European hotel groups have seen rapidly improving business in the last couple of months, as summer leisure business has recovered across markets where international travel has remained problematic.
Irish group Dalata reported first half figures showing a cash outflow of EUR24m over six months, with adjusted ebitda of EUR1.4m for the period. But the figures have been rendered historic as occupancy leapt from 44% in June to 58% in July and 68% in August.
“We saw a big take-up in June, July and August,” said Dalata CEO Dermot Crowley. “Our revpars are higher than they were in 2019, as the leisure demand is so strong.”
Crowley said the experience has proved the level of pent-up leisure demand. Having taken busy Ireland-UK flights himself recently, he also believes that, with flight capacity building, there is every possibility of a similar bounce back in business travel, into the autumn.
Dalata made a point of retaining core teams at its hotels, during lockdowns in the UK and Ireland, and the strategy has paid off as the sector reopened. “We haven’t experienced the same issues that others have.” In August, the group opened a new hotel 300 room hotel in Glasgow, its first in Scotland, without major staffing issues.
The group is planning for the opening of six hotels over the next nine months, in Bristol, Manchester, Glasgow and Dublin, adding 1,500 rooms to the portfolio. Further projects are at early stages, with Crowley’s development team only out travelling in the last couple of weeks. “We’re always looking for opportunities, and there’s plenty of dialogue,” he reported.
The company also made a point of paying its rents in full, and believes this should pay dividends as it seeks opportunities for further expansion. It is still in receipt of Irish government subsidies, which will wind down, while Crowley says the effects of rent moratoriums unwinding has yet to be seen in the market. “The big thing we’re looking out for, is international travel.”
Also reporting a cashflow negative first half, European group PPHE says it is enjoying a strong tourism rebound at its Croatian business, Arena. There, July and August business has improved to see revenues at 90% of 2019 comparables. The company also reported improving demand at its hotels across European city centres, as domestic travel returns following the easing of government restrictions.
With a strong presence in city markets, and particularly in London, PPHE continues to await the return of business travel. PPHE president and chief executive Boris Ivesha said there is evidence of growing business demand: “The number of enquiries for meetings and events in the UK is at the highest level since the pandemic started.”
Several of the group’s hotels remain closed, due to expectations of low levels of business, including the Park Plaza at Amsterdam airport, and art’otel Budapest.
PPHE has continued to take steps to reinforce its liquidity, and in June agreed a joint venture with new partner Clal Insurance, which put in GBP113.7m of equity for a 49% share in a new company holding two of PPHE’s property assets. One is the established 646 room Park Plaza London Riverbank, while the other is the 343 room art’otel London Hoxton, which is under construction and will open in 2024. “The proceeds will enable the Group to pursue new growth opportunities as the pandemic period subsides,” said Ivesha.
And a further view on the returning European marketplace came from Deutsche Hospitality, which reported first half figures within those reported by Chinese parent Huazhu. ADR improved from EUR69 in the first quarter to EUR82 in the second, as occupancy lifted from 18.8% to 24.4%. For the most recent summer holiday period, management said occupancy recovered in August to 50% of the 2019 comparable, with revpar at 67% of the levels reached two years ago.
The business opened two hotels during the second quarter, and has a current portfolio of 122 with a pipeline of 38 properties. The openings included the first Steigenberger branded property in China, and a second IntercityHotel in the country, launched in Yangzhou. This has subsequently been joined buy a further IntercityHotel opening in Zhengzhou during August.
The German business continues to look for new opportunities, and has recently floated two new brands. In July, it signed a license agreement with Porsche Design Group to launch a new luxury lifestyle brand, Steigenberger Porsche Design Hotels. And in August came news of House of Beats, designed to sit in the group’s upscale segment alongside sister brand Jaz in the City. The first Beats properties are to launch in Hamburg and Milan.
HA Perspective [by Chris Bown]: First half figures from Dalata, PPHE and Deutsche Hospitality all look immediately historic. Hotels in the UK were largely closed until May, and some of those in mainland Europe restricted until later – what’s clear is that once the leisure market was released, pent up demand quickly filled hotels.
Dalata appears to have done best, its properties able to crank up quickly, and being in the right places to accommodate leisure travellers. PPHE is less well placed, with its strength in central London more reliant on business guests; while DH is in markets moving a few weeks behind the UK.
Those taking flights in Europe, including Crowley, report packed planes – but this may be more about airlines restricting capacity, rather than booming business demand. However, there are signs that airlines are thinking more positively. Australia’s Qantas recently declared it would bring its mothballed A380 super jumbos back into service from the end of this year, believing it will see a strong ramp-up of international travel.
But right now, everyone’s wondering quite how business travel will return. The US hotel group CEOs insist business demand is bouncing back – just as the Europeans ponder how Zoom will permanently change the way business is done. Both can’t be right.