IRISH hotel group Dalata has been picked by Jefferies as its top mid-cap hotel stock pick in Europe after it initiated coverage of the group.
Dalata is the largest hotel group in Ireland, operating a total of almost 9,000 owned and leased rooms across about 30 hotels here and in the UK. It trades under the Clayton and Maldron brands.
Jefferies said that Dalata is likely to gain market share from independent hoteliers with weaker balance sheets as trading becomes more challenging.
The investment bank said there will be weak demand for this summer, with consumers worried about international travel.
"The road to recovery will take time with consumers reluctant to book international travel for 2021," it added. "Hotel operators with meaningful exposure to European gateway cities such as Accor, PPHE, and Dalata, will also be impacted by the slower-to-recover international demand."
Jefferies said it expects Dalata's revenue per available room (revpar) to fall in line with the market.
It expects group revpar to be 59pc lower in the first half of this year, and 61pc down in the full year. However, Jefferies expects Dalata to post a "strong" recovery in revpar next year, with the figure forecast to be up 89pc, and up 31pc in 2022.
"We expect a 70pc recovery in occupancy by December 2020 and a full recovery by March 2022," analysts at the investment bank said. They are assuming that pricing at the group will fall by 20pc and not fully recover until September 2022.
"We believe that the proliferation of the franchise model by international hotel operators has left a shortage of operators with any scale. We think that Dalata can take advantage of this gap, using management's expertise and decentralised approach to run hotels more efficiently and profitably than competitors," Jefferies analysts said of the UK market.