Dalata Hotel Group January 2018 ISE: DHG LSE: DAL

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1 Dalata Hotel Group January 2018 ISE: DHG LSE: DAL

2 Disclaimer The presentation contains forward looking statements. These statements have been made by the Directors in good faith based on the information available to them up to the time of their approval of this presentation. Due to inherent uncertainties, including both economic and business risk factors underlying such forward looking information, actual results may differ materially from those expressed or implied by these forward looking statements. The Directors undertake no obligation to update any forward looking statements contained in this presentation, whether as a result of new information, future events or otherwise. Page 2

3 Dalata Contents Group Overview Market Update UK Research & Strategy 2018 Page 3

4 Group Overview

5 Dalata Strong, Complementary Brand Proposition Brand Proposition Bedrooms Food and Beverage Conference Facilities Target Customers Maldron is all about providing a fun, relaxed time for all who arrive through our doors. Our great-value hotels are found in convenient locations close to local attractions - ensuring there s always plenty to see and do. With friendly, helpful staff, good food and excellent facilities, it s the perfect place to enjoy good times with family and friends Rest assured, it s a Maldron Generally standard rooms, with family and executive rooms in some locations Integrated bar and restaurant in some locations. Simple menus made from fresh quality produce Meeting room facilities Both leisure and corporate with main focus on leisure guests and family You can always depend on Clayton Hotels to deliver exactly what you need, whether that s a weekend away, a family break or an important business meeting. From the comfort of our bedrooms to the quality of our facilities and the warm, helpful attitude of our staff - every detail is handled with care Where every moment matters Standard, superior and executive rooms Modern bar, restaurant and coffee dock. Food and beverage offering based on local influences and freshly sourced premium ingredients Extensive choice of modern meeting rooms and events facilities Focus on corporate and conference midweek. Leisure, functions and weddings at weekend Page 5

6 Dalata 3 Core Business Segments H Dublin 14 Hotels 3,699 Rooms H RevPAR: 96.36(+8%) 57% Group Revenue 60% Segment EBITDA 48% EBITDAR Margin Regional Ireland 12 Hotels 1,643 Rooms H RevPAR: 60.93(+9%) 21% Group Revenue 15% Segment EBITDA 24% EBITDAR Margin UK * 7 Hotels 1,557 Rooms H RevPAR: 63.72(+15%) 21% Group Revenue * Excludes Croydon Park Hotel 23% Segment EBITDA 38% EBITDAR Margin Information as at period end Page 6

7 Dalata Owned & Leased Portfolio at January 2018 Owned Hotels / Freehold Equivalent Hotel Rooms Clayton Hotel Dublin Airport 504 Clayton Hotel Manchester Airport 365 Clayton Hotel Leopardstown, Dublin 354 Clayton Hotel Leeds 334 Clayton Hotel Ballsbridge, Dublin 304 Clayton Hotel Cardiff Lane, Dublin (1) 304 Maldron Hotel Newlands Cross, Dublin 297 Clayton Hotel Liffey Valley 261 Clayton Hotel Chiswick, London 227 Clayton Hotel Cork City (2) 201 Clayton Hotel Galway 195 Clayton Hotel Belfast 170 Clayton Hotel Sligo 162 Clayton Whites Hotel, Wexford 160 Clayton Hotel Limerick 158 Clayton Crown Hotel, London 152 Maldron Hotel Limerick 142 Maldron Hotel Parnell Square, Dublin 129 Maldron Hotel Pearse Street, Dublin 115 Tara Towers Hotel, Dublin 111 Clayton Hotel Silver Springs, Cork 109 Maldron Hotel Wexford 108 Maldron Hotel Sandyroad, Galway 104 Maldron Hotel Cork 101 Maldron Hotel Derry 93 Maldron Hotel Portlaoise 90 Total 5,250 Lease Agreements Hotel Rooms Clayton Hotel Burlington Road, Dublin 502 Ballsbridge Hotel, Dublin 400 The Gibson Hotel, Dublin 252 Maldron Hotel Dublin Airport 251 Clayton Hotel Cardiff, Wales 216 Hotel La Tour Birmingham 174 Maldron Hotel Tallaght, Dublin 119 Maldron Hotel Galway (Oranmore) 113 Maldron Hotel Smithfield, Dublin 92 Total 2,119 New pipeline Hotel Rooms Owned Clayton Hotel Charlemont, Dublin 188 Maldron Hotel Kevin Street, Dublin 138 Maldron Hotel South Mall, Cork 164 Maldron Hotel Belfast City 237 Clayton Hotel Ballsbridge, Dublin 31 Clayton Hotel Dublin Airport 106 Maldron Hotel Parnell Square, Dublin 53 Maldron Hotel Sandyroad, Galway 64 Leased Maldron Hotel, Newcastle 265 Clayton Hotel, Manchester 300 Clayton Hotel, Glasgow 300 Total 1,846 Summary by Hotel Category Hotels Rooms Owned 26 5,250 Leased 9 2,119 New pipeline 7 1,846 Mgmt Agreement Owners Total 45 9,523 (1) Dalata own 252 rooms and lease 52 rooms (2) Dalata own 194 rooms and lease 7 apartments Page 7

