PPHE Hotel Group H1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 28, 2025

Key Takeaways

  • Negative Sentiment: EBITDA fell 5.7% to £45.5 million despite 4.7% revenue growth, impacted by new hotel openings and higher payroll costs.
  • Positive Sentiment: Five new hotels launched in two years across five capital cities are expected to generate at least £25 million incremental annual EBITDA on stabilization.
  • Positive Sentiment: Net debt/valuation ratio stands at a conservative 34.5% LTV with a 3.8% average fixed interest rate and £100 million of pre-hedged refinancing, underpinning strong balance sheet flexibility.
  • Negative Sentiment: Margins remain sensitive to rate normalization, cost inflation—particularly wage inflation and potential VAT increases in the Netherlands—and UK business rate pressure.
  • Positive Sentiment: Efficiency initiatives, including AI use cases and a new property management system, have capped like-for-like wage cost growth to 3% versus an expected 7%, supporting margins.
AI Generated. May Contain Errors.
Earnings Conference Call
PPHE Hotel Group H1 2025
00:00 / 00:00

Transcript Sections

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Operator

Gentlemen, and welcome to the PPHE Hotel Group Interim Results Investor Presentation. Throughout today's recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time just using the Q and A tab situated on the right hand corner of your screen. Simply type in your question at any time and press send.

Operator

The company may not be in a position to answer every question received during today's meeting. However, the company can read your questions submitted today, and we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company would be most grateful for your participation. I'd now like to hand over to the management team presenting today. Good morning to you all.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Good morning, and thank you, and welcome to our twenty twenty five Half Year Results. I'm Greg Hagity. I'm the Co CEO of PPHE, and I'm joined today by Daniel Kos, the Chief Financial Officer and Robert Henke, our Senior Vice President of Commercial. We are pleased to announce a solid performance and strong strategic progress in what remains to be a very volatile macro and geopolitical environment in the backdrop. However, before we progress through the presentation, we would just like to show you a short video of our strategic progress this year.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Thanks, Mark, for for playing that video. That video is a summary of some of the key projects that we've delivered in in the course of this year as well as a an outlook on on what's ahead. What we'll do as we go through the presentation, we'll expand upon the work that's that's going into launching these new exciting projects as well as our our future pipeline and the details that come with that. To introduce BPHE very briefly, we are a unique company within hospitality real estate. So what makes us unique is that we buy, build, and operate hospitality assets where what we see in our sector is typically companies focus on one element of it.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

So they buy assets, they own assets or develop or operate. We have everything integrated into a PPHE hotel group ensuring that we fully control the the value chain. We have been established since 1989 and have been listed on the the London stock market since 02/2007. We're part of FTSE two fifty, and since December, we're included in the EPRA NA REIT index. Within our sort of group, we have 51 properties today in operation as well as a a number of growth opportunities consisting of about 16,000 accommodation units, which consists of 10,000 rooms, hotel rooms, and self catering apartments, and about 6,000 campsite pitches, mobile homes, premium lodges, predominantly in sort of the Croatian coastal area of of Istria.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Altogether, our portfolio is valued at £2,200,000,000. We go through an annual valuation cycle with external evaluators, and the next set of valuations is is due in December. Within our within our group, we cover eight countries, including seven capital cities where we have a presence today, whereby London and Amsterdam are our key markets in terms of sort of business drivers, growth, demand, and so on, but also the real estate value. So the vast majority of the 2,200,000,000.0 sits within Central London and and Central Amsterdam. We have a compelling pipeline, which we'll touch upon in the the presentation.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

And the way we sort of market our our sort of properties through our our management platform is utilizing a number of different commercial brands which span from upscale select all the way to a luxury lifestyle. So we we tap into different segments of the consumer markets. We have about four and a half four and a half thousand team members that work across our hotels and and campsites every single day. And in addition to the accommodation that we provide, we have diversified income streams from meeting and events, for example, where we have well over 250 meeting rooms, including some of London's largest meeting spaces, and we have over a 100 food and beverage outlets, I. E.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Restaurants and bars that we we operate. So if I look at our sort of, you know, investment reasons, I have already mentioned that we are unique in the the industry by being an operator, an owner, and a development developer of of assets. So we fully control the the entire value chain. Our focus market is Europe. Europe has very robust hospitality demand patterns throughout sort of cycles of of the world as well, and it's predicted to continue to grow in terms of leisure and business travel demand moving forward.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

