PPHE Hotel Group said that it was looking to “capitalise on future opportunities”, describing its £137m total cash balance as putting it in a “strong” financial position.
CFO Daniel Kos told us that the group was currently focused on its pipeline and could “survive a storm”, but noted that this wasn’t the case for all operators.
Kos said: “We’re currently focused on what we have in our pipeline and we can determine the pace - we can ramp up when business comes back. We are keeping our eyes open but we don’t see many transactions happening at the moment. We can survive a storm, but other operators may not.”
Kos said that during the second quarter the group’s cash burn was £3m operationally and £12m to debt servicing. In addition to the £137m in cash it had £60m in undrawn facilities “so we can survive quite a lot of stress”. Kos put the breakeven at 30%.
The CFO hailed the support of all the governments in the jurisdictions which it operated, in particular in terms of payroll support. He was cautious ahead of the end of the furlough scheme in the UK, commenting: “We can break even with government support, but if that support is taken away in the UK it is less sustainable for us at these occupancies and we will have to take some decisions. This is the hardest-hit sector and the pandemic is not going to go away by October”.
The company, which currently has 84% of its portfolio open, said that the first segment to return was domestic leisure travel or travel from surrounding countries, with strong weekend demand experienced in Amsterdam and London in particular, with its flagship hotels reaching occupancy levels of 80% to 90% on weekends. The current customer mix included couples, groups of friends, guests visiting friends and family and families with children.
Kos said that, in the UK, demand was 98% domestic. He said: “There is literally no international demand. We’ve had good months behind us with strong occupancy and I can’t complain, but we now need that mid-week conference business. We have tried to make our hotels as attractive as possible and as safe as possible - we kept one hotel open to the NHS and learned a lot.
“The best news would be a vaccine, but we have to try and get used to this new kind of normalcy.”
For the half year, the group reported total revenue decreasing to £61.9m from £155.3m in the same period last year, with Ebitda of £(3.3)m, against a previous £45.7m. Occupancy was at 34.7%, with ADR down 7.9% on the year and revpar down 58.3%.
Boris Ivesha, president & CEO, said: "The first half of the year has brought unprecedented challenges unlike anything the hospitality industry has seen before. In the face of these difficulties, the group has shown its ability to adapt to the new environment, supported by the high quality of our portfolio, our flexible owner operator model and broad customer appeal.
“Looking ahead, we are focused on maintaining this positive momentum and ensuring that the group is well-positioned to navigate the ever-evolving trading environment and to capitalise on future opportunities in line with our growth strategy.”
PPHE’s development pipeline includes new hotels in London, New York City, Belgrade and Zagreb which were expected to add more than 800 rooms to the portfolio.
Insight: Leisure was great but now we need corporate is the Greek chorus of the sector going into the autumn and early signs are that companies are not eager to send their people to conferences around the globe - even if gatherings were allowed. And that looks likely to remain the case for the depths of winter.
Unless a vaccine is forthcoming - and it may well be only Donald Trump’s campaign chief who sees a November release as likely - then government support for the sector must continue. France, Germany and the Netherlands have all extended their payroll support, while the UK refuses to countenance such a thing.
Asked about the future of the sector at PMQs this week, Boris Johnson drew attention to the Eat Out To Help Out scheme which has just ended, which wasn’t terribly helpful. The government has said it has no plans to extend furloughing - it’s now time for businesses to stand on their own two feet. While there may be an argument for that in some sectors, while the same government is holding back international travel and preventing gatherings, it is an unreasonable stance for hotels. The consolation here is that u-turns are becoming habitual and the bet is that furloughing will continue.