A Time to Look Forward
Business in Recovery with Ambitious Growth Objectives
Dalata Hotel Group plc (‘Dalata’ or the ‘Group’), the largest hotel operator in Ireland, with a growing presence in the United Kingdom and Continental Europe, announces its results for the year ended 31 December 2021.
€million 2021 2020 2019 Variance to 2020 Revenue 192.0 136.8 429.2 40.3% Segments EBITDAR1 75.1 28.9 182.8 160.2% Adjusted EBITDA1 63.2 18.7 162.2 238.3% (Loss)/profit before tax (11.4) (111.5) 89.7 89.7% Basic (loss)/earnings per share (cents) (2.8) (50.9) 42.4 94.5% Adjusted basic (loss)/earnings per share1 (cents) (6.4) (27.2) 42.0 76.5% Free Cash Flow1 28.0 (40.8) 100.6 168.6% Free Cash Flow per share1 (cents) 12.6 (20.6) 54.5 161.2% Group key performance indicators (as reported) Occupancy % 39.7% 30.9% 82.6% Average room rate (€)1 100.71 88.77 113.14 13.5% RevPAR (€)1 40.02 27.45 93.43 45.8%
Tale of Two Halves: Strong Operating Performance as Pandemic Recedes
- Revenue growth of 40% to €192.0 million, 45% of levels reported in 2019
- Following the reopening of hotels at the end of Q2 2021, ‘like for like’ Group RevPAR1 increased from 19% of 2019 levels for the first six months of 2021 to 58% in July and 78% in November as events and domestic corporate business returned
- Adjusted EBITDA1 of €63.2 million and loss before tax of €11.4 million
- Free Cash Flow1 of €28.0 million (2019: €100.6 million) after payments for interest, rent and refurbishment capex1 (H2 2021: €49.0 million)
- Maintaining our core management teams at the hotels and central office throughout the pandemic provided stability which enabled us to scale up quickly to meet higher demand and customer expectations as restrictions were reduced
Continue to Focus on Creating Long-Term Value
- Well positioned for the recovery in demand and to meet the changing needs of our customers with our strong financial position, stable and experienced teams and continued focus on innovation
- Initial growth will be primarily through further recovery of existing portfolio and new hotels funded predominantly by long term leases while cash flow generation returns to pre pandemic levels
- Current pipeline of over 2,000 rooms in prime locations which will see UK footprint surpass Dublin by 2025
- Regional UK and London remains the primary focus but also looking at large European cities for growth opportunities
- Post year end, announced entry into Continental Europe with operating leasehold interest in Hotel Nikko, Dusseldorf
- Commitment to responsible operations and growth
Established Responsible Business Framework to Support Further Improvements
- Established a framework following an extended materiality assessment with key stakeholders
- Set near-term environmental targets to reduce energy emissions, food waste and water consumption
- Committed to diverting 100% of waste from landfill by the end of 2022 and collecting carbon emissions from suppliers to support Scope 3 measurement
- Achieved gender balance on our Board
- Developing systems and processes that enable us to gather reliable data and to support better reporting, measurement and target setting
- Assessing various decarbonisation pathways in line with science-based target initiative criteria
Robust Balance Sheet Provides Opportunity
- Asset backed balance sheet with €1.2 billion in property, plant and equipment
- Conservative gearing with Net Debt to Value1 of 24% (31 December 2020: 23%)
- Cash and undrawn committed debt facilities of €298.5 million (31 December 2020: €298.1 million)
- Debt facilities extended to October 2025 with covenant flexibly (Net Debt to EBITDA and Interest Cover not retested until June 2023)
2021 Trading Overview
- Trading markedly improved once restrictions eased allowing hotels to fully re-open in May (UK) and June (Ireland)
- ‘Like for like’ Group occupancy1 increased from 20.8% for the first six months of 2021 to 63.9% in Q3 and 59.3% in Q4
- Trading in December was impacted by Covid-related restrictions as a result of the Omicron variant which led to reduced occupancy levels and the cancellation of events, albeit to a lesser and shorter extent than experienced during previous waves of the pandemic
Well-Placed for Challenges Facing Hospitality Industry including Inflation
- Excellent decentralised teams to optimise pricing and distribution
- Stable, engaged workforce makes it easier to recruit and retain talent
- Engagement with our people is a top priority – offer extensive training and development programmes, opportunities for career progression and flexibility