8 Dalata Strong Balance Sheet providing covenant for growth All figures m Non-current assets 30 June Dec 2016 Tangible assets Goodwill and intangibles Other Current assets Trade receivables, inventory and other Cash Total assets 1, Objective is to maintain a strong balance sheet with appropriate level of gearing, leading to a strong covenant for potential landlords/investors Decrease in Net Debt to Amended EBITDA to 1.91x from 2.40x 174.4m ( 198.3m) of borrowings in Sterling as a natural hedge against value of Sterling assets and Sterling denominated earnings Combination of strong cashflow, cash balance, undrawn facilities and low gearing provides a Balance Sheet to comfortably fund current expansion plans Equity Bank loans Trade and other payables Other non current liabilities Total equity and liabilities 1, Page 8

9 Dalata The Difference with Dalata Our decentralised operational approach Dalata s decentralised structure is core to our management philosophy Hotel General Managers are critical players we continually develop them A strong multi-functional team at the centre setting direction, seeking growth opportunities, supporting the hotels, and reporting to our stakeholders We grow our own training and development a major focus as there is a need to have a strong pipeline of key people coming through Having people we know taking up key roles de-risks our business We focus on what we are good at Operating 3 star and 4 star modern well-maintained hotels in cities with strong mix of corporate and leisure demand Executing transactions to grow our owned and leased portfolio Identifying strong locations and developing new hotels on them Decentralised revenue management our revenue managers are informed by systems but always make the decisions themselves Investing in systems to support our approach to cost control Owner/Operator Model Control of our brand standards Security of tenure allows us to build a central team to effectively support and scale our decentralised structure Page 9

earnings potential when they open in 2018 Reach the optimum market

10 Drive Portfolio Growth Ireland Ireland: Portfolio Objectives Complete existing development pipeline of 744 rooms and deliver on earnings potential when they open in 2018 Reach the optimum market share in each of the key urban centres Dublin, Cork, Limerick and Galway Page 10

11 Dalata Over 1,840 new rooms across Ireland and UK Dublin 2 New Hotels 3 Extensions 516 rooms Property New Extension Rooms Planning Construction Completion Granted Started Clayton Hotel Charlemont x 188 x x Nov 2018 Maldron Hotel Kevin Street x 138 x x June 2018 Clayton Hotel Ballsbridge x 31 x x Aug 2018 Clayton Hotel Dublin Airport x 106 x x May 2018 Maldron Hotel Parnell Square x 53 x x Dec 2018 Regional Ireland 1 New Hotel 1 Extension 228 Rooms Property New Extension Rooms Planning Construction Completion Granted Started Maldron Hotel South Mall, Cork x 164 x x Dec 2018 Maldron Hotel Sandyroad, Galway x 64 x x June 2018 UK 1 New Owned Hotel 3 New Leased Hotels 1,102 Rooms Property New Extension Rooms Planning Construction Completion Granted Started Maldron Hotel Belfast City x 237 x x Mar 2018 Maldron Hotel, Newcastle* x 265 x x Feb 2019 Clayton Hotel, Manchester* x 300 Q Clayton Hotel, Glasgow* x 300 Q *35 year operating lease Page 11