What we do as a as a business, we like to buy land sites, office blocks, or maybe tired hotels, and then we invest a new proposition, typically hotels, but also in Croatia, we have taken land sites where we've created holiday villages, so to speak, through the introduction of mobile homes, premium luxury lodges. So we take something that is maybe undervalued, underappreciated, we invest, we develop, we launch, and then drive the day to day operations and extract the commercial value through refinancing or maybe part selling, and then we reinvest in the next growth opportunity. This business model allows us to grow from within the group without sort of diluting shareholders, and we have multiple sources of capital that we actually are able to tap into to grow the group. Greg will explain the the management platform a bit later, but an additional sort of strength to our bone is the fact that we don't need to engage third party operators. We have all the disciplines in house that are needed to develop and operate hospitality properties on a daily basis.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

This is the cycle which I described. So we buy, we develop, we operate, we extract value, and invest in the next opportunity that comes along. In terms of assets and geographical spread, like I said, active in eight markets, so that's The UK, Netherlands, but also Germany, Croatia, Hungary, Serbia, Austria, and most recently Italy, where we've just opened our first hotel in Rome. Most of the the value is within city center locations and predominantly through a sort of freehold ownership base. So out of the 2,200,000,000.0, just over 1.6 is is owned on a freehold basis, and the rest of that value is on a long leasehold or ground rent structure.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

We have predominantly city center hotels, but we do have elements of sort of leisure in in Croatia. In The UK, Holland, and Germany, we do have a presence in provincial cities, but it's a a small part of our group. As you can see here, 75% of the the value sits within capital cities where demand is strong. Greg, do you want to explain the operating platform? Yeah.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Thank you, Robert. As Robert's already alluded to, we do have an award winning hospitality platform. This is a proprietary in house model which allows us to manage all end areas under a management agreement which is unique. It generates both base fees and incentive fees for our properties. We have full expertise over the cycle from development to commercial to general hotel operations.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

We have access also to the Radisson Hotel Group's distribution system, loyalty program and purchasing scale whenever we need to yield upon it or drive efficiencies within the business. This platform is also readily and scalable at any time, which gives us as a business clear benefits. It allows us to obviously have full operational control of how we operate and manage the business. It also gives us an opportunity to become uniquely aligned with owners and operators. One obviously being an owner ourselves, we do actually keep ourselves in tune with we are doing management agreements to make sure our expectations for the hotels and the assets are completely aligned.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

But most of all, our agreement and our tacit knowledge gives us the ability to be or have the ability to sell an asset unencumbered in most cases. So that gives us unique flexibility among our other competitors who do operate in this space also. Moving on to Slide eight, we'll talk about a little bit strategic and operational update. Performance wise, occupancy was up for the first half. We have started to see normalized rents and travel patterns stabilized as what we've seen in the past, going pre COVID levels.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Obviously, post COVID, we had exceptional growth in average room rates. We are now starting to see some normalization in those travel patterns. However, our revenue was up 4.7% to 199,900,000.0, predominantly supported by our new and refurbished hotels. Our like for like revenue was up 1.3%. However, notwithstanding, our EBITDA was down 5.7% to GBP 45,500,000.0, a little bit impacted by our openings of our new assets and partly down to increased payroll costs within our re operating regions.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

I think if you were to look at The UK and Pacific, you know, we've done an enormous amount of efficiency measures where wage inflation was forecast to be circa 7%. We've actually managed to impact negatively impact to 4%. This has made us an efficiency gain at EBITDA level to being down like for like 4.9%. But Daniel will talk a little bit about that more as we go forward. And I'm pleased to say, I will see we had a RevPAR growth of 1.4% to 109.3%.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

From a strategic progress point of view, we opened the Ardstell Rome Piazza Solutzio in March, we're very proud of that. It's a five star asset in Rome, beautiful hotel located near Via Vento. And the opening of that hotel completed our long investment cycle, the biggest investment cycle the company has had. So we're pleased to say that's now completed and the assets are now open and starting to form. At the Ardstellen London Hodgson, we've also continued with our phased opening of the asset.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

We launched the 20 fourfour event space panorama. We've also opening this week, going into next, our restaurant and bar on the 20 Fifth Floor called Solaya, that's our destination restaurant at this asset. We also continue to expand our pipeline with a £17,500,000 investment into the City Of London site on Leane Street which will be our first Radisson Red select service hotel in the capital. We also continue to increase our stake in Arena Hospitality with a £15,500,000 investment taking our share of Arena Hospitality to 65.5%. We also exited out of a property in Berlin which has no impact to our EBITDA performance.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

