Book in for profit at the trendy hotel group with room to grow
GRAFFITI can be ugly, irritating and destructive. Street art is supposed to be different – and D*Face is one of its most prolific proponents. Known for outsized murals, the London-born artist is celebrated for work in cities from Los Angeles to Tokyo. That makes him the ideal partner for hotel group PPHE’s latest offering, the art’otel in Hoxton, London’s hipster hotspot.
Replete with a rooftop bar, co-working space and a dedicated art gallery, the 26-storey space opens its doors in less than a fortnight, stylised with pieces from D*Face.
Art’otel is just one of PPHE’s brands, a collection of trendy sites dotted across Europe, each with their own signature artist and other hip accoutrements. The group is no fashion-focused start-up, however. Founded in 1987 with one small hotel in Holland, it now has 52 properties under its belt, ranging from campsites in Croatia to the 1,000-room Park Plaza opposite Big Ben in London.
The stock halved in value to £9.83 during the pandemic, as the group was forced to close almost every venue (though some were kept open for medical staff). There has been some recovery in the price, but at £14.80 PPHE shares remain well below their prelockdown high. That seems unjustified. Cofounder Boris Ivesha recently posted record results for 2023, revealed 2024 had started well and suggested further growth was on the cards.
Most firms in this sector either build hotels or run them. PPHE does both – and this has several advantages.
First, it is much cheaper to buy land or a vacant property and turn it into a hotel than to buy somewhere that is already up-and-running. The Park Plaza near London’s Waterloo station is a case in point. Originally an office block, PPHE spent £125million turning it into a 500-bedroom hotel. On completion, the venue was independently valued at £250 million – a tidy £125 million uplift. PPHE can also build hotels exactly as they want them. The lifts are in the right place, rooms are easy to clean, restaurants are neither too big nor too small, even the corridors are properly thought through.
Importantly, Ivesha and his team can choose locations based on where they think hotels would thrive rather than where they happen to be already.
The strategy has been refined over many years, starting out when an American entrepreneur was looking for a partner to develop Park Plaza hotels in Europe. Ivesha stepped in and has been building and operating Park Plazas ever since. The brand still accounts for almost half the PPHE portfolio but other names have joined the mix, including art’otel and Radisson Red, another upscale option for the trendy traveller.
Campsites in Croatia are different again. Popular in summer, accommodation available includes fully fitted wooden cabins and empty pitches.
The range serves PPHE well. Suites at the Park Plaza in Westminster go for £4,000 or more on New Year’s Eve, when guests have a bird’s-eye view of the fireworks. Off-season camping in Croatia can be had for as little as £40 a night. The breadth of options appeals to both tourists and business travellers, from young to old, wealthy to cash-strapped.
Fortunately, demand is growing across the board. Revenue rose 26 per cent to £415million last year, underlying profits were 35 per cent ahead at £128million, and the dividend soared from 15p to 36p. A strong pipeline of new openings are in store over the coming months, bookings are in good shape and City analysts are optimistic about prospects for this year, forecasting sales of £457 million, profits of £151million and a 41.7p payout to shareholders.
Ivesha is now 76 – and his cofounder Eli Papouchado ten years older – but both are still on the board, as chief executive and chairman respectively. Some observers have criticised the duo for excessive involvement. Others believe the company has benefited from their careful stewardship. Either way, succession plans are in place.
A joint chief executive has been chosen to work with Ivesha. Greg Hegarty, who joined the team in 2009, understands the business inside and out. A deputy chairman has been appointed too. Ken Bradley is tasked with providing an independent voice on the board.
Shareholders can also take comfort in the founders’ continued support for the business: with 43 per cent of the stock between them, they are highly motivated to see PPHE succeed.
Traded on: Main stock market Ticker: PPH Contact: pphe.com
PPHE trades on the stock market at £14.80 but independent experts say the group’s portfolio is worth £26.72 a share. This suggests the shares are significantly undervalued and should rebound, making an attractive long-term buy.