Dalata Hotel Group signals it will not bid for Dublin's Gresham Hotel

The Dalata Hotel Group has effectively ruled itself out of the race to buy Dublin’s famous Gresham Hotel, which formally went on the market last week with a price tag of over €80m.

Management said yesterday that it expected bidding for the Gresham to be dominated by international investors and that it would rather hold available acquisition funds for other projects.

Already the largest hotel operator in Ireland, via its Maldron and Clayton brands, Dalata has been on an aggressive expansion drive over the past 12 months; after raising over €200m in equity and €282m in debt to fund acquisitions.

Last year it spent €559m on acquiring 15 hotels in Ireland and the UK and has, since the turn of the year, committed a further €78.2m on six more hotels and one new build development site in Dublin.

The group has €130m in raised capital left to spend on expansion.

Speaking yesterday, at the publication of Dalata’s 2015 annual results, group chief executive Pat McCann said the group is “probably unlikely” to make a bid for the Gresham, saying “the money which we have left, we have very good use for and will have no problem spending this year”.

He also said Dalata wouldn’t be interested in acquiring Dublin Institute of Technology’s building on nearby Cathal Brugha Street, which is on the market for around €20m and which has been touted as a potential new hotel site.

Yesterday’s results showed a 185% jump in annual revenues to €225m with pre-tax profits ballooning from €4.2m to €28.46m.

Mr McCann called 2015 “a remarkable year” for the group, aided by the uplift in the hotel sector, increased consumer confidence and the group’s expansion drive.

Trading in the first couple of months of 2016, he said, was stronger than expected in Ireland and in line with expectations in the UK, where Dalata has five hotels.

This year will, according to Mr McCann, see a “finish out” of Dalata’s Irish expansion project and a shift in emphasis away from the aggressive acquisition drive of recent months to a focus on bedding-in recent purchases.

However, there remains room for further investment and acquisition.

As well as the planned new build at Charlemont Street in Dublin, Dalata has its eye on six development sites, although management did yesterday urge caution on that figure and suggested it might end up only developing around two of those; pointing out one prospective transaction has recently fallen through.

The group also wants to acquire three hotels — the Maldron sites in Cork, Portlaoise and Dublin’s Cardiff Lane — which it currently operates under lease arrangements.

Next year will see Dalata focus on expanding its operations in the UK market. Mr McCann said the group is already “working on a number of projects” and has a three-to-five year expansion programme lined up.

The focus will be on provincial locations and not on London, where management said is too expensive a market to enter.

Dalata already has a small presence in the English capital, largely through inheritance from its 2014 acquisition of the bulk of the Moran-Bewley hotel portfolio.

Dalata will develop in the UK via a long-term lease approach and will not need to raise fresh equity to grow there.

Regarding the ‘Brexit’ question, Mr McCann said the group’s sole worry would be how either outcome might affect the UK economy.

In Dublin, Dalata wants to account for around 1,000 of the 4,000-5,000 hotel rooms estimated to open by 2019, which would maintain its 20% market share position in the capital.

Dalata’s share price — down by nearly 20% since the start of the year — was down marginally yesterday at just under €4.70.