Occupancy drives higher H1 revenues for PPHE but EBITDA falls

PPHE Hotel Group has seen total revenues rise by 4.7% to £199.9m in the first half of the year, as the group welcomed improved occupancy, but earnings were hit by rising costs over the period. 

Reported RevPAR rose by 1.4% to £109.3, driven by the improved occupancy, but alongside softer average room rates. The group said its margins, though again supported by occupancy, were still affected by the changes in room rates and cost inflation. 

Meanwhile, reported EBITDA was 5.7% lower at £45.5m due to new hotel opening losses, normalising room rates, higher salary costs and increased social security costs.

Despite this, the group said this was largely offset by ongoing efficiency initiatives, which helped counter government-led wage and social security cost increases. 

For example, initial expectations for wage cost inflation were for around 7% but, due to these efforts, the final outturn was limited to less than 3%.

Over the period, the group acquired a development site near the City of London for £17.5m, which is set to become PPHE’s first select service hotel in London, to be operated as a Radisson RED. PPHE expects an investment of around £90m for this project through the European Hospitality Fund.

Since the period-end on 30 June, the group noted trading activity at city locations has “followed consistent patterns” throughout the summer months, and are “modestly improving” as the second half progresses. 

Nonetheless, it noted that whilst occupancy is an important contributor to RevPAR, margins remain sensitive to movements in room rates and cost inflation. 

It added that the combination of the short-term trading trends and a previously announced lower contribution from Art’otel London Hoxton means that the board expects the EBITDA outcome to be at a similar level to FY24.

Greg Hegarty, co-CEO, PPHE Hotel Group said: “In the first half, we increased our occupancy levels whilst proactively managing room rate in an industry which continues to be impacted by the volatile macroeconomic and geopolitical environment.

“The board’s unwavering commitment to delivering high-quality assets in new destinations has meant that it has taken some deliberate actions to delay the ramp-up of some properties, such as Art’otel London Hoxton.” 

He added: “These decisions are in line with our underlying focus on maximising the long-term financial potential of such assets, rather than focusing on short-term performance. The board reaffirms the target to generate at least £25m of incremental EBITDA upon stabilisation of trading from the recently opened hotels.

“During the first half we have made strong progress on building our future development pipeline further, notably with the acquisition of our first property in the City of London made through a subsidiary of our European Hospitality Fund, and the acquisition of the freehold of our current hotel and development site located at Park Royal in London. Overall, revenue performance in the first half has been solid, although normalising rates and higher social security costs have impacted EBITDA margins.”