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Tough UK market to impact easyHotel earnings, board says

By Josh White

Date: Friday 18 Oct 2019

Tough UK market to impact easyHotel earnings, board says

(Sharecast News) - Super-budget hotel owner, developer and operator easyHotel updated the market on its trading for the year ended 30 September on Friday, reporting that despite the ongoing political and economic uncertainty facing the United Kingdom, its owned hotels had continued to outperform the UK hotel market on a like-for-like basis.
The AIM-traded firm said total system sales were up 28% year-on-year to £47.8m, with revenue ahead 56% to £17.6m.

Like-for-like revenue per available room was 7.7% higher year-on-year in the company's owned hotels, while in franchised hotels it fell 1.6%.

The board said the UK mid-scale and economy segment of the hotel market had continued to be impacted by the ongoing political and economic uncertainty, with revenue per available room (revPAR) for the sector down 0.7% for the period, according to STR Global.

Although the London market had continued to perform strongly, with revPAR growing by 4.5%, the regional UK market's revPAR had remained weak, down some 2.8%, with a number of regions experiencing double-digit revPAR declines during the calendar year.

While the European markets had, on the whole, continued to outperform the UK, performance was reportedly mixed on a country-by-country basis, with revPAR growth slowing during the second half of the financial year.

Performance across the group's franchised hotels had marginally improved during the second half, the board claimed, despite market weakness in the Netherlands and Germany.

Delivering continued market outperformance in challenging trading conditions had required an investment in both price and an increased use of online travel agents, easyHotel noted.

The group said it had maintained a tight control of central costs, in support of delivering its year-end targets, but against the more challenging trading environment the board said it expected that group adjusted EBITDA would be closer to £4.6m for the year ended 30 September.

On the development front, during the second half the group successfully refurbished and reopened easyHotel Old Street with 89 rooms, and let the self-contained 15,500 square feet of offices in the building.

EasyHotel Milton Keynes, with 124 rooms, opened earlier than planned, and both hotels were said to be trading strongly.

On 1 October, the group completed the acquisition of the 87-room Ibis Palais de Congres in Nice, with the hotel opening for trading immediately upon completion.

Although the group had experienced planning delays for some of its hotels currently under development, it said it still expected to open 385 rooms - including the 87 rooms in Nice - across four hotels in the next financial year ending 30 September 2020.

A further 701 rooms were expected to open in the following financial year.

Looking at the franchised hotel development pipeline, during the year the group opened two franchised hotels, at Zurich with 39 rooms, and Amsterdam Schiphol Airport with 154 rooms.

Malaga with 146 rooms would open in the next financial year, the board said.

Although the pipeline for franchised hotels was strong, it was unlikely that the hotels in Bur Dubai, Istanbul, Iran or Sri Lanka would open, the board cautioned.

On the subject of the dividend, the board said that while no decision had been made, it expected that the Group's current dividend policy would be reviewed before the publication of its results for the year.

As part of that review, the directors would consider whether it was appropriate to continue to pay a dividend while the company's activities and capital allocation priorities remained focussed on investing in and growing its hotel estate.

"The hotel markets have remained challenging in the second half of the financial year, particularly in the UK where we are seeing dampened consumer confidence," said easyHotel chief executive officer Guy Parsons.

"Whilst our owned hotels have continued to outperform the market, we have not been immune to the weaker regional hotel market and trading across our franchised portfolio has continued to be subdued.

"Whilst we don't foresee any improvement to the trading environment in the medium term, we are focused on our strategic priorities and believe the current economic uncertainties will present attractive investment opportunities to continue to expand our development pipeline in our target destinations, underpinning the long-term growth of the brand."

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