luxury villas and homes along the avenue leading to La
Reserva Club House will be delivered in the second half of
2006; 18 of them were sold before construction commenced.
II. OTHER DEVELOPMENTS
La Marina de Sotogrande offers a wide range of properties.
La Ribera del Obispo is a 29-apartment complex with direct
views of the marina. The location is ideal, at the very entrance
of La Marina golf course and a mere stone's throw from the
shops, bars and restaurants and from the beach and the main
entrance to the marina.
La Ribera del Guramí is a development of 33 luxury
apartments under construction between Ribera del Obispo
and Ribera del Arlequín, with panoramic sea views. The
apartments will be delivered in 2004, and only one apartment
remains unsold.
Ribera del Marlín, a combined 33,000 m2 residential and
commercial complex, is expected to be launched in late
2004.
Phase two of Las Cimas, a 21-home complex using cutting-
edge architecture overlooking the NH Almenara hotel golf
course, will be launched in summer 2004 through RESCO-
Sotogrande (50%-owned by Sotogrande).
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Map of Sotogrande
NEW NH SOTOGRANDE HOTEL
Every year, more visitors come in search of the Sotogrande
lifestyle. Therefore, in order to establish a symbol for the
development, NH Hoteles decided to renovate the historical
Sotogrande hotel. It is currently being refurbished and will
open in the third quarter of 2004. The new four-star hotel will
boast 112 spacious rooms, a swimming pool, an open-air
restaurant and multi-purpose rooms, and will be located
opposite La Cabaña restaurant.
NH ALMENARA DECLARED EUROPE'S
BEST SPA HOTEL
In November 2003, NH Almenara Golf Hotel & Spa won the
Most Excellent European Spa Hotel award in the 2003 Condé
Nast Johansens award ceremony. This is one of the most
prestigious distinctions worldwide. The Condé Nast
Johansens Awards for Excellence are presented annually to
those establishments that represent the finest standards and
best value for money in luxury and independent travel.
The award certifies the good work by the NH Almenara Golf
& Spa hotel team. The hotel is very representative of the NH
chain and has gradually established itself as a European
benchmark in golf and health and beauty services.
The 27-hole golf course designed by Dave Thomas surrounds
the NH Almenara hotel, and its top-level golf academy has
been recognized officially as a high-performance sports
training center.
Sotogrande participated actively in the Volvo Masters
Andalucia 2003 (part of the EPGA tour), which was held in the
Valderrama Golf Club. The Volvo Masters Amateur took place
in the NH Almenara golf complex.
REORGANIZATION OF SOTOGRANDE
Sotogrande performed a rights issue in 2003—which entailed
the issuance of 7,232,265 new shares and the entry of Caja
Madrid into Sotogrande's ownership structure with a 17.3%
stake—thus concluding the series of transactions approved
by the Boards of Directors of NH Hoteles and Sotogrande in
December 2002. The objective was to streamline the Group's
structure by grouping together all the business hotels under
the NH Hoteles parent company and the golf and tourist
hospitality activities under Sotogrande. As a result of the
capital increase, NH Hoteles now owns 78.7% of Sotogrande,
S.A. The transaction involved the following measures:
1. In December 2002, NH Hoteles purchased 49% of AHORA,
a company which owns Casino de Madrid, Los Retamares
Golf Club, Aymerich Golf Management and seven NH
hotels, from Caja Madrid. AHORA is now wholly owned by
NH Hoteles.
2. The Sotogrande Special Shareholders' Meeting in January
2003 approved the issuance of 7,232,265 new shares for a
total of 70.24 million euros including an issue premium. NH
Hoteles did not subscribe to the rights issue, and the Caja
Madrid Group subscribed and paid for the 7,227,642 shares
that were not taken up by the market. The Caja Madrid
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La Reserva | Sotogrande - Cádiz (Spain) La Marina | Sotogrande - Cádiz (Spain)
Group also purchased 4,623 old shares of Sotogrande from
NH Hoteles in order to achieve the agreed stake in
Sotogrande.
3. All of AHORA's assets relating to tourist hotels, golf, leisure
and hospitality (i.e. Casino de Madrid, Los Retamares Golf
Club, Aymerich Golf Management and the hotels in
Marbella) were transferred to Sotogrande.
4. The rest of AHORA's assets (i.e. seven urban hotels)
remained in AHORA's portfolio (100%-owned by NH
Hoteles), namely: NH Ciudad de Santander, NH Avenida de
Jerez, NH Palacio de Castellanos, NH Ciutat de Reus, NH
Luz Huelva , NH El Toro and NH La Perdiz.
In October 2003, NH Hoteles' Management Committee
approved the appointment of Gustavo Gabarda Durán as the
new Chief Executive Officer of Sotogrande, S.A.
Gustavo Gabarda, who worked for over ten years with
JPMorgan before restructuring Portugal's largest steel group,
has been a member of Sotogrande's Board of Directors since
1996. Gustavo Garbarda Durán is now in charge of the
Sotogrande Business Unit, enabling Ignacio Aranguren,
Sotogrande's former CEO, to dedicate more time to
designing the strategy and supervising the management of
the NH Hoteles Group.
EARNINGS
Sotogrande performed well in 2003: booked property sales
amounted to 56.88 million euros and committed sales yet to
be booked reached a record 70.2 million euros, with 42.2
million euros in profit. This compares very favorably with the
situation on 31 December 2002, when committed sales
pending booking amounted to 34.8 million euros, with 15.9
million in profit (i.e. less than half the present figure).
Sotogrande's contribution to Group EBITDA totalled 31.56
million euros.
Between January 2003 and March 2004, Sotogrande's share
appreciated by 14%. Geopolitical uncertainties triggered a
slump in the stock markets in 2003, causing Sotogrande's
share price to fall 38%; however, the stock has gained 57%
since then. Sotogrande's market capitalization totals 335.1
million euros and free float amounts to 4% of capital.
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0Apr May Jun Jul Aug Sep Oct Nov Dec 03 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 04 Feb Mar
SOTOGRANDE MARKET PERFORMANCE
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BOARD OF DIRECTORS - NH HOTELES, S.A.
President and Chief Executive Officer:
GABRIELE BURGIO
Directors:
RAMON BLANCO BALÍN
JOSÉ DE NADAL CAPARÁ
RODRIGO ECHENIQUE GORDILLO
ALFREDO FERNÁNDEZ DURÁN
Mª ELENA GIL GARCÍA
MANUEL HERRANDO Y PRAT DE LA RIBA
AURELIO IZQUIERDO GOMEZ
BERNARD s’JACOB
ALFONSO MERRY DEL VAL GRACIE
MIGUEL RODRÍGUEZ DOMÍNGUEZ
LUIS F. ROMERO GARCIA
Secretary to the Board:
JOSE MARÍA MAS MILLET
Vice-Secretary to the Board:
J. IGNACIO ARANGUREN GONZÁLEZ-TARRÍO
Gabriele Burgio
Executive Chairman
Isabel Aguilera
Chief Operating Officer
Ignacio Aranguren
General Manager of CorporateInvestment and Strategy
Roberto Chollet
Chief Financial Officer
Gustavo Gabarda
Sotogrande ChiefExecutive Officer
Juan Mora
Human Resources Manager
MANAGEMENT COMMITTEE - NH HOTELES, S.A.
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Spain, Germany, The Netherlands, Belgium, Portugal, Austria, Switzerland, Hungary, Argentina, Mexico, Cuba, Uruguay, Chile, Brazil, South Africa and Ghana.240 hotels in 16 countries. 35,000 rooms on three continents. The NH philosophy goes farther every day.
902 115 116 / www.nh-hotels.com
Our brand reaches around the globe.
0066
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CORPORATE GOVERNANCE
NH HOTELES ANNUAL CORPORATE
GOVERNANCE REPORT 44
AUDIT COMMITTEE REPORT 56
06 CORPORATE GOVERNANCE
2003
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INTRODUCTION
This Annual Corporate Governance Report complies with the
provisions of article 116 of Spain’s Securities Market Law and
its content conforms to the provisions of Economy Ministry
Order 3722/2003, dated 26 December.
