Dalata Hotel Group PLC: 2023 Preliminary Financial Results Announcement

Dalata: The Heart of Hospitality

Record operating performance with Revenue up 18% and Adjusted EBITDA up 22%

ISE: DHG   LSE: DAL

Dublin and London | 29 February 2024: 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 2023.

PROVEN BUSINESS MODEL DELIVERING RECORD OPERATING PERFORMANCE

• Revenue of €607.7 million, up 18% on 2022
• Adjusted EBITDA1 of €223.1 million, up 22% on 2022
• ‘LFL’ 2023 RevPAR1 of €116.69, up 11% on 2022 with ARR1 up 6% and Occupancy of 81.0% in 2023
• ‘LFL’ Hotel EBITDAR margin1 of 42.3%, up on 2022 (41.7%), in line with 2019
• Profit before tax of €105.5 million, down due to reversal of previous period revaluation losses post Covid in 2022
• 2023 Free Cashflow1 of €133.4 million, up 5% on 2022

ANNOUNCING TODAY

• 216-bedroom extension at Clayton Hotel Manchester Airport (£40m), subject to planning
• The Board is proposing a final dividend of 8.0 cents per share, representing dividend payment of c. €18 million

EXECUTING AMBITIOUS GROWTH STRATEGY – CURRENT PIPELINE OVER 1,500 ROOMS

• Delivering growth through freehold acquisitions, leases and development opportunities with €156 million deployed during 2023
  • Invested £97.7 million (€112.3 million) in two strategic London assets, Maldron Hotel Finsbury Park (191 rooms) and Clayton Hotel London Wall (89 rooms), which began trading under Dalata ownership during the year
  • Second hotel in Continental Europe with €29.5 million leasehold acquisition of rebranded Clayton Hotel Amsterdam American (173 rooms), which began trading under Dalata in 2023
  • Invested £12.5 million (€14.4 million) in building conversion opportunity in Edinburgh with planning lodged for office conversion to 167-bedroom hotel (14 additional rooms added through design post-acquisition, subject to planning)
• Signed agreement for lease with the landlord of Clayton Hotel Manchester Airport to extend the current lease term from the remaining 61 years to 200 years in total. The new lease is conditional on the receipt of a grant of planning for a 216-bedroom extension to be developed by Dalata. The estimated investment of £40 million also provides for the refurbishment of the ground floor and a portion of the bedrooms at the existing hotel, as well as the upgrade to plant and machinery to improve the sustainability of the hotel. The project is targeted for completion in H1 2027. The existing hotel will continue to trade through the development.
• UK rooms to exceed 5,000 by end of 2024 (+28% since end of 2022) with the opening of centrally located hotels in London, Liverpool, Brighton and Manchester (together 834 rooms)
• Considerable firepower potential from ongoing cash flows to invest in further opportunities over the medium term, underpinned by freehold estate of €1.7bn primarily located in Dublin and London while maintaining a comfortable leverage of 2.0x to 2.5x Net Debt to EBITDA after rent1 (31 December 2023: Net Debt to EBITDA after rent1 of 1.3x with cash and undrawn facilities of €283.5 million)
• Focussed on growing in 11 key cities in the UK and establishing a presence in targeted large European cities with a strong mix of corporate and leisure demand

CREATING LONG-TERM VALUE, BALANCED WITH MAINTAINING FINANCIAL DISCPLINE

• Strong RevPAR1 growth and high Hotel EBITDAR margins1 from existing hotels, together with the impact from new openings helped to deliver strong returns
• Continuing to use innovation to protect profitability and enhance employee and customer experience
• Normalised Return on Invested Capital1 of 13.8% (2022: 11.6%)
• Net property revaluation uplift of €94.1 million (+7% on hotel assets1 at 31 December 2022) with c. €0.5 billion uplift since IPO
• Excellent quality long-term leases with strong Rent Cover1 of 1.8x (weighted average lease term of 29.5 years remaining)
• Fully hedged on £176.5 million term loan with interest rate swaps in place fixing the SONIA benchmark rate at approximately 1.0% until 26 October 2024 and rent payments largely fixed until 2026

