Dalata sees strong H1, but Brexit causes concern

Dublin

Just over a month ago, Dalata—Ireland's largest hotel operator with more than 7,500 rooms across 40 owned, leased and managed hotels—announced that it was putting its expansion plans for the UK on hold following the June Brexit referendum

Now, the company is claiming that the departure of the UK from the European Union could affect the planned pipeline of new venues in Belfast, Northern Ireland, and beyond.

Dalata's Numbers

With ever-growing demand for hotels in Ireland—and Dublin in particular—it's no surprise that Dalata's numbers are strong. The company's revenue increased 33 percent in the first half of the year to €130.1 million. Earnings improved by 50 percent to €34.3 million during the period, excluding acquisition costs and revaluation gains and losses. Occupancy rates during the six months to the end of June improved to 79 percent while revenue per available room increased to €74.90.

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The company, which recently sought to acquire the operating interest in the former Burlington Hotel in Dublin, also announced it had purchased the freehold interest of the Maldron Hotel in Cork for €8.1 million.

"Trade has been ahead of our expectations with the Irish hotel market performing exceptionally well in the period," CEO Pat McCann said. "The continued recovery of the Irish economy has allowed us to benefit strongly from the growth in RevPAR in Dublin and the other large cities in regional Ireland." 

Most of Dalata's rooms (3,196, or more than 48 percent) are in Dublin, and the company is looking to add a further 1,000 rooms to its portfolio in the capital by 2018. Just over 26 percent of its rooms are in the UK, while less than a quarter are in other Irish regions. “We had plans to develop in the UK and we still feel that will happen, but it would be unwise to make any decisions until we get some indication what’ll happen in the UK,” McCann said in July. 

The firm has new hotels under construction in Dublin, Belfast, and Cork. While Dalata’s expansion plans for the UK are on hold until the long-term effects of the Brexit become clearer, McCann said that there is enough growth momentum from the company's Ireland operations to support progress for the next few years. He also said that Dalata has seen "no initial negative effects" on the company's inbound business from the UK or its existing operations in Britain since the June 23 vote.

The Brexit Effect

Still, this doesn't mean that a positive future is set in stone. A weaker pound could deter UK visitors from traveling to Ireland, which is part of the Eurozone. Northern Ireland, however, still uses the pound, so that country's hotel scene could see a boost from UK visitors who don't want to exchange currency. A weaker pound could also attract international visitors for whom the euro is too expensive.

In Belfast, Dalata owns the Maldron at Belfast International Airport and the Clayton Hotel on Ormeau Avenue, and is building a new hotel at in the city center. 

And while the company's Irish hotels are doing well, the Northern Irish properties are in a more precarious position. The Clayton Hotel, for example, saw "significant revenue" last year from business generated in the city that was not repeated in 2016, and RevPAR in Dalata's Northern Ireland hotels has already fallen 11.2 percent on a like-for-like basis to £55.10.  

While Britain's exit from the European Union remains a "significant threat" to Dalata's UK business, McCann said that the company would adapt to the new reality. "In business, there are certain things you can control and certain things you can't," he said. "This is one of those things you can't."

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