This Report is structured as follows:
1. Ownership structure.
2. Board of Directors structure.
3. Related-party transactions and intragroup transactions.
4. Risk control systems.
5. Operation and action of the Shareholders’ Meeting.
6. Degree of compliance with corporate governance
recommendations.
I. OWNERSHIP STRUCTURE
• Share capital:
NH HOTELES, S.A.’s share capital amounts to 239,065,796
euros, comprising 119,532,898 subscribed and fully-paid
shares of the same class each with a nominal value of 2 euros,
represented by the book-entry system.
NH HOTELES, S.A. is listed on the Madrid, Barcelona, Bilbao,
Valencia and Amsterdam stock exchanges and forms part of
Spain’s blue-chip index, the IBEX-35.
• Most significant stakes, in accordance with the information
available to the Company:
Based on Company information, the following shareholders
own over 5% of the total paid-up share capital:
• Board of Directors stakes:
Based on Company information, the following Directors of NH
HOTELES, S.A. own the following shares of NH HOTELES, S.A.
at the date of this report:
• Family, commercial, contractual or corporate relationships
between owners of significant stakes and the Company or
among owners of significant stakes:
The Company is not aware of any family, commercial,
contractual or corporate relationships between owners of
significant stakes and the Company or among owners of
significant stakes other than those stated in section III:
RELATED-PARTY TRANSACTIONS AND INTRAGROUP
TRANSACTIONS.
• Shareholder agreements.
The Company is not aware of any shareholder agreements
that relate to voting at Shareholders’ Meetings or that
condition or restrict the free transferability of shares.
• Percentage of own shares.
At 2003 year-end, Grupo NH HOTELES, S.A. owned 204,712
own shares, representing 0.17% of capital, at a total cost of
1.54 million euros. Own shares are valued at book value, i.e.
5.14 euros per share.
In 2003, there were significant changes in own shares:
- Acquisition of 1,314,782 shares on various days during
the year.
- Sale of 2,100,000 shares (to hedge the stock option plan
for employees of Grupo NH HOTELES, S.A.).
NH HOTELES, S.A. ANNUAL CORPORATEGOVERNANCE REPORT
% DIRECT % INDIRECTSHAREHOLDER STAKE STAKE % TOTAL
ALAZAN INVERSIONES 2001,
SIMCAV, S.A. 5.080 0.000 5.080
ANGELINI, FRANCESCO 0.000 5.240 5.240
CAJA DE AHORROS Y
MONTE DE PIEDAD DE MADRID 0.000 5.000 5.000
CORPORACION FINANCIERA
CAJA DE MADRID, S.A. 5.000 0.000 5.000
FINAF 92, S.A. 5.240 0.000 5.240
HOTELES PARTICIPADOS, S.L. 5.001 0.000 5.001
KEBLAR DE INVERSIONES,
SIMCAVF, S.A. 5.190 0.000 5.190
ORTEGA GAONA, AMANCIO 0.000 10.270 10.270
CAJA DE AHORROS DE VALENCIA,
CASTELLON Y ALICANTE, BANCAJA 5.000 0.000 5.000
% DIRECT % INDIRECTSHAREHOLDER STAKE STAKE % TOTAL
BLANCO BALIN, JOSE RAMON 0.020 0.011 0.031
BURGIO, GABRIELE 1.260 0.000 1.260
CAJA DE AHORROS DE VALENCIA,
CASTELLON Y ALICANTE, BANCAJA 5.000 0.000 5.000
DE NADAL CAPARA, JOSE 0.000 0.000 0.000
ECHENIQUE GORDILLO, RODRIGO 0.007 0.000 0.007
GIL GARCIA, ELENA 0.000 0.000 0.000
HERRANDO PRAT DE LA RIBA, MANUEL 0.003 0.000 0.003
MERRY DEL VAL GRACIE, ALFONSO 0.000 0.000 0.000
RODRIGUEZ DOMINGUEZ, MIGUEL 0.003 0.000 0.003
ROMERO GARCIA, LUIS FERNANDO 0.000 0.000 0.000
SJACOB, BERNARD 0.000 0.000 0.000
FERNANDEZ DURAN, ALFREDO 0.000 0.000 0.000
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Additionally, the Company hedged, with a financial
institution, the stock option plan (4,400,000 shares) for group
employees, which was approved by the Shareholders’
Meeting. That transaction is detailed in the Company’s
financial statements.
By virtue of the resolution adopted by the Shareholders’
Meeting on 28 April 2003, the Company is authorised to
pledge and/or acquire own shares, directly or indirectly, via
an official secondary market and for a price not lower than
their nominal value or higher than the share price at the time
of acquisition, where the nominal value of the shares acquired
and pledged cannot at any time exceed 5% of the total share
capital.
II. BOARD OF DIRECTORS STRUCTURE
The Board of Directors Regulation, which was approved by a
Board of Directors resolution on 20 December 1999 and
subsequently amended on 28 April 2003, determines the
Board of Directors’ principles of action, regulates its
organisation and operation, and lays down the code of
conduct for its members, the overall aim being to maximise
efficiency and optimise management.
The Board of Directors intends to revise the content of that
Regulation so as to adapt it to Transparency Law 26/2003,
dated 17 July, and to submit the final wording to the
forthcoming Shareholders’ Meeting.
All shareholders can read the full text of the current
Regulation on the Company’s web site or request the delivery,
free of charge, of an updated copy since it is the Company’s
desire to make significant information such as Corporate
Governance rules available to investors at all times.
The Board of Directors Regulation defines the Board of
Directors' role as supervising and overseeing the Company's
activities, while delegating day-to-day management to the
executive bodies and management team.
Notwithstanding the above, and to ensure better and more
diligent performance in its general supervisory role, the Board
is committed to exercising directly the following
responsibilities, in addition to the powers given exclusively to
it by law or the Bylaws:
a) Approval of the Company's general strategies;
b) Appointment and, if necessary, dismissal of senior
executives of the Company and other companies
within the consolidated group;
c) Appointment and, if necessary, dismissal of Directors
in the various subsidiaries;
d) Identification of the Company’s principal risks and
implementation and monitoring of appropriate
internal control and information systems;
e) Definition of information and communication policies
concerning shareholders, markets and public opinion;
f) Definition of the own share policy within the framework
defined by the Shareholders' Meeting;
g) Authorisation of transactions between the Company
and Directors or core shareholders which may present
a conflict of interests; and
h) In general, performance of business or financial
operations of particular significance for the Company.
Furthermore, the Board of Directors Regulation establishes
that the Board's actions must be guided at all times by the
aims of maximising the company's value and the consequent
creation of shareholder value, strictly in accordance with
generally accepted ethical values and principles.
• Composition of the Board of Directors.
The Board of Directors of NH HOTELES, S.A. currently
consists of 12 Directors. In accordance with the Regulation, a
distinction is made between executive and external Directors,
the latter being divided into two categories: proprietary and
independent.
The President/CEO and remaining Directors with
management duties, in whatever form, within the Company
or its subsidiaries (provided that these duties are discharged
on an exclusive basis) are considered to be executive
Directors.
Proprietary Directors are those nominated by shareholders
with a significant stable stake in the Company's capital.
Independent Directors must be well-known prestigious
professional or business figures who are not linked to the
management team or the core shareholders. In appointing
these Directors, the incompatibility rules within the Board of
Directors Regulation (substantially similar to the Aldama Report)
are taken into account.
In line with the aforementioned criteria, the names and year
of appointment of the Directors are as follows:
Executive Directors:
Gabriele Burgio. (1993).
Proprietary Directors:
José de Nadal Capará. (1997).
Mª Elena Gil García (2003).
Caja de Ahorros de Valencia, Castellón y Alicante –Bancaja,
represented by Aurelio Izquierdo Gómez (2001).
Alfredo Fernández Durán (2002).
Independent Directors, prestigious professionals or
entrepreneurs who are not linked to the management team
or the core shareholders:
Manuel Herrando y Prat de la Riba. (1992).
Luis F. Romero García. (1996).
Ramón Blanco Balin. (1997).
Rodrigo Echenique Gordillo. (1997).
Alfonso Merry del Val Gracie. (1997).
Bernard s´Jacob. (2000).
Miguel Rodríguez Domínguez. (2003).