We exited at least early and took the opportunity to exit it at this point. We also acquired a freehold in an adjacent development to our Park Royal Hotel on year 40 for £10,000,000 which generates yield of 8.3% adjusted. However, we also secured further planning permission on that site for a four sixty key hotel. So very pleased with our continued progress there. I think the focus going forward is to complete the Hoxton opening, including the restaurant, the bar, and actually we are also launching five floors of CAT A office space, 5,000 square meters at this hotel, which actually leverages our office space with an operating hotel, giving the market some unique services, which obviously will help generate the return on that asset. We also continue to stabilize performance of our new assets such as Hodgson and Roomb to make sure they deliver their potential. We are continuing to maintain a tight cost control, and we are also continuing to invest in acceleration of tech and automatization within the operating units currently. And most of all, we're starting to roll out our select service brand and making sure our design schemes are aligned to that area. Thank you.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Moving on to future contribution from our pipeline. So as I've alluded to, five new hotels launched across five capital cities in two years, all yet to stabilize. On maturity, we're expected to deliver at least GBP 25,000,000 incremental EBITDA. We got to tell Rome is gaining momentum and opened, as I said, alluded to in March. However, it is one of the highest performing customer service orientated hotels in Rome with top scores on booking.com of 9.6 and TripAdvisor five out of five.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

We are starting to see strong demand from embassies, corporates and international luxury business travel. So that's Hoxton. In Hoxton, we open Panorama, as I've already alluded to. The restaurant's opening next week, and that will help us really solidify that asset as a destination within the Scottish area. I'm also proud to say we teamed up with Michelin Star chef Kenny Atkinson, who operates two Michelin Stars in the Northeast Of The UK and it's his first dabble into the London market, so we're incredibly proud to back up that.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

And the offices launch, as I've alluded to, next week. We also upgraded two of our Arena campsites to four star hotels through investment in mobile homes and amenities. As we have already alluded to, we do see a with the acquisition of Lehman Street in the city of London being our first select service hotel, we forecast that to be a circa a £19,000,000 project opening in 2029. That coincides also with our planning permission which we have on Westminster Bridge Road, which we've already further communicated. However, that will also be a select service Radisson Red operation.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

And we already have planning permission for a subterranean hotel, our hotel in Victoria, which is currently going through some minor amendments of that scheme. We look further we look forward to further updating you in due course on that. Daniel?

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

Yes. Thank you very much, Fred. So the group's performance for the first six months of 2025 have been quite resilient, particularly given the external headwinds that we've been facing. These include, obviously, the geopolitical uncertainty worldwide, but also the cost inflation that is facing our industry.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

So our reported revenues during the period increased with 4.7% to just shy of GBP 200,000,000. And on a like for like basis, so when we exclude the Rome and three months of the Ardotel London Hoxton, revenue was up 1.3% to GBP 193,000,000. The stabilizing average room rate that we reported in the first quarter, unfortunately, continued into the second quarter and resulted in an overall rate decline of 1.1% in the first six months of 2025 to 01/1951. But I'm quite pleased to say that we managed to offset these impacts of normalizing rates by increasing our occupancy levels with 180 basis points to 72.4% on average. If we look on a like for like basis, average room rates declined with 2.2% and occupancy has increased with two forty basis points to 73%.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

And this occupancy drive have resulted in a 1.4% increase in RevPAR. And on a like for like basis, that was 1.1%, driven again by strong occupancy. If you look at the trends between the separate territories, our major territories really, it was quite mixed. Whereas the Croatian region, which is not obviously the main summer season but the preseason, showed a 10% rate growth and a 1.7% occupancy growth. The Dutch region unfortunately reported the opposite with a 2% rate decline and a 2.5 occupancy decline.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

The UK region showed the largest occupancy growth of three point six percent three sixty basis points on a like for like basis. And we had a record second quarter reporting 88.9% occupancy. In June alone, we reported 92.4% occupancy in our hotels. That's a level I've never seen before, meaning you're full pretty much on every day and the Sundays are typically a bit slower. However, The UK also reported a like for like rate decline of 3.7%.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

So while occupancy is an important contributor to RevPAR, our margins are very sensitive to the movements in room rates and obviously, the government imposed cost inflation. As a result of national minimum wage increases in all territories and a substantial increase in national insurance costs in The UK, our wage cost growth was expected to reach 7% blended. However, proactive cost control have resulted that this increase could be limited to just over 3% on a like for like basis. So the combination of these trading trends and obviously, the previously announced lower contribution from the Arctetel Hoxden meant that RevPAR in the period was down 5.7% to EUR 45,500,000.0, which was 4.9% lower on a like for like basis. Just to reiterate, approximately onethree of our EBITDA is realized in the first half of the year and twothree is realized in the second half of the year.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