12 Markets Update

13 Dalata Market Review Dublin Savills forecast net additional 3,750 rooms by ,250 Dublin Actual 1 Actual 1 F cast 2018 F cast Occupancy 82.1% 82.3% 82.7% 82.3% , Total market size of circa 20,885 rooms ARR RevPAR RevPAR % Variance 23.0% 15.0% 7.6% 3.3% and 2016 numbers differ slightly from those previously reported as STR revised their numbers Source: STR Global Significant number of rooms expected to open towards the end of 2018 and into 2019 and 2020 Increase in supply expected to be matched by increase in demand from continued economic growth, increased visitor numbers and growing evidence of office relocations from London to Dublin 7.7% RevPAR year on year growth at October 2017 Page 13

14 Dalata Market Review Regional Ireland and UK Continuing strong demand from FDIs, domestic corporate and domestic leisure customers No increases in supply and very little supply pipeline Continued strong growth in 2017 for all three cities RevPAR Growth YTD Oct 2017 Cork 9.6% 13.3% 13.7% Galway 13.3% 10.7% 7.9% Limerick 23.4% 16.4% 12.6% Source: Trending.ie Very strong RevPAR growth in London versus H which was negatively impacted by new supply and impact of terrorism. Market has been weaker in H2 Re-opening of Waterfront Centre in mid 2016 together with positive impact of weaker sterling on ROI visitors resulted in a very strong period in Belfast Mixed performance at three UK regional cities RevPAR Growth YTD Oct 2017 London 1.2% -0.9% 5.8% Manchester 7.5% 5.7% 0.9% Birmingham 11.3% 7.7% 2.1% Cardiff 14.2% -1.1% 9.9% Leeds 8.1% 3.7% -0.9% Belfast 11.9% 9.0% 18.5% Source: STR Global Page 14

15 UK Research & Strategy

16 Dalata 20 Target Cities Identified From Research Following extensive research management have identified 20 provincial UK cities with strong opportunities for Maldron or Clayton hotels 1 Edinburgh 2 Manchester 3 Glasgow 4 Brighton 5 Bristol 6 Leeds 7 Liverpool 8 Oxford 9 Belfast 10 Reading 11 Birmingham 12 York 13 Cambridge 14 Southampton 15 Milton Keynes 16 Cardiff 17 Portsmouth 18 Newcastle 19 Bournemouth 20 Exeter Page 16

17 Target 20 Cities 3&4 Star Segment comprises 57% of the Market 3% 40% 35% 5 Star 4 Star 3 Star Budget & 2 Star 22% Page 17

18 Target 20 Cities Brand Shares Fragmented market with only budget brands having a significant share 12% 7% 5% 4% 4% 4% 3% 3% 3% 2% Premier Inn Travelodge Ibis Holiday Inn Hilton Holiday Inn Express Jurys Britannia Hotels Marriott Mercure Source : AM PM Hotels Page 18

19 Target 20 Cities Brand Shares in 3&4 Star Market Very fragmented with no dominant brand 8% 7% 6% 5% 5% 4% 4% 3% 3% 3% Holiday Inn Hilton Jurys Britannia Hotels Marriott Mercure Crowne Plaza Novotel DoubleTree by Hilton Radisson Blu Source : AM PM Hotels Page 19

20 Target 20 Cities Operator Shares in 3&4 Star Market Operators with less than 4% market share comprise 70% of the 3&4 star market 7% 6% 5% 4% 4% 4% 3% 2% 2% 2% Source : AM PM Hotels Page 20

21 Target 20 Cities Ownership Model in 3&4 Star Market Over 70% of the owner operators have 4 hotels or less 33% of the leased hotel operators have 4 hotels or less 16% 24% 4% 9% 47% Owner Operator Franchised Managed/Franchised Managed Leasehold Source : AM PM Hotels Page 21

22 Target 20 Cities International Brands moving away from operating hotels Worldwide Rooms by Ownership Model Hilton Marriott/ Starwood IHG Accor Franchised 72% 43% 70% 33% Managed 24% 52% 30% Owned/Leased 3% 2% 0% *Accor do not disclose separately no. rooms managed, owned and leased 67%* Source : AM PM Hotels Page 22

23 Target 20 Cities Age Profile in 3&4 Star Market 24% 19% 18% 20% 18% Not Stated Under 10 years years Years 40 + years Source : AM PM Hotels Page 23

