PPHE Hotel Group told Hotel Analyst that it had turned around the negative revpar that it had seen in the first half of the year in the UK.
The group said that it would continue to look for acquisition targets, but would not be drawn into a “heated” market.
On a like-for-like basis1, total room revenue for 2018 increased by approximately 6.7%. Reported room revenue in 2018 increased by approximately 5.7% year-on-year. Reported Group RevPAR increased by 5.3% to £97.7 (2017: £92.9), mainly due to strong RevPAR growth in our Dutch and German regions. Average room rate increased by 2.5% to £123.1 (2017: £120.2), whilst occupancy increased by 210 bps to 79.4% (2017: 77.3%).
The company said that it had see improved trading across all its operating regions and had benefited from the reinstatement of full room inventory at Park Plaza Victoria Amsterdam following completion of a major investment programme, and the first full year contribution of Park Plaza London Waterloo and Park Plaza London Park Royal.
As anticipated, room revenue performance in the year was impacted by the temporary closure of Park Plaza Vondelpark, Amsterdam and reduced room inventory at other properties due to real estate investment programmes, as well as the termination of a lease agreement in Dresden, Germany.
Daniel Kos, CFO & executive director, PPHE, told us: “We’re particularly happy with the UK, where we’ve also had a lot of rooms off through renovations. In H1 we reported negative revpar in the UK, which we’ve been able to turn around because our products are quite diverse and we saw strong leisure and conference business in the second half. It’s remarkable because we informed everyone that negative revpar was expected after a strong 2017, but we are now up on that.
“We have new hotels coming online – we’ve been in scaffolding but soon everything will be new. In Amsterdam we have just reopened our largest hotel and we’ve already seen the return on our investment after six months.”
Looking ahead to the UK’s exit from the EU on 29 March, Koss said: “In terms of booking pace it has been good so far. With everything around Brexit happening we don’t see disturbances so far and our visibility is around three months.
“Our focus areas are on labour, procurement and booking pace. We are hearing noises in the market about people leaving, but that’s not the case for our company. We haven’t seen any changes in the nationalities of people applying for jobs. We have training programmes where you can truly become a GM one day – because we offer perspective to be promoted, that helps a lot. We have a focus on apprenticeships – at the moment we are putting a lot of focus on chefs. If you focus on retention that helps with labour.
“On procurement we have taken advice from our suppliers, we don’t see there being any issues. We have decided to stockpile a few months’ of wine as we have a very strong conference business. The rest we expect to source from the UK.
Commenting on whether the group had any further ground lease or sale-and-leaseback deals on the horizon, Kos said: “Our first focus is to open our refurbished hotels and get the yield of out them. At the moment we have GBP170m excess cash, so we have no need to do any sale and leasebacks, although we will always look at opportunities. We are looking for sites in the UK, mainland Europe – Rome, Germany, Eastern Europe, destinations you would expect. We keep repeating that we would rather sit on our money and be disciplined because the market is pretty heated from other bidders. We won’t spend money for the sake of it.”
The group’s development pipeline includes two new hotels in London which are expected to add an additional 500 rooms by the end of 2022.
According to the latest UK Hotel Market Tracker: Q4 2018, produced by HVS London, AlixPartners and STR, average rates in Q4 rose by 5% in London’s hotels, to GBP157.20, boosting revpar by 10%.
HVS chairman Russell Kett said: “For the UK’s hotels, Q4 was a very different trading picture in London compared with outside the capital. Hotel supply outside London grew 1.8% in Q4 of last year, causing supply to exceed demand. As a result of more intense competition, operators were unable to lift average rates.
“While supply growth was also strong in London at 2%, in 2018 demand resulting from a number of high-profile events boosted visitor numbers and meant that in Q4 London’s operators were able to mitigate the impact of the increasing number of hotel rooms available.”
HA Perspective [by Katherine Doggrell]: As Kos told us, it pays to diversify, although the group had no plans to bring its glamping product to the UK “until you have summer for six months of the year”. People from the UK are, of course, welcome to visit it in Croatia.
Where the company has less diversity and has benefited from it is not locating its properties in the UK outside London. As HVS reported, increased supply in the regions is now making its presence felt.
PPHE is now set to hunker down with its renovated estate and see out the current toppy transactions market, which it has no appetite for. With several months’ wine on hand, a bunker mentality looks a pretty chipper option.