• European IPOs in favour

A trio of public share offerings are in prospect over the summer, as hotel operators look to cash in on increasing investor demand. From budget to luxury, every sector is looking to draw in cash.
At the budget end of the market is EasyHotel, which the London Times revealed has hired Investec to help explore a share sale in the coming months. The principle beneficiary of the listing, on the UK junior AIM market, would be Sir Stelios Haji-Ioannou, the founder of EasyJet and all the following orange-branded businesses.
EasyHotel follows much of the philosophy that drove growth at the EasyJet airline: a budget offering with a base price and chargeable extras, featuring direct booking using a pricing model that rewards early bookers and reacts strongly to demand. There is also the inevitable corporate orange featured prominently throughout the properties. Rooms are small, basic and sometimes come without windows.
EasyHotel has promised much since its establishment in 2005, but has found its franchise model struggling to gain traction in recent tough market conditions. A dream of 200 hotels within a decade will not materialise, while a master franchise with Lonhro to expand in Africa has failed to deliver. To date, the chain has 21 hotels open, with Prague and Frankfurt in the pipeline. The company recently moved to purchase and reopen its hotel in Glasgow, following the demise of the franchisee; it also owns its City of London property, and is backing an opening in Croydon scheduled for this summer. Group sales were GBP15.2m last year.
Sir Stelios has recently beefed up the management team at EasyHotel. Chief executive Simon Champion, a former Deutsche Bank equity research director, joined last year. He has just been joined by Darren Mee as chief financial officer, moving across from TUI Travel.
For investors interested in a stake in the mid market, Scandic Hotels is likely to be heading for a float in the summer. The listing will provide a payback to private equity investor EQT, which owns 78% of Scandic, in a transaction potentially worth more than EUR1bn including debt, according to a Reuters report.
The rising Nordic market has encouraged several listings in recent months. EQT itself has benefited from listing stakes in sanitaryware maker Sanitec and Danish outsourcing specialist ISS, both of which have performed well since floating. EQT bought into Scandic in 2007, when it was spun off from Hilton, shortly before Blackstone took Hilton private.
Scandic reported 2013 revenues of EUR913m, with ebitda of EUR80m. Since the year end, it has agreed to acquired Norwegian market leader Rica Hotels, adding 72 hotels to the portfolio, which now numbers 223. Scandic has also launched its own edgy, urban hotel brand, HTL, aimed at the younger generation traveller, with a target of adding 20 HTL properties operating within five years.
And for those seeking a holding in a luxury hotel operation, Italian company Gruppo Statuto is planning to split out its hotel holdings into a new vehicle to be listed on the Milan stock exchange. JP Morgan and Banca IMI have been asked to plan the listing of the EUR1.5bn vehicle, which will deliver a payback to Italian property entrepreneur Giuseppe Statuto, who operates a broad real estate group with interests in offices and residential as well as hotels.
Among the hotels to be included in the new company are the Danieli in Venice, and the Four Seasons in Milan. According to the Financial Times, new developments in progress such as the Milan Mandarin Oriental, which opens in 2015, will also be wrapped into the package. There is a suggestion that the new company could emulate the style of US REITs Host and Strategic.
While the Italian property market has suffered along with the country’s languishing economy, some now suggest there is upside to be had in luxury Italian property assets. Qatari investors have recently snapped up the five star Regina Baglioni in Rome, and a hotel in Sardinia; while the Sultan of Brunei has also added the Eden in Rome to his Dorchester group.
Statuto helped open up the AC Hotels brand in Italy, and has also bought the Grand Hotel Duomo in Milan, a Crowne Plaza in London and delivered the first W in Italy for Starwood.

HA Perspective [by Katherine Doggrell]: To market, to market and the frenzied drive to go public in the US is catching on over the pond, as investors, particularly those in the private equity sector, look to make what in many cases is a long-postponed exit.
London is a popular choice, with the capital accounting for more than half the EUR11.4bn raised through IPOs in the first three months of the year in Europe, the strongest first quarter for flotations since 2007, according to PwC.
The general enthusiasm for all things flotation should not be taken as a carte blanche by all. The propositions listed above are three very different prospects, in three distinct sectors of the market. In the case of Scandic, the company comes with a proven track record. With Gruppo Statuto, likewise, as the luxury market continues to storm ahead.
EasyHotel would appear to be the mystery guest at the party. When Champion joined the group Sir Stelios said that he looked to him “to take the lead role in developing the next phase of EasyHotel strategy – in particular taking on franchisees in new markets as well as advising me on further direct investments”.
The group’s direct investments include its site in Old Street, London and the Glasgow property. But while the former was a matter of showcasing the brand and the latter more one of saving face there has been no drive to push the company forwards, with the preference remaining with growth through franchising, something which is hard to do without first building critical mass.
The brand has always felt like the company’s attempts to take on the takeaway pizza market or male cosmetics – throwing the ‘Easy’ name on something, painting it orange and seeing if it takes. The reasons why EasyJet was successful – dynamic pricing, online booking, travellers prepared to fly in and out of remote locations – are only partially effective in the hotel sector and the best bits of that model have been successfully exploited by Premier Inn and Travelodge, which have left the brand in their dust.
Should there be an Easy IPO, investors will be looking for assurances that they money raised will be used to build a proper foundation for the brand, rather than providing an exit.

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