EasyHotel is to turn its focus on Europe as the UK comes under pressure, describing the current period as the “perfect time to go to Spain”.
The budget player was not alone, with Motel One also looking to the country for expansion as it opened its first hotel in Spain, in Barcelona.
At EasyHotel, the company said it thought there was potential for approximately 12,000 EasyHotel rooms, primarily in the UK, Spain, France and Germany with an additional opportunity for approximately 15,000 franchised EasyHotel rooms across the UK, Europe and the Middle East.
Guy Parsons, EasyHotel CEO, told Hotel Analyst: “We’re not saying the UK market is dead – our revpar was up 11.2% – but at the same time if you look at the STR figures you can see that Europe is performing ahead of the UK. London has been under pressure for a while and the regions are mixed – underlying all of that is that consumer confidence is weaker than it has been, probably because of Brexit.
“We’ve got a reasonable pipeline in the UK, we’re not pulling out of the UK, but if you look at Spain the fact is that revpar is rising and we’re not seeing land costs rising at the same pace. Now is the perfect time to go to Spain, there isn’t a dominant super budget or budget player.
“We had looked to developing into the four gateway sites, but we may now develop past that. The market economies are absolutely right. We’re confident that we’ve got the product right. The time is right for us to exploit that. We’re going to add resources to look at Europe – even if it’s a challenge, we’re up for that.”
The company has an owned hotel in the pipeline, in Barcelona, and a franchised hotel in Malaga.
Parsons said that the company would update the market on its intentions in Europe in the coming months.
Of the GBP50m raised in February, Parsons said the company had around GBP38m left. Including the additional bank debt it had put in place, he put net cash at around GBP70m, which, at GBP70,000 per room accounted for 1,000 rooms.
The CEO said that the company remained “committed to developing franchised sites”. The group has four new hotels committed and nine owned units in development. It has a further 10 franchised hotels in development.
The comments came as the group reported first-half numbers, with adjusted Ebitda up 51.0% at GBP980.000. Parsons said: “Our growing portfolio of European hotels are trading strongly. Whilst we remain mindful of UK consumer sentiment we believe our super budget offer is appropriately aligned to the needs of discerning and value conscious customers. Group trading remains in line with our expectations and we expect the brand to continue to outperform the market. We will continue to seize opportunities in our UK, European and international markets, balancing our owned hotel development between UK and European assets to create value for our shareholders and underpin the long-term growth of the EasyHotel brand.”
At Motel One, the company opened in Barcelona in February, with Dieter Müller, CEO & founder, commenting: “Barcelona is one of Europe’s most popular city-break destinations, as well as being the centre of an economically strong region, and so the city was right at the top of our wish-list.”
The 301-room hotel was developed by Motel One Real Estate with an investment of around EUR35m. The building permit for the Motel One was one of the last to be granted before the moratorium prohibiting any more new hotel construction in Barcelona’s city centre.
The opening took the number of hotels in the group’s portfolio to 63 open, 19 of which were outside Germany, with 29 hotels in the pipeline.
The European hotel market achieved an overall 2.6% increase in revpar in the first quarter, with the group commenting: “The UK markets of London and Manchester suffered revpar losses. Although demand rose in both cities it was unable to fully offset the growth in capacity”.
Ebitda rose by 5% to EUR24m, with operating profit falling to EUR13m due to higher immediate write-downs on the FF&E of new hotel openings and redesigns
Looking ahead, the group said: “Where market performance is concerned, we believe that although demand will generally continue to be fuelled by two megatrends: globalisation and urbanisation, the occupancy rates in most European cities will come under pressure since significant new capacities are being advertised, especially in the UK and Germany.”
HA Perspective [by Katherine Doggrell]: Much has been written in these pages, almost hourly, about the delights of Spain as a market, although the narrative is more commonly around the country moving ever upmarket and less on the opportunity for the budget sector.
But opportunity there is to bring value to the masses, masses who, as the tour operators have been complaining, are underserved by the economy sector. For EasyHotel, which has a stablemate targeting Spain with great success for years in EasyJet, the move was obvious. As Langton Capital’s Mark Brumby said: “Its brand works and, as the UK market becomes more challenging, its units should become more appealing to consumers looking to save money.”
Both EasyHotel and Motel One have attributed their current successes to putting their money where their mouths are and, in the case of the former, then turning to franchising to build on that.
Travelodge is also present in Spain, under leaseholds, meaning that, of the big budgets who you would expect to see in a Brit-heavy market, Premier Inn is the only one absent.
The company is, of course, betting on Germany, a market where it also insists that there is the chance to be a dominant force, but where there are more brands at play and where land costs are rising. Should the company be picked up by an overseas investor, as rumour suggests, we will be intrigued to see whether they too favour Germany over Spain.