Coronavirus: Shares in Dalata at five year low as bookings are hit
Ireland’s biggest hotel operator dealing with marked deterioration over past fortnight
Dalata chief Pat McCann said the company’s main concern was the health and wellbeing of personnel and customers.
Shares in Ireland’s largest hotel operator plunged almost 10 per cent to the lowest in five years after it said it had been hit with significant reductions in bookings and significant increases in cancellations since the spread of Covid-19 to Europe.
Dalata Hotel Group, which also has a growing presence in the United Kingdom, issued an update on Monday in which it said there had been a marked deterioration in terms of the effect of the virus on its business since it published full year results last month. Its shares closed 9.84 per cent lower at €3.30.
At that point, the company said it had experienced “no material reduction in demand” due to the outbreak of the virus in China.
However, on Monday, it said: “We have since observed a significant reduction in bookings and a significant increase in cancellations following the spread of Covid-19 to Europe, in particular the spread of the virus to northern Italy and from there to the UK and Ireland.”
The group pointed out that the extent of the impact of Covid-19, the rate at which the virus spreads, and the period for which it continues “cannot be predicted at this time”. Therefore, it is “too early” to estimate the financial impact on the company.
Dalata’s share price fell by more than 5 per cent on Monday, continuing a recent trend which has seen it fall by 32 per cent in the year to data and by about 30 per cent since its results on February 25th.
An analyst with Goodbody pointed out that hotel groups “inevitably have a large drop through to the bottom line from lost revenue and this crisis will hit rate, occupancy and other revenues so it is not to be underestimated”.
“Assessing valuation at this point is difficult as we have little context on the levels of cancellations, the time scale of this crisis and whether major events such as the St Patrick’s Day festival will be cancelled,” he said.
“At this point in time it would appear that the group’s balance sheet and cash flows are more than strong enough to weather this storm. We will update further when we get better clarity on the impact on bookings and duration.”
Dalata chief executive Pat McCann said the company’s primary concern was the health and wellbeing of its personnel and customers.
“Dalata’s decentralised operating model means that we have responsibility at a local level, co-ordinated through group, enabling us to respond quickly and effectively as this situation evolves,” he said.
“Our primary concern is the health and wellbeing of our people and our guests. We are implementing additional procedures and following the guidelines provided by the World Health Organisation.
“Our lowly geared asset backed balance sheet together with our experience in reacting to crisis scenarios gives us the resilience to manage the impact of the unfortunate outbreak of the Covid-19 virus.”
Separately, benefits group Mercer predicted economic growth in the first quarter in China is likely to be negative for the first time in decades. If the virus is contained, the fall could be moderate, but, if not, “a severe shock is likely”.
Mercer’s base case is for a sharp economic slowdown in the first half of the year in most economies, followed by a steep recovery. “We do not recommend clients make significant changes to their asset allocations,” it said.
Meanwhile, an Irish remote working app has reported a 163 per cent weekly increase in enquiries from companies planning for business continuity in the face of possible coronavirus restrictions.
Magnet Networks’ Magnet Talk app allows employees to access their desk phones from a remote location such as a mobile handset or laptop, and to make calls from the same office number.