PPHE continues to deliver with a firm end to the year reinforcing confidence that expectations for 2017 will be met (results due in late February). Like-for-like RevPAR growth of c 4% (our estimate) in Q4 is impressive in the teeth of pronounced market slowdown in London, while double-digit yield gain in the first nine months was flattered by weak comparatives and currency. Notwithstanding short-term caution about renovations and costs, PPHE is admirably placed to exploit its very considerable financial flexibility. Its modest rating recognises neither its excess liquidity (likely £200m+ cash post-Hoxton acquisition) nor its asset backing.
After a first half marked by recovery from a challenging 2016, the rest of 2017 saw predictably slower growth on more normal comparatives. Disclosure of 11% like-forlike RevPAR growth for the full year suggests c 4% improvement in the final quarter, which is respectable as not materially boosted by either currency or buoyant Croatia (Q4 is its low season). Consequently, while regional performance is not disclosed, we may infer, as in Q3, low-digit RevPAR gain in London, PPHE’s largest profit source, which is ahead of the market (-1%), as reported by STR, and in line with our forecasts.
The current period should see material payoff from recent transformative investment in London and Germany, offset in part by a step-up in renovations, notably at Victoria Amsterdam and Sherlock Holmes London. In addition, excitingly, overall excess liquidity in both PPHE and Arena should spur significant development initiatives across the estate and without recourse to issuing equity.