Dalata brings Clayton brand to Scotland

Scotland is to get its first Clayton Hotel as Irish hotel operator Dalata beefs up its expansion plans for the UK by leasing a new hotel to be built in Glasgow.

The new hotel, which is expected to open at the end of 2020, will be a four-star property located in the centre of Glasgow on the river Clyde, and will have about 300 bedrooms, a bar, restaurant and conference facilities. Construction is subject to the receipt of planning permission from Glasgow City Council.

Dalata has joined Artisan St Enoch Quarter Limited, a subsidiary of Artisan Real Estate Investors Limited, for the transaction, which will see it acquire a 35-year operating lease, subject to five-year rent reviews linked to the retail price index. Dalata will pay rent of £8,000 a room.

It’s the first time that the Dublin-listed hotel group has moved into Scotland, and the deal expands its reach in the UK, where Dalata already operates seven hotels in cities including London, Leeds and Belfast. A new Clayton hotel is also planned for the centre of Manchester.

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Clive Wilding, property director at Artisan Real Estate Investors, said: "We are pleased to have formed a development partnership with Dalata Hotel Group for this flagship regeneration opportunity providing the chance to restore the forgotten grade-A listed Custom House into a part of the new development.

“The new hotel forms the key part of a wider mixed-use development, for which the planning process will start shortly, with a view to being on site at the end of 2018 and open for business in 2020.”

UK portfolio ‘performing well’

The move into Scotland is part of the group’s overall UK strategy. In a capital markets presentation delivered on Tuesday, Dalata deputy chief executive Dermot Crowley said its UK hotel portfolio was “performing well” with revpar (revenue per available room) for the first half of the year up by about 14.6 per cent, and was outperforming the market.

Mr Crowley said Dalata now sees “a large structural opportunity” to become the market leader in the three- and four-star hotel market in 20 large cities in the UK, given that there are currently no dominant brands in this market segment. The group now has a target range of 10- 15 per cent market share of the three- to four-star market in each city, which translates to an additional 8,000 rooms or so over the next five to seven years.

With “limited acquisition opportunities”, Dalata will pursue new development to achieve its growth targets.

“UK expansion will be undertaken in a prudent and controlled manner with low levels of gearing and minimising financial risk,” Mr Crowley said.

While Brexit poses a “risk” to the economies of its target cities, Dalata still sees an opportunity, and is taking a number of steps to deal with this risk, such as setting higher rental covers (1.85x in year three compared with 1.7x pre-Brexit) to provide a larger cushion should Brexit impact revpar negatively.

Last month, Dalata continued its expansion plans at home as well, taking another step towards full ownership of the Clarion Hotel Liffey Valley in Dublin, acquiring the long-leasehold interest of 33 suites, meaning that the operator now owns and operates 257 bedrooms in the 352-room hotel.