Shares in Ireland's largest hotel company jump 16%

Dalata Hotel Group, the Republic's largest hotel company, this morning floated on the stock exchanges of Dublin and London after raising €265 million from institutional investors from the United States and Europe eager to cash in on the mini-boom in Irish hotel assets.

The company, which operates 40 hotels and is run by former Jurys chief executive Pat McCann, has an initial market capitalisation of €305 million.

After paying fees of about €10 million associated with the flotation, Dalata will have a war chest of €255 million to buy up to 25 new hotels in Ireland.

“We have a successful ‘leased hotels’ division and a successful ‘managed’ division. Now we want to build a successful ‘owned’ division,” said Mr McCann. “We think the time is right to buy Irish hotels.”

According to its listing documents, the company already controls about 10 per cent of the State’s hotel market when calculated by the number of rooms.

Dalata has 5,800 rooms at the hotels under its control, which include about a dozen leased hotels, mostly operating under its Maldron brand; and another 27 managed on behalf of other owners. It is three times larger than its nearest competitor, the Carlson Rezidor group.

The listing documents also reveal that the Competition Authority has launched an investigation into alleged anti-competitive practices in the Irish hotel sector in relation the prices given to third-party resellers, such as websites and tour operators. Dalata's prospectus said it has engaged with the authority, following legal advice.

The company’s revenue last year was €60.6 million, up from €54 million the previous year. Operating profit grew to €5 million and Dalata made an after- tax loss of €580,000. Much of the loss is accounted for by interest paid on loan notes, however, which will not be payable in future.

The bulk of its revenue, €55 million, came from the hotels in its leased division, including its Maldron hotels. The remaining €5 million was in fees from its managed division.

The prospectus highlights as a risk the fact that several of its contracts are only verbal in nature.

Mr McCann said Dalata, which currently runs Citywest and the Ballsbridge Hotel, will "look at everything that comes on to the market" in the Irish hotel sector. It is thought to be in discussions with institutions including the National Asset Management Agency and Bank of Scotland about possibly buying portfolios of Irish hotel assets.

It will look at buying hotels of more than 75 rooms in Dublin, Galway, Cork and Belfast, and will borrow up to 40 per cent of the purchase price of each property.

The listing prospectus reveals Dalata acquired the management contracts for seven regional hotels this year from a company, Pillo Hotels, that is owned by Neil O’Leary’s Ion Equity.

Dalata's new chairman is John Hennessy, who also chairs the listed recruitment firm CPL Resources. Along with Mr McCann and two other executive directors, the board includes former Beamish executive Alf Smiddy; former Aer Rianta and Postbank boss Margaret Sweeney; and former KPMG partner Robert Dix.

Irish-based shareholders, comprising the 10 per cent owned by clients of Davy stockbrokers, TVC Holdings and a number of other Dublin-based institutions, will together hold about a third of the company.