Dalata's CEO On Where It Will Be Spending A €750M Hotel War Chest

Almost two years into his tenure as Dalata Hotel Group CEO, Dermot Crowley sits at the helm of a rapidly expanding hotel group with a €750M war chest at his disposal.

Crowley took the top job in November 2021, having worked as deputy CEO of finance and development for over eight years under Dalata’s founder and first CEO, Pat McCann.

Since stepping into the top job in 2021 after eight years with the company, he has steered Dublin-based Dalata through the pandemic, extended the company’s reach in London and across the UK, and even into its first, but not last, European venture while continuing to grow the Irish business.

In all, London-listed Dalata now owns or operates over 50 hotels, primarily four-star, and employs nearly 5,500 staff. Recent results told of a strong first half to 2023. A summer surge in travel and robust domestic demand saw half-year revenue rise by 29% to €285M, with adjusted earnings before interest, taxes, depreciation and amortisation up 24% to €103M. Its shares are up 21% in the past year. 

Noticeable in Dalata’s August half-year update was the optimism about not just the current demand for rooms but the company’s forecast for the rest of the year and beyond, and Crowley remained similarly bullish when he took a break from the latest leg of the post-results investor roadshow in London to talk with Bisnow.

It caps a busy period during which Dalata has acquired two London hotels for a combined €112M, adding 280 rooms to its UK portfolio and expanding its London room portfolio by 64%. Meanwhile, the 157-room Maldron Hotel Shoreditch is due for completion in the second quarter of 2024.

Three leased hotels are also under construction in Liverpool, Brighton and Manchester and are expected to open at the end of 2024, while Dalata added seven hotels last year, including its first in Düsseldorf. 

With a substantial €750M pot — drawn from the existing and future refinanced debt facilities of the business in addition to ongoing cash flows — beyond what has already been announced in the pipeline, where is Dalata going to spend its money?

“Our main focus is on the UK," Crowley said.

Last year, it opened two hotels in Glasgow, two in Manchester and one in Bristol. It has also been busy in London and bought London Wall, the former Apex Hotel, and opened at Finsbury Park with the company’s first Maldron hotel in London.

“We have hotels in Brighton, Liverpool and Manchester scheduled, and we’re always looking for opportunities, especially in locations we do not have a presence in, including Edinburgh, York and Oxford,” he said. “We’re also hoping to do more in Birmingham, Cambridge and Bristol.”

In London, the company is expecting a “serious rebound” in Asian visitors next year as Asian citizens finally receive renewed passports and visas after a bureaucratic backlog in China.

“It will be four years of pent-up demand by then, and we know how much Asian countries like travelling,” he said. “In Dublin, we didn’t see a strong presence before, but perhaps we will benefit from an overspill from London.

“Part of the equation for us is airline capacity. London is still around 8%-9% behind 2019, although it’s been good to see Dublin reach its previous capacity quickly. There was previously a direct flight from Beijing to Dublin, and obviously, the resurrection of those sorts of routes can only help.”

In terms of future development or acquisition, it remains a case-by-case situation. Shoreditch progressed as a development project because the company acquired a site just before the pandemic that the company felt was ripe for it to construct a new scheme.

“We operate a mix of ownership and leasing because of the balance sheet, because you can only own so many properties,” Crowley said. “Right now, it’s slightly easier to buy because a number of locations are coming up for refinance, and that’s prompting some owners to sell rather than refinance at higher rates.”

But Dalata has also looked beyond the UK and Ireland and in February 2022 took its first step into mainland Europe with the acquisition of the Hotel Nikko Düsseldorf, with more set to come and the focus continuing to be on four-star and upper four-star hotels.

“We’re looking at cities across Germany, plus locations like Amsterdam, Madrid, Barcelona, Vienna and the like,” he said. “We like city centres that have both a leisure and a corporate market. Again, it’s somewhat opportunistic because in reality you get offered a lot of locations and most fall through, so we’re always on the lookout. But you have to choose carefully because once you own a hotel, you can’t move it.”

Dublin Development Pushes Ahead

The Dublin portfolio consists of eight Maldron hotels, seven Clayton hotels, The Gibson Hotel, The Samuel Hotel, plus the Clayton Hotel Düsseldorf, with 10 owned and eight operated under lease. Irish revenue and EBITDA rose at a faster rate than the wider group, the company reported.

“Despite the cost of living squeeze, people still seem to be prioritising travel,” Crowley said. “Clearly, there is a hangover from Covid with pent-up demand. But people have been able to travel for a while now, which would make it some hangover. So the question is whether what we’re actually seeing is a permanent shift in consumer behaviour. We know Gen Z is prioritising experiences anyway, and perhaps that has spread to other generations as well.” 

Crowley also said he sees a recovery on the lagging corporate side despite the fact that technology companies are not travelling as much because of cutbacks, travel budgets, videoconferencing and carbon emission pressures.

“But there are 12% more people employed in Dublin now than in 2019, so the corporate sector has stayed strong,” he added.

One of the reasons Crowley remains confident about room demand for Dalata’s portfolio in Dublin is that most of the recent development in the city has been focused on the budget end of the sector, and that looks set to continue, he said.

"You also have the refugees, who account for around 10% of hotel capacity in Dublin," he added.

"That’s down from about 16% last year, but who knows how long this is going to last? It’s a humanitarian crisis, and I can’t see the situation unwinding quickly.”

Regionally, Dalata has focused on Ireland’s main cities, and H1 demand has been strong. Domestic travel has been noticeable among that, he said.

“We feel optimistic that it will continue, but as to whether people will cut back because of the cost of living issues, I’m not an economist. Our job is just to run our hotels as well and as efficiently as we can,” Crowley said.

Dalata opened two hotels in Dublin last year and has another Maldron hotel planned at Croke Park, which it hopes to go on-site with in the next six months and to be ready for 2026.

“Apart from that, development and acquisition will largely be opportunistic in Ireland,” he said.

Operationally, the company has had to cope with rising minimum wages in both Ireland and the UK — something he said he supports — while the business has also concentrated on sustainability since he took over, with carbon emissions for the first half of 2023 down 24% compared with the same period in 2019.

“We’re really pleased. It just shows that if you focus on sustainability, you can make a difference,” he said.

In terms of his priorities since becoming CEO, Crowley stressed that in his view, the success of the real estate is based upon people, and that is where he has focused his energies.

“I have always been people-focused, but we’ve really doubled down on that since I became CEO,” he said. “My view is that if you focus on your staff, on their development and on inclusivity and diversity, then that will feed through to service and also staff retention. The financial results will come from that.

“I am also very interested in innovation, especially as there is a challenge to do more with less. I’m not talking about making people work harder, but rather working smarter so that people enjoy working for us.”