So we remain in the second half very much focused on controlling our costs further, and we're accelerating a few new exciting technology implementations and process automations to drive further efficiencies. The NAV was up to GBP 28 per share. Obviously, external valuations will be performed at year end again. The increase in the first half was mainly due to foreign exchange results and the acquisition of minority shares. So on a twelve month rolling basis, our adjusted EPRA earnings per share were GBP 1.19, down from the December number of GBP 1.25.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

And on that basis, the Board proposes an interim dividend of $0.01 7, which is in line with last year. We go to the next page. Thank you. So we reported a EUR 49,900,000.0 adjusted EPRA earnings for the rolling twelve months ended June 25, which decreased 6.2% versus the $53,200,000 in December. On a per share basis, as I said, it's coming down to $1.19 per share.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

And as you can see in the first waterfall chart, the EPRA earnings were negatively impacted by a 3,100,000.0 negative decline in income of the existing estate. This decline is mainly due to the negative contribution of the newly opened Ardotel, but also, obviously, the margin decreases I've just alluded to. EPRA earnings are also negatively impacted by the increased finance expenses. And these finance expenses largely increased due to the opening of Okstad and the opening of Rome this year. So their finance expenses are now fully contributing.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

The impact of the new openings to our operating earnings should obviously be temporarily with the ramp up of these properties in the coming year. Moving on to the next slide of cash flows. In the past six months, we reported a free cash flow, so before expansion CapEx, of $21,700,000 And this cash flow was mainly utilized to pay the dividends and to buy out minority shareholders in our listed subsidiary of Renault Hospitality Group and to buy units in the Park Plaza Westminster Bridge. We have nearly come to an end of our substantial CapEx cycle on the most recently opened hotels in Rome and in London, with some final payments expected in the months ahead. So the last six months, expansion CapEx also included a GBP 10,000,000 renovation of two camps in Croatia, which upgraded the facilities and we added new luxury mobile homes on these sites.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

Free cash flow is obviously expected to increase and will be allocated to the company's progressive dividend policy and its expansion CapEx to the new pipeline hotels. Should new minority shares or units be offered, we could allocate free cash flow if these are yield accretive. Regular bank loan repayments are in line with our debt strategy, which I'll detail on the next slide, Robert. So we have a very strong balance sheet. Assuming in the debt position, it's an GBP $890,000,000 gross debt, of which approximately twothree is sterling denominated and onethree is euro denominated.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

The net debt is EUR 100,000,000 lower, which translates to a conservative 34.5% loan to value with the properties at market value. The bar chart in the middle shows you the maturity profile of the remaining facilities. We currently have an average interest rate of 3.8%, and all debt is fixed rate with an average maturity of three point four years. This average interest rate is expected to go up slightly with the upcoming refinance round. For the upcoming GBP $250,000,000 refinance round, we have pre hedged $100,000,000 already until 02/1931.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

This was done early twenty twenty two at substantially lower interest rates compared to the current market. So we've already proactively started refinance discussions and received positive feedback so far. So given the low LTV, we expect no issues in the refinance. Greg, over to you to the Thank part

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

of the you, Daniel. So current trading and outlook, Citi trading in all of our territories remain consistent with what we've seen in half '1. However, we are showing modest improvement and progress in half two. We do expect ADR to get towards twenty twenty four levels towards the end of the year. Croatia has delivered a strong summer season, I'm pleased to say, and occupancy continues to support RevPAR.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

However, margins remain sensitive to rate shifts and cost inflation, and we are doing what we can to minimize those impacts. The near term EBITDA for full year 2025 is expected to be broadly in line with 2024, reflecting short term trading and the phased contribution from the Artisan London Hoxton. Poxton have been opened and being deliberately phased to maximize its long term position resulting in slower initiated profit contributions. The Board reiterates that the recently opened assets are expected to contribute at least GBP 25,000,000 of incremental EBITDA upon stabilization with time lines expected to optimize long term value. Looking ahead, we remain confident in the potential new openings in our pipeline.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

And at the same time, however, we are mindful of the external macroeconomical headwinds from full year '26 onwards, including potential VAT rise in the Dutch region, coupled with business rate pressures coming from The UK in 2026, all of which the business is trying to minimize any potential impact to investors. Thank you. Excellent.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

And we're moving on to Q and A, Matt.

