Hotel group Dalata tipped to benefit from recovery in travel

According to UBS, Dalata will benefit from a continued recovery in travel and further expansion in the UK in the coming years.

he Swiss bank has just initiated coverage of Ireland’s largest hotel operator with a “buy” rating and a price target of €5.50. Shares of Dalata closed up 5.5 percent at €3.55 on Thursday.

Last month, Dalata said sales for 2022 should surpass 500 million euros – the highest ever for the group. Adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of more than EUR 182 million are expected for the year as a whole. This compares to 63 million euros in 2021.

UBS says its upbeat outlook on the Irish company, of which Dermot Crowley is CEO, is also supported by rising room rates.

“Despite consumer pressure and recession fears in the UK, we believe Dalata’s Adjusted Ebitda should more than double over the next two years (vs. 2021) to approximately €185 million, reflecting rising average room rates, continued UK room expansion and a new launch in Germany and the generation of cost-cutting benefits,” UBS said in a statement.

The agent said Dalata will gain more market share in the UK as it opens more hotels there.

“We believe Dalata offers a quality pipeline rollout story and the company should be able to find additional sites to fill the UK pipeline once development is complete,” added UBS’s announcement.

It added: “We note that the UK’s largest hotel operator, Whitbread, expects overall hotel supply to remain flat over 2019-26. Additionally, Dalata has around 0.5 per cent share of the UK market, so we see limited chance of cannibalizing existing hotels.”