Business

Dalata shares slide amid slow start to 2024

Hotel group reports pretax profit of €105.5 million

Dalata Hotels chief executive Dermot Crowley at the Clayton Hotel. Photograph: Damien Eagers

Ciara O'Brien
Ellen O’Regan
Thu Feb 29 2024 - 15:35

Dalata shares fell on Thursday after the hotelier said a key metric of profitability had fallen in the first two months of the year amid a surge in hotel rooms available in Dublin.

Ireland’s biggest hotel operator’s average revenue per available room (revpar) in the capital dropped 11 per cent in January and February compared with the same period a year ago, chief executive Dermot Crowley said in a statement.

The slide was driven by the addition of 1,800 hotel rooms to the market there, combined with a reduced number of events in Dublin which would attract visitors to the city. Overall, Dalata’s like-for-like revpar was down 4 per cent in the first two months of the year.

The drop came in what is traditionally the weakest part of the industry’s year, Mr Crowley said, when the impact of such changes can have a disproportionate impact.

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Still, he remains “optimistic” for the remainder of the year, citing the calendar of events and flights scheduled for Dublin over the rest of the year.

Dalata shares fell 2.8 per cent to €4.52 by midafternoon in Dublin. They are down 2.2 per cent so far this year.

Mr Crowley’s comments came as the group said 2023 revenue hit €600 million as the company continued to pursue its growth strategy.

Revenue at the group rose 18 per cent year on year to €607.7 million, with adjusted earnings before interest, tax, depreciation and amortisation hitting €223.1 million.

Like-for-like revpar was 11 per cent higher for 2023 compared with 2022, with the hotels running at an occupancy rate of 81 per cent.

Dalata now has free cash flow of €133.4 million, and Mr Crowley told The Irish Times that while some will be paid out in dividends, the group is looking to reinvest the rest.

“We’re ambitious for growth, so we want to continue to grow to a small degree in Ireland, but to a large degree in the UK and continental Europe,” he said.

Among the €156 million it invested in its hotels throughout the year was a €112 million investment in two London hotels, the Maldron Hotel Finsbury Park and Clayton Hotel London Wall. It also added a second European hotel, the Clayton Hotel Amsterdam, which cost €29.5 million to acquire the leasehold, and invested €14.4 million in Edinburgh, where it has planning lodged for the conversion of an office to a 167-bedroom hotel.

The hotel group said it was seeking planning for a 216-bedroom extension to its Clayton Hotel Manchester Airport, and plans to extend the current lease term from the remaining 61 years to 200 years in total if the application is approved. The £40 million project is expected to be complete in 2027.

Dalata says that by the end of the year it will have more than 5,000 rooms in the UK, and is focusing on growing in 11 key cities in the UK while also establishing a presence in large European cities.

On where the group might invest in Ireland in future, Mr Crowley said its focus would be on city-centre locations.

“If we got an opportunity for a new hotel in Dublin we would definitely do it, and probably we would like another hotel in Galway in the city centre,” he said.

He named Cologne, Hamburg, Munich, Berlin, Brussels, Vienna as well as a second location in Amsterdam as other options the group is currently considering for expansion.

Pretax profit was €105.5 million, down 4 per cent from the prior year. Dalata attributed this to the reversal of the previous period’s revaluation losses post-Covid in 2022.

The board is proposing a final dividend of 8 cent per share, for a total payment of €18 million.

Mr Crowley also said the group had invested in technology and innovations to make its accommodation and kitchen teams more efficient, which had brought its hotel margins back to pre-covid levels of 42.3 per cent, despite “significant” increases in costs such as payroll and energy bills.

“Between those two areas we reduced our hours in the second half of last year by 10 per cent on a like-for-like basis, despite having an equivalent level of business,” he said.

However, Mr Crowley noted that in the current climate, investing in innovation is not an option for smaller hospitality businesses.

“It’s fine for me to talk about innovation and investing in technology, but if you’re running a restaurant or a small hotel it’s a completely different story. The VAT rate has gone back up to the second highest in Europe, our minimum wage is the second highest in Europe only after Luxembourg, so it’s tough,” he said.

“Looking at the industry as a whole, it needs the small operators, we need the bars and the restaurants, so I think it’s really important we protect those operators,” he said.

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist

Ellen O'Regan

Ellen O’Regan

Ellen O’Regan is an Irish Times journalist.

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