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The Board Secretary—whose fundamental role is to supervise
the good operation of the Board and the formal and material
legality of its actions, to ensure that procedures and
governance rules are respected, and to ensure that the
minutes contain the proceedings of Board sessions and to
certify any resolutions adopted—is José María Mas Millet,
with J. Ignacio Aranguren González-Tarrío acting as Vice-
secretary.
Therefore, the composition of the NH HOTELES, S.A. Board
of Directors complies with the recommendations of the Code
of Good Governance, as external Directors (both proprietary
and independent) greatly outnumber executive Directors (11
to 1), and independent Directors outnumber proprietary
Directors (7 to 4), on account of the fact that, in the current
ownership structure, free float is substantially greater than the
sum of the significant stable stakes represented by the
proprietary Directors.
• Rules of organisation and operation of the Board of
Directors:
- Board selection procedures
The Directors are appointed by the Shareholders’ Meeting or,
provisionally, by the Board of Directors, in accordance with
the provisions of the Spanish Corporations Law and the
Company Bylaws.
The proposed Director appointments submitted by the Board
of Directors to the Shareholders’ Meeting and the
appointment resolutions adopted by the Board by virtue of
the legally attributed co-option powers must respect the
provisions of the Board of Directors Regulation and be
preceded by the corresponding report by the Appointments
and Remuneration Committee, which is not binding.
- Appointment of external Directors
The Board of Directors Regulation makes special reference to
the appointment of external Directors because of their unique
features with respect to executive Directors. The basic
characteristics of the appointment of external Directors are as
follows:
1. Proprietary Directors
Proprietary Directors must be appointed by owners of
significant stable stakes, and the other Directors must
vote so that such appointments or proposed
appointments are approved by the Board of Directors.
2. Independent Directors
Within their respective powers, the Board of Directors
and the Appointments and Remuneration Committee
must strive to ensure that the candidates for
independent Directors are persons of acknowledged
probity, ability and experience who are willing to
dedicate sufficient time to the Company.
For the post of independent Director, the Board of
Directors cannot propose or appoint a person who has,
or has had in the previous two years, stable significant
relations with Company management, has family,
professional or commercial relations with any executive
Director or other Senior Managers of the Company, or
has stable relations with proprietary Directors or the
companies or business groups which they represent.
In particular, the following persons cannot be proposed
or appointed as independent Directors:
a) persons who hold or have held senior executive
positions at the Company in the previous two years;
b) relatives (up to the fourth degree of kinship) of persons
who are or have been executive Directors or senior
managers at the Company in the previous two years;
c) persons who, directly or indirectly, have made or
received significant payments to or from the Company
that might jeopardise their independence;
d) persons who have or have had other relations with the
Company which, in accordance with the Appointments
and Remuneration Committee, might jeopardise their
independence.
- Re-election of Directors
The proposal for re-election of Directors that the Board of
Directors submits to the Shareholders’ Meeting must be
subject to a formal drafting process, necessarily involving a
report by the Appointments and Remuneration Committee in
which it assesses the quality of their work and the dedication
of the proposed Directors during their mandate.
- Term of office
Directors have a three-year term.
Directors appointed by co-option will hold office until the
date of the next Shareholders’ Meeting.
Directors who terminate their mandate or who, for any other
reason, leave their position cannot, in the following two years,
provide services to another company with a similar or analogous
corporate purpose to that of the Company or any of the
companies comprising its Group.
If the Board of Directors sees fit, it can exempt the outgoing
Director from that obligation or shorten the two-year period.
- Removal of Directors
Directors will be removed when the period for which they
were appointed has expired or when so resolved by the
Shareholders’ Meeting by virtue of its legal powers.
The Directors must offer their resignation to the Board of
Directors and resign in the following cases:
a) Upon reaching the age of 70. Directors with executive
functions must retire as executives upon reaching the age
of 65 although they may continue as Directors, if the Board
so determines.
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In this case, Directors will be removed at the first Board
meeting after the Shareholders’ Meeting that approved
the financial statements of the year in which the Director
reached the age limit.
b) When they cease to hold the executive positions
associated with their appointment as Directors or when the
reasons for which they were appointed cease to hold; this
is understood to occur to a proprietary Director when the
Company or business Group which he/she represents
ceases to hold a significant stake in the share capital of the
Company or to an independent Director when he/she
becomes a member of the executive team of the Company
or any of its subsidiaries.
c) In the event of infringement of any of the incompatibility
regulations or prohibitions established by law.
d) When the Appointments and Remuneration Committee
gives them a serious reprimand for failing to comply with
any of their obligations as Directors.
e) When their permanence on the Board jeopardises the
Company’s credit or reputation in the market or any other
Company interests.
• Committees within the Board of Directors.
- Delegate Committee.
The creation of a Delegate Committee is envisaged both in
the Company's Bylaws and in the Board of Directors
Regulation. This committee has a general decision-making
capacity and, consequently, all powers which correspond to
the Board of Directors can be expressly delegated to it,
except those which cannot, by law, be delegated.
However, the small size of the Board of Directors has made it
unnecessary to date to establish this committee and delegate
power to it.
- Other Committees.
The Regulation empowers the Board of Directors to create
one or more committees to take charge of examination and
ongoing oversight of any area of particular relevance to the
good governance of the Company or the monographic
analysis of a particular aspect or matter of particular
significance or importance.
The committees in existence at this time are the Audit and
Control Committee and the Appointments and Remuneration
Committee.
- Audit and Control Committee
The main function of Audit and Control Committee, created
on 30 June 2000, is to support the Board of Directors in its
supervisory and oversight duties, the most important of these
being to ensure the correct application of generally-accepted
accounting principles and to monitor the suitability and
integrity of the internal control systems followed in the
preparation of individual and consolidated accounts.
Specifically, the basic functions of the Audit and Control
Committee are as follows:
1) To designate the Auditor, the conditions of his/her
engagement, the scope of his/her professional mandate
and, if necessary, the revocation or extension of that
mandate.
2) To review the Company's financial statements, to ensure
compliance with legal requirements and the correct
application of generally-accepted accounting principles,
and to advise on amendments proposed by management
to the accounting principles and criteria suggested.
3) To serve as a communication channel between the Board
of Directors and the Auditor, to evaluate the results of each
audit and the management team's response to any
recommendations, to act as mediator in the event of any
dispute between the former and the latter regarding the
accounting principles and criteria used to prepare the
financial statements.
4) To monitor the suitability and integrity of the internal
control systems followed in the preparation of individual
and consolidated accounts
5) To oversee compliance with the auditing contract, ensuring
that the opinion regarding the financial statements and the
principal content of the Auditors' Report are written in a
clear and concise manner.
6) To review the prospectuses and periodic financial
information supplied by the Company to the financial
markets and their supervisory bodies.
7) To ensure compliance with the Internal Code of Conduct
regarding the Securities Market, the Board of Directors'
Regulation and, in general, with the Company’s governance
rules, and to make any necessary proposals to improve
compliance. It is the particular responsibility of the Audit
and Control Committee to gather information and, if
necessary, issue a report regarding any disciplinary
measures against members of the Company's management
team.
The regulations governing the Audit and Control Committee
can be found on the Company's web site.
The current composition of the Audit and Control Committee
is as follows:
Chairman:
José de Nadal Capará.
Members:
Bernard s´Jacob.
Luis F. Romero García.
The committee held four meetings in 2003.
In accordance with Law 44/2002 of 22 December, the
Shareholders' Meeting held on 28 April 2003 approved the
Board's proposal to make the appropriate amendments to
the company's Bylaws to confer Bylaw status on the above
committee.
- Appointments and Remuneration Committee
The basic functions of the Appointments and Remuneration
Committee, created on 30 June 2002, are to advise on
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appointments of Directors, members of the Board
committees and the senior management of the company and
its subsidiaries, to approve standard contracts and
remuneration scales for senior management, to define the
Director remuneration scheme, to advise on incentive plans
and to create and keep a register of the status of Directors
and senior management.
The regulations governing the Appointments and
Remuneration Committee can be found on the Company's
web site.
The current composition of the Appointments and
Remuneration Committee is as follows:
Chairman:
Manuel Herrando y Prat de la Riba.
Members:
Ramón Blanco Balín.