PUTTING PEOPLE AT THE HEART OF WHAT WE DO

• Achieved record engagement scores from employees across the Group and launched additional benefits programmes
• Received ‘Silver’ accreditation from Investors in Diversity and won our first Diversity and Inclusion Award at annual Irish Published Accounts Awards
• Building a pipeline of talent for future growth with approx. 800 employees currently on or having completed development programmes in 2023 (c. 15% of all employees) and 585 employees promoted in 2023
• Experienced hotel leadership - General Managers at our three hotel additions in 2023 have come through the Dalata development pathway meaning our teams hit the ground running

FULLY INTEGRATED SUSTAINABILITY STRATEGY

• 27% reduction in Scope 1 & 2 carbon emissions per room sold achieved in 2023 versus 2019 (compared to a target of 20% reduction on 2019 full year levels by 2026) due to increased sustainability focus and management
• Aim to commit to Science Based Targets initiative (SBTi), subject to receipt and review of final building sector guidance. Regardless of outcome, Dalata continue to focus on broadly following the draft SBTi target requirements, with ambition to target in-use operational emissions, embodied carbon emissions and Scope 3 emissions
• The building conversion opportunity in Edinburgh will be one of our first hotels to be designed with zero on-site carbon emissions and significant potential for biodiversity gains. As a conversion scheme, external consultants estimate that it has been designed with approximately 70% lower embodied carbon and 50% lower whole lifecycle CO2e compared with a hypothetical new build structure
• Adherence to the Corporate Sustainability Reporting Directive (CSRD) from 2024 will provide a more robust and transparent benchmark for our sustainability efforts

BRAND REFRESH

• Refreshed brands reflect our commitment to delivering value, building trust, and fostering meaningful connections with our people and customers
• Launching corporate brand refresh today, Clayton and Maldron to follow in Q2 this year
• Supported by extensive consumer research to redefine where our brands operate and how best to meet our customers’ expectations
• Consolidation of digital marketing and social media activities to increase direct bookings and achieve cost efficiencies. 22% increase in ‘LFL’ direct room bookings in H2 2023 vs H2 2022
• Further investment to support the refresh of our brands expected over time, however, we will remain disciplined in our approach and prioritise spend on the areas most impactful to customers and the business

OUTLOOK

The Group’s ‘like for like’ RevPAR1 was 4% behind 2023 for January / February. Corporate demand was ahead of 2023 levels. Our Regional Ireland and UK portfolio performed broadly in line with January / February 2023. RevPAR1 in our Dublin portfolio was 11% behind last year for the same period. In these traditionally quieter months (January and February represented approximately 11% of our room revenue in 2023), the Dublin market was impacted by the additional supply of approximately 1,800 rooms compared to the same period last year due to the opening of new hotels and some hotels returning from government use in Spring 2023. There was also a lower number of events compared to 2023 affecting the leisure transient segment. RevPAR1 performance for our Dublin portfolio was in line with the market for January.

Notwithstanding this and the ongoing uncertainty in the macro-economic environment, the Group remains optimistic in its trading outlook for 2024 supported by future demand indicators across our markets, including growing air traffic forecasts and strong event calendars for the remainder of the year. External research and surveys indicate that travel remains a high priority for consumers while employment and consumer saving levels remain supportive of trading. We also look forward to the greater contribution from the 10 hotels recently added to the portfolio as they mature.

We remain attentive to the macro-economic backdrop and geopolitical environment for events which could impact the business. As a priority, we are proactively addressing inflationary pressures, particularly payroll costs following recent minimum wage and living wage increases in Ireland and the UK. Dalata have given increases in pay rates ranging from 3.5%-10% in 2024. In 2023, we achieved ‘like for like’ Hotel EBITDAR margin1 in line with that achieved in 2019 despite a 15% increase in minimum wage in Ireland and a 27% increase in living wage in the UK since then along with elevated energy costs. We remain confident in our ability to continue to manage inflationary pressures on the business through our ability to innovate and drive efficiencies across our portfolio.

The Group’s strong Free Cashflow1 generation, asset backed balance sheet with low gearing and proven decentralised business model ensures it is well positioned to respond to the challenges and benefit from the opportunities that may lie ahead.

DIVIDENDS

On 28 February 2024, the Board proposed a final dividend of 8.0 cents per share amounting to approximately €18 million. This proposed dividend is subject to approval by shareholders at the Annual General Meeting. The payment date for the final dividend will be 1 May 2024 to shareholders registered on the record date of 5 April 2024.

