Action Hotels attributes losses to cost of hotel openings

Action Hotels attributes losses to cost of hotel openings

The cost of new openings will result in greater than expected annual losses for Action Hotels.

The disclosure by the Middle East and Australian chain came in a trading update for last year.

Three new hotels opened in 2016, including properties in Brisbane and Ras Al Khaimah, to bring the portfolio up to 12 with a further six planned this year.

Total revenue is expected to have risen by 22% to $53.1 million over 2015 with adjusted earnings [EBITDA] up by 16% to $18.5 million.

However, the company said it was “mindful” of adverse pressure on the hotel sector across the Middle East.

It said: “Given Action Hotels is in accelerated growth and development phase, an overall net loss before tax position is expected as a result of the impact of pre-opening costs of the new hotels, finance costs and depreciation and amortization.

“These costs are charged from the day the hotel is capable of operating but before it reaches its mature operational performance levels and therefore have a disproportionate impact on profitability during this growth and development phase.

“As a result of the finance costs, relating to the increase in debt required to fund the development pipeline, and the other costs associated with the expansion programme, the net loss figure will be materially higher than original anticipated.”

Trading for the first quarter of this year has seen revenue rise by 14% year-on-year with occupancy in line with 2016 at 76%.

Chief executive, Alain Debare said: “We are pleased to update the market on our performance which has been robust across the Action Hotels portfolio.

“We remain focused on driving performance at our operating hotels and our growth reflects the strong contribution from our mature2 hotel portfolio, as well as the encouraging success of our newest hotels as they gain traction in their respective markets.

“We have a good pipeline of hotels in development and are on track to complete an additional three hotels this year.”

Full year results for 2016 are due to be issued on May 2.

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