Aurelio Izquierdo Gómez.
The committee held five meetings in 2003.
• Directors' remuneration
In accordance with the Board of Directors Regulation, the
Appointments and Remuneration Committee is responsible
for defining the Directors’ remuneration scheme, and it must
endeavour to ensure that Director's payments are in keeping
with market rates for similar-sized companies in the sector.
This responsibility is expressly delegated to the
Appointments and Remuneration Committee within the
framework of the Bylaws, in particular in article 20, which reads
as follows:
“Director's remuneration will consist of a fixed annual
allowance and per diems for attending meetings of the
Board and of any advisory and delegate committees. The
overall amount paid to Directors by the company will be
equivalent to three percent of the consolidated group's
net income for the preceding year. The Board of
Directors is responsible for defining the exact amount to
be paid within that limit and its distribution among the
Directors.
Additionally, and independently of the payments
envisaged in the preceding paragraph, provision may be
made for Director remuneration schemes linked to the
share price or which involve shares or stock options. The
application of such remuneration schemes must be
approved by the Shareholder's Meeting, which will
determine the share price to be used as a reference, the
number of options, the strike price of the options, the
period the scheme will operate and any other conditions
deemed appropriate.
Also, subject to compliance with the legal requirements,
similar payments schemes may be established for other
company employees (whether or not they are
executives).
The remuneration envisaged in the preceding
paragraphs deriving from the status of Director will be
compatible with other professional and salary payments
to which the Directors are entitled by virtue of any
executive or advisory functions performed for the
company other than the supervision and collegiate
decision functions pertaining to their status as Directors,
which will be subject to the applicable legislation.”
In 2003, the remuneration paid to Directors was in accordance
with the criteria established by the Appointments and
Remuneration Committee.
The individual payments to each Director were as follows:
Audit AppointmentsBoard and Control and Remuneration
Allowance Committee Committee Total
GABRIELE BURGIO 36,060.60 36,060.60
MANUEL HERRANDO Y PRAT DE LA RIBA 36,060.60 11,095.56 47,156.16
RAMON BLANCO BALÍN 36,060.60 9,246.30 45,306.90
LUIS FERNANDO ROMERO GARCIA 36,060.60 4,760.48 40,821.08
JOSE DE NADAL CAPARÁ 36,060.60 7,397.04 43,457.64
RODRIGO ECHENIQUE GORDILLO 36,060.60 36,060.60
ALFONSO MERRY DEL VAL Y GRACIE 36,060.60 36,060.60
ELENA GIL GARCÍA (incoming) 24,205.06 24,205.06
JOSE Mª GARCIA (outgoing) 11,855.54 11,855.54
BERNARD S' JACOB 36,060.60 6,410.76 42,471.36
AURELIO IZQUIERDO GOMEZ 36,060.60 11,095.56 47,156.16
ALFREDO FERNANDEZ DURAN 36,060.60 36,060.60
MIGUEL RODRÍGUEZ DOMINGUEZ (incoming) 6,915.73 6,915.73
ANTHONY RUYS (outgoing) 29,144.87 29,144.87
TOTAL 432,727.20 18,568.28 31,437.42 482,732.90
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The total payment to Directors of NH Hoteles, S.A. who are
also Directors of other companies in the group (Sotogrande,
S.A., Krasnapolsky Hotels and Restaurants N.V.) was
111,367.69 euros.
The total payment to non-executive Directors for consulting
services was 72,121.45 euros.
The company complies with the recommendations given in
the Aldama Report regarding payments in the form of stock
or stock options as this type of payment is made only to the
President/CEO in his capacity as an employee of the
Company. The President is a beneficiary of the two stock
options plans approved by the Shareholders' Meeting. The
content of these plans has been registered with the Spanish
National Securities Market Commission (CNMV) since their
approval. In accordance with said plans, the President
received a total of 616,189 stock options.
The following payments were made to the eight executives
who make up the Company's Senior Management: 2,043,723
euros as salary, 847,750 euros as incentives for achievement
of objectives, and 494,800 euros as compensation in kind.
The composition of the Company's Senior Management is as
follows:
Gabriele Burgio President and CEO
Isabel Aguilera Navarro Chief Operating Officer
Jesús Ignacio Aranguren
González-Tarrío Chief Strategy Officer
Roberto Chollet Ibarra Chief Financial Officer
Gustavo Gabarda Durán Sotogrande CEO
Juan Mora Narváez Corporate Head of
Human Resources
Fernanda Matoses Corporate Legal Counsel
García-Valdés
María Cortina Aurrecochea Corporate Head of
Communication
& Institutional Relations
• Directors representing significant holdings or whose
appointment was as a result of such holdings:
• Directors who are members of the Board of Directors of
companies which hold significant stakes in NH HOTELES, S.A.
According to Company information, the only Directors of NH
HOTELES, S.A. who are also members of the Board of
Directors of companies which hold significant stakes in NH
HOTELES, S.A. are as follows:
José de Nadal currently represents Finaf 92, S.A. on the Board
of Directors of NH HOTELES, S.A. and is also President of the
former.
Elena Gil García currently represents Corporación Financiera
Caja de Madrid on the Board of Directors of NH HOTELES,
S.A. and is also a Director of the former.
• Directors of NH HOTELES, S.A. who hold office as
Directors or executives of other listed companies in the
NH Group.
Gabriele Burgio and Manuel Herrando Prat de la Riba, both
Directors of NH HOTELES, S.A., are also members of the
Board of Directors of Sotogrande, S.A.
III. RELATED-PARTY TRANSACTIONS AND INTRAGROUP
TRANSACTIONS
• Transactions involving significant shareholders.
The Board of Directors' Regulation establishes control
measures regarding this type of transaction and the Board of
Directors formally reserves for itself the knowledge and
authorisation of any transaction between the Company and
one of its significant shareholders, always following a report
by the Audit and Control Committee analysing the
transaction from the standpoint of equal treatment of
shareholders and the market conditions. Furthermore, any
Directors connected with said shareholder are obliged to
abstain from voting on such matters.
The only contractual relationship known to the Company is
between NH HOTELES, S.A. and PONTE GADEA, S.L. (which
belongs to the group of companies owned by Amancio
Ortega), and consists of leases signed on 6 February 2002
relating to the Abascal (Madrid), Pirineos (Lérida) Iruña Park
(Pamplona) and Villa de Bilbao (Bilbao) hotels, owned by
PONTE GADEA, S.L., and the lease signed 1 November 2003
with Proherre Internacional Sociedade Inmobiliaria, L.D.A. (in
which Amancio Ortega holds a stake), regarding the
Liberdade Hotel in Portugal. The general conditions of these
contracts are similar to those of other leases which the
Company has with third parties.
Transactions with companies which are significant
shareholders or which are represented on the Board of
Directors, either directly or indirectly, are as follows:
DIRECTOR(SHAREHOLDER SIGNIFICANT HOLDING (%)HE/SHE REPRESENTS)
JOSÉ DE NADAL (representing de Finaf 92, S.A.) 5.240%
ELENA GIL (representing CORPORACION FINANCIERA CAJA DE MADRID, S.A.) 5.000%
AURELIO IZQUIERDO (representing CAJA DE AHORROS DEVALENCIA, CASTELLON Y ALICANTE, BANCAJA) 5.000%
D. ALFREDO FERNÁNDEZ DURÁN (representing ALAZAN INVERSIONES 2001, SIMCAV, S.A. and KEBLAR DE INVERSIONES, SIMCAVF, S.A.) 10.270%
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All operations were performed under market conditions and
at market prices.
Another operation of this type was performed between the
companies Actividades de Hostelería Ocio Restauración y
Afines, S.L. (AHORA S.L.), Corporación Financiera Caja de
Madrid (through Sociedad de Promoción y Participación
Empresarial Caja Madrid, S.A.) and NH HOTELES, S.A. As a
result, Corporación Financiera Caja de Madrid, S.A. acquired
a 17.3% stake in Sotogrande, S.A. The transaction involved
three phases:
1. In December 2002, NH Hoteles purchased 49% of
AHORA, S.L. from Sociedad de Promoción y
Participación Empresarial Caja Madrid, S.A. AHORA,
S.L. is now wholly owned by NH Hoteles.
