Hotel group narrows revenues and re-invests in extensive portfolio
A Harrogate-head-quartered hotel company has invested in excess of £140m in re-building, refurbishing and re-positioning of its portfolio of hotels across a three-year-plus programme; narrowing its revenues to build for further successes.
The Principal Hotel Group, which runs Principal and De Vere properties across the UK and is owned by Starwood Capital, has now spent more than £140m on the programme and anticipated spending £100m in 2017 – according to its annual report for year ended 2016, which has this weekend been published.
In 2016 alone, £74.7m was spent re-building, refurbishing and re-positioning the portfolio, which includes The Principal York.
As at 31 December 2016, Principal Hotel Company had £88.6m committed capital expenditure facilities from its lending banks, of which £43.8m had been drawn. The remaining was due to be used to re-develop the group’s flagship hotel, The Principal London, and completion of developments of several De Vere hotels.
The investment programme saw revenue and earnings drop due to hotel closures and business disruption. Revenues from the most disrupted properties (London, Manchester and Wokefield Estate) stood at £30m – down from £51m in 2015. Revenues across the other hotels and venues rose to £260m from £256m. EBITDA was down £10m, from £99m in 2015 to £89m in 2016; while operating profit stood at £57m, down from £66m.
Occupancy for 2016 was at 72%, dropping from 75% in the previous year. Average room rates rose from £74 in 2015 to £79 in 2016.
The full closure of The Principal London from July 2016 for a complete refurbishment and the re-build of the Wokefield Estate bedroom wing after a fire negatively impacted revenues by £20.5m. But the company said the shortfall was made up by the uplift of Principal York and Edinburgh hotels.
Edinburgh, Manchesher and York hotels enjoyed a double-digit revenue growth in 2016 due to the investment, the report said.
The group bought Martins Bank in Liverpool in early 2016 to turn it into a 5-star hotel. In May this year, the group entered a strategic partnership with Hortons’ Estates on the Grand Hotel in Birmingham and the £30m investment will see a full re-development of the 180 bedrooms and suites.
The Group chief executive Tony Troy said: “We anticipate that by the end of 2017 the full positive impact of this three-plus year investment programme will be realised and will be reflected in strong growth and enhanced performance from 2018 onwards.”
Around 20 smaller hotels will have been disposed of by the end of 2017 as part of a company focus on city hotels, larger regional hotels, country hotel and conference venues.
Troy added: “Thanks to the ongoing support of our customers, dedicated staff, our lending banks and our shareholder Starwood Capital, the future prospects for Principal Hotel Company are strong. The management team are proud of the hard work and achievements made in 2016 and year to date 2017.
“Despite the uncertainties surrounding the UK leaving the European Union and slow but steady economic growth, we believe the strategic re-positioning, significant capital investment and relaunched brands will deliver solid returns in the years ahead.”
