Action Hotels PLC (LON:AHCG) Chief Executive Officer Alain Dubare caught up with DirectorsTalk to discuss the highlights of their interim financial statements, the performance of their new hotels, hotel pipeline, exceeding targets and what’s next for the rest of the year
Q1: Alain, if you could start by talking us though the highlights from today’s results?
A1: Yes sure, we’re very excited, we’re publishing a robust set of results for the first half and we’ve got good growth in all the key areas so very happy with that. Revenues are up 18% to $25.6 million and it’s flowing through nicely, the gross profit is up 14%, the adjusted EBITDA is up 18% so all good growth and key indicators. What’s also exciting is that we’re seeing solid progress in the reorder pipeline, we’ve got 30% more rooms upgraded, we opened Brisbane in March, we’ve just opened Ras Al Khaimah last week so plenty of action with us.
Q2: How are your new hotels performing?
A2: The new hotels are doing well, Brisbane was breakeven in the second month of operation, as I mentioned we opened in March and we had by the month of June 51% occupancy, it’s a big unit, 367 rooms in the heart of Brisbane so very happy with that one. Ras Al Khaimah, as I just mentioned, opened last week so that one is also expected to be doing really well.
Q3: Now you mentioned how quickly they breakeven, why is that? How do they breakeven so quickly?
A3: I think it’s really about the nature of the economy itself, these hotels are limited service hotels so in the sense that you get a great product, you get the nice room and you get everything that you need but you don’t especially get everything that you dream of so the mini bars are not stocked, you don’t get room service and these types of things in limited service hotels so the cost base is pretty tight and we were able to achieve occupancy breakeven of 35%. That’s also where we come in with our asset management, I’ve been a GM before and obviously once we have completed the hotels we remain very active on the asset management side of the business and we make sure that the hotel operators manage the business with a lot of care and attention.
Q4: Can you talk me through the hotel pipeline and how it’s funded?
A4: Our pipeline is fully funded, as we’ve announced before, we just above the 2,000 room mark with the opening of Ras Al Khaimah so we have 2,030 operational rooms. 2016 is a key year for us because we’ve got another 3 hotels to complete and open this year, the operating rooms and pipeline rooms currently take us to just about 3,000 rooms mark and that’s fully funded through a mix of equity and debt so we’ve got the construction finance available to build those hotels.
Q5: Now I understand that Action Hotels plc has exceeded its targets in terms of number of rooms since IPO, you must be very pleased with your progress?
A5: Yes we are. At the IPO we at the time we’re saying, in December ’13 we had 6 hotels and 1,000 operating rooms, today we’ve got 11 hotels operating and just above 2,000 rooms operating so that’s doubling the size of the business in the last 2.5 years and including the pipeline we were at the time proposing 2,500 rooms, today we are close to 3,200 with the pipeline. Our target is to reach 5,000 rooms by 2020 and that’s really what we’re aiming at so we’re obviously actively working on a number of opportunities at the moment.
Q6: What’s next then for Action Hotels this year?
A6: Well this year is really to drive the performance of the new hotels and to complete and open these 3 new hotels in Bahrain, Sohar, where I was last week, and our first hotel in Saudi, which is an exciting one, which is the Mercure Riyadh which we’re expecting to complete by December.
