Dalata puts UK expansion on hold following Brexit vote

Dalata Hotel Group has put its UK expansion plans on hold following British voters' decision to quit the EU, according to its chief executive, Pat McCann.

"We had plans to develop in the UK and we still feel that will happen, but it would be unwise to make any decisions until we get some indication what'll happen in the UK," Mr McCann said, confirming comments attributed to Dalata's management in a note from German investment firm Berenberg.

Continuing growth

In the meantime, Dalata, which currently has more than 7,500 rooms across 40 owned, leased and managed hotels, is continuing its rapid growth in Ireland, with plans to develop up to 1,000 rooms by 2018. Fewer than 1,800 of its rooms are in the UK.

Berenberg analysts, led by Ned Hammond, initiated coverage of Dalata this week with a buy rating, saying a slump in the share price of Ireland’s largest hotel operator since the Brexit referendum had been “overdone”. The company’s stock has fallen about 19 per cent since the UK vote on June 23rd.

“The Irish hotel market has been very strong over recent years and, notwithstanding the risks from Brexit, we expect it to remain supportive,” said the Berenberg analysts. “We estimate Dalata will generate double-digit RevPAR (revenue per available room) growth in both Dublin and regional Ireland this year, with solid growth continuing further out.”

Weaker UK market

However, the brokerage noted that the UK market has been weaker and forecasts just 1 per cent RevPAR growth for each of the next three years.

“Prior to the UK’s vote to leave the EU, Dalata had planned to expand in regional UK cities once it had reached its consolidation targets in the Irish hotel market,” Berenberg said. “These plans are now on hold and the company will carry out a full assessment of the impact of Brexit before deciding whether to roll out further in the UK.”

Berenberg estimates Dalata’s sales will rise to €336 million in 2018 from €226 million last year, with earnings before interest and tax surging 70 per cent over the same period, to €90 million.