Dalata keeps faith with UK

Maldron Hotel Newcastle
Maldron Hotel Newcastle

Dalata’s deputy CEO told us that the group was very much focused on growth in the UK as it expanded outside Ireland.

The company said that its institutional investors had continued to show interest in hotels, ensuring that the groups’ pipeline was maintained.

Deputy CEO Dermot Crowley told us: “Dublin and regional Ireland has been more difficult for us in 2019 than anticipated, because of the 4.5% VAT rise, but we have managed to be resilient through a lot of hard work.

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“Our cash generation is very strong and we’re relatively lowly geared. Our portfolio is very young and over 60% of our rooms are either newly refurbished or newly built. Although a lot of supply is coming into Dublin, it’s not all in the four-star sector: 2,000 rooms are in the budget sector, 2,000 are aparthotels.

“We have seen no change at all in terms of interest from our institutional investors, the appetite for hotel investments is still strong  - hotels have stepped into the retail space for investors. Brexit isn’t as prominent a conversation as it has been, the UK has now left the EU.”

The comments were made as the company reported full-year adjusted Ebitda up 12.8% to €134.8m with revpar down 0.7%. Dalata saw revenue growth of 9.3% to €429.2m. The group has a pipeline of around 2,871 rooms due to open between 2021 to 2023, with the UK business expected to have a similar number of rooms to Dublin by 2022. During the year 367 new rooms were added to the portfolio, in London and Cambridge. Another 941 rooms were added to the pipeline in Dublin, Liverpool, London and Birmingham.

Crowley said: “It’s never easy to find sites. We’re more high profile than before and, because we’re straight with the agents and because we’re seen as a more credible partner because of what we’ve done before, they now bring us good, viable opportunities.”

Looking ahead, the company said that trading across its three regions was in line with its expectations for the first quarter of 2020. It said: “We note the combination of positive strong economic projections for Ireland and the projected increase in rooms supply for Dublin. Our modern, well located, well invested portfolio of Dublin hotels is strongly positioned to compete with new supply.

“We are building a strong track record of operational outperformance in our UK business, reinforced by our decentralised model. We expect our existing pipeline to open within the timelines advised. We are very encouraged by the quality of new opportunities that we are pursuing in the UK and expect to announce further exciting new projects during the year.”

CEO Pat McCann said: “Revpar performance is an important aspect of our business but it is not the only driver of strong performance. In 2017 and 2018 we invested in technology to help our people work more efficiently. 2019 was the year we saw the significant benefits of this investment through increases in food and beverage margins as a result of our investment in a new procurement system, payroll savings through the continued use of our human resources management system, Alkimii, and lower claims costs. In recent years we have successfully reduced claims through the use of technology and training.”

Commenting on the UK government’s immigration plan, Crowley said: “It doesn’t make any sense. You only have to be a customer in London to see that immigrants play a really valuable role. I would hope that it would get mitigated as we get to the end of the transition period at the end of the year.

“What we do with employees is focus on our development programme, training, making sure that we are seen as an employer where you can be developed and get promoted. We haven’t seen any staff shortages since the Brexit vote.”

 

Insight: Dalata has been able to ensure that it has eggs in both Brexit baskets, with one leg in the EU and one in the UK. With Dublin coming off the heat and being soft boiled, the UK has stepped in to ensure that stomachs were being filled.

But away from eggs before one starts talking about what a turkey the UK government’s immigration plan is. Hopes are currently pinned on Boris Johnson doing what he’s done so far with the EU and capitulating at the last minute. For Dalata, the UK is still a strong market and the new build four-star segment is one which has shown resilience. If distress is going to be felt, it’s likely to be in the famously under-demolished mid market and those hotels which are pinning their hopes on brands such as OYO.

Dalata has made a name for itself with the institutions who like a lease and a long-term steady rate of return. The group has a strong covenant, reassuring the likes of M&G that it can weather any short-term squalls. No broken eggs here.

 

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