2. Sotogrande, S.A.'s Shareholders' Meeting in January
2003 approved the issuance of 7,232,265 new shares
for a total of 70.24 million euros, giving a nominal value
of 0.60 euros and an issue premium of 9.112628 euros,
with a final price of 9.712628 euros. A total of 94.98%
of Sotogrande, S.A.'s capital stock did not subscribe
to the rights issue, and Sociedad de Promoción y
Participación Empresarial Caja Madrid, S.A. subscribed
and paid for the 7,227,642 shares that were not taken
up by the market. Sociedad de Promoción y
Participación Empresarial Caja Madrid, S.A. purchased
4,623 shares of Sotogrande, S.A. from NH HOTELES,
S.A. in order to achieve the agreed stake; accordingly,
the NH Hoteles Group's stake reached 78.51%.
3. All of AHORA, S.L.'s assets relating to tourist hotels, golf,
leisure and hospitality were sold to Sotogrande, S.A.
The operation was duly communicated to the CNMV and was
made public via its Official Registers.
• Transactions performed by Directors and executives of the
Company and the group of companies of which the
Company forms part.
It should be noted that, in accordance with the Board of
Directors Regulation, Directors must not intervene in the
deliberation and votes concerning matters in which they have
a direct or indirect interest. Nor may Directors perform, either
directly or indirectly, professional or commercial transactions
with NH HOTELES, S.A., unless the transaction is approved
by the Board of Directors with the favourable vote of at least
80% of the Directors in attendance (excluding the Director in
question), and following consideration of a report from the
Appointments and Remuneration Committee.
No transactions were performed in 2003, other than those
indicated below, involving member of the Board of Directors,
Company executives, and other members of senior
management or any person or entity related to those persons.
Commercial relationships with companies that are indirectly
represented on the Board of Directors are as follows:
The aforementioned operations were performed at market
prices and under market conditions.
The most noteworthy transactions performed by the
Company with members of the Board of Directors of
subsidiaries or affiliates of NH HOTELES, S.A. are the
contracts totalling 335,000 euros signed with Baribal
Consultores, S.L. (in which Heraclio López Sevillano, a director
of Latinoamericana de Gestión Hotelera, S.A., has a stake) for
professional assistance in sporadic operations.
Finally, as a result of the remuneration system implemented
for the Company's senior management in 1996, executives
have a 14,319,666 euro loan with the Company due to expire
in 2004, whose expiry date may be extended annually until
2006, with adequate guarantees of payment. This loan has
been duly reflected in the Company's Annual Accounts since
1997 (when it was arranged).
• Significant operations performed with other companies
belonging to the same group.
No significant transactions took place in 2003 between NH
HOTELES, S.A. companies, where such transactions are
understood as those which have not been eliminated in the
process of drafting the consolidated financial statements and
which do not form part of the Company's habitual dealings in
terms of their objectives and conditions.
IV. RISK CONTROL SYSTEMS
The NH HOTELES, S.A. Group's Risk Control Systems may be
classified as follows:
• Financial risk control
• Strategic development risk control
• Business, operating and environmental risk control
• Other preventive measures
LENDER TYPE OF OPERATION AMOUNT
CAJA DE AHORROS CREDIT FACILITY (euros) 18,000,000
Y MONTE DE PIEDAD MORTGAGE (euros) 180,809
DE MADRID MORTGAGE (USD) 8,880,000
TREASURY PLACEMENT 6,00,000
GUARANTEE LINE 12,020,000
OTHERS 2,273,870
CAJA DE AHORROS CREDIT FACILITY (euros) 6,000,000
DE VALENCIA MORTGAGE (USD) 5,150,400
CASTELLON Y ALICANTE GUARANTEE LINE 12,000,000
LENDER TYPE OF OPERATION AMOUNT
BANCO SANTANDER CREDIT FACILITY (euros) 9,000,000
CENTRAL HISPANO MORTGAGE (euros) 17,647,938
MORTGAGE (USD) 10,656,000
TREASURY PLACEMENT 3,600,000
GUARANTEE LINE 10,948,434
OTHERS 1,626,686
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• Financial risk control systems.
The Group controls financial risks via the following
mechanisms:
1. Procedure Manual: Significant transactions performed by
the NH Hoteles Group are standardized via an internal
procedure manual that covers procurements, asset
management, treasury, monthly close, etc. Accounting
standards applicable to Spanish and foreign Group
companies have also been established.
2. Internal auditing: The internal auditing department's
ongoing work is focused largely on identifying risk
situations and assessing risk management. An annual
auditing plan has been drafted whose objectives include
ensuring the correct application of established standards
and procedures at the level of both corporate departments
and individual hotels.
3. Audit Committee: The Audit Committee reports directly to
the Board of Directors and is responsible for overseeing the
correct functioning of all of the Group's Internal Control
Systems. It also periodically analyses the businesses'
principal risks and the systems established to manage and
control those risks, and it is responsible for relationships
with the Group's external auditors.
4. Centralized Management: Finance, interest rate and
exchange rate policies are centralized under the office of
the CFO, applying a non-speculative approach.
• Strategic Risk Control Systems.
1. The NH Hoteles Group has a team of professionals who
analyse various types of strategic opportunities. The team
selects the opportunities that are most in line with the
Group's global strategy and submits them to the
Management Committee and, subsequently, to the Board
of Directors.
2. The Group identifies a number of professionals who form
an Integration Committee for each acquisition with a view
to standardizing policies and procedures in the various
critical areas (human resources, IT systems, marketing, etc).
• Business, operational and environmental risk control
systems.
1. The Management Committee meets on a weekly basis to
analyse the information contained in the scorecards drafted
by the Corporate Management Control Department with a
view to assessing the performance of operations, and to
better monitor commercial assessments obtained through
the IT system, basically via the CRM application.
It also monitors human resources policy and performance.
2. The policy of the Group in general, and its golf activities in
particular, is oriented towards the maximum respect for the
environment and, therefore, it has contracted the services
of an environmental consultation company to assess the
Group's actions and provide advice.
• Other preventive measures.
1) Occupational health and safety
The field of occupational health and safety involves
planning regarding the processes that may give rise to risks
and establishing the appropriate safety measures.
The Company delivers a number of training courses to its
own workforce and to subcontractors.
2) Insurance
The NH Hoteles Group pursues a policy of ample coverage
by signing insurance policies to cover any risks that could
affect the Group. It also pursues an ongoing policy of
revising risk coverage.
3) Risk Map
The NH Hoteles Group, through the Audit Committee, is
currently drafting a risk map that covers 14 classes of risk,
ranging from future rent commitments to the status of
hotels' operating licenses, and compliance with loan
covenants.
The plan will foreseeably be updated every six months in
order to identify possible threats to the Group that could
affect its operations.
V. FUNCTIONING OF THE SHAREHOLDERS’ MEETING
• Shareholders’ Meeting Regulation.
The Shareholders’ Meeting is the highest decision-making
body and the one through which the corporate will is
manifested. In that sense, shareholders, when legally and
validly convened at the Shareholders’ Meeting, decide by
majority vote on the matters within the powers of the Meeting
itself that are attributed to it by law or the Bylaws.
• Existence and description of the Shareholders’ Meeting
Regulation.
The Board of Directors of NH HOTELES, S.A. plans to submit
to the next Ordinary Shareholders’ Meeting, for consideration
and approval, a Shareholders’ Meeting Regulation which
establishes the rules and principles for the Meeting’s
organisation and functioning, thus complying with the
provisions of Law 26/2003, dated 17 July. Until then, the
organisation, functioning and conduct of the Shareholders’
Meeting is governed solely by the provisions of the current
mercantile legislation and the Company’s Bylaws. This text will
be posted on the Company’s web site so that shareholders
can access it from the date of publication of the notice of
Meeting.
The Shareholders’ Meeting is convened by the Board of
Directors, which approves the Meeting notice, the agenda,
the proposed resolutions submitted for approval and any
mandatory reports on specific proposals.
The Shareholders’ Meeting notice and agenda are made
available to shareholders and the public in general through
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announcements in the Spanish Official Mercantile Registry
Gazette and in several national newspapers published in the
city where the Company is headquartered (Madrid) and on
the Company’s web site.
