PPHE Hotel Group said that it was waiting for further guidance on the lockdown in England, but was “well positioned for growth both in the near-term and when restrictions are lifted”.
The company said that over the summer months increased demand from domestic leisure travel had exceeded expectation, but that Autumn had seen that demand fall.
The group, reporting for the three months and nine months ended 30 September said that, since the end of the period, the trading environment had been “volatile”, leading the company to undertake restructuring measures, with certain properties remaining closed and others operating with limited services.
By early July, 84% of the group’s 45 properties had reopened, with the group able to achieve an average occupancy of 29.8% across its estate at an average rate of £96.60 and total revenue of £31.2m. PPHE said that this, paired with the government support measures, resulted in “modest positive operational cash flow in the third quarter” (before debt service and lease expenses).
For the quarter to 30 September the company saw total revenue of £31.2m, a drop of 74.2% on the year. Revpar was £28.80, down 75.2% and occupancy was 29.8%. As at 30 September, the company had £132.4m. in cash (down from £137.0m), and further access undrawn facilities amounting to £63.0m.
Boris Ivesha, president & CEO, PPHE Hotel Group said: “While our operations continue to be impacted by ongoing uncertainty across markets, the group has clearly proven its ability to anticipate, react, adapt, and has ultimately, demonstrated resilience.
“Looking ahead, we remain focused on positioning the business well for long-term growth, underpinned by our unique model, well-invested portfolio and strong customer proposition.”
Operations continued to be significantly impacted by reduced demand and capacity caused by ever-changing international travel restrictions due to Covid-19.’
The group said that, since the end of September, trading had continued to be dominated by domestic leisure stays, with higher occupancy on weekends and often short-lead time bookings. Ivesha added: “Furthermore, the past week has seen a further increase in restrictions in a number of countries, most recently in England where a government-imposed four-week lockdown will now take place from 5 November. We are awaiting further guidance on the impact of this on hotels.
“Government support covers only a proportion of the group’s total payroll costs. To mitigate ongoing pressures and ensure the group is well positioned for growth both in the near-term and when restrictions are lifted, it continues to review its operational structure to ensure alignment with near-term demand.”
In the previous quarter PPHE Hotel Group said that it was looking to “capitalise on future opportunities”, describing its £137m total cash balance as putting it in a “strong” financial position.
CFO Daniel Kos told us that the group was currently focused on its pipeline and could “survive a storm”, but noted that this wasn’t the case for all operators.
Kos said: “We’re currently focused on what we have in our pipeline and we can determine the pace - we can ramp up when business comes back. We are keeping our eyes open but we don’t see many transactions happening at the moment. We can survive a storm, but other operators may not.”
Kos said that during the second quarter the group’s cash burn was £3m operationally and £12m to debt servicing. Kos put the breakeven at 30%.
The CFO hailed the support of all the governments in the jurisdictions which it operated, in particular in terms of payroll support. He was cautious ahead of the end of the furlough scheme in the UK, commenting: “We can break even with government support, but if that support is taken away in the UK it is less sustainable for us at these occupancies and we will have to take some decisions. This is the hardest-hit sector and the pandemic is not going to go away by October”.
Insight: Kos was correct. The pandemic didn’t go away by October and it has now sparked a lockdown in November which sees hotels in England back to the same place they were earlier in the year. There has been fighting talk from many and locked doors from others, but, as the law is set to be laid out this week: "Hotels, hostels and other accommodation should only open for those who have to travel for work purposes and for a limited number of other exemptions”.
Clarity on what is ‘work’ to follow, but it won’t fill a hotel. A second lockdown is what was most feared and the government has promised to extend furlough by one month - but this is not enough time to try and formulate a long-term plan. People are doing their budgets and banks are starting to get itchy.
For PPHE, the position is stronger than most, but the same is true for all. Support will be needed for the sector and it must be sustained into the Spring.