Dalata Hotel Group said that it was working with developers and site owners around the UK on potential new developments, with investors drawn to the group’s strong covenants.
The company said that it was confident that this and its recent equity raise would “assist us greatly in building our pipeline further in 2021”.
The group continued to move ahead with its development pipeline of almost 3,250 rooms across Ireland and the UK. During 2020 it announced three new hotels; in Dublin, Brighton and Manchester.
Dermot Crowley, deputy CEO - business development & finance, said: “2020 has been a very challenging year for people and communities across the world. The impact on the hospitality industry has been acute.
“However, we remain resilient and united in dealing with the ongoing impact of Covid-19. We note the very positive news surrounding vaccines over the last month and look forward to 2021 with renewed optimism.
“The positive impact of the recent equity placing on our balance sheet together with the way in which we have met our rental obligations throughout the Pandemic has enhanced our reputation as a strong reliable covenant. We are confident that this will assist us greatly in building our pipeline further in 2021.”
In April, the company completed a sale and leaseback of Clayton Hotel Charlemont in Dublin for €65m with Deka Immobilien. In July, it increased its debt facilities with it banking club by €39m, while in September, it raised €94.4m from its shareholders through a share placing.
Crowley said: “The strength of our balance sheet, the retention of our teams and the quality of our hotel portfolio will give us a significant advantage as international travel recommences in 2021”.
Dalata said that, it expected EBITDA for the year ending 31 December to be marginally ahead of market expectations. The group had current cash and undrawn debt facilities of €293m after deducting upcoming payments including quarterly rent and interest.
Following the amendment to the group's debt facilities agreement in July, the previous covenants comprising Net Debt to EBITDA and Interest Cover will not be tested again until June 2022.
Trading in the second half of 2020 was disrupted as a result of Covid-19 restrictions across the regions in which the group operates.
Post the initial lockdown in Ireland and the UK, hotels reopened to the general public in June and July with hotels in Regional Ireland and Regional UK benefiting from strong staycation demand during the summer months. Dublin and London hotels were quieter because a higher proportion of their business was ordinarily driven by international travel and events. Occupancy in Q3 amounted to 26% in Dublin, 60% in Regional Ireland and 36% in the UK.
Following an increase in Covid-19 cases, the Irish government implemented the highest level of restrictions, necessitating the closure of hotels to the general public from 22 October for a period of six weeks. The UK government implemented similar restrictions for the month of November. However, most manufacturing and construction services remained open for business compared to the previous lockdown in Q2, generating some limited demand for hotel rooms.
Since the start of December there was a significant reduction of restrictions in Ireland. Our hotels in the UK are subject to varying levels of restrictions. During December, the group described bookings as “encouraging” but on short lead times. Occupancy for the fourth quarter was currently projected to be 17% in Dublin, 28% in Regional Ireland and 21% in the UK.
The group said: “The decision to keep our hotel management teams intact ensured we could respond proactively to the fast moving situation caused by the pandemic. We kept in contact with our key customers and secured new domestic customers in our local markets. The safety of our people and our customers continues to be at the forefront of our minds and our health and safety protocols continue to be accredited by Bureau Veritas, a world leader in testing inspection and certification.”
Insight: Now is not the time for leases was one of the messages of the pandemic, as the opportunity for disappointment all around was great during the pandemic and indeed, we have seen the likes of Scandic scramble to renegotiate before the disappointment takes on a more sinister tone.
But not at Dalata and Whitbread, where the pair have vocally paid their rent and, terrible horror of the pandemic aside, that will serve them favourably in negotiations for many years to come.
So where now for the emboldened Dalata? Earlier this year the group was being eyed up by investors and in September it was the one doing the eying up, raising €94.4m to help it grow market share in a “dislocated marketplace”.
Commenting on distress in the market, Crowley, told us: “It’s obvious it’s going to happen. The high profile one was Travelodge, but a lot aren’t paying their rent. It takes six to nine months for things to play out and September is also a month where people start wanting to know how things are going to go. We’re also seeing opportunities where the landlord sees the benefit of a strong covenant - we’ve paid our rent throughout the crisis.
“The institutions still have a lot of money they want to put to work, particularly when you look at the other options; retail is gone as an investment. If you look at hotels there is still a lot of interest and more if you have a strong covenant.”
With the next six months critical for many hotels, it seems likely that it won’t be solely organic expansion for Dalata.