• Shareholders’ rights regarding Shareholders’ Meetings
Each and every shareholder’s rights regarding Shareholders’
Meetings are scrupulously respected by the Company, under
the terms and conditions established in the current applicable
legislation and Bylaws.
Apart from the right to challenge corporate resolutions
adopted by the Meeting in accordance with the requirements
established by law, such rights are the right to be informed,
the right to attend and the right to vote.
To enable shareholders to be informed, the proposed
resolutions that are submitted for approval by the Meeting
and their associated documents and reports are made
available to shareholders, in the terms and conditions
established in the Spanish Corporations Law, from when the
Meeting notice is published.
The Company also does everything in its power to respond
to any shareholder’s request for information regarding the
items on the Shareholders’ Meeting agenda, either in the
days immediately preceding the Meeting or during the
Meeting itself, and the agenda expressly includes an
opportunity for shareholder questions so that all the
shareholders at the Meeting can participate if they wish; the
Chairman or another Company Director to whom he
delegates will always respond to the shareholders.
Regarding the right to attend and vote at the Shareholders’
Meeting, the Company, within the framework established by
the current applicable legislation and the Bylaws, does its
utmost to enable shareholders to exercise those rights,
especially the right to be represented at the Shareholders’
Meeting, which can be granted to any person even though
he/she is not a shareholder.
As evidence of the Company’s respect for and protection of
shareholders’ rights in relation to Shareholders’ Meetings, the
attendance list and quorum required for a validly-convened
Meeting are controlled by a prestigious company in its field
whose actions conform to accredited professional practices,
and the Board of Directors arranges the presence of a notary
public to take the minutes of the Shareholders’ Meeting.
VI. ANALYSIS OF THE DEGREE OF COMPLIANCE WITH
CORPORATE GOVERNANCE RECOMMENDATIONS
Since 2000, NH HOTELES, S.A. has included a chapter on
Corporate Governance in its Annual Report with extensive
information on the Company’s Board of Directors and
Management.
The Company respects the Corporate Governance
recommendations contained in the Olivencia and Aldama
Reports. The degree of compliance with the
recommendations of those reports is analysed below.
• Functions of the Board of Directors
Apart from the matters reserved for the Shareholders’
Meeting, the Board of Directors is the Company’s highest
decision-making body since, in accordance with law and the
Bylaws, it is responsible for the Company’s administration and
representation and assumes the general power to supervise,
as recommended by the Olivencia Report.
Specifically, the Board has the undelegable obligation to
exercise the following responsibilities:
a) approve the Company’s general strategies;
b) appoint and, if appropriate, dismiss the most senior
managers of the Company and other companies
comprising the consolidated Group;
c) appoint and, if appropriate, dismiss Directors of the
various subsidiaries;
d) identify the Company’s main risks and implement and
monitor appropriate internal control and information
systems;
e) determine the policies regarding information and
communication with shareholders, markets and public
opinion;
f) establish a policy on own shares within the framework
determined by the Shareholders’ Meeting;
g) authorise transactions between the Company and
Directors and core shareholders that may present
conflicts of interest; and
h) in general, make decisions about significant business
and financial transactions for the Company.
• Independence and composition of the Board of Directors
Complying with the recommendations of the Olivencia and
Aldama Reports, the Board of Directors of NH HOTELES, S.A.
has a large majority of external Directors and, among them, a
large number of independent Directors, taking account of the
ownership structure and the capital represented at the Board.
The Board Regulation includes an article stating that:
“To exercise the rights to co-opt and to propose
appointments to the Shareholders’ Meeting, the Board of
Directors shall strive to ensure that external or non-executive
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Directors considerably outnumber executive Directors in the
composition of the Board.
For those purposes, it is understood that executive Directors
are the CEO and the other Directors who, under any other
heading, exercise management responsibilities within the
Company or at any of its subsidiaries.
The Board shall also strive to ensure that the majority group
of external Directors includes Directors proposed by owners
of significant stable stakes in the Company (proprietary
Directors) as well as prestigious professionals who are not
related to the executive team or to core shareholders
(independent Directors).
To establish a reasonable balance between both types of
external Directors, the Board shall strive to ensure that
independent Directors outnumber proprietary Directors given
the Company’s current ownership structure, where the free
float is considerably higher than the sum of the significant
stable stakes represented by the proprietary Directors.
The provisions of this article are understood to be without
prejudice to shareholders’ legal right to proportional
representation.”
The Company’s Board currently comprises twelve Directors:
one executive and eleven external (four proprietary and seven
independent).
• Dimension of the Board of Directors
To comply with the recommendation regarding the reasonable
number of Board members to ensure each Director’s efficiency
and performance, the Board Regulation states that the Board
shall propose to the Shareholders’ Meeting the number of
Directors which, in accordance with the circumstances at any
given time, is most appropriate for the Board’s representation
and efficiency; the maximum number is fifteen.
• Decentralisation of power
The Chairman of the Board of Directors is the Company’s
chief executive although, in accordance with the provisions of
the Board of Directors Regulation, his actions must conform
at all times to the criteria and guidelines set by the
Shareholders’ Meeting, by the Board of Directors and by the
Board’s Committees. All the Company’s resolutions and
significant decisions must also be submitted beforehand for
approval by the Board of Directors or the corresponding
Control Committee. The reports and proposals from the
Board’s Committees are also required for the adoption of
certain decisions.
• Regulatory compliance
The Olivencia Report states the need to give greater
importance to the Board Secretary, reinforcing his/her
independence and stability, and highlighting his/her function of
ensuring the formal and material legality of the Board’s actions.
The Board Secretary’s functions are performed by a
prestigious attorney who is fully backed by the Board to
exercise the functions with complete independence, thereby
enhancing the transaction of business at meetings.
• Board of Directors Committees
- Delegate Committee
Because of the small number of Directors, the Company does
not have an Executive or Delegate Committee. Nevertheless,
the Board Regulation envisages the possibility of creating one
at any time when the Board sees fit and establishes, if it is
created, its composition and functioning, with the obligation
to punctually inform the Board of Directors of the business
transacted and the decisions adopted at the meetings.
- Other Committees
NH HOTELES, S.A. has the following Committees:
Audit and Control Committee
Appointments and Remuneration Committee
Both Committees comprise a minimum of three and a
maximum of five external Directors and their rules of
functioning are included as individual sections in the Board
Regulation.
• Information to the Board
The Directors have access to specific, punctual information
about the items on the agenda of the Board meetings.
Depending on its content, that information is received as
soon as possible so that the Directors can prepare their
participation in the meetings. Other information that cannot
be sent beforehand either because of its confidentiality or
because it has to be updated at the last minute is delivered
at the start of the meeting.
• Frequency and functioning of Board meetings
In accordance with the Board Regulation, the Board of
Directors holds an ordinary meeting once every two months
and, at the Chairman’s initiative, as many times as he sees fit
for the good functioning of the Company. In 2003, 10 ordinary
meetings and 2 extraordinary meetings were held.
At those meetings, the Chairman organised the debates,
encouraging all the Directors to participate.
• Directors’ appointment
Complying with the recommendations of the Olivencia
Report, the Appointments and Remuneration Committee’s
functions are to advise on the proposed appointments of
Directors and to establish a Directors’ remuneration system
and review it periodically to ensure that it is in line with the
functions they perform; its functions are subject to utmost
transparency.
The proposed re-election of Directors that the Board of
Directors submits to the Shareholders’ Meeting is also subject
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to a formal drafting process, which necessarily includes a
report issued by the Appointments and Remuneration
Committee assessing the quality of the work and the
dedication of the proposed Directors during their mandate.
All the Board’s appointments in 2003 were made in strict
compliance with the aforementioned regulations.
• Term of external Directors
Directors hold office for three years and are removed when
the period for which they were appointed expires or when the
Shareholders’ Meeting, using the power legally granted to it,
resolves to do so.
In line with good corporate governance practices, unless
there are exceptional circumstances, the Board does not
propose the early removal of external Directors.
In 2003, two Directors resigned for personal reasons: Anthony
Ruys and José María García Alonso.
