1 CONSOLIDATED FINANCIAL STATEMENTS 2004 NH Hoteles has continued its strategy aimed at creating a strong Pan-European brand. Thus, this year NH has moved into the hotel business in Italy and has just signed agreements to start hotels in two more countries, the United Kingdom and Romania. Furthermore, negotiations have begun through Sotogrande, S.A. to expand its activity in golf and luxury hotels in Europe (Italy) and in the Caribbean. At the end of 2004 NH Hoteles was already present in 18 countries, with 241 hotels and 35,022 rooms. 30% of the rooms in the chain are owned, 59.3% are leased and 10,7% are operating under management agreements. Since 1^st January 2004, 6 hotels, with a total of 830 rooms have been opened. Four of these are in different urban areas in Spain, one is in Sotogrande and one in the Italian city of Mestre, near Venice. NEW PRODUCTS Given the kind of business the Group is engaged in, no capital expenditures have been incurred in Research and Development. The expansion of the nhube areas in NH hotels is now a fact. After the success of the first nhube, opened in 2003 in the NH Balboa in Madrid, in 2004 this innovative idea has been consolidated and five new nhubes have been opened, at the Hotel NH San Sebastián de los Reyes on the outskirts of Madrid, in NH Viapol in Seville, in NH Cartagena, in NH Vienna Airport and in NH Frankfurt Airport. A further 12 new nhubes are planned to be opened in 2005, in hotels in The Netherlands, Germany, Mexico and Spain. This was also the year the Spa Elysium began operating, to consolidate the offer of leisure and relaxation for our guests, aimed at sport, health and innovation. In the area of cuisine, in 2004, the first Fast Good was opened. It offers simple, innovative, top-quality fast food. This new product has, like the nhube, come out of cooperation between Ferrán Adrià and NH Hoteles. Furthermore, the implementation of the back-office system in all the business units has been completed. Work has now begun, based on the standardisation of the system and work methods, on centralising administration so as to improve productivity, in particular in cities where we have a large number of hotels, such as Madrid (where the prototype has been developed), Barcelona… CONSOLIDATED DIRECTORS' REPORT

2 RESULTS The most positive figure for 2004 is that hotel occupancy rates have improved over the board in all the markets where NH Hoteles is present, in Europe and in Latin America. The growth of Revenue per room available has been confirmed in the fourth quarter of 2004, in Central Europe, be it in the Benelux, Switzerland, Austria or Germany. The key lies in the improved average levels of occupancy while at the same time, the average daily price has remained steady or has fallen slightly. In Spain the first part of 2004 was affected significantly by the terrorist attacks in Madrid on 11^st March. However, a return to normality was confirmed in the third quarter of the year. The occupancy rates at NH hotels improved over the year. However, the general price situation remains strained because of increased competition, especially in Madrid and Barcelona. NH Hoteles moved forward in its expansion into Italy. A project has been signed to open a hotel in 2006, with 256 rooms under lease, apart from the hotel opened recently in Mestre, just a few minutes from the centre of Venice. This hotel has already attained a level of occupancy and average price in line with NH hotels in cities such as Madrid, Barcelona and Brussels. Italy is one of the group's operating units with great growth potential. Including the activity of non-comparable hotels, opened, new or renovated in 2003 and 2004, the chain's sales fell back by 1.7% and EBITDA decreased by 11.3%, due above all to the effect of hotels sold in 2003. If we remove the impact of the hotels sold in 2003, sales in the hotel business were up by 4.5% and EBITDA grew by 1.4%. The Cost Savings Plan has had excellent results. Savings achieved in 2004 in comparable hotels amounted to €38 million, better than the target of €30 million set for that year. In total hotels, operating costs per room decreased by 7%, in spite of openings, increased occupancy and cost inflation. 2004 has been a record-breaking year for Sotogrande, which recorded an increase of 73% in sales and 122% in EBITDA. Apart from recurrent sales, in April a large plot was sold and in the fourth quarter the first results of Ribera del Marlin, a project shared 50% each by Sotogrande and PonteGadea, began to be recorded in the accounts. It will also contribute with the margin of the construction, property development and sales and distribution activities between 2005 and 2007. For 2005 NH expects to improve room revenues in all business units with the main focus on retaining and capturing clients on stable ADR and also with an important growth coming from the contribution of non-comparable hotels. The year has started with positive trend in all areas, but it is too early to anticipate any guidance for the full year. What is important is that NH continues working in containing operating expenses and obtaining economies of scale from the new openings. Further cost savings might be achieved with all departmental functions working in improving efficiency. In 2005, NH is back on track with expansion opportunities CONSOLIDATED FINANCIAL STATEMENTS 2004

