Gresham plans to double its hotels

Gresham Hotel Group wants to double its number of hotels by taking on new properties in cities already within its portfolio, writes Una McCaffrey

The company, which yesterday reported weak results for the first half of 2003, is considering "specific opportunities" to cluster new hotels around existing properties in Brussels, London, Hamburg and Amsterdam.

Expansion in Dublin is also under consideration, with such growth more likely to come through acquisition than greenfield development, according to Gresham's chief executive, Mr Patrick Coyle.

"Seven hotels is too small. We're eager to start expanding the group," said Mr Coyle, indicating that a portfolio of about 15 properties would be more efficient.

He said the group may look at acquiring other small chains.

Gresham agreed last month to sell its three loss-making hotels on the west coast for €35.75 million - a deal which Mr Coyle said would offer "enormous flexibility" for growth.

"We have a more optimistic view of the future than we did six months ago," he said.

The expansion plans came as Gresham posted a pre-tax loss of €394 million for the six months to June 30th, when trade was hit by the war in Iraq and concerns over the SARS virus, particularly among US customers.

The company said it would not pay an interim dividend, citing "the uncertain trading environment".

The first-half loss was set against a €160 million profit between February and July last year, the most closely comparable accounting period.

On the same basis, turnover dropped by 5.6 per cent to €25.3 million and operating profits fell from €1.8 million to €1 million

The company pointed out, however, that such a comparison would, in effect, be comparing business in January this year to business in July 2002. Room tariffs in the two months can differ by as much as €100 a night, according to Mr Coyle.

Comparing the first six calendar months in both years would have produced a different result, where turnover would have dropped by €500,000 but profits before tax (and some small exceptionals) would have been €250,000 higher. This performance came as insurance costs rose by €110,000 and was thus directly attributable to cost savings.

Mr Coyle said as much as €700,000 in costs had been "ripped out" over the half, with labour savings alone amounting to €120,000.

Analysts called for more progress, however, urging the company to concentrate on growing the top line while continuing to whittle down its cost base.

Mr Peter Horgan of Goodbody Stockbrokers said the cluster-type expansion envisaged by the group made sense from an operational perspective but suggested that a doubling of the group's portfolio would take a long time.

Gresham shares fell back by three cents to close at 86 cents last night.