• Resignation
In accordance with the Board Regulation, the Directors must
tender their resignation to the Board of Directors and resign
when they are in breach of any of the incompatibility or
prohibition clauses, when they receive a serious reprimand
from the Audit and Control Committee for failing to comply
with any of their obligations as Directors or, above all, when
their permanence on the Board affects the Company’s
creditworthiness or reputation in the market or jeopardises its
interests in any other way.
None of the aforementioned circumstances arose in 2003.
• Age of Directors
In line with the Olivencia Report’s recommendation, the Board
Regulation clearly establishes an age limit policy for Directors
which consists of the Director’s obligation to resign upon
reaching the age of 70. Directors with executive functions
must resign as executives upon reaching the age of 65
although they may continue as Directors if the Board so
determines.
In 2003, no Director reached the aforementioned age limits.
• Directors’ information
All Directors are entitled and obliged to collect as much
information as they see fit at any time in order to perform their
work well.
For that purpose, Directors have the broadest powers to be
informed of any aspect of the Company and to examine its
books, records, documents and other background
information on corporate transactions that are necessary or
appropriate for the diligent exercise of their duty.
That right to be informed extends to the various subsidiaries
comprising the consolidated Group, which right must be
exercised in good faith.
In line with the recommendations of the Olivencia and
Aldama Reports, and so as not to disturb the Company’s day-
to-day management, the exercise of the right to be informed
is channelled through the Chairman or Secretary of the Board
of Directors, who will respond to the Director’s request,
directly providing him/her with information or liasing with the
appropriate organisational bodies.
• Directors’ remuneration
In accordance with the Board Regulation, the Appointments
and Remuneration Committee is responsible for proposing,
assessing and reviewing Directors’ remuneration and for
ensuring that the remuneration is in line with market rates for
similar-sized companies in the sector.
Regarding remuneration comprising the delivery of shares,
stock options and remuneration pegged to the share price,
the Company complies with the Aldama recommendations
since only the Executive Director benefits from such
remuneration.
The remuneration received by each member of the Board of
Directors is disclosed annually in the Notes to financial
statements, broken down and itemised.
The Notes to financial statements also include the
remuneration and total cost of senior management, duly
itemised.
• Directors’ duty of loyalty
The Board Regulation has a specific section amply defining
Directors’ main rights and duties, giving detailed coverage of
conflicts of interest, the use of corporate assets, the use of
confidential information and the use for personal gain of
knowledge of business opportunities gained in the course of
their duties.
None of those situations arose in 2003.
• Duty of loyalty of core shareholders and senior
management
The Board Regulation also extends the director’s duty of
loyalty to the Company to the core shareholders and formally
reserves the knowledge and approval of any transaction
between the company and core shareholders to the Board of
Directors, following consideration of a report from the
Appointments and Remuneration Committee which analyses
and assesses the transaction from the point of view of equal
treatment of shareholders and considers whether it is being
conducted on an arm’s-length basis.
The Internal Code of Conduct also establishes the general
duties and obligations of loyalty imposed upon Directors and
Senior Management, generally regulating conflicts of interest,
the use of inside information, dissemination of price-sensitive
information and transactions with securities.
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• Shareholders’ Meetings
To enable shareholders to be informed, the proposed
resolutions that are submitted for approval by the Meeting
and their associated documents and reports are made
available to shareholders, in the terms and conditions
established in the Spanish Corporations Law, when the
Meeting notice is published.
The Company also does everything in its power to respond to
any shareholder’s request for information regarding the items on
the Shareholders’ Meeting agenda, either in the days
immediately preceding the Meeting or during the Meeting itself,
and the agenda expressly includes an opportunity for
shareholder questions so that all the shareholders at the Meeting
can participate if they wish; the Chairman or another Company
Director to whom he delegates will always respond to the
shareholders.
Regarding the right to attend and vote at the Shareholders’
Meeting, the Company, within the framework established by
the current applicable legislation and the Bylaws, does its
utmost to enable shareholders to exercise those rights,
especially the right to be represented at the Shareholders’
Meeting, which can be granted to any person even if he/she
is not a shareholder.
In line with the requirements of Spain’s mercantile legislation,
the documents relating to the items on the agenda are
available at the Company’s registered address and can be
sent free of charge to shareholders upon request. This
information has also been made available to all shareholders
via the Company’s web site.
In accordance with the latest legislative amendments, the
Board of Directors will submit a Shareholders’ Meeting
Regulation for approval by the Shareholders’ Meeting that is
to approve the 2003 financial statements.
• Transparency
Several articles of the Board Regulation govern the channels
for relations between the Board of Directors and the
Company’s shareholders to ensure the greatest transparency
in those relations.
Beyond the requirements of the legislation in force, the Board
of Directors of NH HOTELES, S.A. has undertaken to provide
markets with accurate, reliable, timely information. In
particular, the Company’s periodic financial reporting, as
stated expressly in the Board Regulation, is prepared in line
with the same principles and professional methods used for
the financial statements and, before dissemination, it is
analysed by the Audit and Control Committee, in line with the
functions attributed to same.
Furthermore, in line with the recommendations of the Aldama
Report, the Company sends the market all the information it
deems to be significant to investors, symmetrically and
equitably. In accordance with the obligations established by
the new Finance Law, the Company will file significant
information with the Comisión Nacional del Mercado de
Valores before disseminating it by other means as soon as the
event becomes known or as soon as the decision is adopted
or the agreement or contract with third parties is signed. The
Company strives to ensure that the significant information it
discloses is truthful, clear and complete at all times.
• Corporate governance information
Every year, NH HOTELES, S.A. includes a Corporate
Governance Report in its Annual Report and in the Company’s
web site, to inform shareholders and investors in general.
• Periodic financial reporting
All the periodic financial information, including annual
reporting, is prepared under the same principles and
methods applied in the financial statements and is analysed
by the Audit and Control Committee before it is released.
• Information via the Internet
To comply with its reporting obligations, NH HOTELES, S.A.
posts its most significant events on its web site to inform
shareholders and investors in general. The corporate web site
includes information and significant documents relating to
corporate governance and aims to become a vehicle of
communications with shareholders, providing them with
updated information about all aspects that may be significant.
Any person who accesses the corporate web site can view,
among other information, current and past share prices,
financial information, the Board of Directors Regulation, the
Shareholders’ Meeting Regulation, the Company Bylaws, the
resolutions adopted at the last Shareholders’ Meeting and
other information of interest to shareholders and investors.
• Independence of the external auditor
Through the Audit and Control Committee, the Board of
Directors has stable, professional relations with the
Company’s auditor, strictly respecting the latter’s
independence, in compliance with the recommendations for
that purpose in the Olivencia Code. Accordingly, the Audit
and Control Committee monitors situations that may
jeopardise the independence of the Company’s external
auditors and, specifically, it supervises the percentage of fees
paid to the auditor out of the total revenues of the audit firm.
In accordance with the legal requirements in force, the
Company’s annual report also discloses the fees paid to the
external auditor, including those relating to services other
than auditing.
• Accounting quality
The Board of Directors of NH HOTELES, S.A. makes every
effort to ensure that the financial statements drafted by it are
submitted to the Shareholders’ Meeting with a clean auditors’
report.
This Annual Corporate Governance Report was approved by
the Company’s Board of Directors on 31 March 2004.
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1) FUNCTIONS, COMPETENCIES AND OPERATION
OF THE AUDIT COMMITTEE
The main function of Audit and Control Committee is to
support the Board of Directors in its supervisory and oversight
duties, the most important of these being to ensure the
correct application of generally-accepted accounting
principles and to monitor the suitability and integrity of the
internal control systems followed in the preparation of
individual and consolidated accounts.
As a result of the entry into effect of the new regulations on
transparency and corporate governance, the Committee's
regulation is now part of the Bylaws. Accordingly, Article 25
of the Bylaws, whose introduction was approved by the
Shareholders' Meeting on 28 April 2003, reads as follows:
1. "Within the framework of the Board of Directors, in
accordance with the requirements established in Article 141
of the Spanish Corporations Law (Ley de Sociedades
Anónimas), an Audit and Control Committee shall be
established, consisting of a minimum of three and a
maximum of five Directors appointed by the Board of
Directors. The majority of the members of that Committee
must be non-executive Directors.