DERMOT CROWLEY, DALATA HOTEL GROUP CEO, COMMENTED: 

“I am delighted to announce that the Group has delivered another excellent set of results, reflecting a year that has been highly successful in many ways. After exceeding revenue of €500 million in 2022, the Group has grown revenues further to over €600 million in 2023. Our established hotels continue to drive revenue and convert strongly to the bottom line underpinned by our decentralised model. We also added three hotels to the portfolio in London (x2) and Amsterdam – two of Europe’s most attractive capital cities. I would like to thank all my colleagues across our 53 hotels and at our central office for their hard work, dedication and professionalism – it is through their efforts that we are able to announce such a positive set of results today.

Hospitality is all about people and, in Dalata, we have great people. Our commitment to inclusion and diversity and our focus on well-being provides our employees with a rewarding and attractive place to work. Our wide breadth of development programmes, together with our exciting expansion plans, provides excellent opportunities for career development which in turn provides a pipeline of talent to open our new hotels and continue to deliver excellent returns for shareholders.

We recognise the power inherent in our brands, and through focus and efforts, we are unlocking that power. As we grow our scale and geographical footprint enhancing our brands becomes more important for maximising our commercial potential. During 2023, we engaged a global marketing communications agency supported by extensive customer research to refresh our brands. Today, we are launching the refreshed Dalata brand which reflects what Dalata is all about – engaged teams passionate about our hospitality and customer service. This is best summed up as “the heart of hospitality”. We will be launching the refresh of our Clayton and Maldron brands in the second quarter of this year.

We are also seeing the benefits of our ongoing commitment to respond innovatively to the challenges and opportunities facing our industry. We have achieved a notable increase in productivity by streamlining work practices within our accommodation and kitchens which is critical given the significant increase in minimum wage rates in Ireland and the UK. The productivity increases were achieved whilst also increasing employee satisfaction levels in those departments. We will continue to use innovation and technology to find smarter ways to deliver what our guests are looking for at our hotels. I am excited by the projects we are rolling out during 2024 and the continued benefits from those commenced in 2023.

Our investment in green plant and machinery and strong focus on sustainability from our management teams has delivered further utility consumption savings. The Group achieved a 27% reduction in our Scope 1 & 2 carbon emissions per room sold in 2023 compared to 2019 (versus a target of 20% reduction by 2026).

Dalata’s growth strategy remains compelling. We combine our hotel operator and developer expertise, supported by a strong financial position allowing us to be agile and capitalise on opportunities as they arise. 2024 will be another exciting year at Dalata. The UK remains our key strategic priority as we open four hotels across that market, which will be our most operationally sustainable new build hotels to date. I look forward to welcoming our first guests in Liverpool and Brighton as we continue to grow our presence across the UK to over 5,000 rooms by the end of 2024.

 January and February in any year are two of the quieter months of the year – the impact of additional supply or reduced demand can have a larger than normal percentage impact on RevPAR. The combination of an additional 1,800 rooms in supply and a reduced number of events has led to a fall in RevPAR1 in the Dublin market. We are reporting a fall of 11% for the two-month period versus 2023. However, when I look forward at the strength of the calendar of events for the balance of the year (especially from May onwards), the strong flight schedule at Dublin Airport and the increase in corporate demand experienced in the year to date, I am optimistic as we look to the balance of the year.”

ENDS

ABOUT DALATA

Dalata Hotel Group plc is a leading hotel operator backed by €1.7bn in freehold and long leasehold assets in Ireland and the UK. Established in 2007, Dalata has become Ireland’s largest hotel operator with an ambitious growth strategy to expand its portfolio further in excellent locations in select, large cities in the UK and Continental Europe. The Group’s portfolio comprises 53 primarily four-star hotels operating through its two main brands, Clayton and Maldron Hotels, with 11,413 rooms and a pipeline of over 1,500 rooms. For the year ended 31 December 2023, Dalata reported revenue of €607.7 million, basic earnings per share of 40.4 cent and Free Cashflow per Share of 59.7 cent. Dalata is listed on the Main Market of Euronext Dublin (DHG) and the London Stock Exchange (DAL). For further information visit: www.dalatahotelgroup.com

CONFERENCE CALL AND WEBCAST DETAILS

Management will host a conference call and webcast for institutional investors and analysts at 08:30 today 29 February 2024.

• The webcast will be available here
• For conference call details, please register here

Please allow sufficient time for registration.

Contacts