1   Letter from the President Dear Shareholders, Once again I am writing to inform you of the main events that took place in the company last year, as well as our business performance and the outlook for the future. After three years integrating the chains acquired in Europe and Latin America, years in which NH Hoteles identified all of the synergies, advantages and cost saving opportunities, in 2005 we once again took up the company’s expansion strategy with renewed enthusiasm. Accordingly, in 2005 the company opened a total of 20 hotels with 2,329 rooms and an additional 6 hotels with 1,221 rooms in the first quarter of 2006, bringing the total number of hotels now open to 262 or 38,054 rooms. In addition, at March 31, 2006, NH Hoteles had signed contracts for a further 18 establishments and 5 extensions with 3,455 rooms. letter from the president 4 Gabriele Burgio, Chairman & CEO of NH Hoteles

5 NH Obradoiro - Santiago de Compostela (Spain)

6 Letter from the President Another highlight of 2005 was the addition of several resorts to our portfolio, mainly in the Caribbean, as well as important real estate businesses, similar to the Sotogrande model. Specifically, NH Hoteles signed a contract for a resort with almost 700 rooms in Cayo Coco in Cuba, which is a 5-star “all inclusive” type operation. Likewise, similar projects to Sotogrande were added in Cap Cana (the Dominican Republic) and Riviera Maya (Mexico), where luxury real estate business, golf and an exclusive hotel offering, such as can be seen at Donnafugata- Sicily (Italy), are the main features.To the latter, we have to add the Santa Bárbara- Castellón complex (Spain), which Sotogrande is planning to undertake with local partners. With these new additions, the number of rooms operated by NH Hoteles under management contracts has gone from 11% of total rooms to 14%. In absolute terms, the chain now has 40% more rooms under management contract. This data demonstrates owners’ growing confidence in the NH Hoteles’ product and management, as they provide most of the investment and place their long-term trust in us. Also in 2005, we won the support of first-class partners, such as in the case of Banca Intesa, one of Italy and Europe’s most important financial entities, which provided €50M to obtain 49% of the equity in NH Italia. This tremendous support will enable growth in Italy, one of the chain’s priority objectives, with the help of one of the main driving forces behind the country’s economy. With regard to results, hotel performance was very satisfactory, with improvements in all business units. Particularly noteworthy events include recovery in Germany, where we experienced magnificent improvements and expect to see profits in 2006, and an improvement in our market share in Spain. RevPAR (revenue per available room) rose 4.3% in 2005, mainly as a result of a 5.2% increase in occupancy. The group’s total turnover was €984.6M, with hotel revenues rising 4.6% to €901.2M, and EBITDA increasing 13.3%. With regard to the Sotogrande real estate business, it should be pointed out that after a record year in its 43-year history in 2004, revenues in 2005 were €83.4M, down 25.6% over the previous year, however, committed sales yet to be booked at December 31, 2005 totalled €80M compared to €64.8M in 2004. NH Hoteles now has over 14,000 employees and the fact that we are comprised of 108 different nationalities is significant proof that we are indeed a true multinational. Furthermore, according to the latest Employee Satisfaction Survey, four out of every five employees would recommend NH Hoteles to work for. At NH Hoteles we place special emphasis on training, which has become a key element in integrating employees. In 2005 alone, over 240,000 hours of training were given at the NH University. “In 2005 we once again took up the company’s expansion strategy with renewed enthusiasm” “At NH Hoteles we have continued to innovate, as every year, in an endeavour to anticipate customers’ needs and offer a unique product”

7 At NH Hoteles we have continued to innovate, as every year, in an endeavour to anticipate customers’ needs and offer a unique product. Specifically, we can mention the creation of a new hotel category, “nhow”, which features the newest trends and the latest in Italian design, with the best quality hotels situated in the world’s most fashionable locations. Moreover, we have developed the “Fast Good” concept by creating the “Fast GO” shop, with products and recipes designed by prestigious chef Ferran Adriá, which can be purchased and cooked at home. And, with over 200,000 members, our guest loyalty programme “NH World” continues to be a great success among clients. Another important highlight of 2005 was the boom in Internet sales, which increased three-fold. In 2006, we expect to see an improvement in business, mainly as a result of an increase in average rate, better product positioning and an improved sales force, in addition to the recovery of the German economy. I would like to take this opportunity to thank all of our partners, shareholders and clients for their confidence in the management team and their support of the company, and also to all company employees, without whose dedication we would not have been able to achieve these accomplishments. In 2006, we will continue to orientate our managerial efforts towards achieving an ever more profitable and consolidated company. Yours faithfully, Gabriele Burgio NH Den Haag – The Hague (The Netherlands)