I turned buyer on the Aim-traded shares of easyHotel (EZH:124p) shortly after the budget hotel operator successfully raised £48.8m net of expenses at 110p a share in a placing to boost cash balances to £71m (‘Small-cap earnings beats’, 21 March 2018). The proceeds and £33m of enlarged debt facilities (£13.1m utilised at 31 March 2018) will be used to accelerate the company’s owned hotel development pipeline in the UK and Europe.
easyHotel currently has seven owned hotels with a total room stock of 702 rooms, and earns a lucrative income stream from a further 20 franchised hotels, which have 1,728 rooms. The owned estate has been growing at quite a lick, with £39m earmarked for new hotel openings (Leeds, Sheffield, Ipswich and Barcelona), which will add more than 500 rooms later this year and 453 rooms (Milton Keynes, Cardiff and two leased hotels in Cambridge and Oxford) in 2019. The recent placing underpins an additional acquisition and development pipeline of eight owned hotels, equating to 1,122 rooms, costing around £60m.
Maintained occupancy rates of 85 per cent across both easyHotel’s owned and franchise hotel stock certainly indicates a high level of demand for its budget offering, and ongoing outperformance of "a more challenging UK hotel market". Indeed, previous openings in Birmingham and Manchester are exceeding expectations. Furthermore, the 13.5 per cent like-for-like revenue growth in the mainly European franchise estate in the six months to end-March 2018 suggests that the board is sensible to target more owned hotels in key gateway European cities.