- Continued focus on innovation and investment in technology – roll out of MICROS Simphony Food and Beverage system and Opera Cloud across our owned and leased portfolio is now complete
Current Pipeline of over 2,000 Rooms Provides Exciting Backdrop for the Future
- Following the recent opening, in early 2022, of two hotels in Manchester (607 rooms), we are opening four more hotels this year, comprising over 900 rooms in Bristol, Glasgow and Dublin (x2)
- The construction of Maldron Hotel Shoreditch in London is progressing well and is expected to open in H2 2023. There are four more hotels due to open 2024 located in Dublin, Brighton, Liverpool and Manchester, three are at the pre-construction phase while the construction of Maldron Hotel Brighton commenced in early 2022
- New hotels will be managed by existing Dalata teams who will ensure presence and application of the Dalata culture and operating model
Trade at the start of 2022 was disrupted by restrictions following the emergence of the Omicron Covid-19 variant. However, January and February are traditionally our quietest months. Virtually all restrictions in Ireland and the UK were removed at the end of January which resulted in a rise in bookings, with ‘like for like’ Group occupancy1 increasing from 38% in January to 62% in February. ‘Like for like’ Group RevPAR1 for February expected to be 91% of the level achieved in 2019.
As we look forward, and in the absence of any further material Covid-19 restrictions, we remain optimistic about the ongoing recovery of the business. There has been significant pent-up demand for travel following the easing of restrictions, and due to a combination of a more benign evolution of the Covid-19 virus and high levels of vaccination, we expect this to continue. As more and more companies return to their physical offices, we expect this to be a catalyst for increased domestic corporate travel and the return of international corporate travel and conferences. The indication of the return of airline capacity and strong calendar of events is also promising.
We remain agile and continue to proactively manage the business in an uncertain environment with potential further Covid-19 variants and the current conflict in Ukraine and its potential wider global implications. We are also cognisant of the challenges currently facing the hospitality industry including staff shortages and inflation across payroll, electricity and gas, linen, and food and beverage purchases and will continue to manage these as we go through 2022. The Group has given payroll increases in line with minimum wage increases in both jurisdictions since 2019. In the UK, the Group brought forward the April 2022 national living wage increase to November 2021. We believe Dalata is well placed to respond to these challenges due to our investment in technology, excellent decentralised teams who will optimise pricing and distribution, our reputation as a great place to work and provide career development and our focus on innovation.
DERMOT CROWLEY, DALATA HOTEL GROUP CEO, COMMENTED: “As I look back on 2021, I am extremely proud of the agility and commitment demonstrated by our teams in an environment that was constantly changing. We ended the year with revenue of €192 million, which is a sizeable achievement considering our hotels were not open to the public for much of the first half of the year. Experienced teams at our Central Office and in each of our hotels enabled us to manage rapid changes in demand levels. Our hotels in Regional Ireland, Regional UK and Northern Ireland benefitted from strong levels of staycation demand following the easing of restrictions in the summer, while the return of domestic corporates and project work later in the year commenced recovery in our Dublin and London markets. By November 2021, before the onset of Omicron, ‘like for like’ Group RevPAR1 had reached 78% of November 2019 levels.
Our business has been significantly challenged by Covid-19 over the last two years but we have always sought to behave in a fair and ethical manner. We have communicated openly with all our stakeholders and have always been focused on ensuring the health and safety of our guests, our people and our suppliers.
I would like to take this opportunity to acknowledge the continued support from all our stakeholders. We agreed extended debt facilities with our banking partners in November which also provides additional flexibility. Our institutional landlords remain committed to our long-term partnerships and our shareholders supported us through the equity placing in September 2020 and are impacted by the continued suspension of dividends.
