Arena Hospitality Group, one of the leading Croatian listed tourism companies, invites investors to come see their Berlin-based hotel on March 4th. During the event they will also present the FY 2018 audited results.

Event Details

Date: Monday, March 4th 2019
Time: 9:30 CET (8:30 UK time)
Venue: art’otel berlin mitte, Wallstrasse 70-73, 10179 Berlin, Germany

RSVP: by Friday, 15th February 2019
To check more details and apply, please see the company’s official invite here: LINK

About Arena Hospitality Group

Arena Hospitality is one of the leading Croatian listed tourism companies which owns and operates properties on the Istrian peninsula (town of Pula and surroundings), as well as in Germany and Hungary. It came into investors’ focus in 2017, following a EUR 106m SPO targeted at future investments. The investments are under way but at a somewhat slower pace than anticipated, and the management is currently in the process of revising the projects.

Arena is majority owned by PPHE Group, an established London-based hotel management and real estate company and bearer of the brands Park Plaza and art’otel for Europe. As of 2007, Arena has the exclusive right to use and manage PPHE’s brands in Central Europe, from Germany in the West to Ukraine in the East and the ex-Yugoslavian countries in the South.

Arena’s History in Brief

Most of the Group’s hotels, resorts and campsites in Croatia were built during the 1970s and 1980s. In 1994, following Croatian independence, the Company was privatized, and its shares were listed on the ZSE in 2003.

In 2007, entities affiliated to certain funds managed by Goldman Sachs acquired a controlling interest, but the period was marked by low investments. The relationship with PPHE Group begain in 2008, when PPHE was awarded management contracts and acquired 20% of the Company. Starting 2011, the Group began refurbishing, upgrading and re-opening some of its properties under the Park Plaza brand.

In 2016 PPHE Group acquired the majority stake belonging to Goldman Sachs affiliates. In December that same year PPHE contributed the majority stake in its German and Hungarian operations (known as the Sugarhill Companies) to Arena, making it its Central-European hub.

In 2017 Arena did a EUR 106m SPO on the Zagreb Stock Exchange, with the goal to further refurbish its portfolio and spread further into Central Europe. Up to today there were no new CE acquisitions and the major hotel refurbishments are pending until the projects get revised (there was a surge in construction costs in Croatia). Some investments were made in campsites (adding mobile homes). Lack of significant investments is the reason why the season 2018 didn’t show growth.

Arena’s Portfolio

Arena’s Croatian portfolio consists of 7 hotels, 4 resorts and 8 campsites, all fully owned by the Group. In addition to using PPHE’s premium brands Park Plaza and art’otel, Arena Hospitality Group uses its own brands Arena Hotels and Apartments and Arena Campsites. Croatian portfolio is characterised by high seasonality (especially in campsites), with most tourist arrivals focused in the June-September period.

Arena works on reducing the seasonality-related risks by putting a focus on city hotels in Central Europe. For the moment they operate 6 hotels in Germany (3 owned, 2 co-owned and 1 leased) and 1 hotel in Budapest (leased). The step into Central Europe also marked the first time Arena used an asset-light strategy, operating part of the portfolio without owning the assets.

Peer Comparison

Comparing the multiples of Croatian tourism companies, we see there is a strong convergence, at least in terms of EV/EBITDA. The companies differ in terms of P/E, but this indicator is in many cases impacted by one-offs (different D&A policies, recognition of tax benefits related to investments etc.).

Actually, the local shares seem to be priced in accordance with international peers’ EV/EBITDA, as one can see in the graphs.

Although EV/EBITDA multiples are similar, they are still ranked in accordance with growth potential. Maistra is leading with 9.5x as the huge CAPEX cycle is expected to result in a high growth. Valamar and Plava Laguna are priced similarly in terms of EV/EBITDA, while Arena Hospitality is traded at a slightly lower multiple as no significant investments have yet been announced (Turisthotel has a somewhat different model, focusing exclusively on campsites).

However, the large cash pile still held in Arena’s balance sheet testifies to the potential (0.3x net debt / EBITDA vs cca 2.5x for Valamar and Maistra). If the management succeeds in picking up the pace of refurbishment and new development, the resulting growth should ensure a drop in trading multiples, well below its peers.

Investments and portfolio growth in CE are obviously a key point in valuing Arena Hospitality Group, and we hope the management will shed more light on these issues during the presentation.

Investments and portfolio growth in CE are obviously a key point in valuing Arena Hospitality Group, and we hope the management will shed more light on these issues during the presentation.