How to bring a hotel group through a pandemic

Interview: Dalata has been battered by Covid, but CEO Pat McCann is finding opportunity

It's a Tuesday morning in the four-star Clayton Hotel in Leopardstown, south Dublin, and the lobby is an oasis of calm. Normally it would be hopping. The occupancy rate for the night is about 35 per cent, when normally it would have been 85 to 90 per cent full.

Rooms at the property, which is owned by Dalata, Ireland’s biggest hotel chain, can be had for €88 bed and breakfast, down from €140-plus in pre-pandemic times.

This reflects the impact of coronavirus on the economy and the cranking up of restrictions in Dublin last week by the Government. The hotel group’s chief executive, Pat McCann, says the latter has led to “very little” by way of cancellations for Dalata, “which is surprising” but business remains tough.

The hospitality trade across the country has been hammered, with Dalata (which also operates the Maldron brand) impacted like everyone else. It made a loss of €70 million in the first half of this year and some 1,500 of its 4,500 staff remain laid off due to a lack of business across the chain, which comprises 44 hotels in Ireland and Britain with more than 9,000 bedrooms between them. Room rates are down 40 to 50 per cent.


Broad grin

“For 2020, it’s about how you survive, and that the company is in good shape when we emerge from this. Out of this there will be opportunity and I want to have Dalata well positioned to take that opportunity.”

Earlier this month the listed Irish company announced it had signed deals to lease hotels in Brighton and Manchester in England. "We are signing those at post-Covid pricing," McCann says with a broad grin. "And we're now seeing opportunities emerging in London. I couldn't afford to get into London previously because of the crazy prices, and now suddenly I'm getting opportunities. We are partnering with developers who have sites with planning and need to look at a long-term solution for them."

Dalata also has 13 hotels in various stages of construction or redevelopment, which will add 3,300 bedrooms to its portfolio.

McCann stresses that Dalata is well capitalised, with about €300 million in cash and undrawn banking facilities to call upon, including €94 million in gross proceeds from a share placing earlier this month in which McCann spent €229,500 buying 90,000 shares (he owns 0.75 per cent of the business).

“We are going to take full advantage of this crisis,” he insists.

According to McCann, Dalata broke even in July and August, which included paying all rents due to its landlords. It demonstrates the resilience of the company but also reflects Government wage subsidies, which are helping a lot of businesses to stay afloat.

Dalata’s average occupancy was just over 30 per cent in July and more than 40 per cent in August, prime summer months when he would expect his Maldron and Clayton properties to be full.

Dalata reopened in Ireland on June 29th and in the UK on July 4th, and McCann says it has “outperformed where we thought we were going to be”, which apparently was an average occupancy rate of just 10 to 15 per cent.

Just two of its staff have so far tested positive for Covid since the reopening, and there has only been one issue relating to a customer, which turned out to be a false alarm.

Dalata has set aside isolation rooms at its hotels for any guest who might develop symptoms. It is also offering rooms to foreign students who have come here for third-level studies, and are required to isolate for two weeks.

“Essentially, you have a situation where people don’t leave their rooms for two weeks,” he says, adding that meals are brought to them.

“We’ll collect [their dirty laundry] and it’s then brought away for specialised cleaning and the same with their linen changes and towel changes. Every day we talk to them . . . there’s a conversation that goes on with everybody in those rooms. The fact is that you are in lockdown and it is strict.”

In addition to his day job, McCann is also president of employers group Ibec (at least for another 48 hours – he is due to step down this week). Wearing his Ibec hat, he says there is a “level of frustration building up” with the Government’s recent communications around the restrictions being imposed.

“They appear to be so last minute. They announce a five-point plan and they say it’s not actually a five-point plan because we have two and a half and three and a half. They’ve actually added to the confusion.”

He wants the 9 per cent Vat rate for the industry restored in the budget, and some movement on commercial rates – Dalata pays €1.8 million in Irish rates each quarter.

New normality

Looking ahead, Dalata has war-gamed the next couple of years. “We see 2021 as a rebuilding year but that won’t start to happen until after the first quarter. For our business to work, we need international traffic. We’ve done well on domestic but it’s not sustainable for the long term, particularly for Dublin.

“And then in 2022 we are looking at what we would term the new normality. That depends on how quickly international traffic comes back.”

He envisages a situation where people who used to commute into Dublin or London each day, and would rent an apartment, might switch to taking a hotel room a couple of days a week under a new hybrid working model. “It will be more economic for them and we’re beginning to see elements of that. We have to be very aware and alert to the changing needs of our customers.”

He is forecasting average occupancy levels next year of more than 70 per cent, and above 80 per cent in 2022.

“Essentially, 2021 will be all about keen pricing, across all our segments. And that is to build volume. Then, as we get into 2022, I will be back to my normalised pricing that goes on in the business, running as it should be.”

This very positive outlook is based around a vaccine being widely available and international travel resuming in a meaningful way, probably from the middle of next year onwards.

And the worst case scenario? “I haven’t done a worst case scenario at this point,” he says.

McCann was due to head away for a week's holiday in Waterford on Friday but had to cancel that when the Government announced the additional restrictions for people living in the capital. "I'm spending it in Dublin now," he says with a chuckle.

Other than a few days in Connemara, he’s done “bugger all else” by way of holidays so far this year.

The Sligo-born executive also became a grandfather for the first time during the early stages of lockdown, and he didn’t get to see baby Conor for the first month due to the restrictions in place. “I was thrilled that both mother and baby were healthy, and after that nothing else mattered.”

McCann will be 70 next year, and has led Dalata since he co-founded the business 13 years ago. Has the pandemic delayed his retirement? “I have no plans at the moment for it. If Covid hadn’t happened I might be starting to think about things differently. With Covid, I have parked everything. It doesn’t even cross my mind,” he says.

"I feel incredibly healthy. I have the same if not more energy than I had 10 or 15 years ago and I'm up for it. As long as I have energy to do what's needed to be done then I'm going to do it. The day I stop having that energy is the day I say to [chairman] John Hennessy 'I'm out of here'."