I would like to acknowledge the support of the Irish and UK governments in helping the hospitality sector navigate the difficulties caused by the Covid-19 pandemic and the related restrictions. The Employment Wage Subsidy Scheme (EWSS) in Ireland is particularly important as it allows us to keep people in employment. In September 2021, despite room revenue for our Irish portfolio being 50% behind what we achieved in September 2019 on a ‘like for like’ basis, the number of hours worked reached 85% of the levels for September 2019 showing the value of the EWSS to maintaining employment in one of Ireland’s most important sectors.
I have spent the last number of months shaping my own team. Carol Phelan was appointed Chief Financial Officer, Des McCann took up the new position of Chief Operating Officer, while Shane Casserly’s role was expanded to include responsibility for innovation and information technology. I have made other changes to the way in which the senior executive team works and communicates to ensure that we are best placed to face the challenges and avail of the opportunities ahead.
As we look forward, it is most definitely a busy and exciting time for Dalata. In the first two months of 2022 we opened two new hotels in Manchester City Centre and we took our first steps into Continental Europe through a new leasehold interest in Hotel Nikko, a 393-bedroom hotel in Dusseldorf which we now operate. On top of this, there are four more hotels opening over the coming four months. Whilst these new hotels provide an exciting backdrop for the year ahead, we remain focused on the recovery of earnings at our existing hotels as restrictions are eased.
Our current pipeline comprises over 2,000 rooms and our Acquisitions and Development Team continue to look for further opportunities. Regional UK and London remains our primary focus for growth at this time. However, we are also looking at large European cities that fit our model. Hotel Nikko, Dusseldorf was our first step into Continental Europe and in time we expect to see further opportunities, leveraging our asset backed balance sheet, strong reliable covenant and hotel operational expertise.
Given the uncertain environment with potential further Covid-19 variants and the current conflict in Ukraine and its potential wider global implication, we continue to remain agile and proactively manage the business as we always have. We remain vigilant in light of the current challenges facing the hospitality industry, particularly inflationary pressures and labour shortages. I am optimistic and truly confident in our abilities to respond to and grow in this emerging environment. We will continue to empower our people, always our greatest asset, through ongoing development and growth opportunities.
The culture of Dalata is ideally suited to ESG. Over the last year, we have worked hard in formalising and putting a structure in place to report our goals and achievements in how we treat our people, interact with our local communities, reduce our impact on the environment and practice good corporate governance. ESG is a journey, and we have plenty of road to travel. I have set an objective for the teams to achieve performance levels in ESG that makes us a preferred partner with our stakeholders – shareholders, real estate investors, banks, suppliers, customers, and employees. As the world emerges from the shadow of the pandemic, with the climate crisis becoming increasingly important, how people behave will inevitably change. This will impact how we attract, develop and retain our people. It will impact how our customers travel, most notably our corporate customers. We will need to be innovative to adapt to these changes, to respond to the challenges and find new ways to operate our hotels and interact with our customers. I am excited about the challenge and confident that we have the team to deliver a competitive strength in the new world.
Here at Dalata we see 2022 as a time to look forward. Covid-19 has changed the world in many ways, yet in Dalata we remain focused on sustainably delivering for all our stakeholders as we always have, and this will guide us in how we adapt to a changing world. Following the removal of restrictions in Ireland and the UK, trade at the hotels has markedly improved reaching ‘like for like’ occupancy1 of 62% in February. The domestic recovery in Q3 2021 demonstrated the strength of pent-up leisure demand. There is a strong calendar of events for 2022, and as flight capacity increases, I expect a strong return of international leisure travel. As more and more companies return to offices I believe this will provide a catalyst for the recovery of international corporate travel.
We are looking forward to capitalising from a position of strength as we continue to rebuild our existing hotels and focus on growth opportunities. Our strong financial position and ambitious teams provides us with a platform for growth as we now look forward beyond the pandemic and towards long term recovery and sustainable growth. We are ready for the challenges and opportunities that lie ahead and look forward with enthusiasm”.