Do-it-all PPHE seeks sensible growth and new investors
 
Do-it-all PPHE seeks sensible growth and new investors
16 SEPTEMBER 2019 7:34 AM

Amsterdam-based PPHE Hotel Group owns, operates, develops and franchises hotels throughout Europe, including a perpetual and exclusive agreement with Radisson Hotel Group for the Park Plaza brand. But an upcoming property in New York City will mark its first foray onto foreign shores.

AMSTERDAM—Executives at PPHE Hotel Group enjoy their firm’s unique, two-part structure.

The first part centers on the ability to make decisions and add value from being a relatively small hotel company, while the second comes from being able to use its partnership with Radisson Hotel Group in Europe, the Middle East and Africa to negotiate online travel agency deals and secure valuable bookings from Radisson’s sizable loyalty platform.

Daniel Kos, PPHE’s CFO and executive director, said his company’s partnership also allows it to tap into Radisson’s larger reach.

“When we negotiate with (OTAs), we negotiate on the platform of 1,500 hotels and 25 million loyalty members,” Kos said. “We’re a bit different from our peers. We build our hotels, and also we own, operate and rent them.

“Usually hotel firms only do one of the four, but we do everything in-house. This is our (unique selling point) and how we add value.”

PPHE’s agreement with Radisson for the Park Plaza Hotels & Resorts brand covers 56 countries in Europe.

Kos said the company, which has a portfolio currently valued at £1.8 billion ($2.2 billion), has a primary focus on full-service upscale, upper-upscale and lifestyle hotels in major gateway cities and regional centers. It also manages hotels, resorts and campsites in vacation destinations.

PPHE’s brands include Park Plaza, Art’otel and Arena Hotels & Apartments, which comprise approximately 8,800 rooms.

Kos said PPHE also has been innovative in other spheres of business.

“As a group, we do everything we can to retain employees,” Kos said, adding initiatives such as staff accommodations, instigating a living wage before being mandated by law, paying wages weekly and keeping housekeeping in-house all help in what are challenging times in Europe. PPHE recently bought an apartment block in the Chiswick district of London that can host up to 30 employees.

Careful growth
PPHE has 46 hotels in five countries—Croatia, Germany, Hungary, The Netherlands and the United Kingdom—with plans for more. But do not expect breathless growth, Kos said.

“We refinance, take the cash out and try and do it again,” he said. “We’re not putting pins in and saying let’s get to 50,000 new rooms. The idea is to achieve significant (earnings before interest, taxes, depreciation and amortization) and do that again. From our first property in Eindhoven, we have achieved steady, profitable growth.”

That Eindhoven, The Netherlands, asset opened in 1989.

PPHE’s pipeline includes two new hotels in London and one in New York City. In New York, the company will debut the Art’otel brand in the Americas with a co-owned property with 98 hotel rooms and 55 condominium residences.

“We’ve been looking for a long time in New York City, but we’re very picky,” Kos said. “We found a great site at Hudson Yards by the Highline. The time difference between us and New York is not so long, so we’ll be able to run it from (our headquarters in Amsterdam).”

Predominantly, the firm will continue concentrating on Europe, targeting such cities as Amsterdam, Berlin, Paris, Prague and Vienna.

“We love London,” Kos said. “Amsterdam is difficult, so competitive, and we are conservative with cash. We have a strict profile, but for the right asset we’ll invest throughout the cycle and in any crisis.”

Increasing investors
There also have been significant changes in PPHE’s financial structure, Kos said. The company joined the London Stock Exchange-administered FTSE 250 and FTSE All Share indices on 6 June, a move Boris Ivesha—the firm’s president and CEO—said would widen PPHE’s investor base while also improving liquidity.

Kos said PPHE has seen both good times and bad, but now is in a great position.

“We joined (the LSE’S Alternative Investment Market) stock exchange in 2007, the last company to do so before everything collapsed,” he said. “In 2011 we moved up to the main market, and now we are in the premium level.”

Kos admitted PPHE saw very little trading as its shareholders look to the long term. He added that there was very little liquidity also, and that the firm was heavily underfunded.

“That is fine as long as we could grow, take the cash out of the assets, refinance them and grow with debt,” he said.

When joining the FTSE 250, the firm asked its main shareholders—Ivesha and chairman Eli Papouchado—to draw down their holdings to below 50% to help bring in more capital.

“Our liquidity has since improved,” Kos said. “We’re not super liquid, but improved, and it has opened us up to larger institutions and a wider investor base.”

On 5 September, PPHE announced in its first-half 2019 earnings results that said it had completed its £100-million-plus ($125 million) renovation program across its portfolio.

Like-for-like revenue increased 6.3% year over year to £155.2 million ($193.6 million) and earnings before interest, taxes, depreciation and amortization increased in the same period by 5.7% to £43.1 million ($53.8 million).

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