Hotel group plans €500m portfolio expansion

The Dalata Hotel Group could spend up to €500m on expanding its portfolio over the next two-to-three years, management said yesterday.

The company — which voiced its intention to acquire up to another 25 hotels, after raising €265m in an IPO earlier this year — also announced the purchase of the Tower Hotel in Derry, for nearly £4.4m (€5.5m) as part of this expansion plan.

The Tower — along with the recently acquired Pearse Street and Parnell Square hotels in Dublin, will trade under Dalata’s Maldron Hotels brand. The initial purchase yield on the Derry hotel of 9% is expected to rise to around 13% by the third year of Dalata’s ownership. That deal is set to conclude in early October.

Speaking yesterday, Dalata’s chief executive, Pat McCann, said there is “a lot of stuff bubbling” in the marketplace and good scope for the group to acquire more hotels.

He also noted Dalata is in “active discussions” with lenders over the agreement of new debt facilities, to further fund expansion activity.

“We don’t believe there’s any issue around debt funding. There is currently a lot of interest from Irish and UK banks,” he said.

He added that Dalata’s expansion will focus on the Irish market for the foreseeable future, as the company looks to “maximise the opportunity in Ireland”, but said the Maldron brand would — in time — be expanded properly into the UK.

At present, Dalata’s only property in Britain is the Maldron Hotel in Cardiff. This delivered a strong performance in the first six months of this year, with a 21% year-on-year revenue increase.

With Dalata also likely to acquire a small number of larger four and five-star hotels, not all of its properties will fall under the Maldron brand.

It is currently finalising terms to take a 25% stake in the Ballsbridge and Clyde Court Hotels in Dublin (the former Jurys and Berkeley Court hotels), which it has operated under lease since early 2012. The group’s long- term objective would beto take full ownership of both, depending on approval from the other shareholders.

In its interim results, yesterday, Dalata reported an 11.4% like-for-like increase in revenue per available room to €53.69.

Management added that the group is enjoying good trading momentum, at present, with a strong pipeline of future transactions; also noting that it is “on track” with the timing and strategy as outlined at the time of its IPO in March.