Operator

That's perfect. Thanks, guys. I just thought I'd give you just to interrupt you there and just allow investors to submit any further questions that they have, please do just use the Q and A tab situated on the right hand corner of your screen. But just while the guide review your questions submitted already, I would like to remind you that recording of this presentation along with a copy of the slides will be available via your Investor Me company dashboard. Robert, as you can see, you've had a number of questions from investors throughout today's presentation.

Operator

Firstly, thank you to everyone for your engagement. If I may just hand back to you, and of course, where appropriate, read out the questions and give response where it's appropriate to do so.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Thanks, Mark. Daniel, I'll start with you. You mentioned that the anticipated wage cost growth was about 7%, and the actual impact was 3% through efficiency initiatives. Can you give some examples of what has been worked on and delivered in terms of efficiency and and what you expect to see moving forward into the second half?

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

Yes. We've, first of all, focused quite a lot on our on our back office. We obviously, with 51 properties, we run quite a large back office. And we've adopted quite a few AI use cases to a lot of the, you know, repetitive tasks that we do, like paying invoices, answering emails. And that has led with, you know, our natural turnover in staff that we didn't need to re recruit quite a a few staff members on that basis.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

We've also been looking at clustering hotels and clustering back office even further. And what's on the roll are a few software, very large software implementations. We expect to launch in the second half a fully upgraded new property management system, a front office system, which will make check-in and check out a lot more efficient, and also the communications to our guests will be a lot more efficient. So also from that, I have high expectations that it will be able to drive more efficiencies. So thank you.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Greg, you summarized the pipeline with land sites and development opportunities in London specifically. Can you give a bit more background which you think will be the first ones to be developed or prioritized at least?

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Yeah. Obviously, we have an active well, we have two active planning permissions. First is Leed Street. We acquired a site with planning for 200 Keys and also an office. So that is currently now being prioritized.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

We will be opening a select service model. So that is a high standard of accommodation with a number of, you know, self-service amenities in the Ground Floor and like Daniel's already alluded to, with technology. So we are prioritizing select service growth currently over full service growth. Okay. Thank And then followed by Westminster Bridge Road, and then we have our site on the A 14 as well, which still needs to be planned a little bit more. But we do see Lehman Street targeting towards 2029.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Excellent.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Thank you. All of this has to be funded for, which presumably will be done through further loans. Daniel, you touched on the leverage for the group. With so much development CapEx ahead, what sort of levels of leverage are you comfortable with?

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

So typically, if we develop a new hotel, so ground up development, we typically take loans that are 55 to 60% loan to cost of the project. I'm saying loan to cost because typically if we complete the development, there is a valuation jump, which typically brings the loan to value down to 45, 50%. We not only look at LTV. LTV is built is important for lenders because it kind of gives them the security of the asset backing in prime cities like London and Amsterdam. We also look at yield on debt, if you like.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

So yield on debt is kind of a cyclical proof KPI, which is the EBITDA divided by the amount of the loan. So banks typically at the moment are still willing to give you 8.59 times EBITDA. I'm not saying that's where we're going, but that's levels that we are comfortable with. On the coming refinance round, we intend to refinance the existing nominal and so basically go further on with the low LTVs that we're showing.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Right. Thank you. Continuing on sort of development sort of side, Greg, you mentioned you see a lot of opportunity in select service with the Radisson Red opening in city of London and other select server developments. Where else do you see sort of opportunities for growth outside of London?

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Yeah. We are we will prioritize our current territories with development. I think one of the main targets for us is a continued development of Rome. We opened our lifestyle luxury lifestyle hotel, the Arts Hotel there. We would love to open a park plaza in Rome of some sort.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

So our development teams are actively looking at this territory specifically as well as the obvious benefits of what we have in all our territories of synergy, management and awareness, etcetera, and our development capability. So obviously, and Italy is not a good target for us. And that's obviously where we are also seeing some really, really good schemes. Not to say that we wouldn't look at other territories if the opportunity was right, but we do see some significant benefits coming out of the Italian region.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Thank you. Daniel, there was reference earlier to the sort of increased sort of shareholding in Arena. Do you want to sort of summarize the strategy behind it and if you're looking for maybe increasing that stake further?