2. The Chairman of the Audit and Control Committee shall be
appointed by the Committee itself from among its non-
executive Directors and must be replaced every four years,
with the possibility of re-election after a period of one year.
3. The Audit and Control Committee shall have, at least, the
following competencies:
a) To inform the Shareholders' Meeting, via its Chairman,
on questions raised in the Meeting by shareholders on
matters that fall under the Committee's scope of
competence;
b) To propose to the Board of Directors, to be submitted
to the Shareholders' Meeting, the appointment of the
Auditor referred to in Article 204 of the Spanish
Corporations Law and, where appropriate, the
conditions of his engagement, the scope of his
professional mandate and the revocation or renewal of
the appointment;
c) To supervise the internal auditing units;
d) To have knowledge of the financial reporting process
and the internal control systems;
e) To liaise with the Auditor in order to receive
information regarding those matters that may
jeopardize the independence of the Auditor and of
any other persons or entities connected to the auditing
process, and to receive information and maintain
communications with the Auditor as envisaged in
auditing legislation and auditing standards.
4. The Committee shall meet at least once per quarter and as
often as is deemed appropriate, if convened by the
Chairman, upon the latter's own decision or in response to
a request by two members of the Committee or by the
Board of Directors.
5. The Audit and Control Committee shall be validly
constituted provided that at least half of its members are
present or represented, and its resolutions shall be
adopted by the majority of members present or
represented, the Chairman having a casting vote.
6. The Board of Directors may elaborate upon and complete
the above regulations in the Board of Directors Regulation,
in accordance with provisions of the Bylaws and the Law."
2) COMPOSITION OF THE AUDIT COMMITTEE
The Audit and Control Committee is composed of the
following Directors:
Chairman José de Nadal Capará Proprietary
Director Bernard s’Jacob Independent
Director Luis F. Romero García Independent
3) RELATIONSHIPS WITH EXTERNAL AUDITORS
The parent company of the NH Hoteles Group has been
audited since 1988. The principal auditors since then are as
follows:
YEAR AUDITOR
1986 Peat Marwick
1987 Peat Marwick
1988 Peat Marwick
1989 Peat Marwick
1990 Peat Marwick
1991 Peat Marwick
1992 Peat Marwick
1993 Arhur Andersen
1994 Arthur Andersen
1995 Arthur Andersen
1996 Arthur Andersen
1997 Arthur Andersen
1998 Arthur Andersen
1999 Arthur Andersen
2000 Andersen
2001 Andersen
2002 Deloitte & Touche
2003 Deloitte & Touche
The 2003 Consolidated Financial Statements were audited by
two prestigious independent firms:
• Deloitte & Touche is the principal auditor and, as such,
it issued the audit opinion on the Consolidated
Financial Statements and verified those of the
companies integrated into the Spain/Portugal, Mexico,
Mercosur and Sotogrande Business Units, which
represent 72% of assets and 53% of revenues.
• PriceWaterhouseCoopers audited The Netherlands /
Belgium, Germany and Austria/Switzerland Business
Units, which account for 28% of assets and 47% of total
revenues.
Deloitte & Touche (D&T) was appointed as the Group's
principal auditor for one year at the Shareholders' Meeting of
NH Hoteles held on 28 April 2003, and as auditor of the
aforementioned Business Units at their respective
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Shareholders' Meetings held in the first half of 2003. Deloitte
& Touche has been the Group's principal auditor since 2002,
even though the partner in charge of the audit has changed.
The total fees received by the firm for its professional auditing
services in 2003 amounted to 657,514 euros.
PriceWaterhouseCoopers (PWC) was also appointed as
auditor of the aforementioned Business Units for one year at
their respective Shareholders' Meetings during the first half
of 2003. PriceWaterhouseCoopers has been the auditor for
the Group's Dutch, Belgian and Swiss companies since 1998
and the for German and Austrian companies since 2002. Its
total fees for auditing services in 2003 amounted to 636,014
euros.
4) CONTENT AND RESULTS OF THE AUDIT
COMMITTEE'S WORK
The Audit Committee held four meetings in 2003 plus an
additional three meetings in the first quarter of 2004. The
business transacted by the Committee was as follows:
a) Analyzing and assessing, together with the external
auditors, the 2002 and 2003 Financial Statements, and
confirming that the auditors' opinion was issued under
conditions of absolute independence.
b) Reviewing the public financial information on a periodical
basis prior to its analysis and approval by the Board of
Directors in order to ensure that the information is reliable
and transparent and has been prepared by applying
standardized accounting principles and criteria.
c) Monitoring the Internal Audit Plan for 2003, examining its
conclusions and implementing any corrective measures
required.
d) Identifying and analyzing the various types of risk to which
NH Hoteles' activities are subject. At the date of preparing
this report, considerable progress had been made in the
classification of those risks and the establishment of various
procedures to reduce their impact.
e) Monitoring the project to implement a new IT system
common to all business units, which has enabled the
following:
• Integration of the customer database
• Unification of the Group's human resources
management
• Introduction of unique budgetary models and
periodical management reporting forms
• Implementation of a front-office program common to
all hotels
• Creation of shared purchasing platforms
• Centralization of the Group's financial management
f) Periodically assessing the extent of compliance with the
saving plan designed by management and its impact on NH
Hoteles' earnings. Savings amounted to 9.3 million euros
(i.e. 23.8 million annualized), exceeding the target of 8
million.
g) Supervising the changes made to the Company's web site
to adapt to amendments in legislation regarding
transparency and corporate governance.
h) Examining the Annual Report on Corporate Governance
prior to submitting it to the Board of Directors for
examination and approval, with particular emphasis on
analyzing the register of the status of Directors and
executives.
In this connection, the Committee assessed the integrity of
transactions where there might be any possibility of conflict
of interest with any of the Group’s Directors or executives,
and extended this analysis to transactions where, though
technically not constituting a conflict of interest, the
Committee considered that such analysis was advisable.
This is the case of the transactions with the Cathnier, S.L.
firm of architects which is managed by the architect Mrs.
Grenier, who is Mr. Gabriele Burgio’s wife, for the design,
planning and works management on certain projects,
mainly nhube and Fast Good.
The Committee observed that the contracts were arranged
on an arm’s-length basis and that they had also been
analysed by the Appointments and Remuneration
Committee.
i) Valuing the goodwill resulting from acquisitions of other
companies, especially the goodwill booked following the
purchase of German group Astron GmbH. As a result, a
special provision was booked for almost 40 million euros to
cover the potential risks derived from NH Hoteles' activity
in Germany and Austria.
j) Identifying, in collaboration with the Group's external
auditors, the principal changes that the introduction of
International Accounting Standards (IAS) may imply in NH
Hoteles' financial statements. In this respect, the Audit
Committee has performed a preliminary assessment of
those effects and proposed a plan of action which, in
accordance with the criteria of maximum prudence applied
in the Group's financial management, has been approved
by the Board of Directors.
The approved proposal means that, again in accordance with
the criteria of maximum prudence, only part (still to be
defined) of the appreciation of fixed assets (excluding
Sotogrande's plots intended for sale) will be booked. The
market valuation assigned to each fixed asset was determined
by a prestigious independent appraiser.
The first financial statements to be prepared under
International Accounting Standards will be those for 2005;
therefore, on 31 December 2004, NH Hoteles will have available
a set of financial statements prepared in accordance with the
IAS with the aim of providing a baseline for comparison with the
financial statements as at 31 December 2005.
5) PRIORITIES FOR 2004
The Audit Committee's priorities for 2004 focus on assessing
the risks referred to in paragraph d) above, monitoring the
plans to implement new IT systems and cost control and
saving plans, and performing the definitive analysis of the
impact on NH Hoteles' financial statements of the
implementation of International Accounting Standards on 1
January 2005.
In conclusion, it should be highlighted that, in performing the
above-mentioned functions, the Committee has had access,
wherever it was considered useful, to all the external
professionals (auditors, appraisers and advisers) and
members of financial management, internal auditing and
management control that it deemed necessary.
2003
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Design: Álvaro Reyero
Production: see the change
Translation: Versalia Traducción
Printing: Novatesa, S. L.
D.L.: B-18897-2004