Dalata shares slide on tough Irish performance

Dalata Hotel Group shares tumbled by more than 6% after it said it saw a drop in like-for-like performance across its Irish hotels during the bulk of this year.

Dalata shares slide on tough Irish performance

Dalata Hotel Group shares tumbled by more than 6% after it said it saw a drop in like-for-like performance across its Irish hotels during the bulk of this year.

The group — which is the largest hotel operator in the country through its Clayton and Maldron chains — said conditions in the Dublin market, in particular, were “tougher than anticipated”.

The company said the rise in the Vat rate for the hospitality sector, from 9% to 13.5%, affected its nationwide portfolio, while Dublin was additionally affected by the introduction of more hotel rooms and a reduction in the number of big events in October and November.

Dalata’s revenue per available room (RevPAR) which is a key growth metric in the hotel industry, fell by 3.2% in Dublin on a like-for-like basis in the first 11 months of the year.

The group’s regional hotels saw a combined like-for-like RevPAR decline of 0.7% for the 11 months to the end of November, with second-half performance similar to the first six months of 2019.

However, Dalata said its Irish hotels outside of Dublin have performed well, “considering the impact that the increase in the Vat rate has had on the regional Ireland market”. The Dublin hotel market as a whole saw RevPAR fall by over 3% in the first 11 months of the year.

“Considering the considerable once-off impact of the substantial increase in Vat, together with increased supply in Dublin, I am happy that our Irish hotels have managed to protect their margins and help the group, as a whole, meet market expectations on EBITDA performance,” said Dalata’s deputy chief executive Dermot Crowley.

“Although supply continues to increase in Dublin, strong economic indicators for Ireland as a whole, and an improved calendar of events in the city will help us to continue to grow profitably in the months ahead.

We have a modern, young and well-invested portfolio of hotels that are run by highly trained and motivated Dalata teams. This puts us in a very strong position versus our competition as we head into 2020.

Mr Crowley said that this year will see a substantial increase in the level of free cashflow generated by the group.

“This increase has been driven by the very successful performance of the hotels opened or extended in 2018 and early 2019,” he said.

In the UK, the company said it has continued to perform “very strongly”, with like-for-like RevPAR up by 3% up to the end of November. Its UK expansion continues, with Dalata announcing plans for a new 260-room Maldron hotel in Liverpool.

“We expect more UK announcements, with the next one likely to lead to the UK becoming the largest division in the group in terms of room count on a pro-forma basis,” said Davy analyst Colin Grant.

The group said it continues to progress its development pipeline of approximately 2,660 rooms across the UK and Ireland.

Despite the challenging backdrop, Dalata said it expects its full-year earnings to be in line with market expectations, currently around €161m.

“It is somewhat disappointing, however, to see Dalata not outperforming the [Dublin] market. However, we would note that the momentum in the UK is building and we have increasing confidence in the outlook for Dalata in this market,” said Goodbody analyst Gavin Kelleher.

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