3 CONSOLIDATED MANAGEMENT ACCOUNT (million euros) NH HOTELES, S.A. & LOSS ACCOUNT AS AT DECEMBER , 31^st 2004 2003 04/03 M Eur. % M. Eur % Var. % Revenue Hotel Operations 855.32 89.7% 870.46 93.9% (1.7%) Revenue Real Estate Operations 98.44 10.3% 56.88 6.1% 73.1% TOTAL REVENUE 953.76 100.0% 927.34 100.0% 2.8% Real Estate Costs (16.68) (1.7%) (15.39) (1.7%) 8.4% Direct Management Expenses (588.65) (61.7%) (602.38) (65.0%) (2.3%) MANAGEMENT PROFIT 348.43 36.5% 309.57 33.4% 12.6% Leases and property taxes (168.42) (17.7%) (154.24) (16.6%) 9.2% EBITDA 180.01 18.9% 155.33 16.8% 15.9% Amortisation (76.97) (8.1%) (79.44) (8.6%) (3.1%) Amortisation Dif. Cons. STG (3.36) (0.4%) (2.60) (0.3%) 29.2% EBIT 99.68 10.5% 73.30 7.9% 36.0% Financial result (20.14) (2.1%) (29.94) (3.2%) (32.7%) Equity-accounted affiliates (0.55) (0.1%) 0.83 0.1% (166.3%) Extraordinary results 0.18 0.0% 28.36 3.1% (99.4%) EBT 79.16 8.3% 72.55 7.8% 9.1% Corporate income tax (22.64) (2.4%) (16.92) (1.8%) 33.8% PROFIT before Minority Interests 56.52 5.9% 55.63 6.0% 1.6% Minority interests (14.39) (1.5%) (4.77) (0.5%) 201.7% NET PROFIT 42.13 4.4% 50.86 5.5% (17.2%) This Consolidated Operating Account is drawn up using criteria for grouping hotel operations which are not always the same as the accounting criteria used in the Consolidated Annual Accounts of the NH Hoteles Group. SHARES AND SHAREHOLDERS During 2004, the Group has carried out several operations to purchase (2,203,530 shares) and sell (2,358,042 shares) its own shares, within the limits stipulated by law and has made the required notifications to the National Securities Market Commission. The result from this operations has been a profit of 1.03 million euros. At the year end, NH Hoteles, S.A. held 50,000 of its own shares, representing 0.04% of its share capital at a total cost of 0.49 million euros. In compliance with accounting rules governing the holding of own shares, the Group has reversed provisions by 0.26 million euros. After this reversal, the own shares held, are stated at their book value of 5.19 euros per share. Furthermore, the Company, in compliance with Section 79.3 of the current Companies Act, has considered 4,400,000 shares that are being used as cover for the hedging option plans on shares granted to employees, as own shares. During 2004, 155,845,027 shares in NH Hoteles, S.A. were traded on the Continuous Market (227,932,416 in 2003). This represents 1.30 times (1.91 times in 2003) the total number of shares into which the share capital is divided, with an average daily rate of trading of 620,896 shares on the Continuous Market, 32% down on the previous year. CONSOLIDATED FINANCIAL STATEMENTS 2004

4 CONSOLIDATED FINANCIAL STATEMENTS 2004 0 254,654 1994 100,000 109,713 1995 207,116 1996 439,104 1997 497,391 1998 380,789 1999 577,128 2000 808,156 2001 693,650 2002 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 1,000,000 911,729 2003 620,896 2004 662,240 Until 31/01/05 0 0.7 1994 1 0.26 1995 0.35 1996 1.66 1997 4.97 1998 4.38 1999 7.12 2000 10.02 2001 7.8 2002 2 3 4 5 6 7 8 9 10 8.1 2003 7.47 2004 6.57 Until 31/01/05 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11 AVERAGE DAILY TRADING IN SHARES 1994-2005 AVERAGE DAILY TRADING IN MILLION EUROS 1994-2005 The charts below show the trends in share prices and market capitalisation in recent years.

5 CONSOLIDATED FINANCIAL STATEMENTS 2004 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 12/99 03/00 06/00 09/00 12/00 03/01 06/01 09/01 12/01 03/02 06/02 09/02 12/02 03/03 06/03 09/03 12/03 03/04 06/04 09/04 12/04 NH HOTELES IBEX TREND NH HOTELES - IBEX DECEMBER 1999- JANUARY 2005 0 213.83 1994 100 210.66 1995 213.67 1996 410.66 1997 1,017.69 1998 916.76 1999 1,565.88 2000 1,335.18 2001 1,250.31 2002 200 300 400 500 600 700 800 900 1,000 1,088.94 2003 1,166.64 2004 1,255.1 Until 31/01/05 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800 CAPITALISATION 1994-2005 (IN MILLION EUROS) The average rate for the year 2004 has been 9.10 euros, compared to 8.88 euros the year before, with a peak of 9.98 euros in January and a minimum of 8.37 in May. The top price in 2003 was 10.42 euros and the minimum 7.00 euros.