Dalata back in profit

Dalata Hotel Group (DAL) stormed back into the black in its first half and on several key metrics is now outperforming pre-pandemic efforts. The Irish hotel operator has expanded its portfolio further, including into continental Europe for the first time, and occupancy rates are on the up – at least for the moment. Consumer spending headwinds are starting to bite, but management "have not seen any impact on demand" yet. 

The situation improved for both revenue per available room (revpar) and occupancy rates as the year went on and we moved further away from pandemic restrictions. Dalata’s post-period trading was encouraging, with like-for-like revpar for July and August around a fifth higher in Dublin, 36 per cent higher in regional Ireland, and 15 per cent higher in the UK against 2019 levels. Occupancy, meanwhile, hit 89 per cent over the summer.

This compares with revpar of €88.6 for the half, which was only slightly ahead of the 2019 comparative. Reported occupancy was 70 per cent, down from the 80 per cent posted pre-pandemic. But the upwards trend is clear.

And future growth will be helped by a robust rooms pipeline, with the group committing to 1,100 new rooms between 2023 and 2025. Delata opened six new hotels this year, including entering a lease for a hotel in Dusseldorf.

The outlook for travel and hotel visits is an uncertain one. The sector could suffer as belts are tightened. And the energy situation is painful - despite the group now hedging its energy costs, it still expects gas and electricity bills to shoot up by €8mn in the second half to €21mn. That’s a big chunk of profit lost. The shares trade on a consensus 17 times forward earnings per FactSet, which looks undemanding against its five-year average of 27 times. Hold.

Last IC view: Hold, 232p, 01 Sep 2020