Diverse opportunities in Continental Europe – and an appetite for diversification – are driving an ambitious growth plan by Ireland’s biggest hotel group, Dalata.
The group, which was founded in Dublin in 2007, is in the midst of a successful expansion strategy across the UK. Alongside this, Continental Europe is also in the group’s crosshairs, following its first successful deals in key European cities.
Deputy CEO of Dalata, Shane Casserly, explains the drivers behind the push into Continental Europe. “We explained it to shareholders this way – if we hadn’t started looking at the UK when everything was going so well in Ireland, we wouldn’t have the pipeline there that we currently have,” he says. “Compared to secondary locations in the UK or Ireland, it’s much more attractive from a risk-reward perspective to now be targeting those large cities in Europe that have significant commercial drivers.”
Expansion plans
For Dalata, expansion in Continental Europe involves scrutinising cities from north to south. Amsterdam, Brussels, Copenhagen and Stockholm all form part of the northern European strategy, alongside Vienna and six key German markets. In southern Europe, Rome and Milan, Madrid, Barcelona and Lisbon are all under consideration.
The business made its Continental European debut in February 2022, with the acquisition of the Hotel Nikko Düsseldorf. In September 2023, Dalata inked its first deal in Amsterdam, acquiring the leasehold interest in the Hard Rock Hotel Amsterdam American from Zien Group.
Now operating as the Clayton Hotel Amsterdam American, the four-star property is centrally located on the corner of Leidsekade Canal and Leisesplein Square. It comprises 173 bedrooms, a ground floor lobby plus café and bar.
Diversification balances risk but also adds exposure to other market foibles, Casserly notes. With Amsterdam authorities recently declaring war on overtourism, he suggests owners need to stay alert. “The latest city tax seems a bit excessive,” he says, “but if you look at the fundamentals, Amsterdam is still an extraordinarily strong city market. Still, such movements need to be monitored.”
As the group explores Europe further, Casserly says that key team members will drive its growth ambitions. In July, the group appointed former Deka and CBRE transactions specialist Kathrin Jung-Reinhard to the role of head of development strategy - Northern Europe.
During her time at Deka, Jung-Reinhard played a pivotal role in Dalata's transactions on the Clayton Hotel Burlington Road, Maldron Hotel Smithfield, Clayton Hotel Birmingham, and the Gibson Hotel, Dublin, “so she knows our business”, Casserly says.
Ambitions revealed
Dalata’s ambitions were revealed earlier this year when the firm published its 2030 vision, targeting an increase in the group’s footprint from 12,000 to 21,000 bedrooms, either open or in development by 2030.
The plan also seeks to make Dalata the largest hotel operator in the four-star segment of all major cities in Ireland and the UK regions by 2030, with a growing presence in London and Continental Europe. All this, via both the acquisition of existing hotels and development of new hotels through a mix of leasehold and freehold ownership.
The group started out in 2007 with the acquisition of a group of companies from Choice Hotels Ireland. This proved the springboard for further expansion across the country, which has taken Dalata to around 32 hotels in Ireland of which 17 alone are in Dublin.
This year, Dalata reinforced its Irish holdings with a key deal for the Radisson Hotel Dublin Airport, but has also divested non-core Irish properties, such as the Clayton Whites Hotel Wexford which has been sold to Neville Hotels.
Says Casserly: “We’re comfortable with a 20 per cent market share in Dublin – we’re currently at around 16-17 per cent, simply because that share has diluted as the market has got bigger. If an attractive, 200-bed property came up in central Dublin today, we would absolutely strike. Nevertheless, it’s more of a stable market for us than an opportunity for strategic growth.” Casserly says that the group feels the same about the cities of Galway, Cork and Limerick, which are providing positive returns for the firm.
Dublin is, however, something of a blueprint for expansion elsewhere. The group has already amassed around 23 hotels in the UK, spread across the country. “We love the idea of replicating our success in Dublin in key regional UK cities, including Edinburgh, Manchester and Birmingham,” he says. “Given where RevPAR is, some of the smaller UK cities aren’t for us. However, London is a separate story. We have doubled our presence in the UK capital since 2022, and see loads of space to grow there, adding another 2,500 rooms potentially to the 900 rooms we already have.”
In November, Dalata inked a leasehold deal for a new 4-star Clayton hotel to be developed on the Tower 42 Estate in the City of London. Subject to planning approval, the full-service hotel at 20 Old Broad Street, EC2, will incorporate 154 bedrooms, a restaurant, bar and gym – plus an all-electric power system, enabling it to target a BREEAM Excellent accreditation.
Casserly says that the deal is exemplary of the firm’s need to ink a mix of leasehold, freehold and development deals going forward. “The owner of that site had no interest is selling it but was looking for a tenant to add to the overall portfolio. If we were only limiting ourselves to acquisitions, we would be missing out on interesting opportunities like this.”
Financial moves
In October, Dalata announced the refinancing of its existing debt facilities and added further liquidity to its capital structure to fund growth.
The €600 million in refinancing secured comprised €475 million in bank facilities and an inaugural private placement of €125 mln with institutional debt investors. The bank facilities included a green term loan facility of €100 million, and a multi-currency revolving credit facility of €375 million, both expiring in October 2029 with the option of two one-year extensions.
Casserly credits chief financial officer, Carol Phelan, for the financial boost. “It puts us in a robust position to then go on and acquire assets,” he notes. “We also initiated a share buy back programme which is good balance sheet management.”
Looking to the future of the sector, does Casserly believe that hospitality’s post-Covid streak of dynamic growth can last? He says: “I think a lot of the current generation that has disposable income are investing in experiences over assets. We’re also seeing the growth of the middle classes throughout the world.” These positive fundamentals should be weighed against real world issues, however. “As an industry, we are always very exposed to changes like recessions, the pandemic and geopolitics. They are what drive cycles.” This is turn has informed Dalata’s structure, pursuing development and operations across two arms of the business. “Our operational wing means we have to take a prudent view and be careful how we structure acquisitions,” he says. “That said, our careful approach paid dividends during the pandemic, when we were able to pay all of our rents.”
While Casserly notes that distress has not really manifested in the sector, despite being on investors’ watch lists, he notes that hospitality favours groups with the strength to scale. “In markets like the UK, RevPAR hasn’t kept track with inflation, nor the living wage,” he notes. Payroll is around 40 per cent of the group’s total cost base, while living wage requirements continue to increase. Casserly sees wage increases as right for society, but notes it is placing pressure on businesses. “We think it will be a challenging market going forward for those that can’t invest in technology or pursue the necessary efficiencies,” he says.