Fattal Lowers Annual Forecast Amid Strong Shekel and Security Concerns Despite Price Hikes
Fattal Hotels experienced a 9% revenue decline to 1.9 billion shekels and a 4% drop in EBITDAR to 707 million shekels in the second quarter, impacted by a strong shekel and ongoing security tensions in Israel. Despite these challenges, net profit rose 17% to 142 million shekels due to reduced tax expenses. The company's main operations are in Europe, including the UK, Ireland, Greece, and Cyprus, where the shekel's appreciation against the euro and pound reduced revenues by 274 million shekels and EBITDAR by 107 million shekels this quarter.
The recent conflict with Iran, lasting from March through early April, also hurt hotel occupancy in Israel, dropping to 43% this quarter compared to 56% last year and 61% in early 2023 before the conflicts. Occupancy in the second quarter was 60%, down from 72% in the same period last year. Due to continued security concerns and low foreign tourist arrivals, Fattal now expects third-quarter occupancy in Israel to fall below last year's 68% versus 73%. Consequently, the company revised its full-year revenue forecast downward to 7.8-8.1 billion shekels and EBITDAR to 2.6-2.8 billion shekels, down from previous estimates of 8-8.4 billion shekels and 2.8-3.1 billion shekels respectively.
Compared to the second quarter of 2023, which coincided with the prior Iran conflict, Fattal's Israeli hotel occupancy improved by 2%, with revenues rising 1% to 502 million shekels and EBITDAR surging 26% to 116 million shekels. The company increased its average daily rate (ADR) by 6% to 162 euros per room per night, contributing an additional 51 million shekels in revenue and 63 million shekels in EBITDAR from its established hotels. Since June last year, Fattal opened 24 new hotels and plans to open 13 more by year-end. These new hotels added 76 million shekels in revenue but only 22 million shekels in EBITDAR due to ramp-up costs and currency effects.
Despite the ADR increase in euros, average revenue per room in shekels fell 11%, leading to an 11% revenue drop in the European segment to 798 million shekels, with the UK and Ireland down 13% to 568 million shekels. Fattal's third hotel partnership with institutional investors, launched in July, has secured investment commitments totaling 693 million euros, expected to reach one billion euros soon. The company is valued at 10.9 billion shekels, with its stock up 1% year-to-date, underperforming the Tel Aviv 125 index's 10% rise. Competitors Israel Canada Hotels and Isrotel saw mixed stock performance, while Dan Hotels' shares fell sharply.