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

Yes. So we have no intent to fully privatize Arena. We're very happy with the the stock exchange listing. We had a block seller. We firmly believe in the story in Croatia. We firmly believe in the the value of Arena.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

The transaction was yield accretive, so it was more of a capital allocation point, I would say. But again, we have no intent in terms of proactively taking this company private.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

But we firmly believe in the strategy and the value of that company.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

I must also come back to the question, Robert, about what you just said about development. Croatia, our peninsula around Plula and our availability to continue to develop that area is still there. There's still lots of potential value in that peninsula specifically. So as we've seen, we've upgraded two campsites this year.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

There's more to upgrade, there's more to reposition. So yeah, Croatia is also the area of focus for us.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

And then obviously, the deliverable for these investments is an increase in EBITDA. The company had set a target of at least GBP 25,000,000 of incremental EBITDA from the new pipeline on stabilization. Do you want to sort of explain, Greg, what stabilization sort of means in our business?

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Yeah. Typically, you open an asset or a hotel, like we two, we have Italy and we have Okstun, we usually trend them on a three year cycle. And usually, at the end of that three year cycle, that's what we would then call the property is stable in its market. It's competing with its competitor set, other hotels within the area. It's had an opportunity to penetrate local corporate and event business and become more established.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

So that's when you say actually the hotel's at its peak occupancy and its peak rate premium. We see our assets predominantly were Hodgson, Rome, etcetera, coming around about 2829.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

That's when you expect sort of these hotels to have stabilized? Yes. And then sounds like there's a lot going on within sort of Hoxton still Yes. To help drive that momentum. Can you sort of summarize what is happening within now in the next maybe twelve months within Hoxton?

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Yeah. Absolutely. I mean, three fifty seven quays in shortage market was quite a disruptive force to the competitor set when we opened that. So we were very mindful of how we priced and delivered that hotel. It's a luxury asset. We want to make sure that asset gets the right premium it deserves for the value of investment we've got into it. So we've strategically phased the occupancy in line with that to make sure we get the maximum average rate potential.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

We've also just completed the full bedroom, product. We just launched the, suite penthouse floor, which is the 20 Third Floor, three sixty panoramic views of London, absolutely stunning. We opened the 20 Third, Fourth Floor panorama meeting an event facility. Next week, we are opening Solea, the destination restaurant with Penny Atkinson. But most of all, next week, we're taking it to market 5,000 square meters of office space.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

And that's over five floors, cafe ready to be, you know, let. So we're looking forward to having that launched in the market there as well. So come, you know, towards the end of this year, we hope to have full asset actually driving and actually disrupting that market.

Robert Henke
Robert Henke
EVP - Commercial Affairs at PPHE Hotel Group

Great. And then a final question, just mindful of time for you, Daniel. The VAT increase in The Netherlands, is that a sort of a final or is that still subject to government sort of decisions or budget decisions?

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

Yeah. So unfortunately, in The Netherlands, we have quite an uncertain political environment with a very lengthy process to get the government. And then when we had the government, this VAT increase was proposed. And then not long after, the government fell again. So this VAT increase, as so far as we know now, is going to be effective in the January 1.

Daniel Kos
Daniel Kos
CFO & Executive Director at PPHE Hotel Group

Holland has a vote in October. I do not expect any government being formed before January 1 that could reverse this. So we are anticipating on a flat increase to 21%, yes.

Operator

Great. Robert, sorry. Thank you. That's great. Thank you.

Operator

I think you've addressed all the questions from investors. So thank you once again to everybody for your engagement. Guys, I know investor feedback is particularly important to you all, and I'll shortly redirect those on the call to give you their thoughts and their expectations. But I guess before doing so, if I may, Greg, just come back to you for a couple of closing comments. And then as I say, I'll redirect investors investors for their feedback.

Greg Hegarty
Greg Hegarty
Co-CEO & Executive Director at PPHE Hotel Group

Yes. Thank you very much. First of all, I'd like to say thank you for your time. Thank you for taking the opportunity to listen to myself, Daniel and Robert. Hopefully, you are a little bit more informed of PPHE, and we are looking forward to the future. Thank you.

Operator

That's great, Daniel, Greg. Thank you very much indeed and Robert for your time this morning. Ladies and gentlemen, if I could please ask you not to close this session as we'll now automatically redirect you for the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of PPHE Hotel Group, I'd like to thank you for attending today's presentation.

Operator

I wish you all the best for the rest of your day.

Executives
    • Greg Hegarty
      Greg Hegarty
      Co-CEO & Executive Director
    • Robert Henke
      Robert Henke
      EVP - Commercial Affairs
    • Daniel Kos
      Daniel Kos
      CFO & Executive Director
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