24 Target 20 Cities Fragmented Market offering Compelling Opportunity Dalata s management team believe that a large structural opportunity has emerged in the 3 and 4 star hotel markets in certain regional cities in the UK. Key drivers of this structural opportunity are: International brands are increasingly evolving to a franchise model leaving a shortage of operators with any scale The specific 3 and 4 star market in certain large regional cities is very fragmented and there are no dominant brands in this market segment Ownership model is also very fragmented Close to 50% of the 3 & 4 star market comprises owner/operators and 70% of these operate 4 hotels or less The stock of 3 and 4 star hotels is considerably older than the age profile of the Budget sector Opportunity now exists for a hotel operator with a strong balance sheet and operational focus to become the market leader in fragmented 3 and 4 star hotel markets Page 24

25 Target 20 Cities Clear Competitive Advantage in Fragmented Market Financial resources & Ability to secure sites Depth of Hotel Operational Expertise & Resources Senior Management Team Dalata Willing to put strong balance sheet behind strategy to own or lease Very attractive to developers & property investors Management and staff avail of comprehensive training & development programmes Highly motivated management teams with large growing hotel group Support of Central Office functions Existing management platform in place in the UK Senior management team has operated in UK hotel market for over [x] years Senior management team created, rolled out and operated a new brand in the UK previously Jurys Inn Competition Large brands won t own or lease. Weak balance sheets for smaller operators Difficult for smaller operators or larger Third Party Operators (TPOs) to provide same level of training or opportunity due to lack of tenure (TPOs) or scale (independent operators) Not clear that same level of experience exists within TPOs or independent operators Large brands dependent on owners to roll out their brands Page 25

26 Target 20 Cities Key Objectives in Target UK 20 cities Our objective is to become the leading 3/4 star operator in our target city markets Target range of 10% to 15% market share of 3/4 star market in each city Translates to additional circa 8,000 rooms (assuming a 12.5% market share in achieved) in 5 7 years Further opportunities are likely to exist in the Greater London area and adjacent to UK airports but Dalata will look to address those opportunities in a more bespoke manner as and when they arise Page 26

Target 20 Cities Early examples of UK expansion strategy Hotel La Tour (Birmingham) Existing Asset Bought in July 2017 for 31m Sold Freehold to Deka Immoboilien and entered a 35 year lease

opportunities to reduce costs and increase revenues Rebranded as a Clayton hotel in October Clayton Manchester Development asset Agreement for lease contracts exchanged Planning

27 Target 20 Cities Early examples of UK expansion strategy Hotel La Tour (Birmingham) Existing Asset Bought in July 2017 for 31m Sold Freehold to Deka Immoboilien and entered a 35 year lease at initial rent of 1.6m p.a. Modern hotel with 174 rooms, restaurant, bar and extensive meeting facilities Exploring potential to add a further 40 rooms Have identified significant opportunities to reduce costs and increase revenues Rebranded as a Clayton hotel in October Clayton Manchester Development asset Agreement for lease contracts exchanged Planning application in Q Excellent city centre location Portland Street Local well regarded developer Property Alliance Group Rent cover Yr 3 > 1.85X Will be branded a Clayton Target opening mid 2020 Page 27

Target 20 Cities Early examples of UK expansion strategy Clayton Glasgow, Clyde Street Development asset Agreement for lease contracts exchanged Planning application in Q1 2018 Circa 300 bedroom new

28 Target 20 Cities Early examples of UK expansion strategy Clayton Glasgow, Clyde Street Development asset Agreement for lease contracts exchanged Planning application in Q Circa 300 bedroom new build Clayton Hotel Very close to retail and leisure attractions International Financial Services District within 5 minute walk Developer partner is Artisan Real Estate Investors Target opening Q Page 28

29 Outlook

30 Dalata Another Busy Year in store in 2018 Continued focus on operational requirements of our hotels through training/development programmes, investment in technology and interaction with our customers Confirmed pipeline of 1840 rooms across the three regions 975 of these to open in 2018 Planning to commence construction in our two new Clayton hotel projects in Glasgow and Manchester. Seeking to secure a further 1200 rooms in our development pipeline Planning to complete the current investment programme in technology across our property management, revenue management and procurement systems. Page 30

Overview Financial Performance. Business Review. Growth Strategy. Appendices. Page 3

Overview Financial Performance. Business Review. Growth Strategy. Appendices. Page 3 Dalata Hotel Group April 2017 ISE: DHG LSE: DAL Disclaimer The presentation contains forward looking statements. These statements have been made by the Directors in good faith based on the information