Letter from the President 1 NH Annual Report 2006 7

Dear shareholders, It is my pleasure to address all of you yet another year to give an account of the main events that have occurred during 2006 and go into great detail on the future strategy of the company. In 2006 we took a further step in the development of growth mainly in Európe, where NH Hoteles already has more than a significant presence. Between last year and April 30, 2007, the number of rooms of the chain has grown by 25%. 81 hotels and 12,242 rooms have been added during that time, thanks in part to two important operations performed in Italy. During the past year we came to an agreement whereby NH Hoteles would take control of the first Italian hotel chain, Jolly Hotels, which has a wide presence in the main cities of the country. The integration of Jolly Hotels into the Italian subsidiary of NH Hoteles was noteworthy due to the geographical complementary nature, the product and the existing strategy between both companies. Likewise, Jolly Hotels provides NH Hoteles with the entry into two new markets such as the United States and France, through the hotels that the company has in New York and Paris. Furthermore, NH Hoteles came to an agreement to acquire Framon, the fifth largest hotel company in Italy by the number of establishments, with a significant presence in Sicily. These two agreements place NH Hoteles as the main hotel company in the Italian market. In accordance with the Italian acquisitions, we have initiated a three-year strategic plan to double the results of the company and reach 71,000 rooms. With the initiation of this strategic plan, we will reinforce the leadership of the group in the average segment in Europe, specifically the organic growth investments in the main markets of the continent where we already have a significant presence. The Strategic Plan, which involves an investment of € 1,300 M, will be financed with the resources generated by the company's activities, as well as by the Capital Increase at a value of € 250 M that the company completed, with the unanimous support of its shareholders, in March 2007. After the latest additions to the chain, we are proud to say that as of April 2007 the company is operating 335 hotels and 48,825 rooms in 21 countries in Europe, the Americas and Africa. In addition, it has 35 portfolio projects that will mean more than 6,000 rooms, mainly in countries like Italy, The Netherlands, Spain and Mexico.   In line with the European expansion carried out during the last 6 years by the chain to situate itself among the main urban hotel chains, the visibility of the firm has not stopped growing until it has become an indisputable reference in the hotel industry. Regarding the 2006 results, it has been a very satisfactory year for the group’s hotel activities, which recorded an important improvement with 30.6% net profit increase in comparison to the previous year. This result was obtained thanks to a 13.4% increase in the hotel's income, up to € 1,021.57 M. The improvement of occupancy and an increase in the ADR (average price) of 8.7% contributed to the sales’ growth. The RevPar (income per available room) rose by 9.7%. The EBITDA (operating profit) from the hotel activities rose to € 161.80 M and showed an increase of 27.2% in comparison to 2005. In 2006, not only has the company’s growth drive been obvious, but also its special attention to containing costs, which is reflected in the group's good results. NH Annual Report 2006 8 Gabriele Burgio Chairman & CEO of NH Hoteles

The company’s sales, including the division of the Sotogrande real estate, increased to € 1,090 M, and the net profit of the consolidated group remained stable, reaching  62.45 M. The smaller contribution of the income from Sotogrande to the net profits of NH Hoteles is explained by the sale of large plot of land in 2005.   One of the most representative values of the group is the more than 19,000 professionals who currently work at NH Hoteles. In the previous period, the company continued making efforts in training its employees. More than 16,000 professionals from the group participated in 233 training programs that NH Hoteles offered in 2006. One year later, we have measured the satisfaction index of the employees, since we know the repercussion this has on the quality of the service we provide. The level of satisfaction increased significantly over 2005, a characteristic of the commitment that the company has in this regard.      A Corporate Responsibility Department was created last period, which concentrates the Company’s contribution into sustainable development, for facing social and environmental challenges posed by the global economy. This year, we invite you to familiarise yourself with the first Report on Corporate Responsibility of the company, which you can find in the leaflet contained in this report.   We changed the company’s image in 2006 to reflect the current reality of the group. NH Hoteles is becoming a company for business and pleasure, and that is why we have defined a new colour for a new market. As far as pleasure, at NH Hoteles we have continued with the expansion in the resorts segment, where during 2006 we added vacation complexes in countries such as Cuba and Italy and currently we have more than 2,000 rooms we are planing to reach across the Dominican Republic, Mexico and Italy. At NH Hoteles, we are convinced of the importance of continuing to innovate, and with this task in mind, we opened in 2006 the first hotel of a new and exclusive category of hotels called Nhow, based on the new philosophy of living contemporaneously and creatively. Other concepts already consolidated are the developments with the collaboration of the consultant from the Ferran Adria Company. Nhube has more than 20 open spaces distributed over Spain, Germany, Austria, Holland and Mexico. In addition, Fast Good, quality fast food offer, has already seven opened restaurants and several projects in Spain. The positioning of Fast Good as a quality brand has been supported over the past year with the significant agreement that NH Hoteles signed with a top spanish airline to serve its products on flights.   Another innovation has been the development of the Website, which has incorporated novel functionalities, so that users may find a more practical and useful environment when making their reservations. One of the successes of the past period is our NH World loyalty program, which exceeds 450,000 members since its beginnings two years ago. It is worth pointing out that more than half of its members have remained active over the last twelve months. Finally, with respect to Sotogrande I would like to highlight the Take-Over Bid that the Group made for the shares in the real estate company which it did not control, and which ended with an increase in the shareholding in NH Hoteles of 98%. The operation was carried out in order to proceed with a restructuring of assets to concentrate the Group’s real estate-tourism activities in Sotogrande. In 2006 we built a solid base to continue growing in the coming years. All of this would not have been possible without the trust of our partners, shareholders, customers and especially our employees who with their daily dedication have led to NH Hoteles being what it is today, a great multinational company. A final thanks to all of those who have contributed to achieving all these goals. In 2007 we want to continue to have all of your support to continue consolidating this profitable project - NH Hoteles. Thank you very much Gabriele Burgio Chairman & CEO of NH Hoteles NH Annual Report 2006 9